San José State University
Department of Economics
& Tornado Alley
History of Costa Rica
Historically Costa Rica has always been somewhat of an oddity. Its name means Rich Coast but it was one of the poorest regions of the Spanish Empire in the Americas. Now it is a relative prosperous Latin American country which does not have a standing army. It was also an undeveloped country that attempted to create a European-style welfare state.
Geographically Costa Rica consists of a central valley, called the Meseta Central bordered by mountain ranges and those bordered by coastal plains. The mountain ranges are part of the cordillera which spans the Americas from Alaska to Tierra del Fuego.
Shortly before European contact the Caribbean area was invaded by the Caribs from the north coast of South America. The Caribs were a warrior people who conquered the tribes they found in the area. The Caribs captured the territory in the coastal plain of what is now Costa Rica on the Caribbean side. In their marauding the Caribs acquired gold which they made into pendants.
In his last voyage Columbus came to Costa Rica. The year was 1502 when his ships sought refuge there from a storm. When the Europeans saw the gold pendants of the natives wore they thought the area must have sources of gold so they called it the rich coast, not knowing that the gold which the natives had came from elsewhere. The area seemed to have such potential for wealth that Christopher Columbus' brother Bartolomé stayed there with a ship to explore the territory when the main party moved on. Bartolomé's party found only hostility but the Columbus family maintained an interest in Costa Rica for decades, long after Christopher Columbus had died in 1506.
In 1502 King Ferdinand of Spain commissioned Diego de Nicuesa to explore the territory of Costa Rica and Panama, a territory that was then called Veragua. The Nicuesa expedition found only difficult terrain occupied by many hostile tribes. Costa Rica was not an easily conquered centrally-administered empire like that of the Aztecs and the Inca. Instead it was an anarchic patchwork of tribes and each piece had to be separately conquered. Nicuesa was not able to establish any permanent settlement. The next expedition, led by Gil González Dávila, found some gold in 1522 but ran into a territorial dispute with the Spanish administrator of Veragua in Panama. It was not until 1524 that even a temporary Spanish settlement in the territory was established. This was by Fernando de Cordova. However the same territorial dispute with the Spanish administrator in Panama led Cordova to abandon the settlement.
The Columbus family in 1534 obtained the right to explore and develop a large section of what is now Costa Rica. An expedition led by Felipe Gutiérrez ended in disaster. Another expedition in 1540 under Hernan Sanchez de Badajoz created a temporary settlement but again territorial disputes, this time with the Spanish administrator in Nicaragua, and hostile natives ended the settlement. It was not until 1559, after six failed attempts over almost sixty years, that a permanent settlement was established in Costa Rica. This was achieved by Juan de Cavallón on the Pacific coast. When no gold was found in the region Cavallón left in 1562, but he was replaced by Juan Vasquez de Coronado. Coronado in 1564 entered the highlands of the Meseta Central and established Cartago. It was only the central valley highlands that had the potential for sustaining a permanent settlement.
In 1539 the authorities of the Spanish Empire made Costa Rica independent of the Veragua administrators in Panama and in 1542 it was given the status of gobernación with its own administrators. But in 1568 Costa Rica was made part of the Kingdom of Guatemala. This Kingdom of Guatemala included, in addition to what is today Guatemala; the state of Chiapas in Mexico, Honduras, El Salvador, Nicaragua and Costa Rica. At that time what is now the state of Guancaste of Costa Rica was included in the territory of Nicaragua. Some elements of the administration of Costa Rica at that time were handled by administrative authorities in Nicaragua.
Since there were no sources of gold in Costa Rica those who came came to farm. The native population was too sparse to support plantation agriculture so those who came came to do their own farming. This fact determined the character of Costa Rica and made it different from other Spanish colonies.
In the early days about the only farming that was feasible in the Meseta Central (central table-land) was subsistence farming. The journey to either coast was over mountains and through difficult lowlands. There were no connecting roads to Nicaragua. Few migrants came. By 1700 the population in Costa Rica, which is about the size of West Virginia, was only 20,000. Of these about 2,500 were originally from Spain. There were about 20,000 natives in the area as well at the time.
Generally all of the Costa Ricans were poor, but there were social class distinctions based upon ancestry. Some were hidalgos (gentlemen) and the others were plebeyos (plebians, commoners). The hidalgos had certain social privileges not enjoyed by the plebeyos, but fundamentally Costa Rican farmers were all about the same.
Despite their being poor the Costa Rican farmers were the target of various marauding groups. The Miskito Indians of the Caribbean coasts of what are now Belize and Nicaragua raided south into Costa Rica. The Costa Ricans tried to defend against these raids but ultimately had to pay a bribe to the chief of the Miskitos to curb their depredations. English and French pirates raided the coastal settlements and destroyed. In 1666 a pirate band of 700 under the leadership of Henry Morgan tried to march into the Meseta Central to raid the town of Cartago. An outnumbered force of Costa Rican farmers defeated Morgan's pirates.
Costa Rican economic development was severely limited because of the lack of roads to the coast. But better roads would not only have facilitated trade they would have facilitated raids by marauders.
The little export that Costa Rican farmers did achieve was in cacao beans, tobacco and mules. The mules were taken overland to Panama where the interoceanic transport was by mule train. Spain imposed the mercantilist policy that the trade of its colonies could only be with Spain. So the Costa Rican farmers got less for what little produce that they could get to the coasts and they had to pay higher prices for what they wanted to purchase. Poor little Rich Coast; it faced difficult terrain, marauders and bad trade policy. And, oh yes, the taxation imposed from Guatemala took resources out and put none back in.
Despite the adversities Costa Rica was growing. The first town of the Meseta Central, Cartago, was established in 1564 and served as the capital. Another town, Aranjuez, was established near the Gulf of Nicoya on the Pacific in 1568. It was not until the eighteenth century that other towns in the Meseta Central were founded. These were Heredia in 1706, San José in 1736, and Alajuela in 1782. These towns tended to become rather independent city-states.
The American Revolution, the French Revolution and the Napoleonic Wars in Europe were shaking up most of the Spanish colonies in America but not Costa Rica. The Costa Rican farmers had the more important concern of raising crops to occupy their attention.
Costa Rica as part of the Kingdom of Guatemala became independent of Spain when the captain general of Guatemala proclaimed independence. Soon after Mexico declared independence General Irtubide was declared emperor of Mexico and tried to bring Central American into his empire. In 1822 the towns of Cartago and Heredia tried to lead Costa Rica in joining the Mexican Empire but San José and Alajuela opposed them in this matter.
Soon Emperor Irturbide was deposed and Central America declined the offered membership in the Mexican republic. There was some attempt to hold the subdivisions of Central America together but ultimately they all opted for independence.
Costa Rica was troubled in 1830's by the disagreement among the towns as to which would be the capital of the Costa Rican republic. There was an attempt to resolve the dispute by having the capital-ship shift every four years but a political leader in San José, Braulio Carrillo, established San José as the permanent capital, but not without resistance. Carrillo was dictatorial in other matters as well and ultimately had to be removed from power by force of arms in 1842.
After the turmoil of the 1830's Cost Rica began regularizing its political institutions in the 1840's. In 1847 a young Costa Rican, José María Castro Madriz, who had founded the University of Santo Tomás was selected by the Costa Rican congress to be Costa Rica's first president. In 1848 Costa Rica declared itself a republic and adopted a constitution which established basic civil rights and abolished the army.
A new economic factor had been developing in Costa Rica for some time. Some farmers were successfully growing and marketing coffee. This was leading to a rise of those coffee growers in economic and political power. They were called the coffee barons. Representatives of the coffee barons forced an increasingly inept President Castro Madriz to resign. He was replaced by a member of one of the prominent families whose wealth was based upon coffee-growing, Juan Rafael Mora Porras.
The coffee barons generally were classical liberals; i.e., they believed in the wisdom of free trade and inadvisability of government intervention in markets. Allowing the markets to take their course in the coffee country of Costa Rica meant that the more successful growers expanded their operations by buying up the properties of the less successful. Over time this led to a relative few number of land owners and a large number of landless peasants who worked for those large growers. The owners of small, inefficient farms usually increased their incomes when they sold their property and became laborers on the larger, more efficient coffee plantations.
1855 the government in Nicaragua was in the hands of feudalists, called then conservatives, and the Nicaraguan economic liberals were trying to depose them. The Liberals to their regret hired American mercenaries under the command of William Walker. William Walker was a meglomaniac from Tennessee who, once his mercenaries had defeated the Nicaraguan president, siezed control of Nicaragua for himself. Walker had himself made president of Nicaragua and re-enstated slavery. He also confiscated the property of Cornelius Vanderbilt, the New York transport magnate. Vanderbilt had created a lucrative transport system in Nicaragua to convey California gold-seekers from the Caribbean side of the country to the Pacific side.
JuanRafael Mora Porras,the president of Costa Rica, decided to do battle with Walker. With a force of nine thousand and the encouragement of Vanderbilt Mora Porras marched toward Nicaragua. Walker sent his mercenaries toward the Costa Rican border to counter the invasion. The Costa Ricans attacked the mercenaries at the border town of Rivas and won when the mercenaries had to flee after a Costa Rican drummer boy set the town on fire.
In 1857 Walker returned to Rivas but his force was again defeated. Walker himself had to seek refuge on an American ship that took him to Panama. When Walker, no wiser than before, brought another mercenary force into the region he was captured in Honduras and summarily executed, thus ending a bizaare episode in Central American History.
Costa Rica was victorious in the war against William Walker but at great cost. About half of the Costa Rican soldiers died as a result of the war, due to disease and privation as well due to actual conflict. The cost as well was great. Costa Rica under President Mora Porras was in financial difficulty even before the war began. An army coup d'etat deposed Mora Porras and replaced him with the leader of another prominent coffee-baron family, José María Montealegre.
The Montealegre family dominated Costa Rican politics for about two decades. A new constitution was written and adopted in 1859 and then again in 1869. When elected presidents displeased the Montealegres they arranged military coups to remove those presidents.
In 1870 a general, Tomá Guardia Gutiérrez, carried out a coup not sanctioned by the Montealegre family.
General Guardia vowed to end the political control of the coffee barons. He called for a plebiscite to make him legally president and was successful. In 1871 yet another constitution was written. This constitution was retained until 1949.
His legal term of office was up in 1876. A new president was elected but after only a few month in office Tomás Guardia cast aside that new president and took the presidency himself. He ruled until he died in 1882.
Tomás Guardia was an archtype that has occurred frequently in Latin America: a military politician who takes a populist stance but replaces the corrupt old guard with a new made up of his family and old supporters. He tried to modernize Costa Rica with a program of free and mandatory public education. He tried to promote export trade by arranging for the construction of a railroad to link the Meseta Cental to the Caribbean coast at Puerto Limón.
The railroad had more of an impact than was expected. It brought Engineer/Entrepreneur Minor Cooper Keith to Costa Rica who not only built the railroad but created the banana industry of Costa Rica and initiated a number of other business ventures, including the creation of the United Fruit Company (united fruit company).
Presidente Guardia had commissioned Keith's uncle to build the railroad but the uncle died and Keith took over the project, called the Atlantic Coast Railroad. This railroad, costing $8 million, was a major financial burden for the small economy of Costa Rica. Keith began arranging deals with the government to ease the financial burden upon it. For example, at the coastal terminus of the railroad, Puerto Limón, Keith agreed to build the wharf in exchange for a portion of the wharfage fee shippers using it would pay. When the city of Puerto Limón needed to sell bonds to build a water and sewer system Keith bought up the bonds.
The construction of the Atlantic Coast Railroad presented some special problems. In the Meseta Central Keith could get the needed laborers from the local population but the lowlands were largely unpopulated because of the problems of malaria and yellow fever. The highland residents looked upon working in the lowlands as suicidal. Keith turned to securing an immigrant labor force. First he sought Chinese and Italian immigrants but these sources proved inadequate and he turned to Jamaica for workers who were used to the conditions of the locale. This changed the demography of Costa Rica. Keith's Jamaican labor force became a separate ethnic group in Costa Rica. They were English-speaking and African in heritage.
Keith arranged to take land holding along the railroad right-of-way in payment for some of the construction cost. He used these land holding to establish banana plantations and thus created Costa Rica's banana industry. It was a symbiotic relationship. The banana industry needed the railroad to get the product to the eastern coast for the U.S. and European markets and the railroad needed the freight business to help cover its costs. Later Keith's banana plantation holdings were merged with another banana company to form the United Fruit Company. This man with the oddly broken name thus had a major impact on the economics, the demography and the politics of Costa Rica.
When General and Presidente Tomá Guardia Gutiérrez died in in 1882 after ruling costa Rica since 1870 the commander of the army, who was Guardia's bother-in-law, took over the government and assumed the office of president. This brother-in-law's name was Fernández Oreamuno. He only ruled for three years, until his death in 1885. His brother-in-law, Bernardo Soto Alfaro, then took over the government. Soto ruled for four years before voluntarily relinquishing the presidency. During his tenure he created a public school system, which like the American system, was free but compulsory.
The election of 1889 was a watershed in Costa Rican History. The candidate favored by Soto lost to José Joaquín Rodríguez Zeledón, a representative of a group of young liberals (classical). This group became known later as the Generation of '89. The classical liberal favored free trade and minimal intervention of the government in the economy. This was the economic philosophy of the coffee barons. The Guardia dynasty represented a more populist, interventionist philosophy.
President Rodríguez did not run for reelection buy instead supported the candidacy of Rafael Yglesias Castro. The Partido Unión Católica (Catholic Union Party) supported another candidate, José Gregoria Trejos Gutíerrez. Trejos received more votes than any other candidate but not a majority so the Costa Rican legislators had the right to name the president and they named Yglesias. The protests were suppressed and the Partido Unión Católica was disbanded.
Yglesias proceded to carry out those projects he felt essential for Costa Rican development. One of these projects was the building of a railroad to link the Meseta Central with the Pacific Coast. He also reformed the currency and put Costa Rica on the gold standard. He did things in a high-handed manner. When he had the Constitution amended so that he could run for another term he provoked opposition. Yglesias was able to retain the presidency in 1898 but the opposition against him strengthened when he attempted to run again in 1902. To prevent civil strife Yglesias and his major opposition candidate agreed not to contest the 1902 election and allowed a compromise candidate, Ascensión Esquivel Ibarra, to win the presidency.
Esquivel continued the policies of his predecessors, including increased funding for education. The 1906 election did not produce a clear winner and the Costa Rica congress selected the candidate with the plurality, Cleto González Víquez as president. González Víquez became known as Don Cleto in his long career in Costa Rican politics. In the next election, in 1910, there was a candidate who won a majority of the votes, Ricardo Jiménez Oreamuno.
Jiménez, popularly known as Don Ricardo, sought and achieved electoral reform. He wanted the electorate to directly elect the president and he wanted more of the population to be included in that electorate. The Costa Rica legislature approved in 1913 a constitutional amendment to implement those objectives. As is often the case, what resulted was quite different from what was intended.
In 1914 the augmented Costa Rican electorate did vote for the president. However, none of the candidates achieved a majority so it was left for Congress to choose the president. Instead of Congress selecting one of the candidates it chose someone who had not run for the office, Alfredo Gonzá Flores. Gonzá Flores pursued the trend of his predecessors; i.e., promoting so-called "progressive" policies. The so-called "progressive" policies involved providing social benefits to the population as entitlements. This is basically the mentality of tribalism, hardly the hallmark of progressiveness. The economic problem of the social welfare state is that the benefits have to be paid for by taxing the viable industries of the country. In Costa Rica's case it was the coffee-growing industry that was taxed. The coffee industry was experiencing declining international prices, but the onset of World War I brought a financial crisis for the Costa Rican coffee industry because the European markets were taken away. Germany had been the best market for Costa Rican coffee.
Gonzá Flores reacted to the loss in coffee revenues by trying to increase the taxes for the wealthy. The wealthy who also were suffering from the coffee crisis reacted by trying to get their wealth out of the country. The capital flight added to Costa Rica's economic problems. Gonzá Flores, faced with a loss of government funds, had to lay off government employees, thus alienating a substantial interest group. The end result was a general disatisfaction with Gonzá Flores' administration. A dissatisfied general, Frederico Tinoco Granados, carried out a popularly supported coup d'etat in 1917.
U.S. President Woodrow Wilson disapproved of Tinoco's coup and political turmoil in Costa Rica led Tinoco to relinquish power in 1919. In 1920 Julio Acosta Garciacute;a was elected president.
Don Ricardo and Don Cleto differed little in political economic philosophies. Both were classical liberals. This did not stop them from waging vigorous political campaign against each other.
When the Great Depression hit, these classically liberal politicians were forced politically to try to do something about economic conditions. Minimum wage legislation was enacted and some unused land owned by the United Fruit Company was distributed to landless farmers.
About this time political parties formed in Costa Rica which represented different ideological positions. Below are listed the major parties of Costa Rica with their general political orientations.
|Costa Rican Political Parties|
|Partido Reformista||1923||Jorge Volio Jiménez||Social Christian|
|Partido Republican||PR||Don Ricardo||Classic|
|Partido Republican Nacíonal||PRN||1932||Don Ricardo||Classic|
|Partido Unión Nacíonal||PUN||Don Cleto||Classic|
|Bloque Obreros y Campesiños||BOC||1929||Manuel Mora Valverde||Communist|
|Partido Vanguardia Popular||PVP||1943||Manuel Mora Valverde||Communist|
|Partido Demócrata||PD||1941||León Cortés Castro||Anti-Communist|
|Partido Social Demócrata||PSD||1944||José Figueres Ferrer
|Partido Unión Nacíonal
|PUN||1947||Otilio Ulate Blanco||Classic|
Although there were few ideological differences between the factions allied with Don Ricardo and Don Cleto a few peripheral issues developed in the late 1930's. Costa Rica had a strong business community of people with a Germanic background. This German community had affiliations with the non-German community. Political differences began to develope over how the Costa Rican government should treat the German community given the geopolitical events in Europe.
Communist party organizing and actions were becoming an issue as well. In 1934 a strike in the banana industry closed down operations for seven weeks. The shear power of the communists in the labor unions was worrying politicians.
In the 1936 election, León Cortés Castro of the PRN was victorious. Cortés generally followed the policy of mild interventionism of his predecessor, Don Ricardo, but he began to use the police to thwart Mora Valverde's communists. Don Ricardo challenged Cortés politically. Cortés selected a physician to be the candidate of the PRN in 1940. That physician, Rafael Angel Calderón Guardia turned out to be a more astute and ambitious politician than Cortés was counting on.
Calderón deviated from the classic liberalism of his predecessors. The classic liberal were basically in favor of the policies of laissez faire capitalism and only deviated from that stance as a result of the seemingly emergency conditions of the Great Depression. Classical liberals were generally anticlerical and saw the Catholic Church as having too much secular power. In contrast, Calderón was an overtly devout Catholic who was pursuing social welfare programs supported by the Church. Calderón was willing to amend the Costa Rican constitution if necessary to achieve his social programs.
Calderón had passed 15 amendments to the constitution. He called them the Social Guarantees. He believed they could be used to create a social democratic program of social entitlements. Members of his own political party began to break with him.
Cortés broke with Calderón politically and formed the Partido Demócrata (PD). Others joined Demócrata in forming political parties opposed to Calderón. In the center there was the Accíon Demócrata. Communist Party leader, Mora Valverde, criticized Calderón's program for being too weak. Social democrats were blaming the inefficiency and corruption of the Calderón government for the lack of progress.
When Japan attacked the U.S. on December 7, 1941, Costa Rica joined the U.S. in declaring war against Japan and its allies of Germany and Italy. In July of 1942 a German submarine torpedoed and sunk a United Fruit Company ship in the harbor of Puerta Limón, Costa Rica. Calderón chose to use this as a justification for taking action against the German and Italian communities in Costa Rica. He supported the passage of an Alien Properties Act which allowed the government to confiscate property in Costa Rica belonging to German and Italian citizens.
A politically unknown rancher named José Figueres Ferres, the son of immigrants from Catalonia in Spain, purchased air time on a radio station to criticize the policies and actions of Calderón. Part way through the broadcast Figueres was arrested and sent into exile in Mexico. That was not to the end of Figueres for Calderón.
Calderón, who was being politically deserted by most everyone to the right of the communists, turned to Mora Valverde for support. Mora Valverde accepted the alliance. The name for the communists was changed to the Partido Vanguardia Popular (PVP). The international ties of communists were played down. The PRN and the PVP formed the Victory Bloc for the election, which they won handily. Their winning candidate was Teodoro Picado Michalski.
Despite the electoral loss to Picado, the opponents did not stop organizing...and reorganizing. A Partido Social Demócrata (PSD) was formed. When Figueres was allowed to return from exile in 1944 he accepted leadership of the relatively small PSD. The splinter party PD which Cortés had formed had a greater membership. Cortés died unexpectedly in 1946 and Figueres sought its nomination for the presidency for the election of 1948. He was unsuccessful. The PD candidate was Fernando Castro Cervantes, a social conservative.
The opposition to Picado and the PRN-PVP alliance continued in the form of street demonstration. In the army there were attempted coup d'etat's. Picado became distrustful of the army and so he relied upon the armed and organized communists party militia. During public protests of election irregularities in the legislative elections of 1946 the government forces fired at the protestors killing two. The public outrage against Picado escalated. Opponents of the regime were being arrested and sometimes forced into exile. Businesses staged a massive shutdown. Communist militia tried to break the shutdown by breaking into stores and giving away the goods.
In 1947 another conservative, Otio Ulate Blanco, revived the Partido Unión Nacíonal (PUN) to run in the 1948 election. Figueres had given up on removing the Picado regime from office through politics. Instead Figueres began organizing an armed insurrection.
Calderón could run for re-election in 1948 as the candidate of the PRN-PVP alliance. The opposition PD, even the social democratic PSD opposition, united in supporting the PUN candidate, Otilio Ulate Blanco, despite his conservatism.
In the February election, out of a total of one hundred thousand votes, PUN's Ulate had ten thousand more votes than Calderón. The Election Commission vote two to one to certify the result. The Picado government refused to accept the Election Commission's certification because it was not unanimous. It had the outgoing legislature review the result. The old legislature was controlled by Calderón supporters and they voted 27 to 18 to annul the election. That gave the legislature the right to select the president, which of course would be Calderón.
At his ranch Figueres assembled an insurrectionist army of about 600, some of whom were foreigners. The Picado government had at its disposal only a few hundred soldiers in the national army but the communists had three thousand in its militia. The show down was going to be between Figueres' insurrectionists and the communist militia.
Forces supporting the government advanced on Figures' ranch, but Figueres withdrew most of his forces into the mountains. Figueres' ranch was burned by the government forces. But the insurrectionists captured three DC-3 transports belonging to the government's airline. These were used effectively in transporting supplies into Costa Rica.
Insurrectionists were able to carry out actions to the south of San José as well as sabotage of the utilities within San José.
Communist militia supporting the government engaged Figueres' forces but were not able to defeat them. Meanwhile negotiation were initiated between Calderón and Ulate. Ulate was willing to compromise but Figueres held out for unconditional acceptance of Ulate as the victor in the election. Mora Valverde also was unwilling to surrender without a signed agreement of safe conduct for the government leaders and no retribution against the communist-led unions. Figueres refused to give such a guarantee.
Ultimately a verbal agreement to Mora Valverde's conditions was given. Mora Valverde also wanted a promise that Calderón's Social Guarantees would not be repealed.
There were about two thousand fatalities in the war, now known as the War of National Liberation, mostly among the forces supporting the government.
Figueres was the winner of the civil war. It was a war to win acceptance of Ulate's victory in the 1948 election. That did not mean Ulate would immediately become president. Figueres negotiated an agreement that there would be an 18 month interim period in which Costa Rica would be government by a junta of which Figueres would be head. The title of the junta was La Junta Fundadora de la Segunda República (The Founding Committee of the Second Republic). During the 18 month period of junta rule a constituent assembly would prepare the constitution of the Second Republic.
During its period of rule the Junta issued 834 decrees with the force of law. Although Ulate was a conservative, Figueres and his supporters were basically social democrats; anticommunist social democrats but social democrats none the less. The Junta decreed an excess wealth tax of ten percent on all bank deposits in excess of about $10,000. The Junta nationalized the banks thus putting credit under government control. The social welfare programs created by previous administrations were not touched. Women were given the right to vote.
A whole set of industries and activities were brought into the public sector to be administered by autonomous public corporations. These included:
When weapon caches were found in communist areas the Junta abrogated the agreement made ending the civil war concerning no punitive actions to be taken against the communist unions. The communist-controlled unions were disbanded, the PVP was outlawed and 200 communists arrested.
Figueres in December of 1948 abolished the Costa Rican Army on the basis that it was unprofessional and unreliable. It was replaced by a national police force of 1500 called the Civil Guard. Many of the people from his own armed insurrectionists went into the Civil Guard.
The constituent assembly that was elected to formulate a new constitution was predominantly conservative PUN supporters. The constitution which was adopted, however, did not deviate from the mild social democratic philosophy of the Junta. Some notable features were:
In November of 1949 the Junta relinquished governmental power to President Ulate and the National Assembly. Along with political power the Junta gave Ulate and the National Assembly a relative larger national debt.
President Ulate, although philosophically opposed to many of the policies implemented by the Junta, did not rescind them. He subtly uncut some of them. Instead of reprivatizing the banks nationalized by the Junta, Ulate allowed private banks to operate in competition with the nationalized banks. The excess wealth surtax was not enforced. The prohibition against communist organizing were enforced. Ulate's administration benefited by rising cofee prices.
In 1951 Figueres, now known as Don Pepe, organized a political party. It was named Partido Liberación Nacional (Party of National Liberation), PLN. His old Partido Social Democrata (PSD) became a part of the PLN.
Figueres proclaimed its objective was to fulfill the goals of the Second Republic. This meant a program of social democracy. The middle class strongly supported him as the only viable alternative to a radical left, anti-American government. More conservative elements promoted the candidacy of Fernando Castro Cervantes who had been opposing Don Pepe since their fight for control of the PD in 1946. In 1953 Don Pepe and his PLN defeated Castro Cervantes and the PUN by an about two-to-one margin.
As president, Don Pepe carried out his program for turning Costa Rica into a social welfare state. Expenditures on education and public housing were increased. Urban development programs were initiated, as were state agricultural programs. To pay for the programs income taxes on the wealthy were about doubled and the taxes on the United Fruit Company were more than doubled. The minimum wage was increased and more jobs were created in government. Imported products were more heavily taxed to encourage domestic production.
Expenditures were increased more than revenues so Costa Rica gave up paying down its national debt, a debt that had been greatly increased during the 18 months when the Junta under Don Pepe's leadership ran Costa Rica. Rising coffee prices during Don Pepe's term of office kept the financial situation from deteriorating.
Don Pepe's term was made politically interesting by an invasion from Nicaragua. The Nicaraguan dictator, Anastasio Samoza García, gave refuge to Calderó and his communist supporters after the Civil War of 1948. In 1955 they came back called themselves the Authentic Anti-Communist Revolutionary Army. Samoza supported the rhetoric by publically referring to the Costa Rican government as "Figueres and the communists." The invasion was easily countered and the invaders retreated back into Nicaragua. International diplomatic efforts established a demilitarized zone along the border.
Don Pepe's term ended in 1958 and he was not eligible to run for re-election, but that did not mean that he left the scene of Costa Rican politics forever.
In 1956 the man who had been the finance minister in Don Pepe's government, Jorge Rossi Chavarría, broke with Don Pepe and his PLN over issues of financial policy and started a new party called the Partido Independiente (PI) to run for the presidency in 1958. The PLN candidate, who promised to continue Don Pepe's policies was Francisco Orlich Bolmarcich. With this split in the support for the center left it was relatively easy for the more conservative candidate of the PUN, Mario Echandi Jiménez, to win the presidency. Echandi had been a cabinet member of Ulate's administration after the 1948 civil war. In 1953 Echandi had been the favorite of the PUN constituency but he withdrew his candidacy to back Castro Cervantes of the PD, who was thought to have a better chance of defeating Don Pepe. Echandi thus had the image of being a responsible, reasonable person driven by principles rather than personal ambition.
Echandi won 46 percent of the vote for president, but his party, PUN, did not have strong representation in the legislature. PUN representatives held only 10 seats out of 444 and was only the third largest group, behind PLN (which held 20) and Calderon's PR (which held 11). Supporters of Rossi's PI held 3 seats.
Echandi found it difficult to make any headway on his campaign promises to reduce the role of the government in the economy and the budget deficits generated by this government involvement. The momentum of increased government involvement created by Don Pepe and the PLN carried Costa Rica to higher levels of national debt and Echandi was powerless to stop this trend.
After the defection of the Rossi wing of the PLN resulted in the 1958 victory for Echandi of the PUN, the PLN leadership reassembled their following for the 1962. The 1958 PLN candidate, Orlich, once again was its candidate. This time he was victorious, even though his opposition included two former presidents, Ulate of PUN and Calderó of the PR. Orlich pursued the traditional policies of the PLN established by Don Pepe. This included social democratic domestic programs and a staunch anti-communist line nationally and internationally. Unused land of the United Fruit Company was nationalized and distributed to landless farmers. Orlich's term in office was made more difficult by the volcano Irazú in 1963. Crop and cattle production were diminished by the fallout of ash from the volcano.
The old saying that politics makes strange bedfellows, was once again true in the 1966 elections. Ulate whom Calderón tried to steal the election from in 1948, thus precipitating the 1948 Civil War, joined with Calderón to support José Joaquín Trejos Fernández, a candidate who they hoped could defeat the PLN candidate, Daniel Oduber Quiró, in 1966. Their strategy worked and Trejos was elected.
The Trejos administration was relatively efficient. Trejos wanted to reduce the deficit and did this by cutting government programs and he increased revenue by instituting a sales tax. His most controversial action was to grant to the Aluminum Company of America (ALCOA) a concession for mining bauxite. This concession became a political issue in Costa Rican politics for years to come.
This election was of interest because it involved the return of Don Pepe to active politics. His opponent was Mario Echandi Jiménez,, who had been the winning candidate of the PUN in 1958. This time however Echandi was not supported by PUN. Instead he organized a party called National Unification. Don Pepe easily defeated Echandi.
Don Pepe did not intend to create controversy. He promised to pursue the general program of his social democratic party, the PLN, but nevertheless some controversy did arise. There were protest, sometimes violent, concerning the mining concession which had been granted to ALCOA by his predecessor. Don Pepe's administration announced that the unrest was due to communists. But while pursuing PLN traditional anticommunist line domestically Don Pepe's administration established diplomatic ties with the Soviet Union.
In 1972 an American fleeing prosecution came to Costa Rica. His name was Robert Vesco. He had gained control of an overseas investment fund and found a way to confiscate hundreds of millions of dollars of hot money that had been invested in that fund. With those funds Vesco tried to buy refuge in Latin American countries. Costa Rica had a tradition of providing a haven for political refugees and Vesco tried to take advantage of that tradition. The administration was accused of corruption for letting Vesco reside in Costa Rica despite his being sought by American authorities for prosecution on charges of financial fraud. (Vesco ultimately left Costa Rica to live in Cuba under the protection of that self-proclaimed paragon of morality, Fidel Castro.)
Costa Rican voters commonly voted against the party in power so typically there would be a change of regime at each election. In 1974 this pattern was broken. The candidate of the PLN, Don Pepe's party, won the election. He was Daniel Oduber Quirós, who had been the unsuccessful PLN candidate in the 1966 election. The 1974 election was hard fought and had seen the return of the Costa Rican communists to political activity.
In office Oduber continued the program of the PLN. This included establishing economic and diplomatic relations with communist countries. Oduber also raised the tax on banana exports significantly and the United Fruit Company and other banana exporters with expropriation if they sought to avoid the tax.
Oduber's administration was troubled by a political disagreement with Don Pepe and with the events stemming from the political revolution developing in Nicaragua.
Capitalizing on the dissension in the PLN and public concern about the revolution developing in Nicaragua, the more conservative element in Costa Rican politics organized a Unity Opposition, Unidad Opositera. The candidate of Unity Opposition was a former member of the PLN, Rodrigo Carazo Odio. Carazo was a businessman and he promised to break diplomatic relations with the U.S.S.R. He also promised to deport Robert Vesco.
Carazo won and Unity Opposition was able, with the help of a small coalition partner, to organize the legislative government. Costa Rica became embroiled in border incidents with Nicaragua as both sides of the conflict violated Costa Rican territoriality. Carazo's administration apparently sanctioned the supplying of weapons from Cuba to the Nicaraguan rebels.
Financial problems plagued the Carazo administration. When the legislature refused to pass tax increases the administration resorted to borrowing. The national debt rose from $800 million to $3000 million. Businesses cutoff from domestic sources of funds borrowed abroad. It is alleged that the per capita of Costa Rica was the highest in the world at that time.
Significant inflation of 50 percent annually prompted a capital flight. In 1981 Costa Rica, which had not been serving its external debt, officially announced that it was not able to pay its debts. The Internal Monetary Fund (IMF) sent in representatives to negotiate the terms of IMF assistance. The agreement called for:
An agreement in Costa Rica and compliance with that agreement turned out to be two different things. The finance minister in the Carazo administration resigned in protest at the government not complying with its agreed-upon austerity program. His successor after one month resigned for the same cause. One observer at the time complained of the problems of dealing with charming but insincere Costa Rican government officials. The IMF ultimately suspended its loan agreement and closed its office in Costa Rica.
The unsuccessful candidate of the PLN in the 1978 campaign, Luis Alberto Monge Alvarez, was renominated. In 1982 he won a resounding victory and the PLN members dominated the legislature.
The prize for Monge's electoral victory was overwhelming. The government was on the verge of bankruptcy, the rate of inflation was nearly 100 percent. Negotiations with the IMF were reopened. The terms of the previous agreement were accepted with additional provisions for the privatization of deficit-ridden state-owned enterprises. But again compliance with the agreement was an issue. When the utility rates were increased public protests forced a reduction of the increase. Strikes by government workers forced an increase in the wages. Support from his PLN party representative in the legislature dwindled.
Monge forced to seek outside help and he was able to secure financial aid from the United States and other donors. The U.S. government was fearful of the Sandinista movement in Nicaragua spreading to other Central American countries.
Don Pepe's son, Jose Maria Figueres, served as president between 1994 and 1998.
(To be continued.)
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