Costa Rica Digest, Sept. 29

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Costa Rica News Digest
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NEWS DIGEST
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*Wife of Former ICE Director Flees Costa Rica

Following the revelation on Monday that the wife of former
Instituto Costarricense de Electricidad (ICE) director, José
Antonio Lobo, had received a payment of US$2.400.000 dollars
from ALCATEL, immigration officials confirmed yesterday that,
Jean Philp Gallup, had abandoned Costa Rica on a flight to New
York at 8:15am yesterday (Tuesday) morning.

The Dirección de Migración y Extranjería confirms that Philp
boarded a Continental airlines flight with direct service between
San José and New York, surprising officials since the investigation
had just gotten underway on Monday, following reports of payoffs
in awarding the ALCATEL contract for GSM cellular service.

ALCATEL was awarded a contract valued at US$149.000.000 dollars to
install 400.000 GSM cellular telephone lines, that would add to the
country's TDMA cellular network.

The GSM contract was the second contract awarded to ALCATEL by ICE.
A contract valued at US$109.000.000 was awarded to ALCATEL in May to
install a fixed telephone central system.

According to Pablo Cob, president of ICE, José Antonio Lobo was a
member of the board of directors that approved the ALCATEL contracts.

Philp left the country on the same day that the Spanish daily
newspaper La Nación broke the story of the payoff. Official at the
Ministerio Público were quick to add that notwithstanding the woman's

departure, the case will remain open and an active investigation will
be conducted.

The report comes on the heels of the Contraloria General de La
Republica (Comptroller's office) not approving the Ericsson contract
for 600.000 new GSM cellular lines, following reports of clandestine
meetings between former ICE executives and Ericsson, among other points
of contentions the Contraloria had on the contract.

ALCATEL, along with other communications firms had bid on the new
contract, however, Ericsson was chosen by the ICE board of directors.


*Pacheco brushes off questions on Alcatel donation

Reporters for the Spanish-language media pressed President
Abel Pacheco Tuesday to explain why he and his political campaign
accepted $100,000 from Alcatel, the French telecommunications firm.

The donation was revealed earlier Tuesday by the newspaper La Nación
as part of a larger exposé of some $9 million paid by the French firm.
The company won a series of contracts worth $260 million to provide
upgraded cellular telephone service in Costa Rica.

Reporters wanted to know how come the donation came illegally from
a foreign entity, why it was not reported to the Tribunal Supremo de

Elecciones, as the law provides, and why the campaign accepted a
donation in an amount greater than the law allows.

Pacheco did not answer the questions directly. He was in the middle
of explaining how his government was mobilizing to fight corruption.

La Nación interviewed Luis Fishman, the second vice president who is
in exile from the Pacheco government. Fishman, who managed Pacheco's

presidential campaign, confirmed that he had received the money in his

personal account and said that all of it went to the campaign.

He also said that Pacheco attended the meeting where Édgar Valverde,
manager of Alcatel, agreed to support the campaign. Also there was
Roberto Tovar, said Fishman. Tovar, who now is the foreign minister,
handled campaign financing.

The money coming to Pacheco and others appears to have a connection
with an earlier continuing scandal. An engineer at ICE appears to
have accepted $77,000 from the French firm, and that money came
through Marchwood Holdings Inc. Marchwood is a Panamanian company
headed by Walter Reiche Fischel, the former head of the pharmaceutical

company that bears his second surname.

Reiche Fischel is in jail under investigation in the payment of some
$8 million in loan commissions to various politicians connected with
the Caja Costarricense de Seguro Social. The Caja purchased medical
supplies from Finland with a $38 million loan



*BAC San Jose Seeks Those Who Started Rumors

The BAC San José bank confirmed that four suspects were involved in
the false rumour that was spread on August 10, of the bank's imminent
failure and the ensuing rush of depositors to withdraw their savings.

Gerardo Corrales, manager of the BAC San José explains that the
Ministerio Público does not consider the spreading a rumour a crime
and the bank has to make a case for defamation and proceed in a civil
court case.

The BAC San José has received support from the Banco Central de
Costa Rica and Superintendecia de Entidades Financieras so that
this type of situation does not repeat itself.


*Poder Judicial Gets More Manpower to Combat Scandals

The president called on the officials for a quick resolution to
the scandals that have been plaguing the country the last couple of
weeks - the Fischel-Caja and the Alcatel payoffs head the list.

The government is giving the Poder Judicial a boost with more
manpower and an increased budget. However, the Fiscal General (head

prosecutor), Francisco Dall'anesse, says that the government handout
just barely covers the cost of the current investigation his office is

conducting.

The Poder Judicial will have a budget of ¢9.100 million colones
(a little over US$20.000.000 dollars) for the 2005 calendar year.



*Delta Adding Second Daily Flight to Costa Rica

Delta Air Lines Inc. is adding a handful of new routes in Latin
America as part of the carrier's strategy to do more lucrative
international and long-haul flying that low-cost competitors haven't yet

encroached on.

The additional connections between Atlanta and several Latin American

countries may also help bolster Atlanta's bid for the permanent
headquarters of the secretariat for the Free Trade Area of the Americas,
say Delta executives and local economists.

Delta plans to add a second daily flight in December to San José,
Costa Rica, as well as São Paulo, Brazil. The carrier also plans
to re-enter Buenos Aires, Argentina, and it will begin service to
Belize before the end of 2004.

The Latin American market represents one of Delta's biggest growth
segments, showing a 10.4 percent increase in revenue so far this year,
from $270 million during the first half of 2003 to $298 million for the
same period of 2004. Delta has flown to Latin America only since 1997,
when it inherited some routes to Mexico and the Caribbean through its

acquisitions of Western Airlines and Northeast Airlines.



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