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The Trouble with Costa Rica

La Miel de los Mudos, y Otros Cuentos Ticos de Ciencia Ficción

by Iván Molina Jiménez
San José: Editorama, 92 pp., $12.50 (paper)


The CIA needed a very important favor from Oscar Arias after he became president of Costa Rica in 1986. Just across his country’s northern border, in Nicaragua, CIA-sponsored rebels were fighting to overthrow the leftist Sandinista regime. Costa Rica’s outgoing president had allowed them to maintain clandestine bases on Costa Rican territory. The CIA wanted Arias to do so as well.

Despite intense pressure from Washington, Arias refused. His courageous stand was one of the main reasons the anti-Sandinista uprising failed. Later he devised a peace plan that led to free elections in Nicaragua, and also helped end civil wars in Guatemala and El Salvador. For his achievements, he was awarded the 1987 Nobel Peace Prize. He left office in 1990 as a national hero, the most revered Costa Rican of his generation.

Over the next decade, Arias traveled widely, spoke for disarmament and other international causes, and accumulated scores of awards, plaques, diplomas, and honorary degrees. In the meantime, trouble began enveloping his homeland. Costa Rica, with long Caribbean and Pacific coasts and a population of about four million, is by far the most successful country in Central America. In recent years, however, social progress has come to a halt, senior government leaders have been implicated in corruption, and urban slums have metastasized as nearly half a million poor Nicaraguans have come in search of work. Arias responded to this gathering crisis by deciding to return to the presidency.

Arias and his friends imagined that Costa Ricans would be thrilled by his return to politics. No other politician is so famous. Despite all his advantages, however, his campaign fell flat. The result of the February 5 election was so close that electoral authorities ordered a manual recount of all 1.3 million ballots. Nearly a month later, they finally announced that Arias had won by a margin of 18,169 votes over his main rival, Ottón Solìs, an economist and former cabinet minister who had served in Arias’s government. Arias received 40.9 percent of the vote. That was fortuitous, because anything less than 40 percent would have forced him into a runoff that he might well have lost.

As I traveled across Costa Rica during the campaign, I found people gripped by foreboding and self-doubt. Many worry that their country’s good days are ending, that the cozy cocoon in which they have lived for half a century is coming apart. They see a host of symptoms. Corruption is perhaps the most visible: one former president has been charged with embezzlement, another with accepting bribes from a French cell phone company, and a third, who has been implicated in scandal but not formally charged, has taken up residence in Switzerland.

Besides having lost its reputation for honest government, Costa Rica is also losing its longstanding position as a land of social equality. Between 1988 and 2004, according to a new study, the income of the richest citizens doubled, while that of the poorest grew by just 7 percent. In a country once famous for its tranquillity, barbed wire, barred windows, and private security guards now protect many homes and businesses. Surging immigration from Nicaragua has strained the labor market and the national budget. Casino gambling and prostitution are not only thriving but ever more visible, and beggars, once all but unknown, are a common sight. Public hospitals are deteriorating as a result of reduced government spending. The two-party system has broken down, and new parties have sprung up to compete for the votes of an unmoored electorate.

Neither the lumbering bureaucracy, the atomized Congress, nor the highly unpopular outgoing president, Abel Pacheco, has managed to confront these challenges. Public frustration is rising. One Costa Rican I met summed up his country’s collective nightmare in a single, terrifying sentence: “We are returning to Central America.”

No one is quite sure why Costa Rica developed so differently from other Central American countries. One view holds that because Costa Rica had so few indigenous inhabitants and so few evident riches when Spanish conquerors arrived in the region, they left it more or less alone, sparing it the feudal aristocracy they imposed in other places. It won independence from Spain, along with the rest of Central America, in 1821 and became a sovereign state in 1838. During the 1940s and 1950s, visionary leaders turned the country into a full-fledged social democracy, with progressive taxation, strong guarantees for labor, a nationalized banking system, near-universal health care, an efficient pension system, and well-run schools. Perhaps most important, President José Figueres Ferrer abolished the Costa Rican army, thereby eliminating a powerful threat to civilian rule.

Figueres, who called himself a “farmer-socialist,” came to prominence in 1948 after leading an armed uprising against a government that was seeking to manipulate election results. The regime fell after a forty-day civil war that cost two thousand lives. That was the last political crisis in Costa Rican history.

After the civil war, Costa Rica entered a period of political stability, high growth rates, and steadily improving social conditions. In just three decades, the proportion of Costa Ricans living in poverty fell from 50 percent to 20 percent. Today more than three quarters of Costa Ricans own homes, and nearly every one of those homes has a refrigerator, washing machine, and color television. Even in remote villages, people have access to electricity, clean water, and public education. The literacy rate is 96 percent, and life expectancy is seventy-eight years—a year longer than in the United States.

During the years when Costa Rica was building an egalitarian society, one other country in Central America, Guatemala, embarked on a similar experiment. The United States refused to tolerate Guatemala’s reformist government, and in 1954 President Dwight Eisenhower used the CIA to overthrow it. Yet Eisenhower accepted a comparable regime in Costa Rica. This profoundly shaped the history of both countries. American intervention set off a thirty-year civil war in Guatemala; the lack of such intervention allowed Costa Rica to become a peaceful democracy.

There were two reasons why the United States allowed Costa Rica to enact social reforms while refusing to allow Guatemala to do the same. First, a uniquely powerful American company, United Fruit, dominated the Guatemalan economy. Feeling threatened by the government’s proposed land reform, United Fruit used its influence in Washington to push for the 1954 coup. In Costa Rica, by contrast, no American company was dominant. Secondly, some of the leaders of the Guatemalan government were open to Marxist ideas, which led the Eisenhower administration to view them as enemies. In Costa Rica, President Figueres and his successors were outspokenly anti-Communist, so the US tolerated their country’s advance toward social democracy.

Figueres and his fellow leaders shaped a remarkably successful social contract that united the three main forces in society: government, business, and popular groups representing workers, farmers, the middle class, and the poor. The consensus that bound these forces together, however, is evaporating. They no longer agree on whether the country’s traditional model, based on high taxes and a high level of social services, can be sustained in an increasingly competitive world. As a result, they are deeply divided on key political questions such as how much the government should spend on education, public safety, and environmental protection, and whether to privatize state agencies like the Costa Rican Electric Institute, which controls power generation and telecommunications.

Costa Rica has been changing since the 1980s, but only recently have we begun to notice it,” the sociologist Montserrat Sagot told me.

In the past we were very concerned with social welfare. Now we’re moving toward a much more individual model, which places the market first and implies less social solidarity. Traditionally we’ve had a commitment not to abandon the lower classes to their fate. We were a society with a great social conscience. Not that we had no poverty, but we felt a great sense of responsibility for each other….

Today there are three worlds in this country. There are the excluded, who feel very resentful and frustrated; the comfortable class that enjoys private clubs, travels to Europe, and wears designer clothes; and a middle class that is steadily becoming weaker and more worried.

Could these widening social divisions threaten Costa Rica’s stability? “It’s difficult to predict, because this society has no tradition of political violence,” Sagot said. “But if government is not able to regain its credibility or respectability, people may conclude that only someone with a strong hand can put the country back together. Oscar Arias is not the type of person who could become a strongman, but he could prepare the way for one. I don’t see a political program that can bring this country back together.”

Every year a team of Costa Rican researchers produces a thick volume of statistics and articles called Estado de la Nación en Desarrollo Humano Sostenible (State of the Nation on Sustainable Human Development). The newest edition concludes that “stability is eroding,” and cites much troubling evidence:

During 2004, for example, increased poverty, a reduction of income at all levels, and lower government spending on social programs led to a decline in the quality of life in Costa Rica…. Although this deterioration affected most of the country’s people, poor and vulnerable groups were hit hardest…. The number of people living in poverty rose from 18.5 percent to 21.7 percent, the highest level in ten years…. The price of water increased 30.5 percent, more than double the rate of inflation, and electricity rates increased by 17.5 percent…. Costa Rica continues to have one of the highest inflation rates in the hemisphere…. Congress performed poorly, the political system showed itself unable to make decisions, and public institutions became less responsive to the people’s will.

I asked a coauthor of the study, Jorge Vargas, what Costa Ricans are feeling as they live through this unaccustomed trouble. “Our society has a collective memory of a very successful era, and that makes us wonder what happened,” he told me. “We’re perplexed. People want things to be the way they were before. This is a huge challenge for the political class, because if we’re still in this situation five years from now, the country will be in deep trouble.”


Oscar Arias, who now assumes the challenge of governing this bewildered nation, comes from a rich family that made money in agriculture and branched out into banking and financial services. He studied law and economics at the University of Costa Rica, and then received a Ph.D. in political science from the University of Essex in Britain. “I was accepted at Yale,” he told me, “but I didn’t want to go to school in an empire.”

While in Britain, Arias came to admire the democratic socialism of Prime Minister Harold Wilson. Several times he joined protests against the Vietnam War. He remembers being part of the crowds that gathered in front of the American embassy in London and chanted, “Hey, hey, LBJ, how many kids did you kill today?” After returning home in the mid-1970s, Arias became a university professor of economics and entered politics. He was elected to Congress, named minister of planning and economic policy, and chosen to head the National Liberation Party. After he was elected president in 1986, some people admiringly called him “the most political of intellectuals, and the most intellectual of politicians.”

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