A study reveals the possibility of underhand dealings in negotiations for the Central American Free Trade Agreement between the United States and Costa Rica, not only in administration of funds but also with regards to the organisations providing funds; relationships between the civil servants in charge of the negotiations and private companies with interests in the treaty; and ample opportunity for the funds to influence the final results of the treaty.
July 2005
On 10 May this year the accountancy firm Deloitte handed over the results of a study on the ‘Programme for Costa Rica’s Participation in the Negotiations for the Free Trade Agreement between the United States and Costa Rica’ to the Ministry for Foreign Trade (COMEX, in Spanish).
Opposition party members believe that the revelations in the Deloitte study confirm that there were underhand dealings, not only in the administration of funds but also with regards to the organisations providing funds; relationships between the civil servants in charge of the negotiations and private companies with interests in the treaty; and the ample opportunity for the funds to influence the treaty’s final results – a concern mainly related to the government and US organisations.
On discovering that Manuel Gonzalez Sanz, head of COMEX and president of the private organisation Foreign Trade Promoters (PROCOMER, in Spanish), had received a copy of the external audit report compiled by the accountancy firm Deloitte, the opposition Citizen Action Party (PAC, in Spanish) requested to review the document.
PAC leader Marta Zamora explained to CAR that the party’s rush to get its hands on the text was mainly based on a desire to understand what had driven the Attorney General’s Office for Economic Crimes to confiscate a number of official documents from COMEX in April 2005.
Just days after the Attorney General’s intervention, a number of government officials resigned from COMEX. Among them were staff who had actively participated in the CAFTA negotiations or who had worked in Geneva, Switzerland, alongside World Trade Organisation (WTO) representative, Ronald Saborio.
This was not the first large-scale exodus of government officials who had participated in the CAFTA negotiations. At the start of September 2004, the then chief of COMEX, Alberto Trejos, the vice minister of COMEX, Gabriela Llobet, and the ambassador for foreign affairs and chief negotiator for CAFTA, Anabel Gonzalez, all stepped down from their posts.
On 18 May, Zamora confirmed that the Deloitte report had detected incomplete book keeping and inadequate controls regarding salaries and social security payments by the people hired by PROCOMER to negotiate CAFTA.
‘We demand to get clear answers regarding these omissions, especially given that many of the former negotiators are now members of the pro-CAFTA lobby group, For Costa Rica. We are also waiting for PROCOMER’s internal audit, which would outline any irregularities concerning the salary raises of former government officials.’
The Deloitte investigations concentrated on the COMEX-approved budget and the donations made to the Programme between 2003 and 2004.
Despite the fact that the US was an interested partner in the CAFTA negotiations, the Programme allowed the Costa Rica-USA Foundation for Cooperation (CR-USA) to donate a little over US$1 million to finance the talks. The body was created by the funds that the US International Development Aid (USAID) agency left behind when it closed its office in Costa Rica.
Another source of funds detected by Deloitte was a donation of roughly US$1 million by PROCOMER, plus a non-refundable loan of US$250,000 by the Central American Bank for Economic Integration (BCIE, in Spanish).
The Deloitte report also states that ‘officials who were paid with national funds and who participated in the negotiations for the international convention did not write a report on the jobs they undertook or the activities they attended to prove their participation in the programme’.
Furthermore, ‘they did not add notes made by PROCOMER’s accountancy department, which register the salary and corresponding social security payments of the Programme’s hired personnel and which certify these costs. Additionally, no request was made for social security payments for those salaries’.
Adding to these ambiguities, in a section titled ‘Comments and Recommendations’, Deloitte noted that a C3.01 million (US$633,000) payment related to a CAFTA launch event in the US ‘was not fully invoiced, but rather accounted for by a bill from the Cosmos Club (Washington DC) for the hire of a conference room, food, parking and other costs in the name of Jaime Daremblum, the then Ambassador for Costa Rica in the US’.
Previously, an internal audit of PROCOMER had also detected problems relating to a series of exaggerated salary increases for trade negotiators, averaging 41%.
On 19 May, deputy minister for COMEX Amparo Pacheco claimed in a press conference that the audit’s conclusions could not be considered proof of anomalies.
During the second half of May, the PAC cited the study on various occasions to highlight the fact that the documents did indeed reveal financial irregularities. On one such occasion, the PAC quoted Deloitte’s findings that ‘some of the expenses covered by CR-USA Foundation funds and administered by the BCT Bank were accounted for with a photocopy of a check, because the original had gone missing. All expenses must be proved by the inclusion of an original document’.
Despite this, the deputy minister claimed that the PAC wrongly interpreted the audit’s conclusions, arguing that ‘these are not big anomalies, much less inadequate management, like the PAC has tried to show. The copies and originals of the invoices are in COMEX; for this reason we cannot consider the alleged flaws a serious error’.
However, PROCOMER’s board of directors created a National Analysis Commission, made up of three of its nine directors, to examine the supposed anomalies which occurred during the CAFTA negotiations. These include the 41% salary rises agreed to by the negotiators themselves when they were acting as public officials, as well as the hiring of advisers, explained the head of COMEX.
According to a COMEX internal audit, these salary increases, paid within the framework set by the PROCOMER-COMEX Cooperation Agreement, allowed negotiator Anabel Gonzalez to receive US$8,700 a month as a consultant, on top of her ministerial salary. Trade consultant Roberto Echandi benefited from a similar situation.
A second report from the aforementioned internal audit, which was presented on 1 October 2004, also alluded to wage increases for CAFTA negotiators that varied from C372,000 (US$782) to C690,000 (US$1,451) between 1 July 2003 and 1 August 2004. Echandi profited from these raises, with an increase of C690,000 (US$1,451), as did current deputy minister Pacheco with C540,000 (US$1,136).
Following Deloitte’s revelations that C39.4 million (US$828,689) were invested during 2003 in contracting 10 strategy consultants, the Comptroller General has begun an investigation into the case.
According to the PAC, another irregularity appeared when Gonzalez Sanz came across an invoice on former negotiator Fernando Ocampo’s desk. The invoice was for services provided by Swiss legal firm Sidley, Austin, Brown & Wood, which had been contracted without the COMEX director’s knowledge.
According to Ocampo, the allegations are part of a cover-up staged by the COMEX chief: ‘All former COMEX officials are being persecuted and I am currently looking to defend myself.’ However, said Zamora, the trade adviser Echandi worked for the legal firm as an adviser to the Secretariat of Appeals for the WTO in Geneva.
The deputy also recalled that in November 2003, COMEX announced that it would establish a panel of lawyers responsible for resolving disputes between CAFTA signatory countries. One of those chosen was Francisco Chacon, former deputy COMEX minister, lawyer for the American Chamber of Commerce (AMCHAM) and husband of negotiator Anabel Gonzalez.
Zamora highlighted that ‘there remain serious questions over links between private legal firms that would benefit from CAFTA and former negotiators who by chance are the main defenders of the Treaty. There are also doubts over the management of funds and disproportionate salary increases for officials. If we hope to openly discuss the Treaty, the issue of COMEX’s internal management should not be hidden.’
In September 2003, during the CAFTA talks, the then Minister of the Presidency, Ricardo Toledo, claimed that, due to business interests, a plan to open up the telecommunications industry had been drawn. Only three months later Alberto Trejos, then head of COMEX, announced a ‘counter-proposal’ which included Internet, cellular and business networks – contrary to the previous plan.
According to Zamora, ‘there is a woeful lack of measures to avoid costly conflicts of interest on such a delicate issue. For example, Fernando Ocampo was an FTA negotiator, yet following his resignation from the government he now belongs to a legal firm with interests in the FTA’s success. At the same time, he is questioned for having in his possession an invoice for $30,000 relating to anomalous deals linked to the international treaty’.
A publicity campaign in favour of CAFTA has recently been launched in the media by the group Por Costa Rica. On 27 May, the PAC asked this group for a list of those who are financing the organisation and its propaganda.
Zamora explained that ‘the FTA is not just an arbitrary issue for Costa Rica, so if we want to discuss it democratically, we need to know who is behind the campaign’. Por Costa Rica began operating in April 2005 and its members feature the former head of trade negotiations, Anabel Gonzalez, former COMEX ministers, Alberto Trejos and Jose Rossi (1994-8) and former negotiator, Fernando Ocampo. – Third World Network Features
The above article originally appeared in Central America Report (10 June 2005), published by Inforpress Centroamericana. When reproducing this feature, please credit Third World Network Features and (if applicable) the cooperating magazine or agency involved in the article, and give the byline. Please send us cuttings. Third World Network is also accessible on the World Wide Web. Please visit our website at http://www.twnside.org.sg
