Envío Digital
Central American University - UCA  
  Number 81 | Marzo 1988


Central America

Between Dignity and Submission

Envío team

Three factors shaped Costa Rica's year in 1987: the Esquipulas peace process and the related awarding of the Nobel Peace Prize to President Oscar Arias; economic stabilization and the dilemma of Costa Rica's relationship to the international economy; and, finally, the creation of sufficient social consensus to maintain self-determination and reconstruct a national project while also avoiding confrontation with the United States.

The prominence achieved by Arias and Costa Rica in 1987 contrasts with the country’s hidden, even sinister, role during the Monge administration. The Iran-Contra scandal, with its revelations of a dirty war, was a political shock to the sensibilities and culture of peace characteristic of Costa Ricans.

In 1987 Costa Rica succeeded in separating itself from the Tegucigalpa Bloc and faithful alignment with US policies in Central America, albeit not without difficulties and pressures. "Selling out without dignity, or dignity without a cent," was the way Carlos Morales, Marco Sibaja and Rosario Zúñiga described Arias’ agonizing dilemma in their article, “Política de desmarque le valió triunfos.”* According to them, he accomplished a balance that “neither prostituted the nation for a few dollars more, nor crippled the economy to raise its voice to the oppressors.” This balance, almost a miracle, has helped pull together a social consensus based on the culture of peace, the tap root of popular Costa Rican identity.
*In Seminario Universidad, Sinopsis 1987, San José, Costa Rica, No. 804, December 1987-January 1988.

Arias Plan/Esquipulas Plan

The Esquipulas Peace Plan has become the most important political event in Central America since the 1979 Sandinista revolution. For Costa Rica, it has meant a break with the foreign policies Arias inherited from his predecessor, President Monge.

When Arias came to power in 1986, Costa Rica was strongly involved in the Central American conflict, forming part of the Tegucigalpa bloc. Monge willed Arias a nation ruled and used by the United States as an ideological platform against Nicaragua and aggressively allied to the US politics of force in the region.

From the time he came to office until early 1987, Arias maintained a clear anti-Nicaraguan stance, although less virulent than during the first half of his election campaign. On January 28, 1987, he even called a meeting of the Central American Presidents excluding Nicaragua, and on February 14 announced a peace plan that, in principle, opposed bilateral negotiation with the neighboring country, favoring a kind of regional ultimatum against Nicaragua.

Arias' foreign policy shift has modified this type of relations. His eight foreign trips in 1987, beginning in Mexico in March, continuing through Europe in May, and culminating in Oslo in December to receive the Nobel peace Prize, allowed him to perceive the support and respect Costa Rica has obtained in many sectors of Europe and Latin America for its commitment to regional peace. He also, however, saw substantial respect and support for Nicaragua from many groups and even governments. On these trips Arias checked out the new alignment of international forces and Reagan’s deeply discredited policies, not only toward Central America but also toward the rest of the Third World.

Arias was also able to see Honduran President Azcona's extreme international weakness, disillusionment, even among Christian Democrats, with Salvadoran President Napoleon Duarte’s incapacity, and even the growing weakness of Guatemalan President Vinicio Cerezo, subject to his country’s armed forces and the Right. Moreover, his repeated trips to Washington allowed Arias to discover that President Reagan was really a man on the way out, presiding over an administration in visible retreat. His friends in the Democratic Party counseled him not to keep his money on a losing horse."

Even if the Republicans continue in the next government, Reagan's Central America policy does not have the support of public opinion or of many Democrats and is even being questioned by Republicans. House Speaker Jim Wright's invitation to Arias to speak to Congress as a guest of honor, against President Reagan's opposition, showed Arias that he had support in the United States that permitted him to distance himself from Reagan without confrontation.

The worldwide support for a peace policy also implied increased power for Arias within Costa Rica and increased his space to maneuver against the Right, even the far Right, which had consolidated its position in Costa Rica during the Monge administration. Costa Rica's new international personality, so damaged during that government, and the new consensus of internal social forces, allowed him to take important steps to transform the servile policies toward the United States into a policy of regional conciliation.

Arias did a U-turn from his violent attacks against Nicaragua at the beginning of the year, even going to the "prohibited country," where he traveled in an open jeep driven by Daniel Ortega himself without bodyguards. Although the contradictions, especially the ideological ones, with the Sandinista revolution are not resolved, a new relationship, including a certain human harmony, has unquestionably been established between the two Presidents, key figures of both governments.

For Costa Rica, and personally for Arias, the Iran-contragate scandal meant international exposure of the imperious pressures of Ambassador Lewis Tambs, Elliott Abrams, Philip Habib, and especially Oliver North. As such, the scandal helped the Arias government gain some distance from the US Embassy in Costa Rica, which had come to have direct influence in controlling the Juan Santa María national airport; the media, where it financed positions against the President himself; and civil society, where it promoted organizations and activities by rightist groups, including ultra-right ones such as the "Free Costa Rica" movement.

Political support for Arias' shift also led to international economic assistance, thus diversifying Costa Rica's dependence on the United States as a by-product. Arias was also able to prove that the Right was pressuring him to concentrate on internal politics, even creating difficulties in the Costa Rican Congress, where he must request permission to travel abroad. The goal of this diversion was to prevent him from interfering with US policies in the region, creating an internal consensus or building political support aimed at marginalizing the Right and the United Social Christian Party as alternatives for the next elections.

In 1988 Arias should give more attention to Costa Rica's internal difficulties, which, in hindsight, have no easy answers. It is probable, however, that the experience acquired in his international campaign will allow him not to divorce internal politics from peace politics and international support, already tightly bound together during 1987.

Arias may be able to use 1988 to surround himself with a sufficiently large and solid social consensus to prevent what he built in 1987 from collapsing like a house of cards. It is difficult to assess to what extent the Arias government captured the character of the identity crisis enveloping Costa Rica during the Monge administration, in which Monge caved in to overwhelming foreign domination. All orders came from the United States, provoking a neoconservative privatization of the economy, and even the beginnings of militarization in contradiction to the country's expressed neutrality.

The Right and conservative sectors in Costa Rica were fully supported by the United States, gaining opportunities they had not had since the 1948 revolution. They saw that the peace plan was linked to the deep Costa Rican culture of peace, the historical roots of the changes that brought Pepe Figueres to power in 1948, and that Figueres himself returned magnificently to the forefront in these years of Costa Rican identity crisis.

These rightwing groups fear the peace project will lose them the advances they obtained with US help and the servility of the Monge government. They also fear that the peace plan and the new Central American parliament, which they violently oppose, will lead the country to greater involvement in the region, obstructing their transnational plans for the "Taiwanization" of Costa Rica, which we detail below. Finally, they fear it will lead to a new Central American regional integration process, which they view as opposed to their transnational interests and humiliating to their self image. That self interest is not only classist but racist toward their Central American neighbors, whom they scornfully consider the region's Indians and Mestizos.

The Costa Rican evening newspaper La Prensa Libre presented this viewpoint in its December 2, 1987 editorial: "If the Central American parliament becomes an instrument of pacification, the result will be completely opposed to what is required. With the exception of satisfying the vanities and yearning for glamour of some, the parliament will be a source of more conflict in an area that is, itself, already dangerously convulsed." The struggle for peace is therefore not only a foreign policy problem for Costa Rica but is also one of how the forces line up within the country.

The culture of peace has been a dominant theme in Cost Rican culture and, as an answer to a problem of social organization, has possibly been Costa Rica's most worthy contribution to Central America. It has been able to recover despite the militarist policy of the United States, the world's largest superpower and Costa Rica's principal ally, and despite its allies within the country, who have fought for its interests and its policy toward Central America.

The reaffirmation of the culture of peace has begun surmount the identity crisis that occurred in Costa Rica during the Monge government. "Peace as integral development in the framework of social democracy is the national project that unifies Costa Ricans across generations and over party lines," said Armando Vargas, writing in La Tribuna Económica in December 1987. "Human dignity, social justice and political liberty are the values that sustain this authentic culture of peace." The same article cites President José María Castro Madrid (1866), showing the deep historical roots of this culture of peace: "I want my country, which can no longer be frightening with its force, to be respected for its justification and wisdom, such that regarding whatever grievance might be inferred on it, the anathema of the civilized world falls on it. We do not have squadrons, let us have the sympathy of nations."

The Costa Rican Dilemmas:
Economic Stabilization and International Markets

Both economic stabilization and Costa Rica's choice of how it enters the world market are tied structurally to the problem of peace in Central America. Although we cannot provide a full analysis of this thesis in these pages, we will attempt a rapid synthesis.

Last year can be described as one of economic stabilization without economic recovery. The gross domestic product (GDP) grew 3.5% in real terms, with a trade deficit of some $170 million, which doubled the previous year’s deficit mainly because of the drop in coffee prices and the reduction in nontraditional exports caused by US protectionism.

Nonetheless, this trade deficit was especially created to allow the importation of the so-called "people's car," with an engine capacity of no more than 1300 cc, adding another $70-80 million to the import bill. The car import policy was an attempt to win over the country’s middle class and professionals, and was accompanied by a strong neglect of the poorest sectors, who have seen reductions in social services, health and education. Minimum wages have not increased in real terms, resulting in a deterioration of living standards relative to the improvements that had been occurring since 1984. Inflation dropped 1%, to an annual level of 14%.

To maintain its stabilization policy, the Arias government had to renegotiate the public foreign debt of $3.9 billion (equivalent to 272% of the value of exports and nearly 90% of this year's GDP). It also drastically reduced its debt service payments, from 41.5% of export earnings in 1986 (an accumulated $1.4 billion in the last four years, which was impossible to maintain and still achieve economic stability), to a partial suspension of payments and a reduction of servicing to only $120 million in 1987. Combined with the reduction in debt servicing, which successfully reduced the central government deficit by 32%, the public sector deficit has dropped from 7.3% of GDP in 1985 to 3.8% in 1987.

This policy of adjusting and controlling public costs, undoubtedly positive for the country, has nonetheless postponed economic recovery. The adjustment has been loaded onto the backs of the weakest economic sectors and has started to impoverish lower income sectors, and even the middle class, in a highly regressive redistribution of income.

The October "crack" on the New York stock exchange had a strong impact in Costa Rica, sparking a crisis in the private financial sector and a public scandal affecting high-level government personnel. At the same time it reinforced the state banking system and the centralization of the finance sector, putting a brake on plans to privatize the system.

The 5% reduction in the gross value of agricultural production, a 35% drop in the production of basic grains and a 7% slump in meat production have been compensated for by dynamic growth in the manufacturing sector, up almost 6% from the year before. This growth is basically due to internal demand. We agree with the analysis of Manuel Bermúdez that "the recession observed in the agricultural sector in 1987 will dampen the growth in the manufacturing sector in 1988 due to the lack of domestic demand," but would add that the growth of approximately 15% in the construction sector and the relaunching of the housing program could be a new motor for internal demand.

La Tribuna Económica summarized the 1987 economic scene as follows: "The general model of economic development might not differ much from the year before—emphasis on export development, a move toward import liberalization and privatization of the financial sector, with relative disregard for the internal market, a conservative wage policy, small devaluations, caution in public spending and efforts to attract foreign investment." It added: "It has favored the stabilization of the economy.... Productive per capita growth is practically at a standstill.... And more, it is stuck together with pins.'"

Next year will also be difficult and, above all, a year for decisions. The crossroads for Costa Rica in 1988 are not only economic, but also geopolitical and social. The road followed will depend on the approach Costa Rica takes to the international economy and to the peace process.

The dilemma can be summarized as the choice between "Taiwanization" and reintegration into a new Central American Common Market (CACM). Taiwanization would consist basically of strengthening all of Costa Rica's exports, not only traditional and nontraditional ones but also the development of new exports based on industrial parks, free zones and transnational services. In this sense, Costa Rica would plan to become Central America’s "newly industrialized country," aided by the benefits provided in the Caribbean Basin Initiative and by a special economic and political relationship writ in stone with the United States.

It would be the country where Central American development aid is concentrated and would provide a platform of services for transnational capital from the United States, Japan and some European sectors. This would imply Costa Rica "freeing itself from the dependence" it currently has on the CACM, according to a high-level presidential official.

Costa Rica would also take advantage of Panama's political and economic crisis, attempting to take over a significant part of Panama's financial services, among them the bank services, insurance, and the combined activities of assembly plants in new industrial and free trade zones. The project would be amply supported by the US Agency for International Development (AID), sectors of US capital and most financial and transnational capital within Costa Rica.

The other alternative is to again become part of the Central American Common Market, and a regional economic project more integrated with the rest of Latin America. This would be based more on the industrial sector and local Costa Rican capital and would attempt to exploit the country's comparative advantages as the basis for recovery and new economic development. To this end Costa Rica would have to reinforce its internal market and its regional ties and begin to diversify its international dependence.

This position would have the support of the European Economic Community and, above all, Latin America, which made clear in the meeting at Acapulco that it would attempt to integrate Central America and the Caribbean countries in a proposal for overall integration of the Latin American economy. The Scandinavian countries and Canada have also demonstrated a special interest in the regional project. It is significant also that the socialist countries organized in CAME and the larger countries of the Non-Aligned Movement have also shown support for an economic regionalization of Central America.

Clearly the dilemma is not only economic, but political and geopolitical as well. Each alternative implies a different internal social alliance. The two alternatives also have different positions with respect to peace in Central America. The results of the peace negotiations will thus be a determining factor in which of these outcomes is chosen.

The Esquipulas II accords are defended and favored by the groups seeking integration, a regional space and an economic and political relationship with their neighbors. These groups see that Costa Rica has comparative advantages that could gain from regional peace. They also see that peace will lead to a reduction in US aid and interest in Costa Rica and that, as such, they are going to need an extended regional market and the diversified dependence mentioned previously.

The groups that favor a Taiwanization of Costa Rica see the Esquipulas accords as space for the Nicaraguan revolution and a weakening of their possible future leadership within the recovery of the Central American oligarchies, which desire a special economic and political relationship with the United States.

These economic interests consider that limiting, isolating and destroying the Sandinista revolution is fundamental to avoid the danger of revolutionary contamination in the whole Central American region. In its editorial of December 11, 1987, the newspaper La Nación presented this position with clarity:

"If the Contadora process helped strengthen the Sandinistas in power, that of Esquipulas II has provided them with oxygen amidst economic and political suffocation.... Like Contadora, Esquipulas II is an instrument of propaganda for the leftists and a mask for the Sandinistas in order to show themselves before the world as agents of peace."

The intent to separate Nicaragua from Central America and Central America from Latin America, which has been the recent US policy in Central America, has become an obsession for those groups of Costa Rica’s financial Right. If successful, this would tie Costa Rica structurally to the United States, converting it into the tropical Taiwan of a modernized backyard, where it would play the role of economic, political and ideological model for the rest of the region.

These groups consider the triumph of Esquipulas II and the Latin Americanization of Central America, linked with Central American integration and international economic diversification, a danger to their transnational economic interests and their ideological power within Costa Rica, currently visible in their monopoly control of the news media. (Costa Rica is possibly the country with the least freedom of the press and electronic media in Central America due to this monopoly control, which even restricts the government’s own ability to announce official policies.)

The Arias government has maintained a gradualist economic strategy, without defining this dilemma. His priority has been to maintain economic and internal political stability in order to consolidate peace. Nonetheless, the conservative tone has predominated inside Costa Rica. US pressures, as much political as economic, have continued to grow despite President Arias' declaration to the contrary in his message to the country on February 15, 1988, defending the peace plan: "They have said that the plan would cause economic reprisals by the United States. I have never received economic or commercial pressure from that nation; on the contrary the cooperation between our two nations has become closer and closer."

This categorical statement contrasts with the declarations of his US friend, Democratic Senator Christopher Dodd, who has accused the Reagan Administration of economic and political pressure on the Arias government. It was even contradicted by President Arias' own visit to Washington, when President Reagan tried to prevent him from accepting Speaker Jim Wright’s invitation to appear before Congress. There are also well-known pressures from the Inter-American Development Bank and AID, as well as the "conditionality campaign" of requirements imposed on Costa Rica by the International Monetary Fund and the World Bank.

The large reduction in US aid to Costa Rica in 1988 is more evidence of these pressures, especially when compared with the help supplied to El Salvador, Honduras and even Guatemala—to which aid has been limited in the past. The special help Costa Rica is receiving from Europe comes in good part to compensate for the reduction of US assistance, thus ensuring sufficient economic space for Costa Rica to maintain its political autonomy with respect to the peace proposals.

In Search of New Consensus

The lesson Arias learned 1987 and his contribution to Central America has been to understand the need for space, time and some international conditions for Central America and his own country and to struggle for these. Without these conditions, peace will be impossible in Central America and the governability of his own country will continue restricted.

Analysts Rojas, Manuel y Sojo, Carlos from the Center of Studies for Social Action, CEPAS, summarize it this way in "Costa Rica, La Administración Arias y las perspectivas para 1988": "An eventual upturn in the war and in the economic crisis would weaken the government, fortifying the opposition politicians of the Right, as much within the governing National Liberation Party as in the United Social Christian opposition... which would oblige it in the medium term to abandon its efforts for regional peace in favor of greater interference by the government of the United States and the multinational financial organizations."

Since peace in Central America is, as such, involved with a vision and identity of Costa Rica’s future, the grassroots majorities in the country should take defense of this time, this space and these conditions into their own hands. For them that implies a national space, defense of their identity and the interests and values they hold in common with the peoples and majorities of the region.

Recovery of the spirit of 1948, battered by US pressure and by its allies in the Costa Rican Right, is a component of this dilemma in 1988. The failure of the Costa Rican Right’s attempt on January 15, 1988, to torpedo Esquipulas III with an offensive campaign against Ortega, was a clear demonstration of its weakness as a Costa Rican alternative. Getting only 400 people to an anti-Sandinista demonstration, after spending over $300,000 on the campaign, indicates that Costa Rican identity has grown stronger with the possibilities of peace in Central America. The representative of "Free Costa Rica" had to admit to journalists in the face of the failure that "Christ was also alone in his passion."

We view the beginnings of an accumulation of unitary and broad popular forces as small signs of hope. The creation of the Permanent Council of Workers (CPT), a broad and pluralist movement that unites the labor unions affiliated to the three large international union federations is a sign in the same direction.

At stake in 1988 is economic stability, internal and regional peace and Costa Rica’s future role in the region. The alternative of a transnational Costa Rica isolated from its region continues to run up against obstacles in light of the Right’s weakness and uncertainties about the export model and Taiwanization of the country. These latter concerns are due to the reduction in US assistance, the weakness of the US economy itself relative to other alternative partners (Europe, Japan and Latin America) and the need to unite with the Latin American bloc to renegotiate the debt burden.

Arias' good year in 1987, at both the Central American and international level, has allowed him to play a role he’ll find hard to repeat in 1988. Arias knew that the Iran-Contra scandal and the Reagan Administration's loss of image and political power could be used to gain space, both in Central America and internationally, as well as open internal space. His "Hands off Central America" policy, directed basically at the US government but also at those domestic groups that looked to US intervention as a way to increase their internal power, gave Arias the international and internal space and time that Costa Rica had lacked with President Monge.

In 1988 it will be necessary to establish a regional alliance to maintain that space and those international conditions. The Arias government will thus have to choose between an alliance of three-to-two or four-to-one in Central America. The three-to-two alliance assumes a choice of Vinicio Cerezo and Daniel Ortega against the other two Presidents, who are not only weak but also nearing the final stages of their terms. It also assumes closer ties between the EEC and Latin America and the consolidation of broad popular support in Costa Rica. Finally, it assumes concentration on conciliation and the creation of a regional pluralism to achieve a new Central American integration.

The regional lineup of four to one, on the other hand, would mean returning to the call for a "Central American Democratic Community," in which the four countries unite to isolate Nicaragua. This regional alliance would obviously have the support of the Reagan Administration, and possibly the next one, whether Democrat or Republican. Nonetheless, it would be difficult for Arias to maintain his image and regional leadership in the international arena. It would also imply the consolidation of conservative and ultra-right within the country, and the danger of substituting conciliation for servility, with the corresponding loss of Costa Rican cultural identity again.

The problems for 1988, therefore, are basically the same ones that were successfully surmounted in 1987:

1. To maintain the regional and international leadership that gained political space and economic assistance for Costa Rica, allowing it to recuperate its historic project of 1948;

2. To achieve internal social consensus at the economic and political level;

3. To define a policy of international insertion in the medium run that reconciles with integration.

The resolution of these problems will depend on the degree to which the Arias government continues to surround himself with the force and identity of the Costa Rican people to defend the national project. If instead he persists with policies based solely on his elected authority, he will lack the strength to defend the peace in the long run because his financial policies will contradict the Costa Rican traditional tendency to compensate inequality with state-distributed social welfare. To be a Costa Rican patriot, Arias will be unable to avoid resolving the contradictory policies of financial submission to the IMF and political independence from the United States.

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Modernization and Militarism

Military Solution in Crisis

Dependence and the Military

Steps on the Road to Peace

Between Dignity and Submission

Conclusions: Whither Central America
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