The Chargé in Costa Rica (Trueblood) to the Secretary of State

No. 1334

Sir: I have the honor to report that in several recent despatches (no. 1212 of March 24, 1944 and 1250 of April 5, 19443) the Embassy has endeavored to give the Department an accurate picture of the serious condition of Costa Rican public finances. The consensus of observers here is that it will take at least one year before some order can be established and it will be perhaps six months or longer before some of the sources of revenues pledged by the Calderón Guardia Administration will become unencumbered. So far as the success and rapidity with which the fiscal situation can be cleared up, much will depend on the firmness of the Picado Administration4 in resisting pressures and in pursuing a resolute policy of retrenchment in [Page 884] public expenditures. The difficulties in the way of executing such a policy in a small country such as Costa Rica, where the public payroll plays such a large part in the national economy, cannot be exaggerated.

Unfortunately, the situation described above cannot help but affect unfavorably the degree of financial cooperation which the United States can expect from Costa Rica in the near future. For example, the following demands on the part of United States Government agencies have recently been made upon the Costa Rican Government:

The Public Roads Administration is desirous of obtaining financial assistance of the Costa Rican Government in prolonging the Pan-American Highway south of San Isidro. Please see in this connection the Embassy’s despatch no. 1290, April 17.5
The Defense Supplies Corporation has only recently persuaded the Costa Rican Government to assume a financial responsibility of $340,000 for the construction of a road linking up the proposed cinchona plantation6 with the existing highway system.
The health and sanitation program of the Office of the Coordinator7 requires financial assistance from the Costa Rican Government to terminate certain pending projects, notably the Filtration Plant at Tres Rios.
The Office of the Coordinator has presented a proposal to establish a Servicio de Educatión in Costa Rica which will require an outlay of $40,000 on the part of the Costa Rican Government.

While the Embassy does not in any way question the desirability of having projects jointly financed by the two Governments, still, under present circumstances it seems a highly doubtful policy to attempt to obtain further financial commitments from the Costa Rican Government when its finances are in such a shaky condition. Furthermore, the Department has indicated its desire that the authorities here be persuaded to renew service on the foreign debt. It does not seem entirely fitting that this measure which will have such an important bearing on Costa Rica’s future credit possibilities should be in any way impaired or postponed by the assumption of other obligations in the meantime, no matter how desirable the purposes of such obligations might be.

The foregoing circumstances are brought to the Department’s attention in the belief that it may be desirable to formulate some policy in this regard, which might be communicated to other agencies of our Government. It must not be overlooked in this connection that it would be a natural attitude on the part of the new administration of Señor Picado to agree to any cooperative plan proposed to him, since he and his advisers are desirous of establishing their friendly disposition to work with our Government. This might even induce [Page 885] them to agree to projects which are not needed at this time or which are beyond the country’s present capacity to finance.

Respectfully yours,

Edward G. Trueblood
  1. Neither printed.
  2. Teodoro Picado succeeded Rafael Angel Calderón Guardia as President of Costa Rica on May 8, 1944.
  3. Not printed.
  4. For correspondence on the proposed development of this plantation, see Foreign Relations, 1943, vol. vi, pp. 94 ff.
  5. Office of the Coordinator of Inter-American Affairs.