Central America’s model State under threat

Press, 13 November 1981, Page 12

Central America’s model State under threat

From “The Economist,” London

Costa Rica, with its tradition of free elections, social welfare and respect for human rights, has long been held up by Latin Americans as proof that democracy can indeed survive in this region of guerrillas and generals. Now even Costa Rica is in trouble. Its central bank is unable to keep up payments on the country’s $2.4 billion foreign debt, labour unrest mounts in step with inflation, and the Government of President Rodrigo Carazo Odio displays greater incompetence by the day. . Rumours of a possible coup are no more than symptoms of hysteria, since Costa Rica cleverly disbanded its army in 1948 and there is no paramilitary group strong enough to hold power by force. Even so. the country’s democratic foundations are being eroded by growing waves of discontent. Costa Rica is suffering, like so many others, from the impact of world prices on a tiny developing nation. The rise in its oil import bill and the drop in the price paid for its coffee' exports over the past 18 months have shattered an economy tht depends on foreign trade, causing huge payment deficits that foreign bankers are unwilling to

finance. In addition, although Costa Rica itself is still peaceful, it is in Central America — a part of the world foreign investors now understandably over-fly. The Carazo Administration has also contributed generously to Costa Rica’s troubles. First it claimed that the problems existed only in the imagination of the opposition; then it alienated foreign bankers, the International Monetary Fund and even President Reagan’s Administration. In the year since the local currency was unhooked from its fixed parity, its value has dropped from 8.60 colones to the dollar to 30 colones. In June a S33OM emergency loan was worked out with the I.M.F. but no money has yet been released because the Costa Ricans ignored their part of the deal. Last month, without a hard cent in its coffers, Costa Rica called together its 140 creditor banks and asked for a renegotiation. The impact at home of all this has been predictably devastating. Wages have been frozen, but prices have already risen by 46 per cent this year. Crippled by the lack of foreign exchange, manufacturing firms have had to lay off thousands of workers. People still in jobs

are striking. Cutbacks in government spending on social services have produced a political backlash from a population long milk-fed by a welfare state. Optimists in San Jose say that Costa Rica is becoming like Britain; pessimists talk of Uruguay. A beam of hope is that Mr Carazo. now more unpopular than any president in memory, will leave office next May. The man most likely to win the election in February is Mr Luis Alberto Monge. He is not himself an inspiring figure — Mr Carazo beat him in the 1978 election — but he has a strong team around him. Though he is a social democrat, he has dissociated himself clearly enough from the Left-wing position on El Salvador to be acceptable to Washington. Already, foreign bankers and international organisations have begun dealing with him in the hope that an economic recovery strategy can be put together by May. The Reagan Administration, intent on its bid to isolate the Sandinists in Nicaragua and to defeat Left-wing guerrillas in El Salvador and Guatemala, have so far barely reacted to the threat to Latin America’s oldest democracy. The American Assistant Secretary of

State for inter-Americah affairs, Mr Thomas Enders, is known to have little time for President Carazo. This is not only because the president helped to install the Sandinists in Nicaragua but also because he reportedly enriched himself

in the process. There is more to it than this; the Reagan Administration has already shown that, it is readier with military aid than with economic aid. After three terrorist incidents in San Jose earlier this year, the United

States delegate to the United Nations, Mrs Jeane Kirkpatrick, quickly offered to train Costa Rica’s improvised security forces. The country’s increasingly desperate cries for emergency financial aid have gone unanswered.