Foreign Relations of the United States, 1951, The United Nations; The Western Hemisphere, Volume II

611.18/3–151

Policy Statement Prepared in the Department of State

secret

Washington, March 3, 1951.

Costa Rica

a. objectives

Our specific objectives in Costa Rica are to: 1) encourage the adoption and practice of policies which will preserve the democratic tradition of that country; 2) cooperate in the development of sound economic and fiscal policies as a basis for democratic progress; 3) obtain full Costa Rican cooperation in the Inter-American System for hemispheric security¹ and solidarity; 4) seek Costa Rican understanding of and support for US policy on extra-continental matters and in the United Nations; and 5) promote friendship and cultural collaboration between the people and the Governments of the United States and Costa Rica.

b. policies

General Background Information

For 300 years the Spanish colonists and their descendants lived a simple and isolated existence on the Central Plateau of Costa Rica. Their economy was virtually non-monetary, based upon barter exchange, and no families of great wealth or political domination were created. The Spanish culture and predominantly European blood-strain, with but a relatively slight mixture of indigenous blood, was retained to a large degree. As a result, there is less social stratification in Costa Rica than there is elsewhere in Latin America, the literacy rate is high, and the standard of living is higher generally than in any other Central American republic.

Costa Rica has a long tradition of political democracy, as the outgrowth of these unique and favorable conditions. It has never maintained an army, except during the times of national emergency, and has relied upon a small police force to maintain law and order. The introduction of coffee and bananas during the past century brought about a profound transformation in the economic and social life of the country. A monetary economy was evolved and the population of the Central Plateau greatly increased, so that nearly 75 percent of the entire population is concentrated in this area. Most of the domestic economic and social problems of Costa Rica today have their roots in this heavy population concentration in a limited area, and in the monetary and fiscal problems which grow out of an unbalanced economy.

In 1948, a successful popular revolution was waged against a corrupt and discredited regime² which, with Communist support, had attempted illegally to perpetuate itself.³ On November 7, 1949, after being ruled by a Provisional Junta for 18 months, Costa Rica returned to a constitutional form of government. Six weeks of civil war intensified the fiscal and monetary problems which today remain unsolved in spite of energetic efforts of the new government.

We have believed the form of Government in Costa Rica to be exemplary in Latin America, and it was our policy, while recognizing the Provisional Junta which governed after the civil war, to encourage its early relinquishment of power in favor of a truly constitutional government. It remains our policy to support Costa Rica’s efforts to adhere to these democratic traditions and to assist by all practical means in the establishment of a solid political, economic, and social basis upon which this tradition may survive and flourish.

Recognizing that a sound economic structure is an essential element of political democracy, it is our policy to provide, when requested, and usually on an expense-sharing basis, technical assistance and advice for the attainment of worth-while objectives. To implement this policy we are cooperating directly with Costa Rica in educational, health and sanitation programs, and in various agricultural projects to stimulate the production of food, rubber, coffee, and abacà.⁴ We support and participate in the cost of the Inter-American Institute of Agricultural Sciences at Turrialba, and, in order to provide the communication network necessary for economic progress, we have supervised the construction of the Inter-American Highway, making major contributions to its over-all cost and granting substantial loans to Costa Rica for this purpose.

It is also our policy to support and encourage the investment of private US capital in Costa Rica. We have endeavored to point out to Costa Rica the advantages of such investment and of encouraging and maintaining an atmosphere in the country which will be conducive to this activity. It is also our policy to encourage the adoption and practice of policies by US firms operating there which recognize the changing economic, social and political ideas of the economically less advanced areas. Where necessary, we advocate the renegotiation and modernization of existing contracts in conformity with enlightened, modern practice. This is considered to be essential to the continuation of harmonious foreign operations in the face of a growing sense of nationalism, expanding labor organizations, and the like.

A continuous unfavorable balance of payments since 1944, chronic unbalance in the Government’s budget, and dislocations arising from the civil war of 1948, have brought the country’s finances to a virtually chaotic state. It is our policy to encourage the present Government of Costa Rica to take determined measures to put the Costa Rican financial house in order, and to reestablish its international credit on a satisfactory basis at an early date.

It is our policy to encourage Costa Rica to participate fully in the Organization of American States, to promote the growth of the Inter-American System, and to adhere to the principles of hemispheric peace, solidarity, and security. To this end we recognize and respect Costa Rica as an equal with full sovereignty, consult with her representatives on matters affecting the Western Hemisphere internally, encourage the solution of problems with neighbor states by lawful and peaceful means, and seek Costa Rican support in presenting a solid Inter-American front in extra-continental matters.

Costa Rica’s support of US global foreign policy has a particular moral value despite that country’s small size. It is our policy, therefore, to consult with Costa Rican officials on extra-continental questions of mutual interest, to acquaint them with our point of view, and to seek their support generally and in the United Nations.

Costa Rica’s democratic characteristics have made possible a truly genuine friendship with the United States. It is our policy to cultivate this friendship as a means of strengthening that country and the example it provides of what may be achieved through the democratic system. To this end, we support a full cultural and information program, including an educational mission and a Cultural Institute. We also support the exchange of professors and provide grants for the specialized training of Costa Ricans in the United States.

c. relations with other states

At the conclusion of the civil war in 1948, leaders of the deposed regime escaped into Nicaragua taking with them certain aircraft and arms. To date, the Nicaraguan Government has refused to return this materiel to Costa Rica and, as a result, the relationships between these two countries have been strained. While it is our policy to seek a direct, bilateral, and peaceful solution of this problem, we have informally counseled, when asked, that the materiel be returned or that Nicaragua make a fair compensation therefor.

As a result of assistance given to the revolutionary leader Figueres⁵ in 1948, Costa Rica, with other countries, was for a time utilized by elements of the erstwhile Caribbean Legion⁶ as a base of operations. This added to the strained relations with Nicaragua, since the strong man of that country, Somoza⁷ (then chief of the National Guard) was a consistent target of the Legion. At one point, Nicaragua was accused of violating the territory of Costa Rica with the result that the Organization of American States was called upon to intercede to maintain the peace of the Hemisphere.⁸ It is our policy to watch carefully the activities of all free-booting international groups, to encourage the exchange of accurate information regarding their activities while discouraging the dissemination of irresponsible rumor, and to seek to have Costa Rica, as all nations in the area, disassociate itself from them entirety and prevent the use of its territory for concentration of their men and materiel. The present administration in Costa Rica has, from its inception, avoided any dealings wth the Caribbean Legion or other similar groups.

Recently there have been disturbing reports to the effect that, with the knowledge and support of President Somoza of Nicaragua, ex-President Picado of Costa Rica is preparing in southern Nicaragua for an armed adventure against his homeland. Although these reports are largely discredited, we are carefully watching possible developments and are prepared to take feasible action in favor of a peaceful solution, if necessary. There are also similarly disturbing but unsubstantiated reports that ex-President Figueres of Costa Rica is forming an armed group on his farm in northern Costa Rica for military action. Presumably such activity would be directed against Nicaragua and might be utilized by Somoza as a pretext for “defensive” action.

Costa Rica officially and its citizens individually have paid less lip service to the aim of Central American Union than have other nations in the area. It is our policy not to encourage or impede efforts to arrive at a satisfactory formula for Central American economic or political union. We recognize that such a union can and should come about only upon the initiative and by the agreement of the interested states.

d. policy evaluation

On November 7, 1949 Costa Rica returned, with the inauguration of President Ulate,⁹ to a truly democratic and constitutional form of Government. During the first year of President Ulate’s administration much has been done toward the restoration of stability in the Government, and steps have been taken, such as disbandment of the Army, to insure continued adherence to democratic forms. Whether due in large or small measure to the efforts of this Government, there has occurred a transformation which is in conformity with our policy toward Costa Rica. Costa Rica’s opposition to Communism appears to be genuine and sincere. The Communist party has been outlawed in Costa Rica and the Government has given every indication of being alert to the threat of infiltration by the agents of international Communism, although it is not well equipped to cope with a real threat.

The desire of Costa Rica to take sound economic steps in an effort to strengthen its basis for political democracy has had our full approval. Our various cooperative missions are functioning to the satisfaction of both parties, and they are soon to be expanded under the Point IV program. We have obtained enabling legislation¹⁰ and a new appropriation which will permit the resumption in 1951 of limited work on the Inter-American Highway, a large part of which will occur in Costa Rica. The abaca program conducted under the Reconstruction Finance Corporation may also soon be expanded and, while contributing to the strength of the Costa Rican economy, is also helping to provide the United States with a source of supply for a fiber of great strategic value. The Inter-American Tropical Tuna Commission, recently established by the Governments of the United States and Costa Rica,¹¹ represents a step towards increasing the food supply of that country and of the United States through the properly regulated exploitation of a valuable resource in Costa Rican and surrounding waters.

We have successfully conducted negotiations for a final settlement of Costa Rica’s Lend-Lease obligation¹² to the United States and have concluded an agreement, subject to legislative approval in Costa Rica, to reamortize the Export-Import Bank debt of that country on a mutually satisfactory basis. We have also received indications that Costa Rica will shortly take up with the Foreign Bondholders Protective Council the matter of resuming service on its outstanding publicly-floated bonds which have long been in default.¹³ After consultation with the International Monetary Fund, Costa Rica has resorted temporarily to stringent exchange controls and multiple exchange surcharges as a method of dealing with its pressing balance of payments problem. The situation has improved to the point where foreign exchange is available currently for essential imports and also has been provided for settlement of a considerable part of the formerly frozen backlog of commercial obligations arising from past imports. It is hoped that Costa Rica will soon take steps in collaboration with the Fund to simplify its complex exchange rate system. The above-mentioned exchange surcharges, however, constituted a violation of our trade agreement¹⁴ with Costa Rica. To assist in the solution of the problem, the United States agreed to a one-year waiver of certain provisions of the agreement. No permanent solution to the problem has yet been achieved, and it may be necessary for us to agree to a termination of the agreement¹⁵ or to an extension of the waiver.

There have been no serious problems resulting from US capital investment in Costa Rica, and the minor ones which have recently arisen, particularly with respect to labor relations, have been satisfactorily solved. It may be anticipated, however, that expansion of the labor movement in Costa Rica will lead to a more noticeable conflict between labor and management interests which may call for the reexamination of policies followed by some firms in an effort to achieve a more liberal and modern approach to the problem of their operation in foreign countries. In 1949, the largest US firm¹⁶ in Costa Rica paved the way for better relationships by renegotiating and modernizing its contract with the Government. The new agreement enables Costa Rica to benefit directly from the successful operation of the firm through a form of profit sharing. This company has also made more recent concessions to labor and to the Government of Costa Rica.

Costa Rica has continually assumed its full role in the Inter-American organizations, bringing to them a commendable spirit of democratic practice. It is believed the present Government will continue to Support the ideals of continental solidarity and hemispheric security, since it has recently contributed to the maintenance of peace in the Hemisphere by eschewing association with the Caribbean Legion and other such organizations. Because of its long anti-military tradition, Costa Rica does not maintain a standing army, relying for its internal security on a national police force. The role of Costa Rica in hemispheric defense, therefore, would be a minor one as regards manpower. Costa Rica’s participation in the Inter-American System, however, is more likely to insure valuable moral cooperation and support and to make possible the use of Costa Rican territory for air and naval bases in the event of a threat from an extra-continental power.

Costa Rica has been a consistent supporter of US foreign policy and its objectives and strategy in the United Nations. Costa Rica’s offer of military bases to the Unified Command for use in the defense against aggression in Korea was accepted, and the Government has declared its willingness to offer several companies of National Guardsmen for military police duty in Korea under the Unified Command.

We have been successful in preserving friendship between the United States and Costa Rica, which is based fundamentally on an identity of democratic tradition, and our cultural, educational, informational, and technical cooperation in other fields should contribute to its continued growth. Costa Rica, although a very small country by comparison, is recognized and treated as an equal by the United States. This fact, as well as our scrupulous avoidance of any encroachment on Costa Rican sovereignty is warmly acknowledged and appreciated.

1. For documentation concerning United States policy with respect to hemisphere defense and related matters, see pp. 985 ff.
2. Reference is to the regime of President Teodoro Picado Michalski.
3. For documentation on this subject, see Foreign Relations, 1948, vol. ix, pp. 488 ff.
4. A planty yielding fiber for the production of manila hemp.
5. José Figueres Ferrer.
6. A group of political exiles and military men from countries in the Caribbean region, with the alleged aim of overthrowing certain dictatorial regimes in the area. For documentation on the activities of the Caribbean Legion, see Foreign Relations, 1949, vol. ii, pp. 437 ff.
7. Anastasio Somoza Garcia.
8. For documentation on this subject, see Foreign Relations, 1948, vol. ix, pp. 488–542, passim, and the editorial note in ibid., 1949, vol. ii, p. 436.
9. Otilio Ulate Blanco.
10. Reference to the Second Supplemental Appropriation Act (Public Law 911), approved January 6, 1951; for text, see 64 Stat. 1223. The act authorized an appropriation of $4,000,000 to continue survey and construction of the Inter-American Highway.
11. The Inter-American Tropical Tuna Commission was established by a convention signed at Washington, May 31, 1949, and entered into force March 3, 1950. For text, see TIAS No. 2044, or 1 UST 230.
12. For information on the conclusion of a Lend-Lease settlement arrangement with Costa Rica, see the editorial note printed in Foreign Relations, 1950, vol. ii, p. 842.
13. During the fall of 1951, Costa Rican officials met several times with representatives of the Foreign Bondholders Protective Council (FBPC), but no specific bond settlement plan was agreed upon.
14. Reference to the Reciprocal Trade Agreement between the United States and Costa Rica, signed at San Jose, November 28, 1936, and entered into force, August 2, 1937; for text, see Department of State Executive Agreement Series (EAS) No. 102, or 50 Stat. 1582.
15. By an exchange of notes at Washington dated April 3, 1951, and entered into force on the same date, the United States and Costa Rica agreed to joint termination, effective June 1, 1951, of the trade agreement between the two governments which had been signed on November 28, 1936. For text of the notes, see TIAS No. 2237, or 2 UST 841; they are also printed, along with a press release dated April 4, in the Department of State Bulletin, April 23, 1951, p. 662.
16. Apparent reference to the United Fruit Company.