Nobel laureate returning to lead divided Costa Rica

SAN JOSE, Costa Rica - Nobel laureate Oscar Arias begins a second stint as president of Costa Rica today, taking power in a nation divided over free trade with the United States and widely seen as rudderless.

Dignitaries from around the world, including former Polish President Lech Walesa, another Nobel Peace Prize winner, arrived over the weekend and met with the president-elect. US First Lady Laura Bush was expected to attend today's ceremony.

Arias first served as president during the 1980s, when Central America was ripped by civil wars. He won the Nobel Peace Prize for his role in brokering an end to the conflicts.

Now he takes the helm as the nation and region focus on economic integration. He pledges to put his country of 4 million people on the road to developed-nation status but lacks a clear mandate after his unexpectedly close election win.

Arias vows to push the Central American Free Trade Agreement with the United States, or CAFTA, through Congress.

Costa Rica has signed, but has yet to ratify the agreement already passed by the United States, Guatemala, Honduras, El Salvador, Nicaragua and the Dominican Republic.

But Arias, who was initially expected to win the February 2 race by a landslide, instead squeaked out a 1.12 per cent victory over challenger Otton Solis, a CAFTA opponent.

Arias lacks a legislative majority and must cut deals with other parties to pass the pact. The Supreme Court has yet to decide whether a simple majority or a two-thirds vote is needed to pass it.

Labor groups and popular organizations vow to take to the streets to stop CAFTA, but Arias is resolute about passing it.

"You should not have the least doubt that in this we will not cede," he said recently.

He likens himself to former US President Bill Clinton and British Prime Minister Tony Blair and says he will use his worldwide acclaim as a Nobel laureate to attract foreign investment. He also wants to shrink the government.

"We have a state that is too inefficient, sclerotic, chaotic," he said. "We need a strong state, not a big state."

Passing badly needed fiscal reforms is seen as another major test, and Arias has pledged to push a tax reform bill to force wealthier Costa Ricans to pay more for infrastructure.

But he faces disenchantment with government after the ineffectual administration of outgoing President Abel Pacheco.

Pacheco presided over the ruin of his own political party with revelations in 2004 that two of its former presidents were briefly jailed over allegations that they received bribes.

Pacheco also handled the controversial CAFTA like a hot potato, first fully supporting it, then expressing reservations, firing the economic team that negotiated the deal and finally saying Costa Ricans would starve without it.

He sent the agreement to Congress but could not muster the political strength to bring it to a vote. His Social Christian Unity Party ran last among the main parties in February with only 3.5 per cent of the vote.

Analysts say Arias has a strong Cabinet but his administration may need more political skill to govern a country unclear about its direction.

"He has a good team, but their skills seem more administrative than political and they will need a lot of political skill," said political scientist Rodolfo Cerdas.

- REUTERS