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

No. 3130

Sir: I have the honor to report that in my opinion a recent editorial in the New York Times regarding the death of the Bolivian tin king Patiño made certain observations which are relevant to the situation in Costa Rica.

The editorial said, in part:

“In most Latin American countries today the majority of wealth is still held in a few hands. This is the basic reason for Communist penetration there. It is soil in which the weed of totalitarianism grows most: verdantly.”

I believe that the majority of Costa Rican wealth, apart from foreign interests, is held in a few hands.…

This group pays what amounts in many cases to near starvation wages and in general are opposed to social change or to reasonable social legislation. Their forebears controlled the country and they wish to maintain such control. They resent the fact that the Government has gotten out of the hands of the wealthy group and, alleging: distrust of the Government, evade as far as possible the payment of taxes. This year there were less than one thousand people who were paying any income tax at all.

Moreover, the taxes on the statute books, both as regards income and real estate, are infinitesimal compared to comparable taxes in the United States. Whenever the Government makes an effort to raise [Page 595] taxes in order to secure money to pay its employees—which payment is continually in arrears—the wealthy landowners, business and professional men sabotage the effort through one means or another.

It is obvious to me that this situation is a basic reason for possible Communist penetration. On the other hand, it may give rise to an effort toward totalitarianism government of another sort. Moreover, although the banks are in sound financial condition and merchants’ accounts paid up, business cannot continue to prosper under a semi-bankrupt government.

The above situation makes the formation of our own policy vis-à-vis-Costa Rica more difficult. We do not wish to see chaos in a country which after all is comparatively more democratic than other countries in Central America. We must, therefore, I think be sufficiently lenient in the readjustment of loans and even in the granting of small loans in the future, if such action is necessary, to avoid complete bankruptcy of the Government.

On the other hand, Costa Ricans must be taught that the United States is not a Santa Claus and that they must take steps to put their house in order before we are willing to help them financially in a measure which we otherwise might favorably consider.33

Respectfully yours,

Hallett Johnson
  1. In airgram A–80, March 19, 1947, the Department informed the Embassy in Costa Rica that the Export-Import Bank had not been approached either formally or informally regarding any credits since 1946, and the Department would not at that time recommend approval by Eximbank of any application for credit for domestic expenditures or for projects which were not self-liquidating and exchange-saving (818.51/2–1147).