Office of the Historian

84. Memorandum of conversation, September 13, among Edwin M. Martin, Ambassador Facio, and other Costa Rican and U.S. officials1

September 13, 1962
[Facsimile Page 1]

SUBJECT

  • U.S. Assistance in Costa Rican Budget Crisis

PARTICIPANTS

  • Edwin M. Martin—Assistant Secretary ARA
  • Gonzalo Facio—Costa Rican Ambassador to the United States
  • Jaime Solera—Former Board Chairman, Central Bank of Costa Rica, and Financial Adviser to President Orlich
  • John W. Fisher—Deputy Director—CAP
  • Oliver L. Sause—Director LA/CAP
  • V.P. Randolph III—OIC Costa Rican Affairs

Mr. Solera remarked that President Orlich had asked him to come to Washington to bring the answers to a questionnaire on the Costa Rican fiscal situation submitted to Ambassador Facio by the Department and to be of whatever help he could in the discussions on the GOCR request for U.S. financial assistance. Mr. Solera said he realized that any sort of U.S. aid, if extended, would come too late to be of much assistance to the GOCR in the remainder of 1962 but that he felt the GOCR could probably get through the rest of the year without external help, provided the GOCR could receive assurance of U.S. financial help in 1963. He said the situation was serious; he noted the September 12 suspension Central Bank cashing of GOCR employees’ checks for lack of ready cash; and he emphasized that the GOCR needed an answer one way or another very shortly in order to know where it stood and make plans accordingly. He said he could remain in Washington until September 20, when he had to return to San José.

Mr. Martin replied that he was fully aware of the problem; that he appreciated the need for a rapid decision by the Department; and that he was encouraged by the report he had received of progress made at Mr. Solera’s meeting September 12 with Messrs. Fisher and Sause. He said the Department would try to make a decision before Mr. Solera left Washington.

Mr. Solera expressed his gratification at this. He stated that the day before it had been suggested that U.S. assistance to the private sector of the economy would improve Costa Rica’s reserve position [Typeset Page 218] and thereby be of indirect assistance [Facsimile Page 2] in the current budget crisis. Mr. Solera said he felt this would not be attacking the immediate problem of budget deficit but would be nonetheless helpful. Mr. Sause observed that one way for the U.S. to help would be expansion of the present agricultural credit loan. Mr. Solera mentioned that it had been suggested that the United States might consider assuming the costs of certain development projects identified in the 1963 budget. Mr. Solera said all these measures would be helpful to the GOCR.

Mr. Martin said that he could make no commitment at this time but that he thought all these suggestions could be usefully pursued. He inquired as to the progress of the GOCR’s own self-help measures, especially in the field of taxation. Mr. Solera and Ambassador Facio assured Mr. Martin that the GOCR legislative reform program was going well, with all its measures either already or about to be passed. Mr. Solera stated that many additional economic and fiscal reform measures, some quite unpopular, would be undertaken by the National Liberation Party. He added that if Costa Rica did not receive any external assistance in its budget crisis the GOCR would be forced to adopt drastic “unorthodox” financial measures, including discouraging imports through prohibitive duties, which would make Costa Rican participation in Central American integration quite difficult indeed. Mr. Martin inquired concerning general business conditions in Costa Rica. Mr. Solera replied that they were better now than in 1961 and that although the business community had confidence in the Orlich Government, failure to resolve the budget crisis was having a disquieting effect on the country’s economy. Before taking leave of Mr. Martin, Mr. Solera said that the GOCR urgently needed a period of grace in repaying its Export-Import Bank loans and asked Mr. Martin if he could help arrange this. Mr. Martin said he was not informed on the legal aspects of such an operation, but he would see what he could do about it. He agreed that delay in the Exim bank repayments would be a desirable part of a package arrangement for U.S. help in the GOCR budget crisis.

  1. U.S. assistance in Costa Rican budget crisis. Official Use Only. 2 pp. DOS, CF, 811.10/9–1362.↩