818.51/2–446: Telegram

The Secretary of State to the Ambassador in Costa Rica (Johnson)

51. Following is text of Eximbank announcement to press for release Feb 5: Board Directors Eximbank have approved an agreement [Page 895] with Costa Rica subject to approval of National Congress Costa Rica to revise amortization schedule on two loans totaling $7,000,000, Wayne C. Taylor, President of Bank, announced today. The loans were originally authorized by Eximbank in 1940 and 1942 to assist Costa Rica in construction of Inter-American Highway and tributaries and for emergency financing in Republic as a part of general plan of hemispheric defense.

By terms of new agreement repayment of principal scheduled to begin in 1946 is reduced during years 1946 through 1950, after which time Bank has agreed to review amortization rates for succeeding years in light of conditions then existing.

“The purpose of the new agreement,” Mr. Taylor said, “is to adjust loan maturity schedule as originally drawn to postwar conditions in Costa Rica. The new schedule of repayments will not only assist Costa Rica but also gives Eximbank greater assurance that repayments can and will be met in accordance with terms now established. This step has been under discussion with Costa Rica for some months,” Mr. Taylor said.

Original agreements provided for retiring $2,000,000 in full in period from 1946 to 1952 and $5,000,000 in period from 1946 to 1958. The loans were secured by Costa Rica’s pledge of tobacco and gasoline taxes. Annual payments of principal under original terms would have varied between $377,000 and $819,000 with an average between 1946 and 1950 of $520,000 per year. Eate of interest is 4%. In 1946 interest and principal due would have equaled about 7% of Costa Rica’s normal total revenues.

The new agreement provides that in the 5-year period from 1946 to 1950 Costa Rica shall make payments for interest and principal combined of not less than $350,000 per year plus any amounts by which gasoline tax receipts shall exceed this sum. For 5-year period Bank has agreed to release its claim upon tobacco tax in order to assist Costa Rica in strengthening her financial economy. The original agreement provisions will again come into operation in 1951 except as they may be modified by mutual agreement at that time.36

  1. This agreement of January 31, 1946, between the Government of Costa Rica and the Export-Import Bank was ratified by Congress on April 8 and signed by President Picado on April 10, 1946. It was published in La Gaceta, April 23, 1946, as Legislative Decree No. 503. (818.51/4–2346)