Last week a small Internet service provider was able to get permission from the Costa Rican government to enter the local market after years of fighting.
That small company is DatZap and, with the support of its parent company VSAT Systems, it is the first company to enter Costa Rica without using the infrastructure of the Instituto Costarricense de Electricidad, known as ICE.
However, that process took the better part of four years. During that entire time, the Central American Free Trade Agreement guaranteed the company the right to enter and compete in the Costa Rican market.
While the major free trade issues for this company have been resolved, the overall issues between the two economies remain.
These issues include Costa Rican policies that implicitly protect government-owned players that used to be national monopolies, U.S. companies investing millions of dollars in costly struggles to get into the market, and the weakness of the U.S. government’s ability or will to protect its businesses.
“To the shame and embarrassment of the U.S., Costa Rica has given every U.S. trading partner the blueprint for avoiding its obligations under an FTA,” says one VSAT document, using FTA for free trade agreement.
Earlier this year, the companies published documents telling of the roadblocks to entering the market thrown up by numerous parts of the Costa Rican government and the lack of action taken by the United States government to help.
DatZap is a small company that resells Internet service from its closely tied affiliate, VSAT Systems. The business is to sell Internet access to Costa Rica through satellites. This Internet connects directly back to the United States and does not use the wires of ICE or the undersea cables.
These documents were published in March of this year. At that time, DatZap’s application for a license to operate had just been rejected by the Ministerio de Ambiente, Energia y Telecomunicaciones after more than three years of seeking the license.
“Costa Rica to this day still refuses to comply with CAFTA, while further solidifying its government telecommunications monopoly,” said one of these documents. “Even worse, the USTR has failed to take action to enforce the protections and guarantees supposedly ensured by CAFTA.” CAFTA is the Central American Free Trade Agreement and USTR is the U.S. Trade Representative.
These issues were addressed in the past couple weeks when President Laura Chinchilla signed an executive order giving DatZap a license to operate in Costa Rica. A story about this company gaining access to the market appeared in A.M. Costa Rica last week. That story is HERE!
One of the two documents gives an account of the experiences of both companies, principally those of DatZap president Donald Wayne Jacobs. This document chronologically explains the three-year process up until March that DatZap went through to get a license. That document is HERE!
The second document is a seven page executive summary, which includes the most pointed critiques on both Costa Rican and U.S. government agencies. That document isHERE!
In these documents, company spokespeople attacked the Costa Rican government for not complying with CAFTA. Officials from the company say that this is accomplished by simply telling the United States that progress is being made without actually achieving any meaningful progress.
The documents say that DatZap was passed back and forth between the Superintendencia de Telecomunicaciones and the ministry in charge of telecommunications. To start out, both groups lacked regulatory procedure for newcomers into the industry. Then both groups moved slowly to establish rules, procedures and forms, tried to convince DatZap to just resell ICE’s service and gave valuable time to ICE and its subsidiary, Radiográfica Costarricense S.A., to set up satellite Internet.
The documents do not go so far as to accuse these government agencies of protecting ICE, but they do say that the Costa Rican government ignored its duties under CAFTA.
“Despite Costa Rica clearly, undisputedly and consistently refusing to comply with its CAFTA obligations for more than three years, Costa Rican officials have straight out lied to U.S. officials contending that the country has taken all required actions necessary under CAFTA,” said the executive summary.
The document also criticizes the U.S. Trade Representative for not taking any action to intervene on DatZap’s behalf. This agency is responsible for working on behalf of U.S. businesses that fall into situations like this, while enforcing terms of trade agreements.
“In particular, Datzap’s situation has been a colossal failure for everyone with the ability and opportunity to help, mainly the USTR, who is required to take action when U.S. rights under an FTA are being denied or violated,” says the executive summary.
This agency’s aid to DatZap was at least unapparent for about one year, for which the company directors criticized the government, it said.
For these failures on the part of both the U.S. government and the Costa Rican government, DatZap and VSAT Systems’ documents said that U.S. businesses were losing money from the treaty and it was particularly hard on small- and medium-sized businesses.
The executive summary calls on the United States, particularly the trade representative to take a tougher stance with countries with which it has treaties in order to protect the interests of U.S. businesses and keep the agreement beneficial for the United States.
“The U.S. must truly commit to take action against Costa Rica and force the nation to pay for the damage to U.S. businesses caused by its blatant failure to comply with CAFTA. Without full support by the USTR in these cases, the protections and guarantees contained in CAFTA and other FTAs are simply pipe dreams,” said the executive summary.