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 with Costa Rica2 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 19423 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. Rate 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.4
- Agreement between the Export-Import Bank and the Republic of Costa Rica signed on January 31, 1946, whereby the Export-Import Bank agreed to accept partial payments on the notes and bonds and to waive certain other requirements with respect to the credits of $2,000,000 and $5,000,000; a copy of the agreement was transmitted to Costa Rica in instruction 340, February 1 (818.51/2-146). The credit of $2,000,000 was established by an agreement between the Republic and Eximbank of July 9, 1942, and a supplementary and amendatory agreement of September 28, 1944; the credit of $5,000,000 was established by an agreement between the Republic, the National Bank, and Eximbank of August 21, 1941, as amended November 13, 1942, and April 7, 1943.↩
- For press release of September 25, 1940, on this subject, see Foreign Relations, 1940, vol. v, p. 736; for documentation on the loan agreement of July 9, 1942, see ibid., 1942, vol. vi, pp. 239–252.↩
In airgram 169, April 23, 1946, Ambassador Johnson informed the Department that Costa Rica had officially accepted the agreement of January 31, and that it had been published in La Gaceta of April 23, 1946, as Legislative Decree No. 503 (818.51/4-2346).
In telegram 475, June 4, 1946, to San José, Ambassador Johnson was informed that the Export-Import Bank had considered an application of the Electric Company of Costa Rica for a line of credit amounting to about $250,000 for assistance in financing the cost of equipment and material for a new hydroelectric plant; that after a review of the facts presented by the company, and also the financial condition of Costa Rica at that time, had denied the application (818.51/6–446).↩