Foreign Relations of the United States, 1952–1954, The American Republics, Volume IV

818.10/2–752

The Second Secretary of the Embassy in Costa Rica (Cunningham) to the Officer in Charge of Central America and Panama Affairs (Siracusa)

confidential
official–informal

San José, February 7, 1952.

Dear Ernie: I have no doubt that it still is the desire of the Department to bolster the Ulate Administration for the reason stated in your letter of last July 11.¹ That letter spoke of the basis on which the Department could support Costa Rican loan applications. I’m writing you now because of the change in the local attitude toward the need for loans and in line with your suggestion that we tell you of any ideas we might have to accomplish the Department’s objective.

As you probably know, the IBRD mission that visited Costa Rica was of the general opinion that the country’s financial position and outlook warrant the granting of loans up to an unstated amount. The Bank’s reaction to Ambassador Oreamuno’s attempt to discuss loans, however, caused deep resentment here with unfortunate reflections against us because of the fact that even among people who should know better (Mario Echandi,² for example) there is a conviction that the United States has practically a decisive voice in IBRD decisions. The Costa Rican decision to carry out its public works and agricultural development programs without IBRD assistance is sound even though it was prompted by resentment against the Bank’s rebuff.

It is the present intention to apply to the Bank only for a loan for electric power development and at the present rate of progress such an application will not be ready for submission within several years.

I can’t help but feel that the decision to discontinue negotiations with the Foreign Bondholders, an Ulate decision apparently reached in anger, was unwise if only for the reason that resumption of payments will continue to be a prerequisite of such a loan. As the opportunity offers we shall continue to point out the desirability of resuming payments on the foreign debt.

From our position, slightly behind the eight ball because of IBRD’s handling of Oreamuno, the situation appears about as follows. Ulate has spent the first two years of his term in doing a splendid job of recuperating the country’s financial position. This sort of accomplishment does not impress Fulano de Tal, as Otilio knows, and so his plan for the last two years of his term is to accomplish things which will impress Fulano—a new airport, more roads, more schools, assistance toward improved and increased agricultural production, etc. He has until November 1953 to do that but the elections will be held by July 1953 at the latest.

There are indications that Figueres³ is not as strong a candidate today as he was a few months ago but it would be unwise to underestimate his possibility of election.

There are several things we might concentrate on in the economic field during the time that is left to us to attain our objective.

1. Make our Point IV program effective to the extent that by the end of this year, 1952, we can point to accomplishments rather than plans. Toward this end I suggest you look over Ambassador Fleming’s⁴ despatch no. 828, January 16, 1952.⁵ I understand that IIAA already is planning for local publicity and this work could be coordinated with 5 below.

2. Reexamine the Alajuela Airport project to determine how we can contribute to the fullest extent to the speedy construction under Costa Rican financing. Our Civil Aviation Mission (Mr. Vigna) already has suggested changes in the plans which will effect considerable savings in construction time and costs. Experts on other phases of the project might examine it to advantage. Advice and assistance on supplies and equipment might expedite work and effect savings.

3. Periodic reexamination of the Inter-American Highway project in Costa Rica with the ultimate objective of completion of as much of that work as funds possible to allot to it will permit by the end of the dry season in 1953.

4. (This is a tough one but with delicate handling may be possible now that Cía. Nacional’s⁶ position vis-á-vis the Government has improved so substantially during the last year.) Through three-way cooperation between the local Government, U.S. agencies in Washington, and Cía. Nacional, (1) attempt to evolve a long range electric power development program in spite of local apathy, (2) draw up plans and specifications for the necessary generating plant or plants, (3) work out a satisfactory plan for financing the plant, and, (4) assist within our possibilities in obtaining an IBRD loan authorization for the project.

If there is any possibility of accomplishing all this in one year the most positive contribution a third party could make perhaps would be to overcome some of the irritating antagonisms that now exist. There remains the possibility that technical problems would prevent completion in a year.

5. Conduct a sustained and discreet but effective publicity program in Costa Rica and designed for Costa Rica by OIE (in conjunction with IIAA) to keep pounding away on the main theme—United States contributions to the development of Costa Rica, where democratic principles now are being so well upheld. Do you recall a talk you and I had during your visit about direct application of OIE facilities in this field?

6. (This one is awfully vague.) Now that United Fruit is beginning to become aware of its need of a public relations program, it might be possible for the Department to point out to them how they might attempt to overcome some of the antagonism toward Cía. Bananera by showing how it contributes to the country’s over-all development. We would not take part in their campaign.

The above program is ambitious and there is no guarantee that it would be successful. If it’s worth trying, it will take concerted effort here, in the Department, and among the agencies that will be involved. Any chances of success would require a lot of time by someone who would be made responsible and see it through.

The Ambassador and Phil⁷ agree that these thoughts might merit some consideration; we recognize that it is extremely vague.

Sincerely yours,

Fred Cunningham

1. Not printed.
2. Costa Rican Minister of Foreign Affairs.
3. Jose Figueres Ferrer.
4. Philip B. Fleming.
5. The referenced despatch contains a discussion of Point IV development programs in Costa Rica (818.00 TA/1–652).
6. Reference is to Cía. Nacional Fuera y Luz (National Power and Light Company of Costa Rica), a subsidiary of American and Foreign Power Company.
7. Philip P. Williams, First Secretary of Embassy, San José.