The Minister in Costa Rica ( Sack ) to the Secretary of State

No. 1013

Sir: I have the honor to enclose herewith a memorandum2 prepared by Mr. Drew3 on the conversations occurring yesterday afternoon between the Foreign Minister, Mr. Gurdián, the Minister of Hacienda, Mr. Brenes, Mr. Drew and myself, when we called at Mr. Brenes5 office yesterday afternoon presumably for the purpose of putting our joint and final approval on the proposed trade agreement between the Government of Costa Rica and the United States. The memorandum recounts additional conversations held this morning between the Foreign Minister, Mr. Drew and myself when we called at Mr. Gurdián’s office.

I am enclosing also the text and translation2 of a proposed addition to the general provisions which Mr. Gurdián submitted to Mr. Drew and myself yesterday as a last minute amendment to the trade agreement.

The proposed amendment by Mr. Gurdián has the effect of permitting the Costa Rican Government to abandon the “most favored nation” policy in its treatment of steamship lines entering Costa Rica by the granting of special concessions to such companies as in turn grant special concessions in freight rates to Costa Rican shippers. Mr. Gurdián frankly declared that his proposal is for the purpose of giving his Government a weapon with which to retaliate against those “Conference” shipping lines, which in his opinion impose excessive freight charges on commodities moving in and out of Costa Rica.

Because the principal Conference lines serving Costa Rica are American-owned and operated, it is obvious that his plan is directly aimed at American shipping companies. Under the present Costa Rican law each and every shipping company presumably is treated [Page 374] identically and it is of interest to report here that because of the application of the “most favored nation” treatment in relation to shipping companies, the Costa Rican Government and the Grace Line have not as yet concluded a new contract. The Grace Line which at, I am told, a substantial loss in every sailing is bringing its big Santa boats into Costa Rica, and in return for this feels that it is entitled to certain concessions by way of reduced port charges, in view of the splendid additional passenger service it is giving to Costa Rica. Privately the Foreign Minister, Mr. Gurdián, agreed with the Grace Line view but he confessed his inability to accommodate the Grace Line because of the provisions of the “most favored nation” clause. Now Mr. Gurdián proposes to abandon the “most favored nation” clause in relation to shipping companies, in order that his Government will be free to grant any concessions or advantages to any company at any time without reference to uniform application of those concessions. Mr. Gurdián seeks to incorporate this theory into the proposed trade agreement.

As pointed out in Mr. Drew’s memorandum, to the best of our joint ability we endeavored to convince him that the trade agreement is no place for any contemplated action against shipping companies for alleged discrimination. I offered to cooperate with Mr. Gurdián in transmitting to the Department of State any complaints he had against American companies and any proposals he might care to recommend to remedy the situation he complains of, and I told him that I felt confident that the Department of State would give his request its most sincere and sympathetic consideration. Mr. Gurdián, however, did not believe that my offer would serve Costa Rica’s needs.

When I told the Minister that since in my opinion the Department of State would never consent to any modification or elimination of the principle of the “most favored nation” clause and that his insistence for such a modification might very possibly lead to a termination of the negotiations for a trade agreement, Mr. Gurdián nevertheless insisted that he could not recede from his position. Thus our conference ended yesterday afternoon.

This morning I telephoned the Foreign Minister and asked for an early appointment, which he fixed immediately. Accompanied by Mr. Drew I went to his office to ask him if he had not reconsidered his position. Mr. Gurdián replied in the negative and as an alternative he then suggested the removal entirely of Article VIII. I pointed out to Mr. Gurdián this morning that aside from abandonment of the “most favored nation” clause, the inclusion of his proposed modification in the trade agreement might have the effect of some day enabling an unwise government to resort to discriminatory tactics against [Page 375] American corporations, which tactics might inevitably lead to consequences disastrous to Costa Rica, in that the corporations might in retaliation withdraw their services entirely from Costa Rica. I tried to show him that such a provision meant the arming of a future government with powers to harass American corporations unfairly and to the detriment of Costa Rica’s economic development.

Mr. Gurdián told Mr. Drew and me that he would confer with the President and advise us later. At noon President Jiménez with his Cabinet and the members of his personal staff were guests at a luncheon in the American Legation. At that time Mr. Gurdián told me privately that President Jiménez is supporting his attitude.

The President, however, during a brief conversation I held with him seemed not to realize the possibilities of his Foreign Minister’s proposal. He informed me that he would discuss it again with Mr. Gurdián because, as he said, “I should hate to see Gurdián insist on anything which might jeopardize the trade agreement with the United States”.

The attention of the Department is also invited to page five of Mr. Drew’s memorandum reporting Mr. Brenes’ proposal to include a provision that the Costa Rican Government will be free to increase present wharfage charges (muellaje) for certain specified purposes. Inasmuch as the prevailing dues are uniformly low I do not believe that the proposed increase, even as large as fifty percent, would defeat the purposes of the trade agreement.

Despite the fact that the Spanish and English texts of the proposed general provisions were delivered to Mr. Gurdián in July of last year, and despite the frequent assurances I have received both from Mr. Gurdián and Mr. Brenes, even as late as last week, that the terms of the general provisions were satisfactory, they have at this late date proposed the two modifications discussed above and Mr. Brenes has not yet given me any assurance that additional modifications will not be forthcoming.

Since the foregoing was dictated Mr. Gurdián telephoned me to say that President Jiménez had requested him to tell me that in accordance with his (the President’s) promise to me at luncheon he had again discussed the proposed modifications with him, and that the President had told him that in the event the Department of State does not accept the proposed modification, further discussions will be held in an effort to find a formula which will satisfy the Department and at the same time embrace Mr. Gurdián’s objectives.

I shall appreciate the Department’s advice as to the best method of satisfying Mr. Gurdián’s viewpoint if he should continue to feel that my original counter-proposal to communicate his views to the Department of State is not acceptable.

Respectfully yours,

Leo R. Sack
  1. Not printed.
  2. Gerald A. Drew, Third Secretary of Legation.
  3. Hunter Miller (ed.), Treaties and Other International Acts of the United States of America, vol. 5, p. 985.
  4. Not printed.