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Diplomacy in Action

32. Letter from William E. Schuerch, Deputy Assistant Secretary of the Department of Treasury for Multilateral Development Banks and Specialized Development Institutions, concerning claims against Costa Rica (January 2, 2004)


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January 2, 2004

Ms. Laura Kent
Cornerstone Capital Management Inc.
709 Paradise Way
Redwood City, CA 94062

Dear Ms. Kent:

This is in response to your petition of July 7 addressed to President George W. Bush in the case of Luis Enrique Villalobos Camacho in Costa Rica. The Treasury Department has been informed of the concerns of United States citizens regarding the Costa Rican government's freezing of the assets of Mr. Villalobos' business in which many U.S. investors had invested significant funds. Our understanding is that these actions relate to an ongoing criminal investigation by the Government of Costa Rica into the business practices of Luis Enrique Villalobos.

You have requested that President George W. Bush take action pursuant to 22 U.S.C. � 283r, one of the "Gonzalez Amendments" to the Inter-American Development Bank Act of 1972. This statute states that the President shall instruct the U.S. Executive Director of multinational lending institutions to vote against any loan or other utilization of funds of the Bank for a country under certain circumstances. As the federal courts have explained, the Gonzalez Amendments and the prior "Hickenlooper Amendment" were effectively repealed in 1994 when Congress passed the Helms Amendment.

In order to promote the settlement of claims with foreign governments, however, the Helms Amendment does not call for sanctions to be applied unless, among other things, three years have passed since a claim has been filed in response to the alleged expropriation or seizure of ownership or control of the property of U.S. nationals. The Helms Amendment also contains a waiver provision at subsection (g), should the President determine that a waiver is in the national interest, and an exception for assistance "directed specifically to programs which serve the basic human needs of the citizens of [the offending] country."

Because the relevant actions by the Costa Rican government took place in July of 2002, the applicable statutory three-year period will not have passed until at least July 2005. Moreover, even if this period had passed, the U.S. government would need to consider more fully before imposing any sanctions whether the alleged actions of the Costa Rican government were expropriatory or otherwise actionable under the Helms Amendment. At present, our government has not seen evidence that would lead to the conclusion that the actions of the government of Costa Rica would be actionable under that Amendment. However, the Treasury and State Departments will continue to monitor the situation and could make a definitive determination on the Amendment's applicability if, after the three year statutory period, the issue has not been resolved.

To date, the State Department informs us that it has taken a number of steps to assist U.S. investors in this dispute with the Costa Rican government. The U.S. Embassy in San Jose has been in contact several times with the prosecutor involved with the case, most recently within the last few weeks, informing him of the adverse effects the freeze is having on U.S. investors, obtaining information on the status of the case and requesting him to expedite the criminal investigation so that any funds to which U.S. investors may be legally entitled can be released.

Several State Department officials have also met and spoken with U.S. investors, to hear their position and inform them of these steps being taken by the Department to assist them in pressing their case. The State Department assures us that it will continue to follow developments in the case actively, and to request that the investigation and any criminal charges be prosecuted in an expeditious manner.

The Treasury Department will also continue to follow developments in the case actively.

I hope this information has been helpful to you. Please do not hesitate to contact me again if you have further questions or concerns. As contact information was not provided for all petitioners, I would appreciate your circulation of this response to the other petitioners.

Sincerely,

William E. Schuerch
Deputy Assistant Secretary
Multilateral Development Banks and Specialized Development Institutions



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