Ambassadors Archive 1

Costa Rica: Leading the CAFTA Effort


An Interview with Ambassador F. Tomas Dueñas

By Hugh S Galford

Ambassador Dueñas of Costa Rica has been in Washington for only nine months, but he has already overseen the birth of his 'baby' -- the Central American Free Trade Agreement (CAFTA). Generally considered as one of the treaty's proponents, Dueñas couldn't be happier with its passage in the US Congress.

”CAFTA,” the ambassador says, 'is one of the most important steps we in the region can take in the building of a solid institutional structure. No sustainable development can come without having very strong regard and respect for the administration of the rule of law, environmental standards, laws for competition, intellectual property rights, consumer protection, and so on.'

Though the treaty is called a free trade agreement, its true impact is in the realm of institutional reform. 'We want to trade and attract investment. We can't have foreign direct investment without a solid structural framework.'

Roughly the size of West Virginia, and with a population of four million, Costa Rica hopes to emulate the success of Ireland and Singapore. Both nations 'bit the bullet' and turned their economies around very quickly.

'Costa Ricans, like the Irish, do not take themselves seriously,' he explains with a smile. 'We have the same size population, a beautiful country and, like Ireland, Costa Rica is socially advanced, with one of the highest standards of education in the Americas. Education has been free since 1850, and there are 40 universities in the country. 'When the age of technology and the age of knowledge came together in the 1990s,' Dueñas says, 'Costa Rica took off.'

The fact that the army was disbanded in 1949 has allowed the country to substantially invest in good health and educational systems. 'As an institution, the army was never important in the 20th century for Costa Rica,' the ambassador explains. 'It's been proven that it's more important to have teachers than to have soldiers.'

Costa Rica has leveraged its educational standing into attracting the most foreign direct investment in the region. Their interest in securing long-term investment has led them to focus on three major clusters of development: an electronics/high-tech cluster around Intel, a medical devices cluster around Baxter/Hospira and Abbott Labs, and a services sector cluster providing administrative and financial services for companies such as HP and IBM.

'We know where we can and cannot compete,' the ambassador says. 'We can't compete in high labor/low cost work, but what companies can we attract?' Half of what Costa Rica produces is for export, and two-way trade with the US accounts for 78 percent of Costa Rica's total trade. 'If we want to improve, we can't do it only by trading in-country or within the Central American region -- we're too small for growth.

Costa Rica is the US' largest trade partner in the CAFTA group; the US provides 55 percent of imports, two-thirds of foreign direct investment, and 70 percent of tourists to Costa Rica. Unlike other countries, Costa Rica harbors no resentment of the US; 'we don't have any complexes,' the Ambassador says with a smile.

While CAFTA holds the key for further growth, no date has yet been set for Costa Rica's congress to ratify the treaty. The delay in ratifying CAFTA is due to structural and policy changes that need to take place in Costa Rica. Before moving forward with CAFTA, the Administration is awaiting congressional approval of a tax reform bill that is key for giving a long term solution to an endemic internal deficit. In addition, there is strong opposition from some specific groups to the Agreement because Costa Rica has committed to opening up for competition the two largest state monopolies: telecom (which also controls the energy sector) and insurance, and these groups 'refuse to accept change.'

The government, he says, 'has taken its time, so everyone knows the consequences and benefits of CAFTA.' This slow, deliberative approach is beginning to show results. Ambassador Dueñas cites the latest Gallup poll, which shows that 70 percent of Costa Ricanswant CAFTA sent to Congress. 'Almost 60 percent say they want it approved, 20 percent are opposed, and the remainder has no opinion -- they don't have enough information. 'The discussion, he says, must be: 'Do we want to maintain and increase relations with the US, or stop them in their tracks? And if the latter, then what?'

The treaty is also becoming politicized. CAFTA will probably enter into force on January 1, 2006, while Costa Rican presidential elections take place the first Sunday in February 2006. The presidential campaign has just begun, with former president, Oscar Ariasrunning for a second term -- supporting CAFTA's ratification, and the Citizen Action Party (PAC), the left wing of the old Liberation Party, opposed.

Beyond CAFTA and its promises of high-tech development, Costa Rica's economy is largely based on tourism and agriculture. In the agricultural sector, coffee, bananas, pineapples and sugar rank high, as do beef and timber. Nonetheless, tourism is probably what Costa Rica is best known for.

The country invented the idea of ecotourism 50 years ago when they realized that what they had could not be exported. In the 1940s, then-president Figueres founded the tourist institute to figure out how to attract foreigners and to have them come permanently. (Ambassador Dueñas notes proudly that there are more Americans living in Costa Rica than there are Costa Ricans living in the US.)

Costa Rica has no ruins or historical buildings; it was, according to the Ambassador, one of the poorest places in the Spanish Empire. Yet, one thing the country has, and in abundance, is nature. Roughly a quarter of Costa Rica is protected as national parks or wildlife refuges. Despite its small size, Costa Rica contains 15 percent of the world's biodiversity. There are more species of birds there than in the rest of North America.

The parks, Dueñas says, are 'truly wonderful: deep jungle, volcanoes, rivers, sea fishing, diving, and hundreds of microclimates. I've been in a place where it was raining, you take two steps, and there's no rain.' The land and its people bring in 1.5 million tourists a year. The country boasts a butterfly farm, founded by an American, that grows butterflies for export of cocoons to museums for research, for breeding, and for release into the wild to maintain populations.

The Golfo Dulce is one of two tropical fjords in the world; it offers the chance to swim in perfectly calm waters where whales and dolphins come to breed. Sea turtles nest on both the Pacific and Caribbean coasts. Costa Rica’s Isla del Coco, off the coast of Colombia, was declared a world treasure by the United Nations. Like the Galapagos, it has a large number of indigenous species, and a permit is required to visit.

Ambassador Dueñas is clearly upbeat about Costa Rica's future, especially should CAFTA be ratified in San José. Prior to arriving in Washington, Dueñas served as the CEO of ESCO InterAmerica Ltd., a regional leader in the design, rental and sale of construction systems. He also served as the Chairman of the Board of Directors and Executive Committee of the Costa Rica Investment and Development Bank. Dueñas was Minister of Economics in 2000 and Minister of Foreign Trade between 2000 and 2002.

His background as a businessman has 'amused' government officials here, who expect a career diplomat in the post. Ambassador Dueñas believes his background has given him advantages. 'I could put some down-to-earth arguments into the debate over CAFTA,' he says. 'I've enjoyed meeting people with legitimate concerns.'

One of his main missions in the future is 'to make sure CAFTA continues. I don't think the process ends with approval by the signatories' Congresses. It must be an on-going process of development -- we must see that opportunities are exploited in the right way, invest in institutional changes, and become an example of what trade can do.

'We owe ourselves and the US -- our partner -- concrete actions. Implementation must be pragmatic. It's not a matter of dreaming, but a matter of working. We must plan, and commit ourselves to its success. It's not a time for rhetoric, but for action. It takes imagination, and the ability to vocalize, so the US administration doesn't take its eyes off the region.'