Costa Rica looks set to back free trade with US

SAN JOSE, Costa Rica, Oct 7 (Reuters) Costa Ricans appeared to narrowly approve a free trade deal with the United States in a referendum on Sunday that has split the Central American nation like no other issue in decades.

Almost 52 percent of Costa Ricans backed the Central American Free Trade Agreement, or CAFTA, according to returns from nearly 86 percent of polling stations. Forty-eight percent were opposed.

If the results hold, the vote will lift Washington's standing in Latin America where the U.S. image has suffered in recent years after leftist leaders took power in countries like Venezuela and Bolivia.

Supporters of the trade pact, led by Nobel peace laureate President Oscar Arias, say Costa Rica needs to open its economy more since it is a small country with few natural resources.

''There are a lot of opportunities (with free trade), more possibilities for the country to grow,'' said Liliana Cespedes, owner of a small gym.

The agreement would expose state-run sectors like telecommunications and insurance to competition from foreign firms.

Critics say it will mean a flood of cheap U.S. farm imports and limit the country's sovereignty by taking investment disputes to international arbitration.

Costa Rica's government supports the trade agreement, but it is the only country not to have ratified CAFTA -- which includes Guatemala, El Salvador, Honduras, Nicaragua and the Dominican Republic.

The referendum split the coffee-producing nation of 4 million people, with Arias and businesses warning Costa Rica would lose investment and jobs if it did not get on board CAFTA.

In the largest march in Costa Rica in years, about 100,000 people filled the streets of the capital last weekend to protest the trade pact.

Opinion polls in the run-up to voting showed the country split almost evenly over the trade accord.

Costa Rica, which has no army and boasts of pristine beaches and jungles, has enjoyed almost uninterrupted democratic government for over a century and has much better free education and health care than its neighbors.

REUTERS SR GC1153