Foreign Relations of the United States, 1961–1963, American Republics; Cuba 1961–1962; Cuban Missile Crisis and Aftermath, Volumes X/XI/XII, Microfiche Supplement

72. Despatch 360 from San Jose, January 24¹

San Jose, January 24, 1962

REF: [illegible in the original]. SUBJECT: President of Costa Rica expresses concern over 1962 Sugar Allocation.

SUMMARY:

President Echandi called the Ambassador in on Tuesday, January 16, and talked with him for two hours about the concern currently felt in Costa Rica over the 1962 US sugar allocation. The President felt that the US was discriminating against Costa Rica in comparison with Nicaragua and Panama, that the depressed prices for coffee and bananas make sugar exports at quota prices vital in the Costa Rican foreign exchange picture, that any reduction in quota and allocation from last year’s 30250 tons will mean serious losses to numerous mill owners and thousands of small producers in Costa Rica, and he noted that commiefront PADP leader Enrique OBREGON Valverde has already begun to exploit the current apparent discrimination evident in the 1962 allocations to create anti-US sentiment. The Embassy shares the President’s concern, and urges that the US take prompt action to assure Costa Rica of an allocation for 1962 at least equal to last year’s 30250 tons, and if possible an increase proportional to that granted Nicaragua.

The Ambassador visited President Echandi on January 16 at the President’s request for a discussion of the 1962 US sugar quote and allocation to Costa Rica, a discussion which lasted two hours during which Echandi made the following significant points:

1.) Discrimination against Costa Rica becomes evident in any comparison between the quotas and purchase allocations made to Costa Rica in 1961 and for the 6 month period ending June 30, 1962, and the quotas and allocations made to Costa Rica’s neighbors, Nicaragua and Panama over the same period.

COUNTRY	Total Quota & Purchase Allo. 1961	Quota of Purchase Allo. to 6/30/62	% of 1961 quotapurchase allo. granted for 1st 6 mo. of 1962.
Costa Rica	30250 Tons	5000 Tons	16.7 %
Nicaragua	43368 Tons	50000 Tons	112.9 %
Panama	10000 Tons	5000 Tons	50.0 %

The President asked for some explanation of this apparent discriminatory pattern, to which the Ambassador was unable to respond. The Embassy requests that the Dept. furnish us urgently with an account of the rationale on which the current allocations are based. The Embassy notes that the sugar report for Nicaragua submitted by the Agricultural Attaché on Oct. 7 ’61 predicts an export availability for 1962 of 60000 tons “of which 50000 tons can be shipped in the first six months.” A parallel report on Costa Rican sugar, dated Oct. 10, ’61 predicts an export availability for Costa Rica of 45000 tons “during calendar year 1962.” The Embassy is hopeful that these reports have furnished the basis for 1962 allocations, and that current planning envisages an additional 40000 ton allocations, to Costa Rica. However, national rivalries in the area being what they are some public announcement of US interests to redress the balance between Nicaragua and Costa Rica should be made promptly, or subsequent allocations may well be regarded as defensive responses to (partly commie) local outcry.

2.) Echandi stressed the obvious importance to Costa Rica of holding the line and if possible increasing sugar exports as a foreign exchange counterbalance to currently depressed coffee and banana income. The GOCR has indeed been striving to diversify agricultural production away from these two traditional export earners, and any reduction in quota or allocation at this point would both reduce Costa Rica’s already weakened foreign earnings position and would deal a heavy blow to Costa Rican efforts at agricultural diversification.

3.) The President particularly emphasized the point (often made in Embassy despatches and reports on the sugar situation in Costa Rica) that a reduction in quota and allocations and consequent reduction in overall income from Costa Rica sugar exports would affect a relatively large number of people in Costa Rica, where 10% of the population depends for at least a part of their livelihood on sugar production. (There are an estimated 27,000 small sugar producers and a total of 33 ingenios (sugar mills) in operation throughout Costa Rica.) He compared this situation with that of Nicaragua where sugar production is controlled by a relatively small number of large producers (notably including the Somoza family) and with Panama, where two large producers, one of them the President, reportedly own virtually all refining and production capacity. The Ambassador and Embassy [illegible in the original] been shown several new or improved and augmented [illegible in the original] representing a substantial new investment in Costa Rica’s sugar production capacity-based on expectations of at least a 50000 ton allocation for the future. Many of these new plants are owned and operated by Cuban refugees who have settled in Costa Rica and who in turn play a significant role in alleviating the Cuban refugee problem here by furnishing employment to other refugees. A reduction in sugar purchases at the quota price is likely to bankrupt a number of these struggling enterprises right at the start. In addition, the Embassy wishes to point out that the most immediate sufferers among producers should the sugar price weaken are apt to be the many thousands of small producers who lack the resources to withstand an adverse crop year. Their only resource in hard times is to sell their land—usually at a low figure and usually to larger landholders, a situation which runs directly contrary to the land reform objectives of the Alliance for Progress.

4.) Finally, the President called attention to the recent increase in publicly expressed concern over the sugar situation in Costa Rica. During the past two weeks articles and paid advertisements have appeared in the San Jose press (see attachments) deploring the low allocation to Costa Rica for the last 6 months of 1962, and giving a pessimistic prognosis for the future of the economy if the US does not respond to Costa Rica’s needs. Not unexpectedly Enrique Obregon Valverde, US-hater and commie-party-lining candidate for the presidency on the PADP ticket is among the most articulate spokesmen of this concern, using the comparative allocations to Nicaragua and Panama in support of his party’s thesis that Costa Rica’s economy is overly dependent on the US which is committing Costa Rica along with the rest of Latin America to bankruptcy. (see attached advertisment of PADP). Echandi noted that the current situation provides for the moment virtually irrefutable documentation for all opposition elements to indulge in demagoguery at the expense of the US, and that if US assurance of an increased allocation is not forthcoming soon they will be able to claim that future increases are the result of their agitation.

COMMENT:

The Embassy concurs in the President’s estimate of the importance to Costa Rica’s economy and to the 10% of the population dependent on the sugar market of insuring that the US purchase in 1962 at least 30000 tons of sugar from Costa Rica at the quota price. Further, in view of the increased investment in sugar production in the country and the desirability in terms of US objectives of agricultural diversification away from past dependence on coffee and bananas to urge that if possible total quota and allocation purchased from Costa Rica total the 45000 tons recommended by the agricultural attaché in his survey of Oct. 10, 1961. On several occasions and prior to the announcement of the 1962 (6-months) [illegible in the original] and expansion of the sugar industry and its importance to the economy of the country have been reported to Washington by the Embassy. This was done in an effort to bring this matter to the constant attention of those concerned in Washington, and so consideration would be given to this information in the establishment of sugar quotas. Also, the Ambassador during his recent visit to Washington, discussed this matter and expressed his concern to the Department and to representatives of the Department of Agriculture.

The Embassy considers this a serious matter affecting not only the B program of Alianza para Progreso, but our friendly relations with a good friend of the United States. Costa Rica is a country that stands out as a champion of democracy in the midst of the Latin-American countries, and is a loyal ally and consistent supporter of U.S. policy both in the U.N. and in the OAS. The Embassy cannot place sufficient emphasis on the seriousness of this problem, and it is believed that unless there is a satisfactory answer to this apparent disturbing situation, undoubtedly the sugar industry and the economy of Costa Rica will face a further serious crisis. Finally, the Embassy hopes that the Departments of State and Agriculture will coordinate with the Embassy on the public relations aspect in connection with future allocations, so as not only to counter current dissatisfaction over the comparatively small quota to date for Costa Rica, but to stimulate the maximum possible popular satisfaction from subsequent increases. Further and most important so that the U.S. Government will receive full credit for this assistance instead of a third party or private intermediary.

Raymond Telles

Ambassador of the United States of America

Enclosures:

1. Telegram from President of Costa Rica

2. Newspaper clippings: La Nacion Dec. 14, ’61, Jan. 13, 14, 16, ’62

3. Le Prensa Libre, Jan 5, ’62

4. La Republics, (Not Dated)

5. Letter—“Liga de Proteccion a la Agriculture de la Ceña”

6. Petition of Ingenio de Birris

1. President Echandi’s concern over 1962 U.S. sugar allocation. Official Use Only. 4 pp. DOS, CF, 818.235/1–2462.