810.154/663
The Minister in Costa Rica (Sack) to the Secretary of State
[Received November 22.]
Sir: In further reference to the Department’s Instruction No. 96 of October 17, 1934,23 and my reply thereto of October 26, 1934 (Despatch No. 47724), on the subject of aid by the Government of the [Page 483] United States to the Government of Costa Rica in the construction of the proposed Inter-American Highway, I have the honor to attach herewith copy and translation of the note of the Foreign Minister in reply to my note No. 134 of October 22, 1934, wherein I transmitted to this Government the instructions of the Department of State with reference to contemplated assistance to countries which are cooperating in the construction of the proposed highway.
The Department will observe that Mr. Gurdián acknowledges “the very great importance” of the highway and anticipates the benefits which will accrue from its construction. At the same time the Foreign Minister—and his viewpoint is transmitted after conversations, to my knowledge, with President Ricardo Jimenez and other officials of the Government—very frankly points out the financial difficulties immediately confronting actual construction. On this subject Mr. Gurdián says:
“…25 Costa Rica’s difficult situation has obliged my government to effect inevitable economies in its expenditures in order to avoid budgetary deficits, and to suspend, through a prior arrangement with its American and European creditors, the service on its foreign debt. Under these conditions, the country finds it impossible to assume new obligations, which according to the estimates of the cost of the Inter-American Highway in the country, would mean an increase of one hundred per cent in the external debt of Costa Rica.”
This debt is now approximately twenty-four million dollars upon which no interest is being paid, and upon which the resumption of interest payments and amortization of principle is not even being discussed.
In an informal conversation with Señor Gurdián on October 22, the day I personally presented the note embodying the Instruction No. 96 of the Department, the Foreign Minister emphasized the financial difficulties confronting construction and he asserted at that time that while the Government is considering all possible solutions of the problem no particular plan of financing up to now has been regarded as feasible. In his conversation Mr. Gurdián said that the Government has considered the revenues to be derived from increased gasoline taxes; from the granting of a concession to an outside corporation for the construction of the road; from proposed bond issues; from toll charges, et cetera, but no plan up to now has been considered feasible.
In this connection may I direct the Department’s attention to the estimated costs for the proposed highway in Volume 2 of the Reconnaissance Surveys made under the direction of the Bureau of Public Roads of the United States Department of Agriculture.
[Page 484]These estimates contemplate the construction of 312.7 miles (503.2 kilometers) of road in Costa Rica.
- Table 19, planning merely the grading and surfacing of the road with local materials and the construction of the necessary bridges, estimates the cost at $11,145,206.25.
- Table 20, contemplating the use of an oil surface, estimates the cost at $11,516,693.85.
- Table 21, contemplating the use of concrete and the construction of a thoroughly modern highway in every respect, estimates the cost at $25,907,156.
This is a sum, as I recall, greater than the estimated cost of construction in any of the other Central American countries. May I point out at this point that all of the new highway construction in Costa Rica made with current revenue funds is of concrete and that this Government, whether rightfully or wrongfully, is of the opinion that nothing but concrete will survive the terrific downpours which are almost daily occurrences during the eight and a half months of the annual rainy season. It is also true that the United States Bureau of Public Roads contemplates a 20-foot highway as the minimum width for safety and anticipated traffic, whereas most of the present Costa Rican highway construction is confined to the dangerously narrow width of 12 to 16 feet which makes it difficult for speeding cars to pass in safety.
The Department will agree, therefore, that the estimated cost of $25,907,156, for a properly constructed highway in Costa Rica presents a real problem to this country and one which the Government of a necessity must consider regardless of its desire for the highway. As a matter of fact, construction of a concrete highway through the mountainous terrain of Costa Rica with all modern safety devices and with increased utilities on curves, would unquestionably double Costa Rica’s national debt.
On the other hand the report of the engineers properly emphasized the great increase of Costa Rican wealth which would result from the construction of the highway and I find myself in complete accord with conclusions which hold that the highway will more than pay for itself through the additional prosperity and the increase in agricultural and economic resources which should result from the opening up of hundreds of miles of territory north of San José toward the Nicaraguan border and south of the capital in the direction of Panamá.
Unfortunately, this view is not held by a sufficient number of Government officials and leading citizens to stimulate a real public enthusiasm in Costa Rica for the highway. In addition there exists the unquestioned suspicion—and this feeling prevails in official as well as unofficial circles—that the United States Government is keenly interested in [Page 485] the proposed highway because of its desire to further increase the defenses of the Panama Canal. An important section of Costa Rican public opinion anticipates that economic and political developments will some day force a war between the United States and Japan and that the United States is pushing the highway in order to have an overland means of transportation for our troops. Even such an enlightened Costa Rican as President Ricardo Jimenez has had this suspicion in the back of his mind.
The note of the Foreign Minister calls attention to the fact that the survey as recommended by the United States engineers routes the highway between the towns of Naranjo and Las Cañas (Plates Nos. 23, 24 and 25 of Volume 2 of the Reconnaissance Survey) too closely parallel to the line of the Government-owned Pacific Railroad, and would thereby create a source of competition for the railroad. The Foreign Minister suggests substitution of a different route, if technically possible, to eliminate this proximity to the railroad. He does not, however, say that Costa Rican engineers will be directed to make a new instrument survey to discover a substitute route.
May I direct the Department’s attention also to this paragraph of Mr. Gurdián’s note:
“Having set forth the economic conditions of the country in relation to the great undertaking referred to in your note, my government expresses its thanks for the valuable cooperation offered by the Government of the United States, and accepts it if Costa Rica is found to meet the situation which the American Congress had in view in passing the appropriation laws cited in the note under reply.”
By way of further exposition of the Costa Rican viewpoint may I call attention to a recent letter by the editor of El Diario de Costa Rica to the Foreign News Editor of the Associated Press, a copy of which is enclosed herewith.26
In accordance with the statement in the Department’s Instruction No. 96 to the effect that it will be glad to receive any recommendations I may care to submit, which invitation I assume is inclusive of the entire subject, may I respectfully offer the following thoughts;
First; I do not believe it will be advisable for the United States Government at this time either directly or indirectly to appear to be hurrying Costa Rica into a decision on the project which will involve a great outlay of cash, or a further increase in the public debt.
Second; I feel that as the work progresses in other countries of Central America and in Mexico that Costa Ricans of their own accord will come to the conclusion that they are missing something and that they then will manifest more interest in the project than at present and will show a greater desire to participate in its proposed benefits. In other words, I feel that the ultimate success of the project, insofar [Page 486] as Costa Rica is concerned, will be greater if the decision to go forward is one that is dictated by a genuine public and official enthusiasm, and at present no such enthusiasm exists.
Third; I feel that it will be very inadvisable for the United States Government at this time, and perhaps in the future, to assist directly in the payment of the cost of construction other than is contemplated in the acts of Congress referred to in Instruction No. 96.
Unquestionably there does prevail in Costa Rica a desire on the part of many people, including land owners, for the very generous United States, as an act of good neighborliness, to come along and say in effect: “Don’t worry Costa Rica, we will build the road for you.” Nothing would please some Costa Ricans better than this, but even if the United States was so generously inclined there are sufficient politicians in the Costa Rican Congress who would not only look such a gift horse in the mouth but would denounce the alleged motives of the United States for such generosity. In such a gesture the Nationalists would again visualize “Yankee Imperialism”.
I feel that the only justification which might exist for the expenditure by the United States Government in Costa Rica of a sum sufficiently large to finance all or the greater part of the highway in this country, would be the construction of a military highway wherein the ends would justify the means and the question of cost would not be a factor. In such an event the United States could then afford to turn a deaf ear to the protests of the Nationalists, but otherwise I am confident our motives would not be appreciated and would always be questioned.
Fourth; I do not believe it would be advisable for title United States to make available to Costa Rica any portion of the funds or materials contemplated in the acts of Congress until this Government of its own accord negotiates or commences a definite instrument survey as a substitute for that portion of the highway between the towns of Naranjo and Las Cañas to which objection has been made.
Fifth; if and when the United States Government should ever extend material assistance to the Government of Costa Rica, and if and when,—should this be done—American capital is employed to assist in the construction of the highway, I would stipulate that all materials purchased and all scientific assistance employed be American. Unfortunately, in the past Costa Rica has been know[n] to finance construction projects with American money (electrification of the Pacific Railroad) and turn right around and expend these dollars in material and equipment purchased in Germany.
Sixth; in the light of Costa Rica’s present default on its outstanding bonds, and in the light of the apparently indefinite date of resumption of payments of interest on and amortization of these bonds, I feel that the financing of this highway in Costa Rica by the sale of a bond issue to American investors as has been suggested by some people, even if permitted by the Department of State, would be a very risky and perhaps dubious financial venture. I would suggest that if ever the day comes when the Department feels inclined to favor the raising of funds in the United States to finance this project, the transaction be hedged with such restrictions that not only the security of the American investors is assured but the self-respect of the United States Government be also maintained in reference to inevitable subsequent outbursts of political leaders.
[Page 487]In conclusion may I respectfully summarize my reactions to the Costa Rican participation in the Inter-American Highway project based on observations during my 13 months in Costa Rica, and they are that Costa Rica will some day construct its sections of the Inter-American Highway and thereby furnish a complete road from Laredo, Texas, to the “Panama Canal but the impetus should be supplied by the Costa Ricans themselves from the standpoint of their selfish economic interests, and that in no way should the impression prevail that the “Yanquis of the North” are forcing Costa Rica either to accept or to build the road.
The Department may feel, as a result of my conclusions, that I am not in sympathy with the proposed construction of the Inter-American Highway. If, unfortunately, this opinion should prevail may I enter a denial in advance and say for the record that I not only visualize the actual highway as the greatest prospective economic and cultural development pending in Costa Rica but that I have neglected no occasion to informally and properly convey my enthusiasm to officials of the Government.
I can not help but feel, however, that the United States Government will make a great mistake if it appears in the light of a philanthropist giving to Costa Rica a gift of all or part of the cost of construction of this highway until such time as Costa Rica shows a determined spirit of effective cooperation in the execution of the project which will justify the financial aid of the United States Government in accordance with the intent of the Congress.
Respectfully yours,