Costa Rica wins 7-month CAFTA deadline extension

SAN JOSE, Costa Rica (Reuters) - Costa Rica has won a seven-month extension from its U.S. and regional trading partners to pass laws required for its entry into the CAFTA free trade pact, President Oscar Arias said on Wednesday.

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Costa Rica was about to miss a deadline on Friday to pass a dozen laws needed for it to implement the U.S.-Central American Free Trade Agreement. It now has until October 1 to comply.

“We’ve won the extension from the Central American countries, the Dominican Republic and the United States so that the legislative assembly can get to know and approve the implementation agenda,” Arias told a news conference.

Only half the necessary legislation has passed a first hearing in Costa Rica’s Congress, held up by the Citizen’s Action Party, or PAC, but Arias said opposition parties had now agreed to try and get the required laws passed in 90 days.

U.S. Trade Representative Susan Schwab said Washington would work closely with Costa Rica to complete the measures. “Today’s agreement will give Costa Rica until October 1, 2008, although we hope that Costa Rica will complete its implementing process before that date,” Schwab said in a statement.

Costa Rica narrowly approved CAFTA in a referendum in October, but lawmakers have been haggling over its terms.

A clause requiring the country’s state-run telecommunications industry and its insurance business to open to foreign competition has proved particularly thorny. PAC lawmakers say the required laws will damage state-run companies, endangering welfare funding.

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Arias said in January he would seek an extension to the CAFTA deadline as business leaders worried that unless Washington agreed to more time, Costa Rica would lose existing preferential tariff access to the U.S. market.

Sectors such as textiles and tuna, which provide around 20,000 jobs, could have suffered a crippling jump in U.S. import tariffs, while the fast-growing call-center market may also have been hurt without a free-trade deal in place.

CAFTA, the second-largest U.S. export market in Latin America after Mexico, includes Guatemala, El Salvador, Honduras, Nicaragua and the Dominican Republic. Costa Rica, a popular eco-tourism destination, would be the only CAFTA member not to have implemented the accord by the March 1 deadline.

U.S. Assistant Commerce Secretary Christopher Padilla is due to meet Arias in San Jose on Thursday.

Separately, Arias said on Wednesday the World Bank had agreed to provide $72.5 million in financing for a planned $80 million modernization of the Costa Rican port of Limon. The Costa Rican government will contribute the other $7.5 million.

Reporting by John McPhaul; Writing by Catherine Bremer