IV. POLITICAL ENVIRONMENT A. Nature of Bilateral Relationship With the United States The bilateral relationship between the United States and Costa Rica has traditionally been and continues to be very good. Although there have been some bilateral irritants over the years, including in the past year or so, these have been relatively minor in an otherwise excellent relationship. B. Major Political Issues Affecting Business Climate The major political issue affecting the business climate are the pending expropriations cases. Currently there are seven long- standing major cases and about two dozen newer cases. Not only are these cases a significant irritant to bilateral relations but they also raise questions about the protection of foreign investment in Costa Rica. A second investment problem--the ruling of the constitutional court that the American telecommunication company Millicom cannot continue its cellular phone operations in Costa Rica because of the constitutional monopoly granted to the state telecommuni- cations/electricity company ICE--also has political dimensions. Any resolution of the disagreement involves a decision by the president and the approval of the Legislative Assembly, followed by yet another court ruling. In short, all the major political powers of the country will have to agree to resolve the current impasse. Third, the current insistence of the administration in maintaining strategic monopolies in oil refining (RECOPE), insurance (INS) and utilities has important implications for doing business in Costa Rica. Fourth, the possible loss of Generalized System of Preferences (GSP) benefits because of alleged violations of international labor standards would have serious consequences for the Costa Rican export industry, particularly textiles. The petition filed by the AFL-CIO and accepted by the United States Trade Representative in 1993, although later withdrawn, caused considerable bilateral friction over the issue of national sovereignty. C. Synopsis of Political System Costa Rica is a democratic republic. It is governed according to the Constitution of 1949. This charter established a system of checks and balances between the executive, legislative and judicial branches. While the President holds important executive powers, both legislative and judicial arms are also integral parts of the government. The 1949 Constitution abolished the Costa Rican army and created a powerful, independent body, the Supreme Electoral Tribunal (TSE), to oversee the impartiality and fairness of elections. A 1969 constitutional amendment limits the president to a single four-year term in office. The 57-member unicameral Legislative Assembly is elected currently with the President. Candidates for the legislature run on party slates in each province and not as individuals. Deputies serve four-year terms and cannot be re-elected for successive periods. The new legislative assembly for 1994-1998 took office on May 1, 1994. The Supreme Court has 22 magistrates who sit in four chambers, including the Constitutional review chamber.In the February 6, 1994 election, President Jose Maria Figueres ran as the candidate of the National Liberation Party (Partido Liberacion Nacional or PLN). He was elected to a four-year term in office, defeating his nearest rival Miguel Angel Rodriquez of the Social Christian Unity Party (Partido Unidad Social Cristiano or PUSC) by a margin of two percentage points. President Figueres PLN party holds 28 seats in the new Legislative Assembly. The PUSC received 25 seats. Three smaller parties won four seats. The next elections for President and the Legislative Assembly will be in February 1998. The two major parties divide the political spectrum with the PLN representing the Social Democratic left and the PUSC representing the Christian Democratic right. However, the political differences are not enormous and the Costa Rican emphasis on consensus tends to push governments to the center. At present, minority parties hold an important balance in the Assembly, with most significant legislation requiring a two-thirds vote (38 of 57 deputies).