Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

CR–10. Despatch from the Chargé in Costa Rica (Godfrey) to the Department of State¹

No. 42.

San José, July 30, 1958

SUBJECT

• Analysis of United States and Other Assistance Programs in Costa Rica

In conformity with the Department’s Circular Telegram of May 5, 1958,² there is provided the following overall analysis of United States objectives and the role of various United States and non-United States programs in Costa Rica for fiscal year 1960. Since Ambassador Willauer was suddenly called to Washington³ it was impossible for him to review this despatch. However, the substance of the message was reviewed with him and the points included in the “special objectives” section were dictated by him.

Summary

United States assistance in Costa Rica under the Mutual Security Program, in both its military and civilian phases, is primarily directed toward technical assistance. There is no grant aid program. There is at present only one loan project, which was provided under the “Smathers Amendment” appropriation. Most of the technical assistance is given under the auspices of the International Cooperation Administration and is civilian in nature, which is entirely in keeping with both our own objectives in Costa Rica as well as coinciding with Costa Rica’s own traditional boast of being a country “with more school teachers than soldiers”.

Our civilian and military assistance programs are especially directed toward the U.S. objectives of (1) encouraging the growth of a healthy progressive economy based on the free enterprise system and (2) contributing to the maintenance of internal security and stability. The achievement of those objectives will, we believe, best serve to assure a close friendship and cooperation between our two countries in meeting and resolving the economic and political problems facing the United States in this Hemisphere and in the rest of the World.

Special Objectives in Costa Rica

Ambassador Willauer wishes to emphasize the following special aspects of our objectives in Costa Rica, which while of special significance in an evaluation of our MSA program in this country, still fall well within the general U.S. policy objectives.

1. Costa Rica: A “Pilot” Operation. Because of its demonstrated adherence to democratic principles and practices and because of the relatively high educational and cultural standards of its people, Costa Rica enjoys a prestige in Latin America out of all proportion to its diminutive size. What happens in Costa Rica has a special exemplary significance to other Latin American peoples who are striving toward a more democratic social and political system.

Therefore, Costa Rica offers an excellent opportunity as the stage of a “pilot operation” which could well serve as the example and inspiration for a much broader scale application elsewhere in Latin America. Furthermore, its small size makes it possible for experimental and demonstration work to be done in Costa Rica at much less cost than in larger countries.

Thus, our objective in Costa Rica goes much beyond the actual contribution we may make just to Costa Rica. The implications of our successes - or our failures - on this small stage will be immediately observed by a much larger audience in this Hemisphere who have their eyes trained on this little country. It should be our purpose to make the most of this special opportunity to demonstrate our willingness and our ability to help Latin America evolve toward a sound economic system based on democratic principles.

2. The Issue: Private Enterprise Versus Socialist Tendencies. After the five years of the Figueres Administration (1953–58), with its ever increasing inclination toward socialism, there was inaugurated in May of this year the Administration of Mario Echandi, who had campaigned on a program to reinstate private enterprise as the primary motivating force in the economy of the country. Since a primary U.S. objective is to prove that faith and reliance on the free enterprise system is justified, it follows that a major U.S. objective in Costa Rica is to help Echandi fulfill his campaign pledge.

Last week President Echandi stated his position to Ambassador Willauer along the following lines: “Since I have championed the cause of private enterprise, the overall success of my Administration in improving economic conditions in Costa Rica will either aid or hurt the concept of private enterprise throughout this Hemisphere. Quite apart from any definite accomplishment I may achieve in my own country in improving economic conditions will be the repercussion my success will have elsewhere in Latin America. My success or my failure will be noticed and will help tip the scales one way or the other. Specific projects may or may not succeed, but the general result of my Administration must be favorable. If it is not successful, the fact that a man campaigned for private enterprise and failed will be used as an argument throughout Latin America for more socialism.”

The basic need for positive results and their urgency was highlighted in an intimate meeting held a few days ago to discuss the possibility of holding a Central American Investment Conference in San José in February 1959,⁴ with President Echandi, Ambassador Willauer, and some prominent Costa Rican and American businessmen present. It was frankly stated that the investment climate still prevailing in Costa Rica is hardly propitious for holding such a conference with positive results, at least so far as Costa Rica is concerned, and the outcome of such a meeting would hinge on the change in the general economic climate which could be achieved in the meantime.

President Echandi faces serious immediate obstacles in accomplishing his frequently reiterated objective of strengthening private enterprise. He is essentially a minority president having been elected with less than a plurality of the votes. The Legislature is controlled by the only well-organized political party which is devoted to the semi-socialistic policies of former President Figueres. Echandi must depend for anything resembling a significant bloc in Congress upon the votes of deputies led by former President Calderón Guardia, who initiated social reform in Costa Rica. A number of the important aspects of Costa Rican economic life are in the hands of autonomous institutions created by Figueres and manned by, at least for some time, officers sharing the Figueres economic philosophy. Perhaps most important, the danger of a drop in the price of coffee presents the possibility of severe economic and psychological consequences. As an outspoken and so far fearless spokesman for private enterprise, Echandi needs carefully planned assistance in overcoming these obstacles and leading Costa Rica toward a system of freer enterprise.

3. Planning: The Longer Range Need. While there is urgent need at the moment for special help to reverse the trend toward socialism, a major need for the long run is an economic plan for the country. Only such a plan will assure orderly progress toward a strong free enterprise economy as well as assure that U.S. assistance will make the most effective contribution toward that objective. Some rather haphazard planning exists within certain individual Ministries of the Government, but there is no centralized planning and only a minimum of coordination at the Council of Government (Cabinet) level. The need of such overall centralized planning was pinpointed by the recent Eisenhower study group as probably the most basic need of Costa Rica.

Therefore, Ambassador Willauer believes that a primary objective of our technical assistance program in Costa Rica should be to arrange within the near future for an economic advisory team to study the economic needs and possibilities of Costa Rica and to formulate an overall economic plan for the country. This could be done by a private organization, even preferably so, at a cost of not less than $100,000 and perhaps twice that amount. The recommendations resulting from such planning would be an important factor in determining our future technical assistance program. Specific projects of technical assistance might be undertaken on a contract basis. To the extent any such contracted projects might duplicate the present USOM program, the latter would obviously be reduced to avoid any overlapping.

The program as now planned would continue until a plan was finally devised, and it is quite likely that a majority of the current projects would be included, since they are designed to help resolve what are undoubtedly basic problems of the country. The difference would be the assurance that our technical assistance contribution was being used to the best advantage by Costa Rica itself in achieving its planned goal.

Operational Aspects of U. S. Technical Assistance⁵

a. Balance Between Programs, Both U.S. and Other. The overall “program” of United States assistance and other activity in Costa Rica, in addition to the work of the Embassy itself, is composed of the following essential elements:

(1) The Mutual Security Program devoted to technical assistance in agriculture, health, education, housing, public administration, the complementary training program in these and certain other fields, a loan of 2 million dollars for the construction of the Children’s Hospital; (2) Eximbank loans in the amount of approximately $21,000,000; (3) the international Exchange of Persons program involving a limited number of leader grants, exchange of teachers, and training activities; (4) the Military Mission, which comprises a program of training and assistance to the public forces of Costa Rica; (5) the Inter-American Geodetic Survey, carrying out aerial and other surveys required for an extensive mapping project; (6) the sizable grants made available or the construction of uncompleted portions of the Inter-American highway through Costa Rica, administered for the United States by the Bureau of Public Roads; (7) the public information program of USIS including principally press, radio and motion pictures.

The problem of ensuring the maintenance of a proper balance among the elements of these programs and among the programs themselves is a continuous preoccupation of the Embassy. A systematic approach to the exchange of information and consultation on new projects, particularly between the Embassy and USOM, is provided in general meetings of agency heads with the Ambassador, and day to day consultation between officers of the Embassy and those of other agencies. In addition, the detailed program submissions of USOM have been thoroughly reviewed by the Chief of the Economic Section of the Embassy with the appropriate officers of USOM.

As a result of this continuous, and as required, special review, it is the Embassy’s view that there are no special problems of imbalance between the various United States programs and activities in the country. Since the activities of the Inter American Geodetic Survey (IAGS), an agency of the Department of the Army, are in the mapping field and therefore not primarily military, the only military program is that carried out by the Army Mission. An underdeveloped country, Costa Rica therefore receives the major portion of assistance from the United States in the economic rather than the military field. Given the general orientation of Costa Rica, as described above, this balance is believed to be in harmony with United States objectives. However, there are certain phases of assistance in the military field to which additional attention might well be given. These will be dealt with in a separate despatch.⁶

Non-United States assistance activities in Costa Rica are carried out by several international organizations including the United Nations Technical Assistance Board, the Food and Agriculture Organization, UNESCO, World Health Organization, UNICEF, the International Labor Organization, and the International Rank of Reconstruction and Development. In addition CARE has a small program in the country, and there are small assistance efforts by certain European countries.

Through the serious and careful study of USOM, considerable progress has been made during the year on the primary problem of determining just what activities are carried on by these various non-United States agencies and the extent to which they may be duplicating or overlapping United States programs. In general there do not appear to be any serious problems of imbalance between these and comparable non-United States programs in the country. However, as set forth under “e” below, it is believed that there is substantial room for improvement in the coordination attempted by the Costa Rican Government itself in order that the most effective use of those international organization assistance programs can be made.

b. Capability to Utilize Assistance. A majority of U.S. assistance is applied through the “Servicio” technique. These “Servicios,” such as STICA for agriculture and SCISP for health, are joint U.S.-Costa Rican administrative agencies, which make it possible to apply technical assistance on a daily operational basis. This close operational relationship of U.S. technicians with their Costa Rican counterparts greatly facilitates achieving the ultimate goal of full administrative and operational responsibility by the Costa Ricans themselves. It assures the most effective use of our technical assistance as well as a much larger degree of complementary participation in the project by the host government.

c. Implementation of U. S. Policy. A careful review of the proposed U.S. assistance program for FY1960 (especially of the ICA program, which comprises the majority of such assistance) has been made and it is the Embassy’s opinion that all projects have a direct relationship with U.S. policy objectives. They are especially directed toward promoting the growth of a dynamic, diversified economy based on the free enterprise system. They will undoubtedly also assist in meeting the special policy objectives outlined above. For example, during the Eisenhower study group visit the problem of expanding rural credit for diversification of agriculture was emphasized as being of special importance and it is being given a high priority by the Echandi Administration. This problem had already been appreciated by the USOM/CR and, in fact, two days after the Eisenhower visit the head of the Rural Credit Board of Costa Rica departed for the U. S. on a special rural credit study tour that had been programmed long before the Eisenhower visit.

d. Minimum to Meet U.S. Objectives. While it is possible that some rearrangement of projects, and especially of priorities, might result from such an overall economic plan as that proposed elsewhere in this report, the current program on the basis of current evaluations does not exceed the minimum required to achieve U. S. objectives in Costa Rica. In fact, such an economic plan might well result in recommendations in an expanded or accelerated program. Certainly in view of the need to add such a project for an economic survey justifies the observation that the current program is less than the minimum required to achieve U. S. objectives.

e. Coordination Between Various Assistance Programs. There is undoubtedly a need for more coordination of the various assistance programs in Costa Rica, especially by the Costa Rican Government itself. It is precisely the solution to this lack of planning and coordination which has been presented here as a special objective. The various Ministries and autonomous institutes are all busily engaged in formulating plans and competing among themselves for the limited facilities available for their execution.

There is no problem of coordination between the various U.S. programs, since the Ambassador has established procedures which assure a constant review of U.S. projects both in the planning and execution stage. The USOM is often effective in advising the various Government agencies against entering into projects which would cause duplication of effort or be misdirected in an unproductive direction. The need for more coordination is being constantly brought to the attention of Costa Rican officials by U.S. officials, but the machinery for such coordination, especially in the planning stage, simply does not exist.

A review has been made of all current projects being conducted by United Nations agencies and other international organizations. While some of them, such as the FAO, are working on projects that are closely related to some U.S. projects, there is no current duplication of specific projects. While reservations may be made as to their relative effectiveness, most of these non-U.S. projects may actually be considered as complementing our own objectives. Embassy and USOM officials are developing a close association with the UN technical assistance director for this area in an effort to implement further coordination.

There is a small but increasing amount of technical assistance being given by other countries, especially France and Germany. Coordination, if any, of these efforts lies solely within the Costa Rican Government, but no serious problems of overlapping have been noted to date.

Special Operational Suggestion

A limiting factor in granting larger scale assistance to Costa Rica is the fact that unlike the situation existing in many other Latin American countries, Costa Rica does not have any funds available from PL480⁷ sales nor is there any prospect of obtaining such funds under the current rules. While funds may be available to the country from international lending institutes for defraying the foreign exchange requirements of development projects, it is not possible to take advantage of these available lending resources because of the inability to finance out of current budgets the local currency cost of such development projects. Ambassador Willauer believes it is poor Hemisphere economics to base economic development on the accident of a special country’s ability to create counterpart funds by the use of Public Law 480. More thought should be given to the possibility of creating a common fund from the counterpart funds created in various countries for use in development projects throughout the Hemisphere. Until such time as funds for local use are available, Costa Rica would be greatly limited in pursuing any development program which might evolve from the overall economic plan cited as a special U.S. objective in this country.

Conclusion

It is believed that the degree of consultation and review constantly being carried on among U.S. officials in Costa Rica gives ample assurance of an effective U.S. assistance program in Costa Rica, both in planning and in execution. The Embassy is firmly of the opinion that emphasis must be given toward implementation of what have been cited as special U.S. policy objectives in Costa Rica. It is quite likely that these will form the basis of subsequent recommendations for additional U.S. assistance for Costa Rica. Aside from any such special program, in the meantime, the current assistance program is undoubtedly contributing toward an eventual solution of some of the major economic and social problems of the country.

Richard A. Godfrey
Commercial Attaché

1. Source: Department of State, Central Files, 718.5-MSP/7–3058. Official Use Only.
2. Circular telegram 1043 to San José and certain other U.S. diplomatic missions called for an analysis by the Chief of Mission of the foreign assistance programs in the host country for fiscal year 1960. (120.171/5–558)
3. Willauer left San José, July 28, 1958, for consultations with Treasury officials in Washington on reallocation of UFCO’s taxes. He returned to San José on August 15.
4. No record of the proposed conference was found in Department of State files.
5. The following comments are made with special reference to Paragraph 2, Cirtel, May 6, 1958. [Footnote in the source text, Cirtel, May 6, 1958, was not found in Department of State files.]
6. The despatch under reference was not further identified.
7. Reference is to the Agricultural Trade Development and Assistance Act of 1954, approved July 10, 1954, which provided for disposal of agricultural surpluses. For text of the Act, see 68 State 454.