Costa Rica is facing an uphill fight to have its Congress approve the necessary legislation implementing the Central American Free Trade Agreement in time for a March 2008 deadline set by the FTA, even though it is poised to ratify the agreement as much as a year earlier, sources this week said.

Under CAFTA, signatories have to implement the agreement no later than two years after it went into effect with the first country, which was El Salvador in March 2006.

To implement the CAFTA, Costa Rica has to pass 13 bills, of which the two most controversial would dismantle its telecommunications monopoly and open the sector to private competition. The first telecommunications bill opens the sector to competition while the second one establishes an independent regulator, sources said.

Other implementing bills dismantle the Costa Rican insurance monopoly, and change intellectual property laws to change relevant patent and copyright provisions.

Passing legislation privatizing the telecommunications monopoly will pose a challenge partly because two-thirds of Congress, and not a simple majority, must support it, sources said.

Costa Rican government officials insisted this week that the Congress would pass the telecommunications bills. They pointed out that two-thirds of Congress supports the CAFTA ratification and that they will also support the telecommunications bills and other implementing legislation necessary for CAFTA to enter into force.

However, a private-sector source in Costa Rica lobbying in favor of CAFTA said there are currently not enough votes in favor of the telecommunications bills to meet the two-thirds majority threshold.

The two telecommunication bills have been assigned to committees for consideration, but debate in committee has not yet begun, sources said. The other implementing bills are either pending before their relevant committees or pending before the Congress. The Costa Rican government will prioritize the telecommunications, insurance and IPR bills in the extraordinary session of Congress in the hope that they can be reported out of committee when the plenary session ends by April 30, sources said.

Dismantling the telecommunications monopoly is controversial in Costa Rica partially because the current arrangement provides for universal service through subsidizing telephone rates for those who cannot afford them, one source explained. This is expected to change if the telecommunications sector is opened to private competition, the source said.

In addition, Costa Ricans are wary of dismantling a long-standing monopoly that is perceived to be functioning well, and there is also a lot of union support behind maintaining the current system, sources said.

The Costa Rican government plans to have the congressional vote on CAFTA before the controversial implementing bills will come up for a vote, partly because this will exert greater pressure on reluctant members of Congress to support them, once source said.

Ratifying the CAFTA will pose less of a challenge than the implementing legislation, because there are sufficient votes to pass the CAFTA by the required simple majority. In an interview with Inside U.S. Trade, former Costa Rican presidential candidate Otton Solis said that his party, the Citizens' Action Party, would not pursue a strategy of delaying a vote on CAFTA. Instead, the members of his party will seek to convince other members of Congress to oppose the CAFTA by the strength of their argument.

Solis said in an interview this week that he hoped to travel to Washington in late January to argue his case that parts of CAFTA need to be renegotiated, such as the provisions on IPR and agriculture. He said he hoped the Democrats, who now control Congress, would be more sensitive to objections to certain provisions of the agreement. But he acknowledged that he had not yet begun the process of reaching out to them.

The CAFTAhe International Affairs committee, which will submit its majority opinion on the agreement to the plenary session of Congress by Dec. 12, sources said. That opinion, which is expected to be favorable, will then trigger consideration by the plenary session of the Congress in January.

After that vote, the agreement will go to the Constitutional Court in Costa Rica for a 30-day review and then return to Congress for a second debate and vote. That vote is not likely to occur until mid- to late-March, sources said.

Separately, Costa Rican President Oscar Arias is scheduled to meet with President Bush next week. In their Dec. 6 meeting, Bush and Arias will most likely discuss CAFTA in the context of a broader discussion on trade, according to a White House spokeswoman. According to a White House statement, the range of issues to be discussed includes the importance of democracy, free trade, and economic prosperity.

President Arias will arrive in Washington on Dec. 3 along with the Costa Rican minister of foreign affairs, the minister of energy and environment, the minister of foreign trade, and the minister of finance, as well as members of the private sector, informed sources said. Along with the meeting with President Bush, meetings are scheduled with Secretary of Commerce Carlos Gutierrez, officials from the World Bank and the International Monetary Fund, and key senators including incoming Senate Majority Leader Harry Reid (D-NV) and outgoing Senate Foreign Relations Chair Richard Lugar (R-IN).