Bankers lose patience with Costa Rica

Press, 5 June 1982, Page 14

Bankers lose patience with Costa Rica

By

PAUL ELLMAN

in San Jose, Costa Rica

Once it was a country which set an example to its violenceprone neighbours: it abolished its Army, deciding that the income from its rich soil was better spent on schools and hospitals; its policemen more often carried screwdrivers than pistols, so they could remove licence plates from cars',which violated parking regulations; and, every four years it went to the polls peacefully to elect a new President and Parliament. Today, although still the only functioning democracy in Central America, Costa Rica is a candidate for the title of the world’s most bankrupt nation and is nervously contemplating the prospect of being sucked into the political violence which afflicts the rest of the region. It has also had to begin rearming itself. The country’s new President, Mr Luis Alberto Monge, spent his first week in office last month sending out distress signals to the world’s financial institutions for short-term aid to allow his Government to meet some of the commitments it has inherited. By any standards, let alone those of a country the size of Costa Rica which has a population .of a little over two million, the debt burden is staggering. At $4 billion it is enough to make Costa Rica, after Israel, the second most indebted nation per head in the world. The problem is that Costa Rica has by now too often

reneged on its debts for Mr Monge to hope for much of a sympathetic hearing. Almost 100 American, European and Japanese banks have been told not only can they not expect to be paid back the principal on any of the loans they have made, but also that no interest payments will be forthcoming. Costa Rica has an equally bad record with international financial institutions: it has broken all eight agreements reached with the International Monetary Fund, three of them in the past 20 months. Bankers dispute Costa Rica's claim that it cannot afford to pay back anything. They point to the fact that export revenues this year are expected to total $9OO million — only 8 per cent less than the average and a manageable decline compared to the genuine catastrophes presently confronting other Central American nations like El Salvador, which has seen its export earnings fall by more than 40 per cent.

Offended bankers point to recent indulgences by Costa Rica like the installation of a sophisticated 14-channel cable TV system fed by satellite from the United States, and the allocation of $93 million to the national airline for new aircraft as proof that Costa Ricans cannot give up the sweet life.

“If they can find the money for these new toys, why can’t they find some for us? If only

they would put just a little aside to show willingness to pay some interest," lamented one foreign banker in San Jose. _ Nevertheless, although San Jose remains an elegant oasis of calm in Central America, its style a blend of Paris and Madrid, the storm is not far away. Inflation is running at 117 per cent, unemployment has doubled to almost 20 per cent and stores are finally running short of imported luxuries.

President Monge warned in his inauguration speech that the country faced a choice between “national consensus and chaos” if its democratic institutions were to survive growing social tensions. . Some are already thinking in terms of the bullet as a better solution than the ballot box, with an embryonic terrorist movement springing up among disillusioned university students and a number of arms caches being uncovered by police, among them one at the home of the head of the Communist Party. -The greatest danger lies in the deteriorating relations between Costa Rica and neighbouring Nicaragua. Costa Ricans, who always despised the dictatorship of Anastasio Somoza, were at first proud that their country served as a base for, and supplied financial help to, the Sandinista movement which overthrew him in 1979. They then became a little peeved when the Sandinistas

jeered at their democracy as “bourgeois." Now they are becoming more than a little frightened by the open hostility being shown by Nicaragua, whose delegation was booed by some of the crowd at Mr Monge’s inauguration. The tension between the two countries has grown in recent weeks since the arrival in San Jose of Mr Eden Pastora, who as “Commandante Cero" was the main military figure in the Sandinista insurrection but who has now broken with his former comrades, denouncing them as "traitors” .and claiming that they are turning Nicaragua into a Soviet satellite. Mr Pastora has said he will open his own guerrilla offensive against the Sandinistas, in effect a second front to match the one operating out of Honduras by Right-wing exiles, and has been scouting around the jungle of the eastern border area which served as his old base of operations against the Somoza dictatorship. Costa Rica, which has had no Army for 40 years, is illequipped to cope with any conflagration which might occur on its borders with Nicaragua, whose armed forces have been strengthened with the help of Soviet bloc countries. It has come to rely on the 3000 men of its inexperienced Civil Guard, most of whom obtained their positions through political patronage and are thus replaced after each election, to provide what little defence it has.

To cope with the growing danger. Costa Rica has indicated that it will accept military assistance from the United States and has launched

a programme to.equip the Civil Guard with mortars, heavy machine-guns and Ml 6 carbines. — Copyright. London Observer Service.