Costa Rica: Politics, Economics, and Democracy 9781685853839

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COSTA RICA

COSTA RICA Politics, Economics, and Democracy

Bruce M. Wilson

b o u l d e r l o n d o n

To Kerstin and Kieran

Published in the United States of America in 1998 by Lynne Rienner Publishers, Inc. 1800 30th Street, Boulder, Colorado 80301 and in the United Kingdom by Lynne Rienner Publishers, Inc. 3 Henrietta Street, Covent Garden, London WC2E 8LU © 1998 by Lynne Rienner Publishers, Inc. All rights reserved

Library of Congress Cataloging-in-Publication Data Wilson, Bruce M., 1961– Costa Rica : politics, economics, and democracy / by Bruce M. Wilson. p. cm. Includes bibliographical references and index. ISBN 1-55587-485-1 (hc. : alk. paper) 1. Costa Rica—Politics and government. 2. Democracy—Costa Rica. 3. Costa Rica—Economic conditions. 4. Costa Rica—Economic policy. I. Title. F1546.W55 1998 320.986—dc21 97-50100 CIP British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library.

Printed and bound in the United States of America

∞

The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials Z39.48-1984. 5 4 3 2 1

Contents

vii ix

List of Tables and Figures Preface 1

Introduction

1

Approach, 3 Chapter Outline, 4 2

From Columbus to Calderón: The Political and Economic Consequences of Costa Rican History

9

Colonialism, 9 Independence, 16 Political Developments from Independence to the Civil War, 18 Economic Development from Independence to the Civil War, 23 The Last Military Dictatorship, 29 Political Parties, 30 The Civil War, 32 Conclusion, 35 3

The Political Consequence of Institutional Rules The Junta and Postwar Reforms, 41 The Constituent Assembly, 44 Electoral Changes, 45 Devolution of Political Power, 51 Local Government, 54 Autonomous Institutions, 54 The Judicial Branch, 57 v

41

vi

CONTENTS

Political Parties, 58 Interest Groups, 66 Conclusion, 75 Appendix, 76 4

The Creation and Consolidation of the Social Democratic Model

81

Emergence of the PLN’s Development Model (1948–1962), 83 State-Led Industrialization Within the CACM (1962–1972), 94 The Entrepreneurial State (1972–1982), 99 Public Policy Outcomes, 106 Conclusion, 107 5

The PLN and the Politics of Neoliberalism

113

The PLN’s Initial Response to the Economic Crisis, 115 Reorienting the Economy, 124 Electoral Laws and Economic Reforms, 132 Neoliberal Policies and Reelection Strategies, 134 Conclusion, 143 6

Conclusion

151

Stability and Change in Democratic Institutions, 151 The 1998 Election Campaign and the Party System, 156 The February 1998 Election, 157 Is the Social Democratic Model in Costa Rica Dead? 160

List of Acronyms and Abbreviations Bibliography Index About the Book

163 167 179 187

Tables and Figures

Tables 1.1

Major Social Indicators of Central America

2.1 2.2

Characteristics of Presidencies, 1824–1950 Government Revenue, Expenditure, and Public Debt, 1940–1943

33

3.1 3.2 3.3 3.4 3.5 3.A

Constituent Assembly Election Results, December 1948 Presidents and Heads of State, 1948–1998 Legislative Assembly Election Results, 1949–1998 Allocation of State Election Funds by Party, 1970–1994 Major Autonomous Institutions, 1925–1977 Legislative Assembly Election Results, Limón, 1962

44 47 48 50 55 76

4.1 4.2

Presidents and Legislative Representation, 1948–1982 Selected Social Indicators, 1950–1980

5.1

Major USAID Institutions and Their Costa Rican Counterparts Presidential and Legislative Assembly Election Results, 1978–1998

5.2

2 20

87 106 122 139

Figures 4.1 5.1

Central American Gross Domestic Product Per Capita, 1920–1984 U.S. Aid to Costa Rica, 1980–1995

vii

82 120

Preface

I first visited Central America in 1986, after traveling on local buses from the U.S. border to Mexico City, where I managed to see the second round of the World Cup (which is more than can be said for the Scottish team). I went on to Guatemala, El Salvador, Honduras, and Nicaragua. Although the whole trip took just three months, it was evident that the 1980s were not kind to Central America and its people. Democratic government was a rarity, and serious political differences were more likely to be resolved through violence than through the ballot box. The severe economic crisis that engulfed the region in the early 1980s menaced social conditions, undoing much of the progress of the previous decade. My first visit to Costa Rica came the following year (by plane this time) to begin exploratory fieldwork for my dissertation. Like most people who arrive in Costa Rica after traveling in other Central American countries, I was struck by how different Costa Rica appeared. There were no shortages of food in the stores and restaurants, no young soldiers nervously patrolling the streets, no curfews, and although many people might have looked poor by U.S. or Western European standards, the abject poverty visible in much of the region was absent. Although wars raged to the north of the country and dictators ruled in much of Central America, Costa Rica did seem like an “oasis of peace,” “la Suiza centroamericana” (the Switzerland of Central America). It is this contrast with its neighbors that makes Costa Rica interesting to many social scientists. First, its tradition of democratic rule stands in stark contrast to the political instability and violence of much of the rest of the region. Second, the country’s chosen path of economic development resulted in much higher social indicators than in nearly any other country in the developing world.

ix

x

PREFACE

By the mid-1980s, though, Costa Rica was already undergoing substantial changes. The National Liberation Party’s (PLN) forty-year-old state-led economic development model and the state’s commitment to its extensive social and welfare programs were gradually being replaced by a neoliberal economic program that de-emphasized the role of the state and relied on market mechanisms to determine prices and the allocation of goods and services. Most surprising, the party behind the transformation was not the more conservative Social Christian Unity Party (PUSC) but the PLN, the very party that had implemented the programs and defended them from conservative attacks since 1948. These are the topics addressed in this book. When Lynne Rienner expressed her interest in this project—concentrating on the political economy of Costa Rica—I was glad to take on the task since I was puzzled by the contrast between Costa Rica and its neighbors as well as by the domestic politics of economic reform in Costa Rica. Once I realized the enormity of the endeavor, though, my initial enthusiasm dampened, and I quickly developed an empathy for Spalding Gray and his “Monster in a Box.” My personal “monster” grew to inhabit many boxes and followed me around the country from Washington University in St. Louis to the University of Iowa, then Rice University in Houston, and finally to the University of Central Florida in Orlando, where the bulk of the book was written. As well as filling many boxes with notes, articles, and drafts of chapters, the research and writing of the book generated a considerable number of personal and intellectual debts. In the past ten years of field trips to Costa Rica, many Costa Rican politicians, bureaucrats, interest groups, leaders, and businesspeople have given their time and resources to help me better understand the country’s political economy. In particular the staffs of the Supreme Electoral Tribunal, the Legislative Assembly, and the Sala Constitucional have been especially helpful in offering information and copying documents. Ricardo Seevers has also proved to be the perfect host and an excellent guide to Costa Rican society, economy, and politics. I am also in debt to friends and colleagues who read and commented on various versions of chapters or the entire manuscript: Kerstin Hamann, Roger Handberg, Ronald Harpelle, Philip Keefer, Fabrice Lehoucq, Trudi Morales, and Michelle Taylor. Michelle Taylor has been an amazing colleague and friend since our graduate school days. Her support of my work goes beyond what is expected of a colleague. She even carried draft chapters of this book with her to Honduras, so that I might produce the book a little quicker and a lot better. Phil Keefer at the World Bank also forced me to think more clearly about key economic development ideas and how to structure the argument throughout the book.

PREFACE

xi

I would also like to thank the anonymous reviewers at Lynne Rienner Publishers for their insightful comments, which have strengthened the book, and the copyeditor, Cheryl Carnahan, who did an excellent job of translating my Scot’s English. I have benefited from a number of graduate and undergraduate research assistants who have helped with this project, particularly Ariam Ferro, Wajiha Kahn, James Rossi, and Orlando Sánchez. Teresa Newlin, secretary of the Political Science Department, helped rescue a number of chapters when a well-known word-processing program produced in a certain northwestern state corrupted nearly all the electronic files. Finally I would like to thank my son, Kieran, who has been patient beyond his years and very understanding of my repeated trips to Costa Rica. Kieran is already excited about accompanying me to Costa Rica and has suggested more than once that “Wenn ich gro␤ und stark bin, kann ich mit Dir nach Costa Rica mitkommen.” To my wife, Kerstin Hamann, who has been (among other things) a coauthor, colleague, adviser, stern critic, editor, and a loyal and tireless friend, I owe a debt of gratitude that cannot be expressed adequately. Kerstin now knows more about Costa Rican political economy than she ever imagined or cared to know. Any errors in analysis or in fact are, of course, mine.

1 Introduction

On the first Sunday in February 1998, Costa Ricans went to the polls to elect a president, two vice presidents, and all fifty-seven members of the Legislative Assembly as they had done every four years since the end of the short civil war in 1948. The election marked the twelfth consecutive time the country’s president was chosen in a peaceful, democratic, constitutional fashion. No other country in Latin America or the Caribbean can match either the length or the depth of this democratic experience. Costa Rica’s political life sets it apart from its neighbors, but its economic and social development make the country rather exceptional, especially since the end of the 1948 civil war. Gross domestic product (GDP) per capita has been consistently higher than the GDPs in Costa Rica’s neighboring countries, and income distribution has also been considerably more egalitarian. In terms of the Human Development Index (HDI), in 1996 Costa Rica ranked 31st in the world, which placed it in the ranks of the developed industrial countries.1 The other Central American countries, in contrast, ranked 112th through 117th. Table 1.1 shows the differences in social indicators more concretely. In the period 1990–1996, 96 percent of Costa Ricans had access to safe water, compared with just 64 percent in Guatemala and 53 percent in Nicaragua. A similar picture emerges with respect to access to health services, which 80 percent of Costa Ricans enjoy, compared with the Central American average of 58 percent and just 34 percent in Guatemala. The average life expectancy in Costa Rica is almost seventy-seven years; the next highest in the region is sixty-nine years in El Salvador. On average, Guatemalans can expect to live eleven years less than Costa Ricans. Likewise, Costa Rica’s infant mortality rate (16 deaths per 1,000 live births) compares favorably with Guatemala’s 67 per thousand or Nicaragua’s 60 per thousand. A related indicator is the poverty index, which reveals that in 1994, 6.6 percent of Costa Ricans lived in 1

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poverty, compared with more than 35 percent in Guatemala and 28 percent in El Salvador. One final important indicator is the educational success of primary-school students. In Costa Rica more than 75 percent of students graduate from primary school, which contrasts with 31 percent in El Salvador and 44 percent in all of Central America (FLACSO 1991:155; Weisskoff 1993:4; UNICEF 1995). Even the most casual student of Central American politics or economic affairs will be struck by analysts’ ubiquitous use of caveats to exclude Costa Rica from the region’s general pattern of political and economic life. Since the end of World War II, much of the Central American isthmus has suffered from years of dictatorship, fratricidal civil war, revolution, and enormous poverty, yet Costa Rica has enjoyed continuous democratic governance, significant levels of economic development, and social improvements that rank it among the wealthy industrial democracies of Western Europe and the United States. In contrast to its neighbors, Costa Rica often appears (and promotes itself) as an oasis of peace and prosperity, “la Suiza centroamericana” (the Switzerland of Central America). The country has also been widely lauded for its creation of and commitment to one of the most extensive welfare states in Latin America, which has played a significant role in reducing poverty, infant mortality rates, and the incidence of major diseases (Seligson, Martínez, and Diego Trejos 1996) and has facilitated improvements in general health levels, income distribution, and literacy. Consequently, the average Costa Rican enjoys a standard of living considerably higher than that of citizens in neighboring countries. Although these data reflect very real achievements for a Third World country, their origins have been so clouded by national mythologies that many myths have taken on the status of facts. These “historical facts” are

Table 1.1

Major Social Indicators of Central America Under-five Child Mortality Rate (per 1,000 live births) 1995

Costa Rica El Salvador Guatemala Honduras Nicaragua

16 40 67 38 60

Life Expectancy at Birth (years) 1994 76.6 69.3 65.6 68.4 67.3

No Access to Safe Water (%) 1990–1996

No Access to Health Services (%) 1990

Human Poverty Index (%) 1994

Adult Illiteracy Rates (%) 1995

4 31 36 13 47

20 44 66 34 17

6.6 28.0 35.5 22.0 27.2

5.2 28.5 44.4 27.3 34.3

Sources: Weisskoff (1993:4); UNDP (1997:21, 164, 174).

INTRODUCTION

3

frequently used for distinctly political ends, which makes it difficult to clearly understand Costa Rica’s historical and contemporary political economy. Even in contemporary Costa Rica, politicians and academics alike are wont to repeat them as a true representation of the country’s history. Consequently, coherently interpreting the country’s political economy is a formidable task. This book examines some of the most interesting questions concerning Costa Rica’s political economy. It ranges from the relevance of the country’s colonial experience for its postindependence political life and economic development to the origins of the modern interventionist state to the enormous changes brought about in response to the severe economic crisis of the late 1970s and early 1980s. The book also provides a thorough grounding in the institutional rules that direct the political life of the country.

Approach The lens used to understand the political process in each period is informed by the new institutionalist writings (see, for example, March and Olsen 1983; Steinmo, Thelen, and Longstreth 1992). The framework employed recognizes that politicians’ preferences “can be understood only in the context of the institutionally generated incentives and institutionally available options that structure choice” (Grofman 1989:1). I adopt Peter Hall’s (1992:96) definition of institutions as “formal rules, compliance procedures, and customary practices that structure the relationship between individuals in the polity and the economy. Institutions may be more or less formal but invariably serve to regularize the behavior of individuals who operate within them.” The book stresses the importance of institutions, not in determining policy outputs but in providing the context in which policy debates take place and in which political actors make their calculations within a constrained range of choices. The book explains modern Costa Rican politics and economics by focusing on the political institutions, political parties, and interest groups that assumed key roles after the 1948 civil war. This analysis reinterprets the historical foundations of the democratic system during the colonial period. Many authors writing on Costa Rican politics in the early to mid1980s, during the country’s worst economic crisis since the Great Depression, believed Costa Rica was teetering on the brink of a political breakdown that would result in a situation similar to that of Uruguay in the 1970s. 2 Charles D. Ameringer, the author of one of the most frequently cited books on Costa Rican politics, ended his 1982 study on a pessimistic note, questioning the prospects for the survival of Costa Rica’s social

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democratic economic development model and even its form of democratic government. Costa Rica’s democratic system did survive without a major crisis, but the social democratic development model did not. Although a democratic breakdown did not take place, significant political and economic changes have occurred since the mid-1980s as a direct result of the economic crisis. As a consequence, a need exists to reevaluate the pattern of Costa Rican politics and the way in which the political system has responded to internal and external stimuli, such as the economic downturn. This book analyzes the role of the country’s most important political actors (political parties, political leaders, domestic interest groups, and international institutions) in connection with the institutional framework within which political processes take place, such as electoral laws or the constitutional separation of power. Since the civil war, Costa Rica’s political institutions have been slightly modified but not radically changed. More significant change has occurred in the issues facing the country’s politicians and in the nature of the resulting policies. For the postwar period, then, economic policy discussions have to be understood in the context of electoral competition between the National Liberation Party (Partido Liberación Nacional; PLN) and a main opposition party. Both the rise and decline of the social democratic model were pursued by governing parties with one eye on the next election.

Chapter Outline The book is structured as follows. Chapter 2 uses recent historical research to examine and reevaluate some of the mythology that surrounds the origins of Costa Rica’s democratic stability. This chapter discusses Costa Rica’s political history from the start of the colonial period in the early 1500s to the short, bloody civil war of 1948. It is often argued that Costa Rica’s colonial history is the key to understanding its democratic origins. Although there is little doubt that the country’s colonial experience was indeed somewhat different from that of its regional neighbors, more recent research (Gudmundson 1986; Jiménez Castro 1986; Acuña and Molina Jiménez 1991; Stone 1975, 1991, for example) has shown that it exhibited neither the enlightened pacific leadership nor the egalitarian income and land distribution previous research had encapsulated in the rural-egalitarian thesis. Instead, these studies show that sizable inequalities existed in both the colonial and postindependence societies. The rural-egalitarian thesis is further undermined by a closer examination of the country’s early political history. The notion that the yeoman

INTRODUCTION

5

society of the colonial era led directly to a nascent democratic state is challenged by evidence that shows it was only after the 1948 civil war that elections were free, open, honest, and held on a regular basis. Moreover, it was only after 1948 that elections became the only way in which governments were changed. The most important period in defining current Costa Rican political development was the buildup to and aftermath of the short, bloody civil war of 1948. In response to the Great Depression, the Costa Rican state began for the first time to be directly involved in solving its economic and social problems. As a result, the old elite compromise collapsed, electoral outcomes were set aside, and civil war ensued. Chapter 2 also examines the relationship between the country’s economic situation and the activities of important political parties and interest groups during the 1940s. Why and how the economic crisis developed into a political crisis, and why that crisis was resolved not through the ballot box but on the battlefield, highlight the willingness and ability of Costa Rica’s elites to abandon democratic procedure when it went against their vital interests. More important for the modern period, however, are the effects of the war, which resulted in a new constitution and new political institutions governing the policymaking process. The chapter examines the changes in the country’s economy as it became fully integrated into the world markets as an exporter of primary products and discusses the buildup to the 1948 civil war and its consequences for the modern Costa Rican democracy. Chapter 3 assesses the political and economic consequences of the civil war. In particular, the banning of the Communist Party and its powerful affiliated labor unions (which muted the political left for many years and emasculated organized labor), the proscription of the military, the promulgation of a new constitution (which dispersed political power among different branches of government), new electoral laws, and a redefinition of the role of the state in the economy are interpreted as consequences of the breakdown of the nascent democratic rule. These institutional rules are still in effect and provide the parameters within which political actors behave. This chapter gives in-depth coverage of the new political and economic institutions and identifies the most important political actors and their interests in the postwar period. It also examines the politics that motivated the new elite compromise, which resulted in the adoption of new democratic rules and a gradual break with the old export-led economic development path. With the adoption of democratic rule and fair elections, political parties and interest groups moved onto center stage in Costa Rican politics. As an outgrowth of the political struggle during the civil war, one of Latin America’s best organized parties, the social democratic Partido Liberación

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Nacional, emerged. The parties of the right were also reorganized but failed to merge into a single party until 1983. For the first time in Costa Rican history, political parties became more than vehicles of personalistic leaders; instead, they were issue based and had to compete for the majority of the electorate’s votes in order to govern. Chapter 3 points to the modifications of the electoral laws, candidate selection procedures, and the broadening of political parties’ support bases to include disparate social groups within each party to explain the mechanisms through which political parties formulate and implement policies. The emergence of the political party system and internal party politics are described. The chapter also examines the power of interest groups, including the Catholic Church, labor unions, civil groups, and the well-organized and economically powerful business groups, international financial institutions, and political parties. The institutional parameters within which interest groups attempt to influence social and economic policymaking are identified. Chapter 4 builds on the institutional framework spelled out in Chapter 3 to analyze the growth in the role of the state in both the economy and the supply of welfare services. The chapter explains the evolution of the social democratic development model in terms of the way political parties and interest groups interacted with each other and behaved within institutional constraints. Thus, the state-led economic development model was applied only gradually over a number of years, and attempts by conservative parties to reverse the development model were stalled as a result of institutional rules (especially electoral and political party laws and the creation of autonomous institutions). Chapter 5 examines the shift in economic development models. After more than thirty years of expounding and expanding a social democratic development model, it was a social democratic party rather than a conservative party that successfully began a significant reversal of the model. Despite the historical success of the model and its use by the PLN to facilitate its political success in the postwar period, the PLN—elected in 1982 at the nadir of the economic crisis—abandoned the model it had previously advocated and began to implement a sweeping series of neoliberal economic measures. By analyzing the adoption of the reform package, the chapter highlights the changes in relative influence of competing interest groups and factions within the governing party. This in-depth analysis of major components of the new policy direction will provide a clear picture of how Costa Rican politics is formulated and implemented and how these processes have changed as a result of the economic crisis. Chapter 6 reflects on economic and social changes in the context of the campaign for the 1998 presidential and legislative elections, which determined which parties and individuals would govern the country for the

INTRODUCTION

7

subsequent four years. This election campaign allows a reexamination of the importance of electoral laws and other institutional barriers in inhibiting the success of third parties. It also illuminates the institutional arrangements, especially election and political party laws, that permit political parties to credibly campaign on populist or social democratic electoral platforms, even though their party in office has recently advocated and implemented neoliberal structural reform policies. This concluding chapter finally examines the increasing role played by the recently created constitutional court, which has already changed the conduct of Costa Rican politics in ways unintended by the politicians that created it.

Notes 1. The HDI is a composite index of educational attainment, life expectancy, and income (UNDP 1996:11–42). 2. Many Costa Ricans saw parallels between their country and Uruguay. Both had enjoyed democratic governance for many years, and both had large welfare states. In the early 1970s, a severe economic crisis led to political chaos and eventually to a military coup in Uruguay. See, for example, Gillespie (1991).

2 From Columbus to Calderón: The Political and Economic Consequences of Costa Rican History In 1989, political leaders from all over the Western Hemisphere, including U.S. President George Bush, congregated in San José to celebrate one hundred years of Costa Rican democracy.1 Whereas defining and demarking the exact dates for the start of a democratic regime is difficult, the centennial celebration was part of a national myth surrounding democracy in Costa Rica. The historical underpinnings of the country’s democratic government are undeniable, as are the important historical differences between it and the other Central American republics from the colonial period onward. This chapter examines the importance of Costa Rica’s historical experience from the colonial period until the 1948 civil war for the country’s political, economic, and social development. The first section examines the often-cited “rural democracy” thesis of the country’s political development in light of recent research, which shows that the colonial and independence periods, although important for later economic and political development, do not provide a satisfactory explanation for democratization. The second section examines the gradual and uneven movement toward more democratic governance from 1889 to the outbreak of the civil war in 1948. In the postwar period an elite-level settlement was reached that included new economic and political institutions, which, after a short transition period, produced an unbroken period of free, competitive elections. The incremental increase in the role of the state in the economy since independence and the growing levels of state intervention in the provision of social benefits laid the groundwork for the postwar state guidance of economic development and the creation of one of the most highly developed welfare states in Latin America. Colonialism When Christopher Columbus arrived in Costa Rica in 1502, he mistakenly believed considerable quantities of gold existed in the area and enthusiastically 9

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notified the king of Spain, “I saw more signs of gold in the first two days [in Costa Rica] than I saw in Española during four years” (Columbus 1961:195). Other conquistadores were subsequently attracted to the area by the “lure of easy wealth, preferably gold or silver, . . . the availability of Indian labor to build agricultural estates,” and the prospect of rapid social mobility (Woodward 1985:41–42; Stein and Stein 1970:30). Contrary to early reports, Costa Rica had neither valuable mineral resources nor a significant Indian population that could be readily put to work.2 As a consequence, the settlement of Costa Rica began much later than occurred in the rest of Central America and Panama. It took almost sixty years for the first permanent Spanish settlement to be established in Costa Rica, which was regarded by settlers as the “poorest and most miserable [province] in all America” (Acuña and Molina Jiménez 1991:21). The Spanish population of Costa Rica grew very slowly, exceeding a few hundred only after the mid-seventeenth century (Gudmundson and Woodward forthcoming). Colonial Central America Costa Rica’s colonial experience was characterized by geographic isolation, widespread poverty, and failure to find and produce exportable products. For much of the rest of Central America, control of the native Indian population formed the backbone of the colonial economy and society, which was the basis for a new economic order designed to benefit the Spanish Crown and to encourage the settlement of the area through rewards of encomienda.3 That system guaranteed settlers a supply of labor, permitted the creation of large mining concerns and haciendas to produce cochineal and indigo for exportation to Spain, and underwrote the wealth and status of a new elite class among the colonizers. This pattern of development was especially true for El Salvador and Guatemala. The encomienda system effectively reduced the Indian population to serfs. Under protest from the church, the practice was abolished by the New Laws in 1542, but “lax enforcement and evasion allowed the system to continue” (Woodward 1985:43). The system was eventually replaced by the repartimiento, which required that all Indians between ages sixteen and sixty had to work one week in four for whomever they were assigned by the audiencia, a Spanish government body that encompassed both legislative and judicial functions. This system lasted through the eighteenth century and was used to keep the Indian population in a socially, economically, and politically inferior position and to increase the wealth of the settlers (Woodward 1985:43–45). Thus, the economic power of the conquistadores was based on privileges granted by the Spanish Crown, access to land, and the control of

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11

Indian labor. The typical Central American province in the colonial period was characterized by exploitative relations between the Indian majority and the conquering Spaniards, as well as by violence among conquistadores over control of Indians and land. As a consequence, Indians and mestizos (people of mixed Indian and Spanish blood) were reduced to severe poverty, whereas the conquering white Spanish elite became wealthy and powerful. This “clear-cut social and economic stratification quickly came to be the central organizing principle of society, giving rise to social duality that largely persists to the present day” (Seligson 1987:155). Colonial Costa Rica Most scholars agree that Costa Rica’s colonial experience was different from the experiences of its Central American neighbors. Scholars vary widely, however, about the significance of those differences for the country’s subsequent political development. According to a widely repeated history, Costa Rica’s colonial experience formed the social and political foundations of its later democracy. Authors promoting this “rural democracy” thesis argue that the failure to find significant gold deposits and the lack of easily subduable Indian labor prevented the Spanish conquistador elite in Costa Rica from replicating the economic relations found in other parts of Central America.4 The settlers could not generate economic wealth by exploiting Indian labor, as occurred in other Central American countries. Proponents of the rural democracy thesis argue that as a result of the paucity of Indians and the fictional mineral resources, the area was very poor and attracted few settlers, and those who chose to live in the colony “had to work the land hard . . . so that they would not die of hunger along with their families” (Pacheco 1961:32). Unlike other parts of Central America, in Costa Rica conquistadores were unable to stake claims to large areas of land, as the labor supply (forced or voluntary) was too small to support such enterprises; consequently, no highly stratified class structure developed. Instead, a rural egalitarian society was formed in which nobles and commoners alike had to till their own land. This rural egalitarian society made democratic development in the independence period a historical inevitability.5 Indeed, considerable evidence supports some of the historical claims of the rural democracy thesis, if not its conclusions. It is generally accepted, for example, that fewer Indians lived in Costa Rica than in other parts of the region. Indians living in Costa Rica were very hostile to the settlers, and their numbers declined precipitously throughout the colonial period. Of a population of 27,200 Indians in 1522, fewer than 15,000 remained less than a hundred years later, and that number had diminished to 8,281 by 1801 (Creedman 1991:145). 6 The Indian population was

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reduced through wars with the Spanish conquerors, intertribal wars, enslavement by and sale to people from Panama and Peru, new diseases brought by the Spanish, and starvation as a result of forceful removal from their lands (Pérez-Brignoli 1989:36).7 Unlike the Incas of South America or the Aztecs of Mexico, Indian society in Central America had no centralized authority; instead, the Indians were separated into autonomous tribes. As a result, no central power source existed that could be conquered; thus, Central American Indians were not defeated all at once. The subjugation of the Indians in northern Central America did not stop Costa Rican Indians from persisting with attacks on Spanish settlers. As one conquistador reported to the Spanish king in frustration, “Your Majesty may be assured that in Costa Rica there are no peaceful Indians” (quoted in Rinehart, 1984:6). The rural democracy thesis argues that the Costa Rican economy and society were built on a small, ethnically homogeneous “white” population (removing any ethnic cleavages) that depended on self-sufficient farming for its existence and experienced a common, pervasive poverty (removing any class cleavages). Consequently, there was no urban development and little occupational diversity. Because of the geographic isolation and lack of economic importance of the province, colonial government institutions were poorly developed. Rural democracy thesis proponents point to these factors as responsible for Costa Rica’s rural egalitarian ideology, which laid the foundations for a particularly Costa Rican culture that fostered democratic development during the nineteenth century.8 The direct connection between rural poverty and democratic development is spelled out by Lawrence E. Harrison (1985:48), who notes that Costa Rica’s early poverty, scarcity of Indians, and geographic isolation “discouraged the evolution of plantation agriculture . . . [and] the evolution of [a] military class.” The early poverty led to a “common leveling experience [that] triggered a process of cultural change that is self-reinforcing” and resulted in the development of a national culture of brotherhood among the homogeneous Costa Ricans (Harrison 1985:55–56). These proponents do not deny that the encomienda system was used in Costa Rica or that it was an important aspect of seventeenth-century colonization, but they argue that Costa Rica’s encomiendas were unlike those of the northern states. They were unprofitable, were small from the start, and declined during the sixteenth century “to the point where some barely had three Indians” (Monge Alfaro 1989:10). The typical settler in Costa Rica, then, “took over the land, clearing and tilling primitive plots, just enough for simple subsistence” (Monge Alfaro 1989:10). The larger farms that did exist tended to be reduced in size over generations because of the apportionment of landholding among heirs; thus, with each generation landholdings became smaller. In contrast to Guatemala, where haciendas

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13

became the typical land tenure system, Costa Rica’s most common landholding was a small or medium-sized family farm. Costa Rica’s colonial experience meant that, in contrast to other countries in the isthmus, there were no major social classes or castes or “despotic officials who arrogantly kept themselves apart from the populace. There were no groups of strong and powerful criollo landowners, nor Indians who hated the Spaniards, nor a wretched mestizo class which had to endure the landowners’ abuse” (Monge Alfaro 1989:12). Colonial society, especially from the eighteenth century onward, was viewed as bucolic and egalitarian, revolving around self-sufficient agricultural production on small and medium-sized family farms. This view of Costa Rican society during the colonial and early independence periods has become part of the national psyche. Although it is still very popular among academics and politicians, however, it has been slowly eroded by more recent research. For example, evidence from Samuel Stone’s genealogical studies, although it does not explicitly abandon the rural democracy thesis, highlights the social stratification and wealth inequalities that existed (Stone 1974, 1975, 1991). Stone (1974: 406) shows that during the colonial period the Spanish Crown “reserved access to political posts to conquistadores and hidalgos (nobles), thus giving control of the province to a small group of families by virtue of their descent,” and that these families maintained their position during the independence period and afterward. He argues that through its monopoly on power, this group “stood in contrast with the rest of the population, which subsisted on a primitive type of agriculture” (Stone 1974:406). Thus, the argument of universal equality of poverty during the colonial and immediate postindependence periods must be reconsidered and, with it, the political implications attributed to that poverty and equality (see also Acuña and Molina Jiménez 1991). The most severe blow to the rural democracy thesis comes from Lowell Gudmundson (1983, 1986), who provides convincing evidence that even with the country’s late colonization, isolation, lack of Indians, and relative poverty, the social structure in Costa Rica during the colonial and immediate postindependence periods was not egalitarian but complex and highly structured. By examining census data, notaries, travelers’ accounts, and other primary sources, Gudmundson shows that the mythology surrounding Costa Rica’s social and economic reality before the coffee export boom is fallacious. Rather than household self-sufficiency among dispersed and privatized smallholders . . . the early nineteenth-century village economy was based on nucleated village settlement in which land tenure complexities and inequality and the social division of labor affected all but the most isolated segments of [the] peasantry. Not only were there tangible differences

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between the “elite” and the peasant masses, but also within that same heterogeneous peasantry and among a surprisingly well-developed urban artisanry and agriculture. (Gudmundson 1983:429–430)

That is, far from exhibiting the egalitarianism and universal poverty claimed by the rural democracy thesis, economic and social life in Costa Rica was characterized by significant income and wealth disparities, even in the absence of pronounced race distinctions. According to Gudmundson (1983:435, 444), the society was not completely rural, but instead “diminutive cities functioned as specialized centers of production and distribution for their surrounding villages.” He notes that whereas poverty was widespread, before the introduction of coffee Costa Rica “was no self-sufficient household economy” and existing wealth was relatively concentrated. One of the empirical findings of the rural democracy thesis, the existence of a large number of small family farms, has also been challenged. Carlos Meléndez Chaverri (1989), for example, shows that outside of the major settlement areas of the Meseta Central, land tenure was similar to that of other Central American countries. The northwest region of the colony was marked by large-scale cattle farms, whereas cacao plantations flourished on the Atlantic coast. Meléndez Chaverri (1989:16) accepts the rural egalitarian thesis for the Meseta Central but argues that in other areas of Costa Rica the hacienda was “the basis of an oligarchical and antidemocratic social order” and that the current “agrarian problems of the northern Pacific region in modern times are direct legacies of the hacienda.” More recent research, then, requires that we draw different lessons from the colonial experience in Costa Rica. Clearly, some historical legacy exists from the colonial period. For example, the sparseness of Indians was very real, but the political consequences of that paucity are uncertain. Costa Rica is not the only country in Latin America that had few Indians. Argentina also had a small Indian population, but the immediate outcome was not the advent of democracy. Instead, Argentina was governed initially by ruthless caudillos and then by a series of populist dictators, with democratic governance arriving relatively late (see, for example, Corradi 1985). On the other hand, other countries that used “coercive” labor practices have developed highly democratic regimes.9 Thus, although the argument rages concerning the importance of Costa Rica’s colonial period, most scholars accept that it was not an egalitarian, nonhierarchical society. Democracy, then, cannot be explained by relying only on the colonial period. To understand the possible political effects of the colonial period, we must follow the country’s political and economic development through the independence period.

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Colonial Economy and Society From the mid-sixteenth century until independence in 1821, Costa Rica, like the rest of Central America, was under the administrative control of the audiencia in Guatemala. The audiencia acted as the colonial government with control over all economic activity in a larger colony that stretched from Chiapas (now part of Mexico) to Costa Rica. The audiencia functioned as the highest civil, criminal, and military court in the colony and carried the responsibility to safeguard the Indians from Spanish settlers’ abuse. The president of the audiencia filled the military and civil roles of both captain general and the governor of the colony (Pérez-Brignoli 1989:37). In 1542, Costa Rica was granted the status of gobernación (province) with its own governor and captain general, who was appointed directly by the Spanish king, although the area remained subordinate to the captain general of Guatemala. The status of gobernación was usually a recognition of an area’s size and economic and political importance, but in Costa Rica’s case it was a recognition of the geographic barriers to administering the area effectively from Guatemala. With the exception of paying taxes to the Kingdom of Guatemala, Costa Ricans “were left largely to their own devices, without either outside interference or assistance” (Rinehart 1984:12). At the local level, a significant degree of political autonomy was afforded ladino and Indian villages, especially after Spain’s promulgation of the Cádiz Constitution in 1812. As a consequence, local interests tended to dominate the cabildos (municipal councils). The exact means of choosing regidores (aldermen) varied by region and over time. In the early colonial period, Costa Rica’s regidores were elected by their fellow townsmen, but by the seventeenth century there was so much “patronage and graft . . . [that] local officials came to be appointed rather than elected, and the office of a regidor usually went to the highest bidder” (Creedman 1991:234). The effects of receiving gobernación status and the powers given to local cabildos gave the province a significant level of political autonomy, which, in turn, helped to keep Costa Rica out of the more violent political debates in the region, including the war of independence. This isolation also facilitated the consolidation of power by local elites. Cartago, the first Spanish settlement in the central valley, was founded by Juan Vásquez de Coronado and a small army of 114 troops. Indian villages near Cartago were subjugated and forced to pay tribute to and work for the original conquistadores. These early settlers, with their access to Indian labor and tributes, became the political and social elites of Costa Rica. Their offspring retained that political power and social importance even after the Indian villages, upon which their wealth was dependent, had declined significantly. The families of the original settlers, although never

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as opulent as their counterparts in Guatemala, were the forebears of Costa Rica’s political and social elites. Between independence and 1970, for example, more than 20 Costa Rican presidents and 250 deputies could trace their bloodlines directly to Vásquez de Coronado (Gudmundson and Woodward forthcoming). According to Gudmundson (1983), significant social divisions existed in colonial and postindependence Costa Rica, but unlike the elites in Guatemala, whose wealth was a function of landholdings and Indian labor, in Costa Rica the elites’ wealth was drawn from their interests in a wide variety of “wealth-generating and preserving activities, especially trade and politico-religious officeholding” (Gudmundson 1983:451). The elites diversified their economic interests, becoming merchants and financiers as well as farmers. Thus, the interests of the landed elite and the merchant classes overlapped, whereas in the rest of Central America they developed as two separate classes with different economic and political agendas. This fusion of elite interests became particularly important after the introduction and development of Costa Rica’s first successful export product—coffee—in the mid-nineteenth century. The diverse economic interests of Costa Rica’s elites are graphically described by Wilhelm Marr, a German businessman who traveled in Central America in the 1850s. On market day the president of the Republic does not disdain to cut some yards of gingham for a peasant; the Treasury Minister becomes hoarse in his efforts to prove to a purchaser that he ought to buy a miserable glass. Behind the improvised counters there are Officials, captains, and Majors selling nails, feather cutters, and scissors; Magistrates of the Supreme Court sell cotton socks; lawyers find buyers for underwear. (Marr 1972:178–179, quoted in Gudmundson 1983:446)

As Marr makes plain, the political and economic elites were not financially able to hire employees who could insulate them from direct contact with peasants and other nonelite members of society; instead, they engaged in tasks that put them in direct contact with the rest of society. Throughout the colonial period the elites searched in vain for sustainable and profitable products to export to improve their economic condition. Although some temporary successes were achieved with cacao and tobacco, at the close of the colonial period Costa Rica had no major export products and remained the poorest province in Central America.

Independence News of Costa Rica’s independence from Spain took almost a month to travel from the colonial capital in Guatemala to Cartago, the provincial

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capital of Costa Rica. Representatives from Costa Rica’s four major settlements (Alajuela, Cartago, Heredia, and San José) met a few days later to discuss the political status of postindependence Costa Rica: Should it declare full independence, join Iturbide’s Mexican Empire, or join with the other countries in the region to form a federation of Central American states?10 Although initially Costa Rica declared absolute independence, the debate concerning annexation or federation continued and soon degenerated into a short civil war. The question was resolved on a battlefield at Ochomogo. The war pitted anti-Mexican Liberals from San José and Alajuela against Conservatives from Cartago and Heredia, who favored annexation with Mexico. The liberal victory came after three-and-a-half hours of battle and almost three weeks after Emperor Iturbide had abdicated and gone into exile. Thus, with the fall of Iturbide, the choice between annexation to Mexico and the formation of a Central American Union became moot (Edelman and Kenen 1989:6; Creedman 1991:62, 192). With the collapse of the Mexican Empire in 1823, the Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua declared independence and created the Central American Federation (CAF). The liberal constitution of 1824, based on the Spanish Cádiz Constitution of 1812, gave the five individual states extensive political autonomy. The CAF was controlled by a very weak executive branch at the federal level.11 Each country had the right to elect its own national head of state and Legislative Assembly and was thus able to implement policies at variance with those of other CAF states, as well as with the CAF government.12 The CAF represented the first in what was to become a long history of desire for and failure of Central American unification.13 The first union of Central American states began to fail very quickly. Petty jealousies, resentment, and provincialism, built up during the colonial period between the infant states and Guatemala, were not resolved but instead were allowed to fester. The fears and problems of the smaller states were aggravated by the CAF’s proportional representation electoral system. Costa Rica, for example, with its small population, was limited to just two of the forty-one seats in the Congress (Pérez-Brignoli 1989:70). The biggest blow to the CAF and regional unity resulted from a rift among the elite, which was produced by the rules and regulations that surrounded the colonial administration and excluded Spaniards born in Latin America from holding profitable and prestigious administrative positions. The Conservatives drew their wealth and prestige from their ties to the Spanish Crown and their prerogative to hold political office. During the independence period, Conservatives demanded “moderation, order, and the stability of traditional, familiar institutions” (Woodward 1985:92), whereas Liberals—previously excluded from the benefits of colonial administration—wanted to expand the Bourbon reforms of the early nineteenth century,

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reduce ecclesiastical power, and end the privileges granted the old elite, including guild and trade monopolies. The Liberals were heavily influenced by thinkers of the European Enlightenment and appealed for more egalitarian “political and judicial institutions, public education, and economic development, especially road, port, and immigration projects” (Woodward 1985:93). The differences between Conservatives and Liberals reduced the region to chaos with a series of bitter, bloody civil wars. Costa Rica was dominated by Liberals since the colonial administration, trade ties, and the church were relatively weak. In 1824, the country’s relative political stability compared with its northern neighbors encouraged the political leaders of the town of Nicoya to vote to secede Guanacaste province from Nicaragua to become part of Costa Rica.14 The CAF was also financially weak, a situation compounded by the refusal of individual states to send tax revenue to the CAF. The development projects of the governing Liberals required increased revenues. The lack of willingness by member states to pay taxes to the central government forced it to seek loans overseas. A 5-million-peso loan from a London banking firm in 1825 produced a net infusion of just 300,000 pesos for the federal government’s treasury, which was soon exhausted in paying for the civil wars (Pérez-Brignoli 1989:72). The CAF’s indebtedness further weakened its central institutions and brought it into conflict with British money lenders. In Costa Rica, the head of state, Juan Mora Fernández (1824–1833), paid little heed to the CAF, which had quickly become a battleground for the wars between the region’s Liberal and Conservative caudillos (Woodward 1991:12–20). Instead, Mora emphasized nation building, creating a coat of arms and a national flag (designed and sewn by his wife), and incorporating a number of new cities and towns. In addition, he minted a new currency and introduced the first printing presses, the first newspaper, and developments in infrastructure (Creedman 1991:178–179). Costa Rica briefly withdrew from the CAF in 1829 because of the chaos in the other republics but rejoined less than a year later. In 1838, the head of state, Manuel Aguilar Chacón, removed Costa Rica from the federation when a Conservative coup in Guatemala effectively ended the CAF’s central government.

Political Developments from Independence to the Civil War Costa Rica’s role in the CAF, like its role in colonial Central America, was peripheral. It is often argued that political life in postindependence Costa Rica was an exception to the Central American norm of political violence and dictatorship. But the differences, especially before the end of the

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Guardia dictatorship in 1882, were more in scale than in type. Politics was dominated by personalistic leaders from the coffee oligarchy who frequently used political violence and fraud to achieve their political goals. Popular inclusion in the country’s political life remained very limited until 1889, after which it increased only gradually. In Costa Rica, then, democratic development was not a linear progression from colonial rule to Liberal democracy (Bulmer-Thomas 1987:18). Although the earliest constitutions in Costa Rica and the CAF reflected the thinking of European Liberals and the U.S. Constitution, the implementation was less than faithful to those ideas. Until the end of the nineteenth century, heads of state came to power primarily through armed force or, to a lesser degree, through elite compromise or noncompetitive elections (Busey 1961). The 1889 election was a political turning point for Costa Rica: For the first time in the country’s history, an election was won by an opposition candidate who was subsequently allowed to take office. The election occurred, however, almost seventy years after independence, and only a very small percentage of the population was enfranchised. In the immediate postindependence period, less than 2.5 percent of the population voted in the elections (Seligson 1987:158). Voting participation increased very slowly; in the 1889 election under 9 percent of the population voted. Even though Costa Rica left the CAF because of the political instability of its sister republics, Costa Rica itself was less than tranquil. The early 1830s were littered with examples of nondemocratic resolutions of political issues, principally among leaders of the four major municipalities. Indeed, one of the first political events after independence was a civil war, which grew out of the elites’ inability to agree on how the country should be governed. Table 2.1 shows that political stability after independence improved very slowly over many years. In the early independence period, military dictators controlled the executive branch of government nearly half of the time and, on average, served terms almost four times longer than their civilian counterparts. During the second period (1890–1920), political stability improved, with a significant decline in the percentage of the period under military presidents and a shorter average duration of their terms. In the third period (1921–1950), after the removal of the Tinoco dictatorship in 1919, the military was effectively removed from the political discourse, and no other military leader held the position of chief executive except José Figueres Ferrer who took power in 1948 and governed as the leader of a junta (Vega Carballo 1989). Before 1890, Costa Rica had frequent elections, but their results were often not key to determining presidential succession. Seven of the twentyfive presidents took office by force, six became interim presidents after the

20 Table 2.1

COSTA RICA Characteristics of Presidencies, 1824–1950

Characteristic

1824–1889

1890–1920

1921–1950

2.4 1.5 5.8 44.0 30.0 37.0 19.0 19.0

3.4 3.6 2.0 7.0 11.0 22.0 22.0 11.0

3.8 3.8 — — — — 13.0 13.0

Average years per presidency Civilian presidents only Military presidents only Percentage of period under military rule Percentage of interim presidencies Percentage of presidents serving less than a year Percentage of presidencies ending in resignation Percentage of presidencies ending in coup d’état Source: Booth 1989:390 (adapted from Table 9.1).

resignation of incumbents, and eleven presidents took office following indirect, noncompetitive elections. The only president elected in a competitive election during the first seventy years of independence was Manuel Aguilar in 1837; he was turned out of office the following year in a coup. Two other presidents were executed shortly after relinquishing office. In 1835, Braulio Carrillo Colina became president as a compromise candidate after an indirect election had produced a stalemate. Although he came from Cartago, he immediately put aside the Ambulatory Law (Ley de la Ambulancia)—which mandated periodic rotation of the capital city among the four major cities—and established the capital in San José. As a result of that move, the other three cities elected their own presidents and mustered a 4,000-troop army that marched on San José and was defeated by Carrillo in the country’s second civil war—the War of the League (Guerra de la Liga) (Rinehart 1984:19–20). Conservatives in Cartago were still not placated, and they aided an unsuccessful invasion of Costa Rica from Nicaragua led by Manuel Quijano the following year. The invasion’s failure confirmed San José as the country’s permanent and undisputed capital. Although Carrillo was a Liberal, his liberalism extended more to the economic than the political sphere. Carrillo was defeated in the 1838 election, but he removed the winner from office through a coup the following year and subsequently governed as a dictator until 1842, when he was removed from office in a coup. Carrillo’s antidemocratic credentials were highlighted in his 1838 decree Law of Foundations and Guarantees (Ley de Bases y Garantías), in which he proclaimed himself “head of state for life,” abolished popular sovereignty and local government, centralized power in the office of jefe político, and effectively ended the 1825 constitution (Seligson 1987:158–159; Gudmundson and Woodward forthcoming). In 1842, opponents of Carrillo’s dictatorial rule asked the new head of state, General Francisco Morazán, a Honduran and former president of the CAF, to oust Carrillo. As president, General Morazán gained immediate

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popularity for restoring the personal freedoms suspended by Carrillo. His popularity, though, was short-lived because of his efforts to use Costa Rica as a mustering ground for a conscript army with which he intended to reestablish the Central American Federation by force. Morazán was overthrown within six months of taking office and was executed shortly thereafter. During the following ten years, seven people held Costa Rica’s top political position. This political instability and the rampant use of nondemocratic means to change presidents belie claims of the rural democracy school that the “natural climate of Costa Rica is democracy” (Navarro Bolandi, 1948:83–85). The 1841 constitution was voided and superseded by the 1844 constitution, which for the first time included provisions for direct election of the president (as well as judges and senators) and a voter registration system. The franchise, though, was restricted to married males over twentyfive and property owners (who owned property worth at least 200 pesos), which effectively reduced the electorate to 2.5 percent of the total population (Seligson 1987:160; Romero Pérez 1979). The constitution lasted just three years, as did the practice of direct elections, which was not reintroduced until 1913. Secret balloting did not exist in Costa Rica until 1926; instead, votes were exercised publicly under the watchful eye of the patrón (Busey 1961:56). The 1847 constitution lowered the minimum voting age to twentythree but also introduced a series of measures designed to further restrict the already limited franchise. Only literate, male citizens over age twentythree with two years’ residence in the electoral district and property worth at least 500 pesos were permitted to vote. The first government elected under the new constitution restricted the franchise further by raising the voting age back to twenty-five and increasing the minimum value of property to 1,000 pesos. The literacy requirement alone restricted the franchise to 10 percent of the total population (Seligson 1987:160–161). As the coffee elites became wealthier, they also became better organized politically, more protective of their economic position, and willing to use undemocratic means if their interests were threatened. For example, President Mora Porras, an important coffee grower and exporter, created the country’s first bank in 1858, which was perceived by the coffee elites as a direct threat to their capacity to earn usury profits. The elites responded by encouraging the president’s overthrow by his brother-in-law, José María Montealegre (Cardoso 1991:44).15 The coffee interests maintained a heavy-handed involvement in national politics over the following ten years, installing and removing presidents to suit their economic interests. The constitution was rewritten in 1859 and again in 1869 when the franchise was expanded, and for the first time the military was placed under civilian control. This constitution lasted until President Jiménez

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Zamora was removed by the populist general Tomás Guardia Gutiérrez in 1870. Guardia Gutiérrez initially governed through Bruno Carranza Ramírez, but a few months later a plebiscite declared him president. As president, Guardia Gutiérrez, who had promised to end the political dominance of the coffee elite, governed as an iron-fisted dictator for twelve years. In 1871, he wrote a new constitution, which remained in effect until the current constitution was written in 1949.16 The 1871 constitution established a unicameral congress and relaxed some franchise restrictions. Although Guardia Gutiérrez began to expand the political franchise, thereby broadening democracy, he also banned all political associations, exiled many of his opponents, and ignored the constitution’s ban on presidential succession, thus reducing Costa Rica’s democratic practices. Guardia Gutiérrez was a modernizer with ambitious plans for the country’s progress. He improved the infrastructure, introduced compulsory education, continued the encouragement of coffee production for export, and commissioned the building of a railroad system. During his dictatorial rule, he weakened the dominance of the coffee elites by replacing them with his family members and friends in important government positions. Consequently, after his death in 1882, a noncompetitive, indirect election was won by General Próspero Fernández Oreamuno, commander of the armed forces and brother-in-law of the late dictator. When General Fernández died in office in 1885, he was replaced by his brother-in-law, Bernardo Soto Alfaro. Even though this dynastic method of selecting political leaders was clearly less than democratic, the policies of the three presidents still liberalized the country’s economic and political life. For example, Soto introduced free, compulsory secondary education, restricted the power of the church, and permitted an election “characterized by full freedom of the press, frank debates by rival candidates, and an honest tabulation of results” (Rinehart 1984:29). The 1889 election marked the first time a nongovernment candidate had won an election and been allowed (after a false start) to take office. President Soto’s hand-picked successor lost the election to José Joaquín Rodríguez Zeldón and a group of Liberals that became known as the “Generation of ’89.” Even though this was the first time in Costa Rican history that a peaceful transition of power from a governing to an opposition party had taken place, the transition to democratic rule was still far from complete. During the fifty-eight years from 1890 to 1948, the use of nondemocratic means to change the chief executives was still common. Of the twenty presidents who served during that period, four were installed through force, four were imposed by incumbent presidents, and four more took office through elite-level compromises that circumvented or subverted the electoral process. A significant difference over earlier periods

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was the election of six presidents through competitive elections, which after 1913 were direct and after 1925 included the use of secret ballots, photographic identity cards, the creation of the National Election Council (Consejo Nacional Electoral; CNE) to oversee elections, and the gradual expansion of the franchise (Lehoucq 1996a:14).17 During the 1890–1948 period, at least four unsuccessful coup attempts and eleven revolts against the government took place, however (Yasher 1995:73).

Economic Development from Independence to the Civil War The Costa Rican model of economic and social development is predicated on a significant role of the state in addressing both economic and social issues. It is commonly assumed that the high level of state capacity was a consequence of the major social and institutional changes that took place following the civil war in 1948. In this section I argue that the state’s important role in economic and social development was not a result of a rupture with the old regime in the aftermath of the Liberación victory in the civil war but instead was a continuation of a long history of state intervention stretching back to the early nineteenth century. The origins of state intervention in economic issues can be found in the introduction and development of the coffee industry in the mid-nineteenth century when the state facilitated the financing and developing of the country’s infrastructure and encouraged coffee cultivation. State intervention in the economy was both encouraged by and necessary for the development of the new coffee elite. State intervention in social issues, however, was more sporadic and ad hoc and was often met with hostile reactions from the coffee elites. It is often argued that social welfare programs, for which Costa Rica has been noted, were a result of policies successive PLN governments introduced in the post–civil war period. Although those governments were important in the expansion of state-sponsored social benefits, the welfare state’s origins lay not in the turbulence of the civil war but were the result of a series of gradual changes introduced by reformist governments, most notably those of Alfredo González Flores (1914–1917), Rafael Angel Calderón Guardia (1940–1944), and Teodoro Picado Michalski (1944– 1948). The fact that state intervention in social issues was less readily accepted by the political and economic elites is illustrated by the 1917 coup, which ended the Gonzáles Flores administration, and the 1948 civil war, which ended the regimes of Calderón and Picado. In the next section, I detail the origins of social and economic intervention by the state, as well as their economic and political ramifications.

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The Internationalization of the Economy Prior to the introduction of coffee, Costa Rica’s elite had experimented with a number of different export products (mules, cattle, cacao, and tobacco) but had failed to develop a significant export product. After coffee was first introduced in the early 1800s, the coffee industry expanded rapidly, especially following the first direct coffee exports to Europe in the 1840s. Coffee quickly became the country’s leading export product and the engine of its economic growth. By 1890, coffee accounted for more than 90 percent of export earnings.18 Thus, the lack of developed alternative exports, like indigo in El Salvador or cochineal in Guatemala, served Costa Rica well in the rapid adoption of coffee cultivation. Furthermore, the lack of preindependence export alternatives meant the tradition of mercantilist restrictions and high taxes on exports did not exist in Costa Rica and consequently did not hinder the development of the coffee sector (González-Vega and Céspedes 1993:62). Coffee soon became the country’s leading foreign exchange earner, and Costa Rica became the wealthiest country in the region. According to Samuel Stone (1974), members of the existing political and economic elites were the first to become enthusiastic exponents of coffee cultivation and trading. For example, President Juan Rafael Mora Porras (1849–1859) used earnings from his diverse economic interests (real estate, mining, sugar, cattle, and importing textiles) to become one of the country’s largest coffee producers and exporters (Gudmundson 1983:447). The early success of coffee in Costa Rica unified the economic elite and reduced the differences between Conservatives and Liberals (Pérez-Brignoli 1989:77). Although Costa Rica’s geography and climate were well suited to the cultivation of high-quality coffee, the infrastructure was not.19 Coffee was not grown on the coasts near seaports but in the mountain regions of the Meseta Central. Thus, exports destined for European markets had to be transported by mule over the Meseta mountains to a Pacific coast port and then shipped by way of Cape Horn, a very slow and expensive journey. If the economy were to rely on coffee exports, the government had to assume an active role in the development of infrastructure, such as roads, railroads, and ports. No individual coffee grower had either the incentive or the ability to organize and build suitable infrastructure. As a result, the national government, at the behest of coffee growers, financed (through a tax on coffee exports) and developed the country’s infrastructure to aid in coffee exportation. Victor Bulmer-Thomas (1987:13) concludes that “the establishment and development of the coffee trade would not have been possible without strong state support.” In the early years, coffee grew as a direct result of government intervention in the economy, and as the coffee

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trade expanded so, too, did government revenues and the government’s capacity to engage in economic management (Bulmer-Thomas 1987:13). Government intervention went further than just creating the necessary infrastructure. In 1825, the ecclesiastical tithe on coffee production was abolished. During the presidency of Braulio Carrillo Colina (1835–1837) the state became actively involved in cultivating and distributing coffee saplings free of charge to any person willing to grow coffee; local government funds were used to foster the development of the coffee industry (Gudmundson and Woodward forthcoming; Torres-Rivas 1993:17). Coffee production developed in a country with a very small population (60,000 in the 1820s) that occupied just 2 percent of the national territory (Hall 1982:14). Coffee production, though, is highly labor-intensive, especially during the two-month-long harvest season when labor demands increase tenfold. Consequently, as a result of labor shortages, the operation of large-scale coffee farms was uneconomical. Whereas large landowners engaged in coffee cultivation, it was not their sole or primary source of income; they tended to diversify their economic interests to increase their incomes. For example, some large landowners on the frontier, where the labor shortage was most pronounced, sold small plots of land to settlers with the goal of processing and marketing the small farmers’ harvests. Another important vehicle was the ownership and control of beneficios—processing plants that remove the coffee bean from its shell. Small farmers could not summons the capital outlays necessary to build their own beneficios and instead sold their coffee harvests to a beneficio owner, who would then process, market, and export them. This “allowed for a trade rather than [a] land-based oligarchy to dominate local society and politics” (Gudmundson and Woodward forthcoming). The wealthiest coffee exporters commonly used their connections to European merchants and bankers to establish commercial houses in Costa Rica. These commercial houses practiced usury—borrowing money from British bankers on the strength of future harvests and lending it at a much higher rate of interest to smaller coffee growers. This practice gave the larger growers considerable power over the smaller ones and provided them with a significant source of income. The importance of such income for wealthier coffee growers and their families was illustrated when the government of President Juan Rafael Mora Porras (1849–1959) attempted to establish a bank that was beyond the control of the coffee growers and thus to impinge on their capacity to earn usury income. The growers and processors responded by encouraging a successful coup (Cardoso 1991:44). Control of the banking industry, as will be seen in later chapters, has remained an important issue in Costa Rican politics ever since.

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Bananas. In the 1870s, the government moved to build a railroad from the port of Limón on the Atlantic coast to the coffee-growing regions near the capital, San José, to reduce the time and cost of exporting coffee to the principal markets in Europe. British financial institutions were invited to raise the $12 million necessary to build the railroad, but unfortunately for Costa Ricans the British banks retained 80 percent of the money raised in Great Britain as a commission. Thus, Costa Ricans were left with only 20 percent of the necessary capital to build the railroad and had incurred a new, extensive international debt (LaFeber 1993:56). A second attempt to complete the railroad was made in 1883, when the government contracted Minor Keith, a U.S. railroad builder, to finish the railroad.20 The company was granted a ninety-nine-year lease on 800,000 acres of land (nearly 7 percent of the national territory) along the railroad, which it used to cultivate bananas as a means of defraying the cost of building the railroad (Bulmer-Thomas 1987:5). Thus, the development of the banana industry was an accidental by-product of the government’s attempts to facilitate the exportation of coffee (Seligson 1980:49). Although the coffee and banana industries were similar in that both were agroexport products, they had significant differences. First, the banana industry quickly became a foreign owned and controlled monopoly. In 1899, Minor Keith merged his Tropical Trading Company with the rival Boston Fruit Company to form the United Fruit Company (UFCO), which aggressively consolidated its dominant position as Costa Rica’s main banana producer. In the late 1920s, UFCO bought out two new banana companies that had been developed on the Pacific coast (Cardoso 1991:52). The banana industry, dominated by UFCO—a large-scale, vertically integrated enterprise—stood in stark contrast to the large number of domestically controlled, small-scale farms in the coffee sector. The coffee industry was also integrated into the domestic economy. That is, the links among coffee growers, processors, exporters, and financiers tended to be close and domestically owned. The banana industry, however, resembled a country within a country, paying no taxes to the Costa Rican government (until 1910) and developing few links to the rest of the economy or society—the banana companies even provided their own schools and hospitals. The UFCO was largely self-sufficient, relying not on Costa Rican inputs but on imports from the United States. The company exported its profits along with the bananas. The banana companies relied on U.S. banks for financing and on their own transportation lines (rail and shipping) to ship the bananas to the United States. The companies have been described as “truly separate enclaves in the tropical forests” (Pérez-Brignoli 1989:103; see also Seligson 1977:218–220, 222–224). Second, the banana industry’s high labor demand in a relatively uninhabited region resulted in the evolution of a separate labor market on the

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Atlantic coast with imported West Indian labor, mainly from Englishspeaking Jamaica.21 Although wages on banana plantations were consistently higher than those in the Meseta Central, few “whites” were attracted to the hot, tropical Atlantic coast. On the other hand, few West Indians chose to live outside the Atlantic banana region until after the 1948 civil war, which effectively created two labor markets (Harpelle 1993).22 Third, workers in the Atlantic banana region were nonpeasant agricultural workers (rural proletariat) concentrated in a single location, working for a single employer, and generally nonwhite, which further alienated them from the larger society. These attributes made the banana workers targets for the creation of a well-organized labor union that had no parallel in the coffee industry. When banana production peaked in the late 1920s and began its precipitous decline through the mid-1930s, the newly founded Communist Party (Bloque de Obreros y Campesinos) was able to capitalize on the deteriorating conditions and organize the banana workers. In 1934, the union’s 10,000 banana workers went on strike against the UFCO. After several weeks, the government intervened, and the strikers won significant concessions (Seligson 1980:68). As a consequence of this economic development, new social groups became more vocal—banana workers through the Communist-controlled unions; other workers through the church-sponsored Costa Rican Confederation of Workers, Rerum Novarum (Confederación Costarricense de Trabajadores Rerum Novarum; CCTRN); and the new middle class through its ties to the existing political parties, the new think tank “el Centro” at the University of Costa Rica, and the Social Democratic Party. Thus, economic growth was directly responsible for the rise of new social groups, but it was economic crisis that pushed many of these groups to organize and participate in the political arena. Abuse of and strains on existing political institutions, which were not designed for an open polity, accompanied by economic crisis resulted in the 1948 civil war. At the beginning of World War I, Costa Rica’s entry into the international economy as a primary goods producer was complete. The country’s pattern of production and trade was also well established by this time, with bananas and coffee accounting for more than 85 percent of export earnings. The vast majority of these two exports was sold in just two markets—42 percent to Great Britain and 50 percent to the United States (Bulmer-Thomas 1987:8–9). This pattern of exports, which concentrated on agroexport products and selling in a small number of markets, continued for many years. Although the economy became more diverse, especially after the implementation of industrialization laws in the late 1950s and membership in the Central American Common Market after 1963, coffee and banana exports remained the major source of foreign currency. Even

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in 1994, these two products accounted for more than 37 percent of all exports (EIU 1995[1]:8). Social Intervention Economic intervention by the state was fundamentally important to the creation and development of the coffee industry and was also significant for the origins of the banana industry through tax breaks and land concessions, for example. State intervention in other areas, however, was not always so well received. Even though Costa Rica had a long history of state intervention, this active role of the state had remained limited mostly to economic issues and education. In the early twentieth century, President Alfredo González Flores attempted the first noneducation social reforms in response to a severe economic crisis brought on by the dislocation of export markets following the outbreak of World War I. González Flores became president after a political impasse that followed the country’s first direct presidential elections, which failed to produce a clear winner from among the three candidates. The outgoing president, Ricardo Jiménez Oreamuno, disliked all three candidates. Finally, under some pressure from Jiménez, who had already handed over control of the armed forces to González Flores, the congress elected González Flores—who had not been a candidate—as a compromise president. By the time World War I started, the economic problems resulting from Costa Rica’s adoption of and reliance on monoculture production, an import-export model of economic growth, and the economy’s integration into the international market became obvious. Initially, the war did not affect Costa Rica’s export levels, but it did considerably disrupt imports, which dropped by more than 50 percent between 1913 and 1915 (Edelman and Kenen 1989:65). As the government’s principal source of revenue had been taxation of imports, the war resulted in a precipitous decline in government revenues. President González Flores attempted to resolve the economic crisis through increased state intervention in the economy and a series of economic reforms. The reforms had two major goals: to put the government’s finances on a “broad and secure base” and to address the economic injustices of the current tax system by introducing a progressive tax system that challenged the oligarchy’s economic hegemony (Salazar 1981). The oligarchy’s response was decisive and instructive. Federico Tinoco Granados, the minister of war, led a military coup at the behest of the coffee oligarchy, removing President González Flores and reasserting the oligarchy’s economic and political hegemony. What does the overthrow of the reformist regime of González Flores tell us about the nature of Costa Rican democracy at the turn of the twentieth

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century? First, the agroexport sector and the import merchants joined forces in an alliance against the González Flores regime. Since they were unable to maintain control of government policies through the democratic process, they enforced their will through the coercive strength of the military. What was also instructive about the coup was the lack of support expressed by the sectors that should have benefited from the economic reforms. The reality was that there was little immediate popular support to defend the reforms. As with all previous reforms in Costa Rica, these were implemented by “enlightened elites” on behalf of, rather than in response to, popular sectors agitating for reform. Furthermore, because of the manner in which González Flores had become president, he had no popular mandate or support base within the congress until the 1916 midterm elections. Those election results, which gave González Flores’s party nearly 90 percent of the seats, along with his refusal to deny persistent rumors that he intended to impose himself or a “puppet” for another four-year term angered the political class by appearing to exclude it from representation at both the executive and legislative levels of government (Lehoucq 1996b). The 1917 Tinoco coup showed that the oligarchy had both the inclination and the ability to thwart any reform measures that challenged its hegemonic position in society. That is, the coup showed that the oligarchy was still capable of imposing its economic agenda, even if the electoral system failed to produce governments willing to do so. The coup also showed the limits of the economic elite’s commitment to democratic governance.

The Last Military Dictatorship The military rule of Federico Tinoco brought about the first direct U.S. intervention in Costa Rican internal affairs (Murillo Jiménez 1981). U.S. President Woodrow Wilson refused to recognize Tinoco’s government, which effectively prevented Costa Rica from accessing much-needed foreign capital from U.S. markets or developing new markets to replace the loss of its traditional ones in Europe as a result of World War I.23 Tinoco’s inability to resolve the country’s economic problems and consequently to serve the economic and political interests of the coffee and importmerchant elites had three important outcomes. First, in the short term it resulted in his removal in 1919, after just eighteen months in office. Second, Tinoco’s military dictatorship spurred the formation of two guerrilla insurgencies, a minor one in the northern province of Guanacaste and one in the south originating from Panama. The application of violent solutions to political questions was nothing new in Costa Rica, but guerrilla insurrections were still uncommon. The guerrillas in the south were led by

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Jorge Volio Jiménez, a sort of “renaissance man”: a former soldier (who fought against the U.S. occupation of Nicaragua), a former priest (educated and ordained in Europe), an intellectual (influenced by Social Christian thought), and a former member of the National Assembly of Costa Rica (a member of the existing political elite). Third, the removal of Tinoco had more to do with the policies of the U.S. government than with either of the two guerrilla armies, but the guerrilla war established Volio as a national figure and contributed to the discrediting and deterioration of the army (Pérez-Brignoli 1989:115). The military, as a result, was seriously weakened (although it had never been as politically important as the militaries in other Central American countries) and remained ineffectual and politically insignificant until its abolition in 1948. The economic and political elites learned an important lesson in state control and democratic procedures.

Political Parties Political parties, an integral part of any functioning democracy, first appeared in Costa Rica during the campaign for the 1889 election, but prior to the 1948 civil war these parties were personalistic electoral machines, working to elect contending leaders from the coffee elite as president rather than ideologically based party organizations.24 There were two notable exceptions: the Reform Party (Partido Reformista), founded in 1921, and a Communist party, Workers’ and Peasants’ Bloc (Bloque de Obreros y Campesinos), which was founded in 1931 and changed its name to the Popular Vanguard Party (Partido Vanguardia Popular) in 1943. The Reform Party was the first modern political party, and it presented a challenge to the existing personalistic elite-dominated parties with broad ideological platforms demanding social change. With support from the General Confederation of Workers (Confederación General de Trabajadores; CGT), Volio contested the 1924 presidential election, promising social change. Having failed to win the presidency in a three-way race, he threw his support to former president Ricardo Jiménez Oreamuno (1910– 1914), who was finally elected in a congressional vote with Volio as his vice president.25 Although Volio’s compromise with Jiménez’s Republican Party permitted him to promote some of his reformist ideas—for example, the introduction of limited workman’s compensation—the final cost was the collapse of the Reform Party and a return to the earlier personalistic politics.26 The limited reforms were seen as “the ultimate instance of state interventions” but were not part of “any larger, more comprehensive approach to social welfare” (Rosenberg 1981:281). The second nonpersonalistic party was the Communist Bloque de Obreros y Campesinos, led by its founder, Manuel Mora Valverde. Although

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the party was ideological, Mora Valverde’s influence over the party and its supporters was very important (he led the party for more than six decades). With the exception of artisans and segments of the intelligentsia, the party failed to attract significant political support in the urban areas. But on the banana plantations on the Atlantic coast, the party was able to organize workers and capitalize on the deteriorating economic conditions caused by the Great Depression. The most significant attempt to introduce economic and social reforms prior to the civil war came during the eight years of rule of presidents Rafael Angel Calderón Guardia (1940–1944) and Teodoro Picado Michalski (1944–1948). Calderón, a foreign-educated pediatrician, leading Catholic layperson, and former president of the congress, was handpicked by outgoing president León Cortés Castro as the oligarchy’s National Republican Party candidate for the 1940 presidential election. Cortés believed Calderón would be a pliable puppet who would serve in the interest of the oligarchy until Cortés could reassume the presidency after the 1944 elections. Calderón, though, became neither Cortés’s puppet nor a mouthpiece for the economic interests of the oligarchy. Instead, he became the first president of Costa Rica to make “genuine social and economic reform the primary goal of his administration” (Rinehart 1984:38). With only token opposition, the National Republican Party won the 1940 presidential election with more than 84 percent of the vote and in conjunction with its new ally, the Partido Vanguardia Popular, took control of almost 75 percent of the seats in congress (Salazar 1981:68; Lehoucq 1992a:181, 318–319).27 In 1941, Calderón introduced far-reaching reforms including social security (offering unemployment, health, accident, and old-age benefits), an eight-hour workday, a minimum wage, and workers’ right to organize (Salazar 1981:84–91; Ameringer 1978:10–11). Calderón’s motivation for introducing the reforms has been a topic of heated debate. Some have argued that Calderón was motivated by his understanding of the conditions of workers’ poverty in Costa Rica and was informed by the Social Christian teachings of Rerum Novarum he encountered in Belgium during his medical studies. His Social Christian views were reinforced by the new archbishop of Costa Rica, Monsignor Víctor Manuel Sanabria y Martínez, a noted advocate of labor and social reform. Calderón believed social legislation was necessary to prevent later class conflict and was the “only formula to harmonize the conflicting interests of capital and labor” (Calderón, quoted in Rosenberg 1981:279). Other scholars have argued that Calderón introduced major social reforms in an attempt to build a political support base among the maturing labor unions, which he needed to replace his traditional supporters from the upper classes (see, for example, Bell 1971; Ameringer 1978). Mark Rosenberg (1981), however, argues convincingly that this was not Calderón’s

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initial motivation. He points out that the important social security legislation passed in 1941 was not part of a larger reform program or a response to the need to develop a broader electoral support base. It was not until the midterm 1942 congressional elections that the president moved to expand his support beyond the National Republican Party’s traditional base.28 Although the reforms were still those of an “enlightened elite” and not a response to the demands of popular sectors, the Calderón and Picado administrations eschewed the support of the coffee oligarchy and developed a broad coalition, which included the Catholic Church and the Communist Party, to defend the reforms at the polls. 29 The reforms Calderón introduced, then, were important because they “reoriented the state as an instrument of the working and middle groups” (Rosenberg 1981:279). As was the case with previous failed social reforms in Costa Rica, Calderón’s reforms were implemented not at a time of economic boom but during the economic crisis brought on by World War II. Table 2.2 shows the growing government budget deficit and increasing public debt as a result of the dislocation caused by the war and the rapidly increasing government expenditures to fund new social programs. The worsening economic situation was coupled with punitive wartime measures meted out against Costa Ricans of German descent by the government in 1941. Over many years, those Germans had become an integral part of the country’s coffee and business elites, particularly the most lucrative aspects of the coffee industry—coffee processing and the ownership of financial institutions. They were now marked by the government for expropriation of their farmlands and businesses, and many were interned in concentration camps (Bell 1971:109–112). Government attacks on these so-called enemy aliens were viewed as personal assaults on the coffee and business elites, which further alienated them from the National Republican Party government.

The Civil War No shortage of explanations exists for the outbreak of the short, bloody civil war in 1948.30 If Calderón’s governing coalition seemed to encompass an unusually broad alliance, the opposition groups were equally broad and were united in their dislike of Calderón or their fear of his return as president. The coffee and business elites viewed Calderón as a traitor to his class and were vehemently opposed to his reformist economic and social policies and his punitive anti-German policies. They were joined in their opposition by members of the small but growing middle class, smallbusiness owners, and professionals—all of whom felt excluded from the existing political system because of electoral fraud, were disgusted at the graft and corruption of Calderón’s cronies, and were terrified by the

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COSTA RICAN HISTORY Table 2.2

Government Revenue, Expenditure, and Public Debt, 1940–1943 (millions of Costa Rican colones)

Year

Government Revenue

Government Expenditure

Government Deficit

Public Deficit

1940 1941 1942 1943

41.7 42.6 36.9 50.4

43.2 53.0 62.1 80.9

1.5 10.4 25.1 30.5

135.3 149.2 176.9 206.8

Source: Salazar (1981:79–80).

government’s reliance on Communist Party support and its close ties to the church (Bulmer-Thomas 1987:135; Edelman and Kenen 1989:84; Rojas Bolaños 1979, especially 77–93). The expanded role of the state in society also opened the government to charges of cronyism and corruption. As Charles Ameringer (1978:11) notes, “Calderón not only retained the spoils system but placed the most transparent sort of sycophants and hangers-on in public office.”31 In addition, the economic conditions (budget deficits, inflation, and shortages of goods) caused the peasants’ well-being to deteriorate and made them more susceptible to the opposition’s propaganda. According to Manuel Rojas Bolaños (1979), news of government corruption traveled much further and faster than did news of the benefits of social reforms. Middle-class opposition solidified in two groups: the Center for the Study of National Problems (CEPN, also known as El Centro) and Democratic Action (Acción Democráta; AD), the social democratic faction of León Cortés’s Democratic Party. El Centro agreed in essence with Calderón’s social reforms but was horrified by the Communist Party’s influence on the government and by the levels of political and economic corruption. Calderón missed an opportunity to co-opt the members of El Centro when his government implemented the social security legislation. The social security program required the establishment and staffing of a large bureaucracy, the Caja Costarricense de Seguros Sociales (CCSS), but none of the jobs were offered to the intellectuals and technocrats who formed the membership of El Centro. In the final stage of Calderón’s government, El Centro became increasingly political, and after the fraudulent 1944 election victory of Teodoro Picado, Calderón’s handpicked successor, El Centro joined forces with Acción Democráta. In 1945, the two groups released a manifesto under the name of the Social Democratic Party (Partido Social Democráta; PSD), an anti-Communist moderate leftist party that became the PLN in 1951. José Figueres Ferrer, one of the leading lights of the AD, was a farmer and businessman who had been catapulted onto the national political stage

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when he was exiled from Costa Rica for vociferously attacking the Calderón government on national radio in 1942.32 During Figueres’s Mexican exile, he immediately began making plans with exiles from other Central American and Caribbean countries—a group known as the Caribbean Legion—to return to Costa Rica with the necessary military power not only to replace the government of Calderón and the National Republican Party but to install a “Second Republic.” Thus, as Calderón cemented his coalition with the Communists and the leader of the Costa Rican Catholic Church and prepared to run again for the presidency, the opposition to his regime developed an equally broad front. According to Ameringer (1982:31), the anti-Calderón opposition coalition was made up of “coffee barons, who wanted to eliminate the social guarantees; [Otilio] Ulate, a newspaper publisher, who longed for the good old days of the liberal patriarchy; the Social Democrats, who wanted reform and democracy; and Figueres, who wanted revenge.”33 In the 1948 elections, the Social Democratic Party supported the candidacy of Otilio Ulate Blanco of the oligarchy’s National Union Party (Partido Unión Nacional; PUN). Figueres and his comrades in the Caribbean Legion, who had been planning a military struggle against the Calderón regime, initially carried out their campaign through a series of terrorist attacks during the Picado administration (1944–1948). Whereas a number of political actors were willing to compromise with the incumbent regime (Lehoucq 1991), most studies of the period note that Figueres was unwilling to do so and was committed to removing the old regime by force.34 The catalyst for the civil war was the violence and the rampant electoral fraud surrounding the 1948 election. The PUN candidate won the election by about 10,000 votes, but during a special session the congress, controlled by the National Republican Party, voted to annul Ulate Blanco’s victory. Government troops then moved against the PUN, arresting Ulate Blanco and most of the PUN leadership. Government forces visited Figueres’s farm to investigate rumors that he was assembling an army of insurrection, which they found to be true when Figueres, not waiting for a political resolution, led his National Liberation army against the government forces. At the same time Figueres was fighting from his farm in the Meseta Central, foreign mercenaries from the Caribbean Legion, working in tandem with Figueres’s forces, captured parts of the Atlantic coast and began moving toward San José. The country’s military, already severely weakened, was no match for the insurgents, even with the support of the Communist Party’s militia. An invasion force of several hundred soldiers from Nicaragua was unable to bolster the beleaguered government forces. The war was brought to a

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negotiated settlement through the signing of the Mexican Embassy Pact. The war lasted six weeks, and between 1,000 and 2,000 people were killed.

Conclusion Whereas the evidence presented in this chapter shows that the impact of Costa Rica’s colonial legacy on its form of democratic government has been overstated, there is no doubt that the colonial experience was clearly different from that of neighboring republics. The country’s geographic remoteness and isolation, which limited contact with both Spain and the colonial government in Guatemala, were important in keeping the colony on the periphery of the Spanish empire. The political and economic insignificance was compounded by the lack of easily subduable Indians and gold deposits, which in turn encouraged only small numbers of conquistadores to settle in the province and prevented the creation of the exploitative hacienda system that characterized much of the region. Although Costa Rica indisputably remained the poorest province in Central America throughout the colonial period, the traditional history of a classless society of subsistence farmers living in a rural democracy has been shown to be little more than a myth. Social stratification began with the very first settlers who maintained their social and political positions in spite of their relative lack of wealth. Costa Rica’s early history, then, is different from those of other countries in the region, but more in a sense of scale than of type. The creation of a predominantly homogeneous population with a considerably more egalitarian distribution of poverty than in neighboring countries may have aided the process of democratization. This in itself, however, is an insufficient explanation for Costa Rica’s democratic stability since the 1948 civil war. As this chapter shows, until the last years of the nineteenth century, political leaders in Costa Rica were more likely to come to power through military strength than through the ballot box. The switch back and forth from democratic to nondemocratic forms of governance makes the explanatory power of cultural factors less than convincing. That is not to suggest that the colonial and independence periods were irrelevant to the creation of contemporary Costa Rican democracy and the impressive social development that has become characteristic. Clearly, in the independence period the country made significant strides toward democratic government and increased state intervention in economic and social issues, but the economic and social reforms were generally carried out by some enlightened member of the elite rather than as a response to popular

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pressure. It is evident that from the late nineteenth century onward, elections were increasingly relevant in determining presidential succession, and popular organizations were permitted to form—including the Communist Party and labor unions. The increasingly democratic society, though, was controlled by the political and economic elites. And even though those elites were relatively unified, electoral fraud and nondemocratic actions, such as military coups, were still common. As a result, it was not until the new political institutions were created by the 1949 constitution that the country could truly be described as a democratic regime with widespread, meaningful participation and open elite competition for electoral office. Chapter 3 highlights the creation and ramifications of the most important post–civil war institutions, which permitted the introduction of a democratic regime and an interventionist state.

Notes 1. Calvo et al. (1990) debate the validity of the 1989 celebration of Costa Rica’s “100 years of democracy.” 2. I use the term Indian to distinguish between the indigenous people of Central America and those who came from Europe. 3. The encomienda was a grant of Indian labor and tributes to Spanish settlers from the Spanish Crown. In exchange, the settlers were to protect the Indians and train them in the Christian faith. The system was formally abolished in the late eighteenth century but was widely practiced after that date. A variation of the encomienda system survived well into the twentieth century. For example, as late as the 1950s, the constitutions of El Salvador and Guatemala made provision for the supply of unpaid labor. The Salvadorian constitution states, “Suitable measures shall be enacted to prevent and suppress vagrancy”; the Guatemalan one reads that “every person has the obligation to contribute to progress and the well-being through work; vagrancy is a punishable offense.” Vagrancy laws generally affected only the Indian population (Weeks 1985:4–15). 4. Various other, less extreme renditions of the rural democracy thesis exist. See, for example, Aguilar Bulgarelli (1981), who disputes some of the rural egalitarian model but still concludes that the country’s colonial experience sowed the seeds for later democracy. 5. For an excellent review and critique of the major authors who either developed or promoted the rural democracy view of Costa Rica’s colonial history, see Gudmundson (1986). Costa Rican authors who employed the rural democratic view of colonial society include Facio Brenes (1975); Rodríguez Vega (1979); Monge Alfaro (1980); Cerdas Cruz (1978); Pérez-Brignoli (1989); and Stone (1991). This view is also common among English-speaking academics—for example, Busey (1962); Seligson (1980); Ameringer (1982); and Harrison (1985). 6. Seligson (1981:4), gives even lower numbers of Indians in Costa Rica. By 1583 there were 4,500, and by 1681 only 1,600 Indians remained. Gudmundson and Woodward (forthcoming) note that these figures covered only the Central Valley and Nicoya, the two areas settled by the Spanish, and that the actual number of

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Indians may have been as high as 500,000. Whichever numbers are correct, the number of easily subduable Indians living in the areas settled by the Spanish was small, and those numbers were quickly reduced after the Spanish arrived. 7. The extent of Indian slave exportation from Nicaragua and Nicoya (northwest Costa Rica) is discussed at length in Newson (1982) and MacLeod (1973:50–56). 8. Pacheco (1961:43) lists the relevant factors in the creation of a “mentalidad costarricense” (Costa Rican mentality): the lack of Indians, small landholdings, the poverty and weakness of the church, the elimination of military actors from political affairs, high levels of education sponsored by the state, and the lack of class distinctions and antagonisms. 9. See, for example, Valenzuela and Valenzuela (1983) for the case of Chile. 10. San Salvador refused to be annexed to the Mexican Empire and, in a desperate search for an alternative, proposed a fourth option declaring itself annexed to the United States. The situation was resolved when Mexico sent 2,000 troops to incorporate the city by force (Woodward 1991:6–7). 11. Each state maintained its own assembly, executive, and judiciary (Woodward 1991:10). Woodward (1985, esp. chapter 4) and Pérez-Brignoli (1989:66–78) discuss at length the major problems of the CAF. The term liberal was broadly defined as constituting a commitment to free trade, anticlericalism, and the introduction of representative government. 12. Although the union of states bore the title “federation,” because of the significant levels of political autonomy the individual states enjoyed, it is much more accurate to describe it as a confederation. 13. A number of Central American caudillos throughout the nineteenth century wanted to reunite the region by reason or, more commonly, by force. Five serious attempts to unite the five countries were undertaken between 1842 and the establishment of the Central American Common Market (CACM) in the early 1960s. The most recent attempt at unification was the Central American Parliament, which all countries in Central America agreed to join with the embarrassing exception of Costa Rica, proposed by former president of Costa Rica Oscar Arias Sánchez. The CACM is discussed in more detail in Chapter 4. 14. This transfer of territory was sanctioned by the CAF in 1825 but was protested by Nicaragua for many years thereafter (Gudmundson and Woodward forthcoming:137). 15. Mora was executed six months later when he tried to regain power (Gudmundson and Woodward forthcoming). The importance of banking to the coffee elite is discussed later. 16. The 1871 constitution was replaced temporarily during the military dictatorship of General Tinoco from 1917–1919 and was also the foundation for the current document. 17. Until after the civil war, the incumbent congress counted votes and compiled results of executive and legislative elections. The scope for electoral fraud is obvious. 18. The development of the coffee industry was somewhat slower in other parts of Central America, but by the end of the nineteenth century coffee exports made up 96 percent of Guatemala’s export earnings, compared with 71 percent for Nicaragua and 66 percent for El Salvador (Bulmer-Thomas 1987:3). 19. “The secret of coffee expansion in Central America has resided . . . in a particular combination of rich soils of volcanic origin, areas of appropriate altitude (between 800 and 1,400 meters above sea level), regular temperatures and appropriate

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rainfall and an intensive use of agricultural labor” (Pérez-Brignoli n.d.:4). This was especially true for Costa Rica. 20. The full terms of the 1884 Soto-Keith Contract are contained in Meléndez Chaverri (1978:321–330). 21. Although the workers who came to Costa Rica from the Caribbean are commonly labeled black, a more accurate and inclusive term is West Indian. To refer to someone of African heritage in the West Indies as black is derogatory unless it is done as a political statement. Furthermore, not all of the people who moved from the Caribbean to Limón were black, and many, if not most, thought of themselves as light in color (Harpelle 1996). 22. Little interaction occurred between banana workers and those who worked in the highland coffee farms. It is commonly claimed that a legal prohibition barred West Indians from moving to the highlands to live and work; see, for example, Bulmer-Thomas (1987:12). Recent research by Ronald Harpelle (1993, 1996) uses census data that show that in 1927 more than 400 “people of colour” already lived and worked in San José. Furthermore, between 1930 and 1950, a large number of people moved from Limón to the Central Valley. Harpelle argues that the “people of colour” who moved to the Central Valley did so to show their desire to integrate into Costa Rican society. 23. Even UFCO lobbying could not convince President Wilson to recognize the Tinoco regime (Baker 1965). 24. The first two parties, the Partido Constitucional Democrático and the Partido Liberal Progresista, were personalistic election machines created for the 1889 election (Aguilar Bulgarelli 1989; Yasher 1995:73). 25. Since no candidate won the necessary 50 percent of the vote, the task of electing the president fell to the Legislative Assembly. Jiménez and Volio used some less-than-democratic procedures to guarantee that the congress would elect Jiménez (Lehoucq 1996a:348). For an examination of Volio and his party, see Ramírez (1989); Salazar (1981). 26. Volio’s compromise contributed to the Reformist Party’s subsequent decline because it contradicted his electoral promise not to collaborate with any traditional personalistic party. 27. Lehoucq (1992a:181, 318–319) also notes that electoral fraud was becoming increasingly prevalent; by the 1944 election, between 40,000 and 60,000 false identification cards had circulated, which was equivalent to 25 to 30 percent of the electorate. The underlying reasons for the alliance between the National Republican Party and the Communist Partido Vanguardia Popular are discussed in Chapter 3. 28. Rosenberg (1981:248) notes that Calderón neither consulted nor was pressured by the Communist Party or any other labor groups concerning the social security policies and that the public had little “knowledge of and participation in the social-security decision.” Rojas Bolaños (1979:77) notes that by 1942 the government had lost support among all social classes and that rumors of coups made the need to develop a broader support base even more urgent. 29. Workers benefited from a progressive labor code and the introduction of the so-called Social Guarantees. The church, through the leadership of the new archbishop, Monsignor Víctor Sanabria, supported the social reforms and was also the direct beneficiary of government policies. For example, the Jesuit order was readmitted to Costa Rica, religious education in high schools was legalized, and the University of Costa Rica (UCR) was reopened after having been closed in 1888—all of which increased the influence of the Catholic Church and alienated

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39

anticlerical Liberals who still believed in the separation of church and state (Ameringer 1978:11). 30. For some of the multiple competing explanations of the origins of the civil war, see, for example, Rojas Bolaños (1979); Salazar (1981); and Schifter Sikora (1985), who offer an economic-class conflict-based explanation. For a spirited attack on these and other explanations of the civil war, as well as an alternative explanation based on the struggle for control of the state, see Lehoucq (1991). 31. In 1947, Calderón admitted that some members of his administration were corrupt and had enriched themselves while in office (Bell 1971:63). 32. Figueres’s exile was particularly notable since Costa Rica had no tradition of exiling political opponents; thus, he became the first person to be exiled by a government in many years. 33. A full history of Figueres’s machinations and his part in the civil war is contained in Bell (1971) and Ameringer (1978). Ameringer (1978) gives an account of the role of the Caribbean Legion in the fight against dictatorships in various countries, including Costa Rica. 34. Ameringer’s (1978) generally sympathetic biography of Figueres notes that Figueres had given up on the possibility of a democratic solution to the political crisis and was committed to a violent overthrow of the regime long before the 1948 election.

3 The Political Consequence of Institutional Rules

The civil war was a critical turning point in Costa Rica’s political and economic development. The new constitution, written in the aftermath of the war, marked the end of the old regime and laid the foundations of the modern Costa Rican state, including its electoral laws, distribution of political power, and the legal groundwork for increased state intervention in economic and social issues. Because these institutions are still in effect, any discussion of policymaking in Costa Rica must clearly outline the rules of political discourse and the institutional restrictions and incentives faced by political actors. This chapter, then, examines the creation of the 1949 constitution, highlights the separation of political powers among four branches of government, and examines the consequences of the separation of powers. One important consequence of the broad devolution of political decisionmaking has been an increase in the number of points of access through which interest groups and opposition parties can attempt to influence the policy process. The devolution of power has also permitted those groups to develop new tactics to influence government policy beyond personal contacts, financial contributions, and strikes. The chapter then describes the political actors relevant to economic policymaking in Costa Rica, specifically political parties and interest groups whose influence has changed over time. An understanding of these political actors and their tactics furnishes the necessary background to better comprehend the political, social, and economic developments discussed in the remainder of the book. The Junta and Postwar Reforms The civil war was not won on the battlefield but instead was brought to a negotiated conclusion by the signing of the Mexican Embassy Pact in April 1948. The agreement paved the way for a peaceful transfer of power 41

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from the government forces of President Teodoro Picado Michalski to the insurgent forces of José Figueres Ferrer and Otilio Ulate Blanco. The pact brokered an end to the fighting by guaranteeing economic and political rights for the defeated government’s supporters and employees—both military and civil—as well as the maintenance of the Social Guarantees, the Labor Code, and the social security system introduced by Calderón and Picado (discussed in Chapter 2). The signers of the pact also agreed to grant a general amnesty and indemnification for civil war victims, regardless of their political affiliation (Ameringer 1978:64–65). In May 1948, the leader of the Army of National Liberation, José Figueres Ferrer, and the presumed victor of the 1948 elections,1 Otilio Ulate Blanco, signed the Ulate-Figueres Pact, which granted Figueres an eighteen-month period in which to govern the country by decree through an eleven-person junta.2 At the end of that period, executive power was to be handed to Ulate. The pact was a necessary instrument to overcome the mutual distrust of the two principal leaders of the anti-Calderón alliance. Tensions between the Army of National Liberation, led by Figueres and the social democrats, and its allies in the oligarchy had become increasingly apparent. For example, Figueres failed to consult with Ulate on the question of launching the civil war or on the conduct of the war. Figueres’s speeches fed the distrust: “They are wrong if they believe that I am going to give the presidency to Otilio Ulate, or to any corrupt politician. I am going to reform this country” (quoted in Schifter Sikora 1981:206). Whereas the causes of the civil war are in dispute, the actions of the triumphant junta in the postwar period provide some insight into the disparate motivations of the actors (see, for example, Zelaya et al. 1981; Romero Pérez 1982; Schifter Sikora 1985; Rojas Bolaños 1979; Gudmundson 1984; and Lehoucq 1991). Soon after the junta took office, it put aside the Mexican Embassy Pact and unleashed a wave of repression against sectors that had supported the Calderón-Picado administrations. The repression was particularly harsh against the Communists, whose party was declared illegal and whose previously powerful affiliated labor unions were banned. The ban was a major blow to organized labor and reduced the number of unions in Costa Rica by almost 80 percent (Aguilar Hernández 1989:74). More than 200 leading Communists were jailed, 6 of whom were murdered by junta security forces under mysterious circumstances during an unsuccessful invasion by Calderonista troops from Nicaragua in December 1948 (Salazar 1981:155–156). The repression was not limited to Communist Party members but included the many non-Communist supporters of the Calderón regime. The junta established special tribunals to investigate sympathizers of the old regime. The tribunals had the power to dismiss people from government jobs and to confiscate property from those it accused of profiting illegally

INSTITUTIONAL RULES

43

under the old regime. More than 3,000 supporters of the old regime were arrested, and more than 7,000 were forced into exile (Aguilar Hernández 1989:71–72). The simmering divisions among the anti-Calderón forces surfaced within weeks of the junta taking office. In a radio address in June 1948, Figueres shocked the country when he announced that the banking system had been nationalized and a 10 percent wealth tax had been imposed. These two measures, which were directed at the dominant economic class (supporters of Ulate), allowed the state to take a central role in managing the economy and to direct economic development for the first time in Costa Rican history. Taking control of the banks was perhaps the most significant measure promulgated during the junta’s eighteen months in office. According to Jorge Rovira Mas (1989a:130), political as well as economic goals motivated the nationalization of the banks, which was designed to weaken the political influence of major segments of the established economic elite and to foster the emergence of a new political class. The economic importance of banking nationalization is discussed in more detail in Chapter 4. Another action taken by the junta, which had no precedent in Latin America, was the abolition of the standing army. On the surface, this step might appear to be either a very enlightened measure by the junta or an extremely naive political action. The civil war was not a purely Costa Rican affair; both sides in the conflict had relied on international supporters. Anastasio Somoza García’s Nicaraguan National Guard had invaded and occupied the northern part of the country, ostensibly in support of Calderón’s forces. In the postwar period, the threat of an invasion from Nicaragua by Calderón or the Nicaraguan National Guard was very real and would appear to have mitigated against dismantling the army. Figueres’s use of the Caribbean Legion to topple the Calderón regime left him with a debt to the organization, which was committed to the overthrow of other dictators in the region and had earned their enmity, especially that of Anastasio Somoza. The action, however, might have been the only political option open to the junta. The disbanded army consisted principally of the remnants of the Calderón regime’s army, which had been defeated and disgraced in the final years of the regime and had thus been weakened both politically and militarily. Furthermore, Figueres maintained his own Army of National Liberation and incorporated its members into the new Rural and Civil Guards (English 1971). Thus, the destruction of the old army strengthened the junta’s political position and permanently removed a possible source of political instability from the Costa Rican polity. The political significance of abolishing the army while Figueres maintained his own “citizens” army was not lost on members of the soon-to-be-elected Constituent Assembly.

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When one assembly delegate requested that Figueres turn over control of his army to the assembly, Figueres told him that “if he wanted the arms he might come with his friends and get them” (quoted in Ameringer 1978:85). Another example of the political uncertainty during the junta government was the attempted military coup by Figueres’s minister of public security, Edgar Cardona.3 The attempted coup lasted twelve hours but collapsed in a mutiny when Otilio Ulate, the president designate, refused to support it.

The Constituent Assembly Although the junta came to office with the goal of creating a “Second Republic,” the Ulate-Figueres Pact assigned the task of writing a new constitution to a popularly elected Constituent Assembly. Elections for the assembly took place in December 1948; as Table 3.1 shows, they resulted in a landslide victory for Otilio Ulate’s Partido Unión Nacional, which won thirty-four of the forty-five available seats. The junta’s Partido Social Demócrata won just four seats, two seats less than the reconstituted Calderonista party (Partido Constitucional). The only factor uniting the victorious civil war forces was an intense dislike of the Calderón-Picado administrations. This fact was first made clear by the junta’s punitive decrees (mentioned earlier) and subsequently by the serious disputes between the PUN-dominated Constituent Assembly and the PSD-dominated junta. The assembly, for example, ratified Ulate’s February 1948 election victory but refused Figueres’s request to recognize

Table 3.1

Constituent Assembly Election Results, December 1948

Party

Votes

Seats

Partido Unión Nacional (PUN) Partido Constitucional Partido Social Demócrata (PSD) Partido Confraternidad Partido Acción Cívica Partido Movimiento Republicano Popular Partido Liberal Total

62,300 10,815 6,415 2,439 844 749 448 84,010

34 6 4 1 0 0 0 45

Source: Salom Echeverría (1991:85). Note: Oscar Aguilar Bulgarelli (1981:66) differs on the seat allocation and the names of the parties. Both authors agree that the PUN won a landslide victory, with the PSD (supporters of the junta) achieving a weak third place behind the reconstituted Calderonista party, Partido Constitucional.

INSTITUTIONAL RULES

45

León Córtes Castro as the 1944 presidential election victor and also refused to formalize the decree legislation that had been passed by the junta. More seriously, the Constituent Assembly rejected the draft constitution presented by the junta in April 1949. Instead, the assembly used the Liberal constitution of 1871 as its starting point for the new document (Rovira Mas 1989a:131). The final document that became the 1949 constitution was a modified version of the 1871 constitution with some significant new measures. Much of the labor legislation introduced during the CalderónPicado administrations was maintained, including minimum wage legislation, the length of the work week, and rights of workers and employers to organize freely. A social security system covering medical services, old age, and disability and maternity benefits was also mandated (Rinehart 1984:189). Article 12 of the constitution formalized the presidential decree proscribing the existence of a standing army. The new constitution introduced a series of changes in the economic and political life of the country and ushered in the beginning of the modern Costa Rican state. The following sections examine the new electoral laws, the constitutionally mandated separation of powers, and their consequences for the behavior of political actors. They illuminate the nonintuitive consequences of institutional rules since the civil war on political behavior in general and policymaking in particular.

Electoral Changes Costa Rica’s post–civil war political stability is largely a function of the elite-level compromise concerning the manner in which competition for political power should take place (Wilson and Hamann 1995:93–96). This compromise was reflected in a series of new electoral laws that have facilitated the smooth transfer of political power among competing political parties and effectively prevented the use of violence for political ends since the conclusion of the civil war (Lehoucq 1996a). This section examines the new institutions and electoral laws and highlights the laws’ consequences. One of the most important changes for electoral politics was the creation of the Supreme Electoral Tribunal (Tribunal Supremo de Elecciones; TSE). This body was the extension and formalization of President Picado’s National Electoral Tribunal created for the 1946 elections. The TSE is a nonpartisan body composed of three magistrates and six alternates (suplentes) elected by the Supreme Court in staggered six-year terms.4 A 1975 constitutional amendment gave the TSE the status of a fourth branch of government. TSE regulations and rulings have the force of law. The tasks of the TSE include announcing and supervising elections, interpreting electoral laws, maintaining voter registration lists, and making

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recommendations to the Legislative Assembly to improve the electoral process. The TSE also determines which political parties meet the requirements to be allowed to compete in elections, interprets all legal and constitutional questions concerning elections, and maintains the Civil Registry—recording births, deaths, marriages, and citizenship. The body has the power to veto any legislation concerning elections, although the assembly can overturn the veto by a two-thirds majority. In 1959, the TSE recommended a constitutional amendment to make voting mandatory, which was accepted by the Legislative Assembly. In subsequent elections, voter turnout increased dramatically, up from 65 percent of the registered electorate in 1958 to 85 percent in 1966. Voter turnout has remained close to 80 percent in every election since 1966, with the exception of the 1998 election when it declined by more than 10 percent (Wilson forthcoming c). The TSE took control of elections away from incumbent governments and has guaranteed free, fair, and honest elections since the end of the civil war (Lehoucq and Wilson forthcoming; Denton 1971: 66–67). The 1949 constitution also extended the franchise by granting suffrage to women and reducing the voting age to twenty (in 1971, eighteen-yearolds were granted the right to vote). Furthermore, it granted civil status to the English-speaking West Indian population on the east coast of Costa Rica, effectively enfranchising them as well. Presidential, legislative, and municipal elections are held simultaneously once every four years on the first Sunday in February. Voters are given three ballots—one for the president and two vice presidents, one for all fifty-seven seats in the Legislative Assembly, and one for the municipal councils. Although Costa Rica uses closed-list proportional representation electoral rule to elect deputies to the Legislative Assembly and the municipal councils, the country has developed a two-party rather than a multiparty system, which would be a more usual outcome of proportional representation.5 Table 3.2 shows that the presidency has alternated between the PLN and the various anti-PLN electoral coalitions, whereas no third party has ever won control of the executive. The two main parties regularly capture more than 90 percent of the presidential vote; since 1986, that figure has been more than 97 percent (Rovira Mas 1995:3, 4). Furthermore, Table 3.3 shows that although third parties tend to receive more of the national vote at the legislative level than at the presidential level, the votes have not necessarily translated into significant representation in the Legislative Assembly. Third parties have only occasionally been important players in the policymaking process. The development of Costa Rica’s two-party system is a consequence of four major factors: proportional representation, campaign financing laws, a 40 percent rule for presidential elections, and the simultaneous

47

INSTITUTIONAL RULES Table 3.2

Presidents and Heads of State, 1948–1998

Date of Term May 1948– Nov. 1949a 1949– Nov. 1953b 1953–May 1958

President/Head of State

Party

Percentage of Votes

José Figueres Ferrer

Junta

n/a

Otilio Ulate Blanco José Figueres Ferrer

Partido Unión Nacional (PUN) Partido Liberación Nacional (PLN) PUN PLN Partido Unificación Nacional PLN PLN Partido Unidad PLN PLN Partido Unidad Social Cristiana (PUSC) PLN PUSC

55 65

1958–1962 1962–1966 1966–1970 1970–1974 1974–1978 1978–1982 1982–1986 1986–1990 1990–1994

Mario Echandi Jiménez Francisco J. Orlich Bolmarcich José Joaquín Trejos Fernández José Figueres Ferrer Daniel Oduber Quirós Rodrigo Carazo Odio Luís Alberto Monge Alvarez Oscar Arias Sánchez Rafael Angel Calderón Fournier

1994–1998 1998–

José María Figueres Olsen Miguel Angel Rodríguez

46 50 51 55 43 51 59 51 53 48 47

Sources: Constitución política de la República de Costa Rica (1988:56–57); Nelson (1984:293); da Graça (1985:53); Wilson (1992:46); Tribunal Supremo de Elecciones (1994); La Nación, February 6, 1998. a. Figueres was not elected and used the title Director de la Junta Fundadora de la Segunda República rather than president. b. Otilio Ulate was the presumed winner of the 1948 election, which was annulled by the Calderón-controlled Legislative Assembly. This decision was reversed by the Constituent Assembly in 1949. He eventually governed as president from November 1949 to November 1953, as agreed in the 1948 Ulate-Figueres Pact.

election of the president and the Legislative Assembly. First, electoral rules override the proportional representation system’s bias toward multiparty politics. Instead of a single nationwide, multimember constituency, there are seven multimember districts, which share the fifty-seven seats in the Legislative Assembly. The allocation of those seats is distributed by the TSE based on the percentage of the national electorate living in each region. Thus, the densely populated areas, such as the region of San José, are represented by significantly more deputies than the sparsely populated province of Limón.6 The importance of the division of the country into seven multimember districts for the creation of the two-party system can be seen in an example from the province of Limón during the 1962 election. The appendix to this chapter illustrates that parties are punished for not forming coalitions prior to elections by showing the negative consequences for parties that contest elections separately rather than in a coalition. In this case, the Republican Party (Partido Republicano; PR) and the National Union Party

(4) (30) (20) (29) (29) (32) (27) (25) (33) (29) (25) (28) (23)

1949 1953 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998

8 65 42 49 49 51 41 39 55 52 47 45 35

V

(27) (18) (25) (29) (25) (27)

(S)

— — — — — — —

V

43 29 46 51 41 41

PUSC

(26) (22) (16)

(S)

— — — — — —

— — — —

UN

43 36 25

V

(11) (19)

(S)

— — — — — — — — —

— —

PR

22 33

V (33) (1) (10) (8)

(S)

— — — — — — — — —

V 74 7 21 13

PUN

(11)

(S)

— — — — — — — — — — —

—

PD

21

V

(1) (0) (0) (0) (4) (4) (2) (1) (0) (0)

(S) — — —

Left

2 0 5 4 8 6 4 2 1 1

V (8) (3) (4) (0) (2) (3) (14) (1) (2) (1) (2) (4) (7)

(S)

V 18 7 15 3 8 8 30 10 10 2 4 7 24

Others

— 67 65 81 82 83 80 81 79 82 82 81 70

(%)

Turnout

Sources: McDonald and Ruhl (1989:178–179); FLACSO (1991:198–199); South America, Central America, and the Caribbean (1991:211); La Nación, February 11, 1994; Rovira Mas (1989a:22; 1995:4, 6, 8); TSE (1994:124). Notes: (S) Number of seats won. V Percentage of total valid votes received. PLN—Partido Liberación Nacional. PUSC—Partido Unidad Social Cristiana was created in 1983, transforming a broad anti-Liberación electoral coalition, Coalición Unidad, into a single registered political party. UN—Unificación Nacional (National Unity). PR—Partido Republicano (Republican Party). Became Partido Republicano Calderonista in 1970, after the death of former president Rafael Angel Calderón. PUN—Partido Unión Nacional (National Union Party). PD—Partido Democrático (Democratic Party). Left—1986, Pueblo Unido and Alianza Popular; 1990, Pueblo Unido. Other—1986, Partido Unión Agrícola Cartaginés (PUAC); 1990, PUAC and Partido Unión Generaleña; 1994, PUAC, Partido Agrario Nacional, and Fuerza Democrática; 1998, Fuerza Democrática, Integración Nacional, Renovación Costarricense, Movimiento Libertario, Partido Acción Laborista.

(S)

PLN

Legislative Assembly Election Results, 1949–1998

Year

Table 3.3

48

INSTITUTIONAL RULES

49

abandoned their previous electoral alliance to contest the elections independently. The penalty the parties paid in this district was the loss of a seat to the PLN that they would have won if their previous coalition had remained in effect. Whereas votes for presidential candidates are aggregated at the national level, in the case of the Legislative Assembly elections votes are counted only at the level of the seven provincial constituencies. Thus, this pattern of dividing the vote could be harmful to the parties’ capacity to win representation and could significantly affect the election’s final outcome. Although it is relatively easy to create and register new political parties at both the regional and national levels, other laws have hampered the success of those parties once they are established. In addition to the use of multimember districts, three other institutional factors hamper the success of third parties: election campaign financing laws, a 40 percent rule for presidential elections, and the simultaneous election of the executive and the legislature. Election campaign laws empower the TSE to grant political parties state funding (deuda política) for a major portion of their campaign expenses. State financing should encourage the creation of new parties since it reduces the entry costs of engaging in electoral competition and the necessity to solicit funding from private sources. Another rule excludes parties that received less than 5 percent of the vote in the previous election (10 percent before a 1972 constitutional amendment)—which includes new parties—from receiving state funds. Thus, new and smaller parties must use their own resources to contest elections, whereas the large established parties rely on state funds to underwrite their electoral campaigns. Between 1971 and 1991, established political parties enjoyed an even greater advantage when they received state funding in advance of the election, based on the number of votes the party had obtained in the previous election.7 The extent of the financial advantage for the established parties has grown considerably over time. Article 96 of the constitution earmarks up to 2 percent of the average ordinary budget for the three years preceding the election as the state’s contribution to the election campaign fund. As the public sector has grown rapidly since the end of the civil war, so, too, has the state’s financial contribution to the campaign expenses of the major political parties. For example, in the 1994 national election, more than two billion colones (approximately U.S.$11 million) were distributed to political parties for campaigning. For the 1998 election, the state’s contribution to the political parties’ campaign funds has been estimated to reach 7.6 billion colones (approximately U.S.$38 million) (EIU 1996 [1]:21).8 Thus, even though it is easy for a party to be officially recognized by the TSE, the funding of political parties’ electoral campaigns leaves

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new parties at a serious financial disadvantage, a situation that encourages maverick or disgruntled politicians to remain within their existing party rather than establish new ones. Table 3.4 reveals the magnitude of this financial advantage: Between 1970 and 1994, over 90 percent of available state election funds was granted to the two largest political parties. A further barrier hindering the success of third parties is the 40 percent rule used in presidential elections. To win the presidency, a party’s candidate must win at least 40 percent of the votes. If no party receives the necessary 40 percent, the constitution requires a runoff election between the top two candidates two months later. Parties are thus encouraged to form electoral coalitions and support a single candidate to reach the 40 percent requirement rather than split their votes among ideologically similar smaller parties. According to Matthew Shugart and John Carey (1992), parties’ electoral strategies are determined by their desire to control the presidency, which encourages them to form coalitions and eventually facilitates the development of a two-party rather than a multiparty system. Consequently, smaller parties have traditionally formed electoral coalitions, both to the left and the right of the PLN, rather than contest elections as separate parties. A final hurdle facing third parties, according to Shugart (1988, 1995) and Mark Jones (1994), concerns the timing of elections. Shugart demonstrates that when presidential and legislative elections are held simultaneously, as they are in Costa Rica, the parties of the two leading presidential candidates tend to benefit from a significant coattail effect in the legislative elections, which is not true of countries that hold separate elections.

Table 3.4

Allocation of State Election Funds by Party, 1970–1994 (%)

Party

1970

1974

1978

1982

1986

1990

1994

PLN PUSCa Othersb Total

57 43 0 100

46 32 22 100

42 49 9 100

60 33 7 100

53 46 1 100

47 51 2 100

47 45 8 100

—

—

67

124

379

698

1,333

Cost per vote (colones)

Sources: Fernández 1992: table 1; author’s calculations; EIU 1996 (1):21; La Nación, December 31, 1995; TSE n.d. a. The PUSC includes the party’s precursor parties and electoral coalitions. For the elections of 1970 and 1974, the main anti-Liberación coalition was Partido Unificación Nacional. The anti-Liberación coalition fought the1978 election as the Partido Unidad, which became a formally registered party in December 1983 and has contested each election since as Partido Unidad Social Cristiana. b. No other party received state funding in 1970, but in the other elections several parties received contributions from the state for their electoral campaigns.

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Table 3.3 shows that the new electoral laws and institutions did not instantly produce a two-party system; instead, this development has taken place over a number of years. Over the years, a combination of electoral laws and experience has pushed politicians to seek compatible bedfellows and to cement political alliances, which has edged the country toward two major political parties representing broad fronts of factions and interests. Defeated pre-candidates are not normally banished from their party but are encouraged to stay in the party. Unsuccessful pre-candidates are often offered high-ranking positions on the party’s Legislative Assembly list, which virtually guarantees them a seat in the new assembly. Thus, the incentive for political elites to leave the dominant parties and form new parties is lowered from two sides: the institutional obstacles to the success of third parties and the informal rules to encourage defeated pre-candidates to remain within their original party, form factions, and attempt to change the party from the inside.9

Devolution of Political Power Although it concentrated power geographically in the capital city, the new constitution decentralized power among the four branches of government. The constitution severely weakened the presidency and the executive branch of government, which were supplanted by a more powerful fiftyseven-member Legislative Assembly.10 The constitution requires that the assembly meet for two three-month sessions every year; the first session runs from May to July and the second from September to December. It is not uncommon for the assembly to meet in extraordinary sessions for up to five more months each year. Only the president can convoke extraordinary sessions of the Legislative Assembly, during which he or she controls the agenda. This limited power to set the agenda can be an important parliamentary tool for the president since it helps him or her to overcome some forms of legislative stonewalling on contentious bills sent for legislative approval (Wilson 1994).11 Both the legislative and executive branches of government can initiate legislation, but the president can do so only with the approval of the relevant government minister and, consequently, has no independent power to initiate legislation. The president is required to prepare the national budget but cannot veto any changes made by the Legislative Assembly. The president has the power to veto any bill, except national budget bills, within ten days of the assembly’s vote. A presidential veto can be overturned by a two-thirds legislative majority. 12 Other limitations on presidential powers include strict limits on presidential decrees, which can be exercised only if they are not in conflict with and do not extend beyond

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the scope of existing law.13 International loans can be contracted only with the agreement of the Legislative Assembly. As will be seen in subsequent chapters, this last point has produced some serious problems in economic planning and policymaking. One other limitation on the power of the president that existed until a constitutional amendment was passed in 1997 was that the president could not travel beyond the Central American isthmus without the express permission of the assembly.14 The new constitution permitted presidents to seek reelection only after eight years out of office (Article 132) in an attempt to prevent a repeat of the Calderón-Picado alternation during the 1940s. This restriction was strengthened by a 1969 constitutional amendment that barred presidents from ever seeking reelection (a grandfather clause excluded former presidents). This policy further weakened the executive by making a new chief executive a lame-duck president immediately upon taking the oath of office. This legislation effectively limits an incumbent president’s capacity to control sitting legislators since he or she has little control over deputies’ future political careers and thus has few enticements with which to encourage legislators to support his or her legislative agenda.15 Although most legislative power resides with the assembly, other institutional rules prevent individual deputies from using their positions to become national power brokers. Two factors mitigate against power accumulation by individual deputies. The first factor concerns term limits. Since legislators cannot seek immediate reelection, the vast majority of deputies serve as freshmen and fail to return to their party’s election list after the mandatory four-year sabbatical. John Carey (1996:77) calculates that of the deputies who have served in the Legislative Assembly since 1949, 87 percent have not been reelected; only 11 percent returned for a second term, and a paltry 3 percent have served three terms. No deputy has served more than three terms in the Legislative Assembly. The second factor that mitigates against power accumulation is the devolution of power to the assembly’s committees, where the most important work of the congress takes place (Baker 1971; Carey 1996; Wilson 1994). A 1963 constitutional amendment reduced the number of permanent committees from ten to five. Currently, six permanent committees are formed, with nine members each who serve one-year terms.16 On rare occasions, a deputy might serve two terms on the same committee. The committees are appointed annually by the president of the assembly and are not required to reflect the composition of the full assembly; thus, the more important committees are dominated by the governing party. For example, during the 1990–1994 period, the Government and Administration Committee had eight members from the majority party and just one from the opposition PLN, and the most important committee—the Budget Affairs Committee—

INSTITUTIONAL RULES

53

had seven PUSC and three PLN members, with one member from a small third party (Muñoz Quesada 1994:112). The president of the assembly is elected annually in an open majority vote on the assembly floor. Thus, the majority party in the assembly controls the committees. All bills are studied by a designated committee, which must return them with recommendations to be discussed in the assembly’s plenary session or by the assigned floor committee. Committees are required to produce recommendations within fifteen days, but that seldom happens. Bills can disappear in committee for years, sometimes even decades. For example, three electoral law bills have been before assembly committees since 1991, 1987, and 1980, respectively (Carey 1996:48). One politically significant effect of the committee system and its rotating membership has been to prevent deputies from developing committee expertise or political power. Moreover, little staff support is available to committee members that would help them to build an area of expertise (Hughes and Mijeski 1973; Lehoucq and Wilson forthcoming). Costa Rica’s famously slow pace of lawmaking spurred a major reform of the Legislative Assembly’s operation that took effect in 1993. Modeled on the Italian parliamentary committee system, the work of the assembly’s plenary session was lightened with the introduction of three “mini-plenary” committees. The new committees, called First, Second, and Third Legislative Committees of the Floor, are composed of nineteen deputies, each appointed by party leaders in proportion to the membership of the full plenary session. The committees are to closely reflect the whole assembly and thus can discuss and pass legislation with the same authority as the full body. Deputies can attend and speak at meetings of any of the three committees, but they can only vote on issues discussed by the committee to which they were appointed (Muñoz Quesada 1994). Although the assembly lacks the power to approve or reject the president’s cabinet or his or her choice to lead the Autonomous Institutions (discussed later), it can censure cabinet members with a two-thirds vote, but it cannot remove them from office. Since the civil war, the Legislative Assembly has censured only two ministers. The most recent occurrence was in December 1995, when Minister of Public Security Juan Diego Castro was censured for leading a march of 100 Guardia Civil (police) to the Legislative Assembly to protest the slow passage of a penal reform bill.17 Even though 51 of the 56 deputies present voted in favor of censure, President Figueres did not replace the minister (Lehoucq and Wilson forthcoming). The assembly, through a two-thirds vote, has the power to initiate impeachment proceedings against the president or either of the two vice presidents. The impeachment trial is conducted by the Supreme Court judges. To date, no official has been impeached.

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Local Government The maxim applied to U.S. politics, that all politics is local politics, is almost completely reversed in Costa Rica. Local government is very limited in both its functions (it is responsible for street lighting, garbage collection, fire fighting, and a few other minor services) and its power to raise revenues. Most tasks relevant to local governance are administered by the Legislative Assembly or national-level Autonomous Institutions (AIs). Representatives (regidores) to the local councils are elected at the same time and with the same electoral law as the deputies to the Legislative Assembly. Since the Municipal Code reform in 1970, the president no longer appoints municipal executives; instead, the regidores elect their own council leaders. Local cantons have little revenue-raising power, however, and depend on the national government for the vast majority of their funds (Ameringer 1982:54). The power and importance of local government have been further limited by national politicians’ power over the funding of local projects and the political futures of local government representatives. Studies have shown that a quid pro quo exists between local and national politicians, in which municipalities are more likely to receive project funding if the party controlling the council is also the one controlling the government (Lehoucq and Wilson forthcoming). The political insignificance of local government is reflected in the fact that most Costa Ricans are more likely to approach their deputy in the Legislative Assembly than they are the relevant local regidor. Polls show that most Costa Ricans believe national bodies, such as Autonomous Institutions, and national politicians are much better able to resolve their problems than are local governments (Lehoucq and Wilson forthcoming).

Autonomous Institutions Autonomous Institutions are semi-independent government agencies charged with responsibility for specific tasks. As Table 3.5 shows, these tasks cover a broad range of activities that might be carried out by government departments or the private sector in other countries. Although Costa Rica has a relatively large number of AIs (118 in 1994 but nearly 200 in the early 1980s) that provide services ranging from education to electricity to financial services to urban planning, they are not unique to that country. The original AIs were created in Uruguay in the 1930s and were first adopted in Costa Rica during the administration of Rafael Angel Calderón Guardia before the civil war. The PLN governments have fully developed them since the end of the war, and AIs have become synonymous with the PLN.18 Expansion of AIs was initially guarded and then boomed in the late

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Major Autonomous Institutions, 1925–1977

Date

Agency

Function

1925 1940 1941 1943 1943

Instituto Nacional de Seguros Patronato Nacional de la Infancia Caja Costarricense de Seguros Sociales Universidad de Costa Rica Consejo Nacional de Producción

1949

Oficina del Café

1949

Instituto Costarricense de Electricidad

1950 1954

Banco Central de Costa Rica Instituto Nacional de Vivienda y Urbanismo Instituto Costarricense de Turismo Ferrocaril Eléctrico al Pacífico Instituto Costarricense de Acueductos y Alcantarillados Instituto de Desarrollo Agrícola

Monopoly provider of insurance Assistance to mothers and children Administration of the health system Tertiary education Stabilize basic food prices and promote domestic food production; converted to an autonomous institution in 1956 Set price for coffee paid by processor to small farmers; regulate credit from state-owned banks to small coffee farmers Administer electricity generation and supply and telecommunications Central Bank Provide low-income housing and urban planning Tourist promotion Railroad Water supply and sewerage

1955 1956 1961 1961 1961

1965 1970 1971 1971

1972

1973 1973 1974

1974 1977

Rural development and agricultural reform Addressed land tenure disputes

Instituto de Tierras y Colonización; changed name to Instituto de Desarrollo Agropecuario Instituto Nacional de Aprendizaje Vocational training Instituto de Asesoría y Fomento Municipal development Municipal Instituto Mixto de Ayuda Social Social assistance program for poor families Fondo de Desarrollo Social y Family Allowances and Social Asignaciones Familiares Development Fund—funding for welfare programs Corporación Costarricense de Promote state-owned production; a Desarrollo holding company for many stateowned companies Comisión Nacional de Asuntos Indíginas National Commission for Indian Affairs Universidad Nacional National University, Heredia Refinadora Costarricense de Petroleo Created in 1963 as a mixed privatepublic enterprise with a monopoly to refine and supply petroleum products; in 1974 became a fully state-owned enterprise Instituto Nacional Sobre Alcoholismo National Institute on Alcoholism Universidad Estatal a Distancia Open University

Sources: Ameringer (1982); Honey (1994); Lara (1995).

1960s and the 1970s. The government created twenty-five AIs between 1948 and 1957 and another twenty-eight between 1958 and 1967. Over the next ten years, sixty-six more AIs were founded (Jiménez Castro 1986:16).

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The 1949 constitution included Autonomous Institutions for three main reasons. First, they were considered a means to further weaken the executive branch through the devolution of political power to technocratic agencies beyond the control of the executive. Second, AIs were designed to permit technical experts to fulfill the new constitutional mandate to promote the social, economic, educational, and cultural well-being of Costa Ricans without interference from politicians. Finally, AIs were intended to protect the welfare function of the state from retrenchment by unfriendly governments. As I show in the following chapters, this in-built mechanism for preventing the rolling back of state programs has been fairly effective. Some argue that it has been too effective, resulting in a ratchet effect whereby it has been much easier to expand the number of AIs than to curtail their activities, disband them, or even control them. The number of Autonomous Institutions has increased in an ad hoc fashion, usually in response to political problems confronting the current government. For example, the Institute of Land Settlement (Instituto de Tierras y Colonización; ITCO) was created in 1961 to resolve land tenure disputes and rising levels of land invasions in the late 1950s and early 1960s.19 It has also been argued that the AIs were created to quiet specific disgruntled groups by apparently opening channels of negotiation without actually resolving the problem. The fact that most AIs were created during periods of economic and political crisis rather than in economic boom times appears to support this assertion. In 1971, the Combined Institute for Social Assistance (Instituto Mixto de Ayuda Social; IMAS) and the Family Allowances and Social Development Fund (Fondo de Desarrollo Social y Asignaciones Familiares; FODESAF) were created to carry out President Figueres’s declared “War on Poverty.” These new AIs’ antipoverty tasks were already covered by other AIs such as the National Planning Office (Oficina de Planificación Nacional; OFIPLAN) and the National Child Welfare Agency (Patronato Nacional de la Infancia; PNI), which highlights the problem of duplication among AIs (Garita 1981; Sojo 1984:50–51) and further hints at the creation of AIs as a political tool. The mechanisms that exist to coerce these institutions to work together are weak, though. For example, the National Production Council (Consejo Nacional de Producción; CNP) was originally established to help private farmers through price supports, but it quickly overstepped its designated remit, assigned itself regulatory powers, and eventually went into food processing—competing with the very people it was set up to help (Tartter 1984:202). In the late 1960s and mid-1970s, two attempts were made to limit the autonomy of the AIs, which collectively granted the president marginally

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more control but did not remove the institutions’ policymaking autonomy. The legal changes had very little impact on some AIs, which are financially independent. Some agencies are guaranteed a portion of the government’s budget—for example, the University of Costa Rica (Ameringer 1982:41)—whereas others have the capacity to generate their own revenues. The latter group includes the Costa Rican Institute of Electricity (Instituto Costarricense de Electricidad; ICE), which provides electricity and telephone services throughout the country; the Costa Rican Petroleum Refinery (Refinadora Costarricense de Petroleo; RECOPE), which refines and sells gasoline; and the Agrarian Reform Institute, which has sold bananas on the international market and leased parts of the country’s coastline and national parks under its control. All of these AIs can increase their revenues through commercial endeavors, which also increases their policy autonomy (Denton 1971:42–43). The financial and political autonomy of these institutions further weakens the executive and legislative branches of government, and although the president can appoint and remove the heads of the AIs, they are effectively independent of the control of the president and the Legislative Assembly (Taylor 1995). The AIs must report their expenditures to the comptroller general, another autonomous entity, rather than to the executive or legislative branch of the government. Thus, the political appointees that head these institutions are fairly powerful within their own policy bailiwicks. Another AI is the Defensor de los Habitantes, literally, the defender of the inhabitants, which is effectively an ombudsman’s position. This office was created in 1992 to investigate wrongdoing by public officials. If the ombudsman’s investigation finds the accusations against the state to be credible, he or she can facilitate the search for redress by publically denouncing the actions, asking the Legislative Assembly to establish an investigative commission, or taking the case to the Sala IV—a part of the Supreme Court (see the next section). The ombudsman is appointed for a four-year term across two administrations and submits an annual report to the Legislative Assembly.

The Judicial Branch Costa Rica has a strongly independent judicial branch that is equal to the executive and legislative branches. The Supreme Court (Corte Suprema de Justicia) has twenty-two members and thirty-seven alternates (suplentes) and is guaranteed at least 6 percent of the national budget (Constitución política 1988, Article 177). The Supreme Court justices are elected by the Legislative Assembly for staggered eight-year terms with automatic reappointment (unless two-thirds of the deputies vote against reappointment),

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an arrangement that precludes political interference in the judicial process and usually results in lifetime appointments (Constitución política 1988, Articles 152–167). Until 1989, the Supreme Court was divided into three chambers (Salas), each of which examined specific types of legal questions. In 1989, the Legislative Assembly created a fourth chamber (Sala IV) to handle the increasing use of the courts by government agencies, interest groups, and individuals challenging the constitutionality of various laws and regulations. The Supreme Court had traditionally played a very low-key role, acting on the belief that the laws of the Legislative Assembly were valid unless they were obviously and glaringly unconstitutional. Jaime Murillo Víquez (1994) notes that between 1938 and 1989, the Supreme Court declared just 380 government acts unconstitutional. In the three years after the creation of the Sala IV in 1989, the new court declared 974 acts unconstitutional. Whereas institutional barriers had once made approaching the Supreme Court very difficult, expensive, and time-consuming, since the inception of the Sala IV the role of the court has changed dramatically. The new branch of the court has become controversial; it plays a central role in public policy debates and has not shied away from confrontations with other branches of the government (Handberg and Wilson 1997; Lehoucq and Wilson forthcoming; Gudmundson 1996:83–86). As we will see in Chapter 6, the Sala IV has also become a very important location for and participant in economic policy disputes between interest groups and government and between competing government institutions (Murillo Víquez 1994; Handberg and Wilson 1997).

Political Parties As was noted in Chapter 2, political parties have been in existence in Costa Rica since independence. But except for the Reformist Party in the 1920s, the Communist Party founded in the early 1930s, and the small Social Democratic Party created in the 1940s, political parties were personalistic electoral machines that were generally nonideological and fell inactive between elections. No other “modern” programmatic parties became a reality until after the civil war. Only then was the Partido Liberación Nacional created, which dominated the political landscape for the next forty years, winning seven of the eleven presidential elections. Even with the advent of programmatic parties, personalism still played a very important role, even for the Communist Popular Vanguard Party (Partido Vanguardia Popular; PVP). The new parties were more than just electoral machines and have survived the deaths of their founders. Two major parties dominate Costa Rica today: the PLN and the PUSC, which together regularly account for more

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than 95 percent of the presidential vote. Before discussing the two major parties and some important minor parties, I briefly outline some commonalities that characterize the PLN and the PUSC. Party Discipline and Control Historically, party discipline in Costa Rica has been weak. That is, it is very difficult for party leaders to force copartisan deputies to vote a party line or to control the behavior of copartisan political appointees who head state agencies such as the Autonomous Institutions and state-owned enterprises. Party cohesion is made problematic for three significant reasons. First, the president is effectively a lame duck immediately after the inauguration. Second, deputies are ineligible for immediate reelection. Third, historically, parties have been unwilling or unable to punish dissident deputies. Because presidents are prohibited from ever seeking reelection, they have little control over the deputies of their own party. The situation is exacerbated by early “unofficial” election campaigns for the next presidential candidate, which traditionally start just six months after the new president has taken office. In 1984, for example, three pre-candidates threw their hats into the ring to become the PLN’s presidential candidate in the 1986 election; in summer 1990—three-and-a-half years before the next election—more than ten pre-candidates had initiated unofficial campaigns to become the PLN’s 1994 presidential candidate.20 Some studies (Taylor 1992; Carey 1996) show that the vast majority of politicians aspire to political careers, but since they cannot be immediately reelected that career has to be built outside the Legislative Assembly.21 To prolong their political careers, deputies must align themselves not with the incumbent president (even though he or she was responsible for placing them on the party’s electoral list) but with the pre-candidate they believe is most likely to win the party’s nomination.22 This situation has two important effects on the nature of political discourse. First, the perpetual search for the next presidential candidate contributes to the creation of factions within each party. Second, as a result of this factionalism, political parties experience great difficulty in controlling the voting behavior of their deputies. During Legislative Assembly sessions, the two main parties hold caucuses every Monday morning to decide party positions. But Carey (1996) highlights the confusion among deputies from both major parties as to what constitutes a binding party line. As a result, there is a lack of copartisan cohesion for assembly votes on policy, even on very important issues. Even a chief executive who enjoys a large majority in the Legislative Assembly cannot be guaranteed copartisan support and often must rely on the votes of opposition deputies to push legislation through the congress.

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The lack of party discipline is exacerbated by the fact that deputies know party lines are rarely enforced through punitive sanctions.23 The PUSC, for example, has never expelled a party member or disciplined a deputy for voting against the party line. The PLN has only rarely expelled party members for indiscipline. When deputies have been brought before the party’s Ethics Tribunal, little action has been taken. Survey data show that nearly 30 percent of deputies in the 1990–1994 congress expected no form of punishment for voting against the party line, even if they did so on a regular basis (Carey 1996:148–153).24 Parties have some sticks and carrots with which to corral deputies, the most important of which are the Ethics Tribunal and the allocation of Special Projects (Partidas Específicas; PE) funds. A notable use of a disciplinary action through the Ethics Tribunal occurred in 1985. In what became known as the Mayo Negro, sixteen PLN deputies defied a party caucus decision to vote for Matilde Marín as assembly president. Marín was the favored candidate of Oscar Arias Sánchez, the recently nominated PLN presidential candidate. All sixteen deputies were brought before the PLN’s Ethics Tribunal on charges of indiscipline, which after a lengthy proceeding resulted in the expulsion of one of the sixteen from the party; the other fifteen received no sanction. The true cost of the indiscipline of the fifteen became evident when Arias won the 1986 presidential election and subsequently refused to grant any of the sixteen deputies politically appointed jobs, thus effectively ending their political careers (Carey 1996:140–146).25 One potential carrot presidents possess is the allocation of PEs, which comprise up to 2 percent of the annual ordinary budget. These monies are divided among the deputies of the governing party to meet the demands of their constituents. They give the president two opportunities to control the votes of his or her copartisans and, during periods of divided government, the president can use them to cajole the party controlling the Legislative Assembly into supporting his or her agenda.26 First, the president can allocate the PEs among the deputies; second, the president can later refuse to disperse those PEs if the deputy does not vote the president’s line. Carey (1996), using figures from the 1988 and 1991 congresses, calculates that in 1988 the PLN allocated 98 percent of PEs to its own deputies and 2 percent to independent deputies. In 1991, the PUSC president allocated 96 percent of PEs to his own deputies and 4 percent to independent party deputies. Within the president’s party, the distribution of PEs is generally equitable. Opposition deputies usually receive no funds, whereas deputies from some minor parties receive small distributions in exchange for votes on important issues. The Cartaginés Agricultural Union Party (Partido Unión Agrícola Cartaginés; PUAC), a small regional party from Cartago province that has won a single seat in four of the last five assemblies, has been one

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of the most successful small parties with respect to receiving PEs. In 1991, for example, the PUAC received 25 million colones for supporting PUSC policies in the Legislative Assembly. In 1988, the PUAC deputy was granted 23 million colones for supporting the program of the PLN. In both assemblies, funds for the major opposition parties were close to zero, as were funds for the socialist deputies who opposed both the PLN and PUSC policy platforms (Carey 1996:108–109). A final hindrance to party cohesion in the assembly is the law that prohibits the simultaneous holding of office in a political party and in the assembly. As a result, a dual party hierarchy exists—that of the party in the government and that of the party proper. The two bodies often disagree with each other and compete for control of the deputies, thereby creating confusion about the party’s actual policy position. Nevertheless, although they lack any effective mechanism to control the votes of their partisans in congress, both parties have strong control over who appears on their lists for legislative elections. At first blush, this outcome seems odd, since the Electoral Code includes strict rules that specify a strongly decentralized candidate selection process. The process starts with assemblies in 510 districts across the country that are open to all registered party supporters. Each district assembly elects five delegates by majority vote to attend one of eighty-one cantonal assemblies. Similarly, the cantonal assemblies each elect five representatives to send to one of seven provincial assemblies, which, in turn, each elect ten delegates to the national assembly. Using a majority vote, these national assemblies select each party’s electoral lists for the seven provinces.27 It is an open secret, though, that leaders of both major parties respect the letter rather than the spirit of the law. The TSE, with its five magistrates and twenty staff, is unable to visit all of the assemblies leading up to the national assembly. Consequently, party leaders have learned to manipulate and circumvent the rules of the Electoral Code and to tightly control the nomination process (Carey 1996:88–93). One favorite tactic is to hold the district assemblies at odd hours, informing only dependable party supporters of where and when the meetings will take place (Casas Zamora and Briceño Fallas 1991:325). Thus, by controlling the selection of district assembly delegates, party leaders can control who attends the cantonal and national assemblies. To make sure the party leadership would achieve its desired outcome at the national assembly, the leadership invited seventy “sectoral” delegates representing different groups within the party—such as youth, women, peasants, and so on—to supplement the seventy delegates elected through the regional assemblies. This process was halted by the Supreme Court and the TSE in 1992 after a successful challenge by José Corrales Bolaños, a PLN presidential pre-candidate. According to Corrales, blatant

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fraud also occurs at the national assemblies to guarantee that the candidate list will be acceptable to the party leadership (interview, San José, June 1990). Carey (1996) concludes that all irregularities of which both parties’ candidate selection processes are charged do occur, but he argues that the most important aspect of delegate control is the use of patronage. Delegates, like deputies, are interested in political careers, and the person with the most influence over such careers is the party’s presidential candidate. Thus, that candidate, rather than the sitting president or other party leaders, has a great deal of control over delegates’ behavior. The prohibition on presidential reelection, the ban on the immediate reelection of deputies, and the legal separation of a party in the assembly from the permanent party machinery make parties simultaneously weak and strong. Parties are strong in their capacity to control legislative candidate selection, but they are significantly weaker in their ability to control the behavior of those candidates once they are elected to the Legislative Assembly. This lack of control of deputies and political appointees has had serious ramifications for the policymaking process in Costa Rica, especially for presidents with minority support in the congress. Partido Liberación Nacional The most important political party in Costa Rica is the social democratic Partido Liberación Nacional.28 Since its inception, the party has captured the presidency in seven of twelve elections and has retained control of the Legislative Assembly during eight sessions. 29 The extended periods of PLN government and the Autonomous Institutions the party has created have fundamentally altered the nature of the Costa Rican economy and the role of the state in resolving social and economic problems. Despite its coherent ideology, the PLN, like other Latin American social democratic parties, differs from its Western European counterparts in that it was never a socialist party with exclusive ties to workers’ movements. Instead, the PLN began as a multiclass party, addressing primarily middle- and lower-class concerns, emphasizing redistributive policies, and pointing to the role of the state as a medium to resolve national problems and facilitate and direct economic growth. The fact that the party’s supporters and members had diverse socioeconomic backgrounds and interests contributes significantly to the factionalism within the PLN. Latin American social democratic and leftist parties began as antiCommunist, multiclass coalitions appealing to white-collar workers (particularly state employees), industrial blue-collar workers, and farmers with small and medium-sized farms, as well as urban marginalized classes. This multiclass nature often creates conflicts within parties, especially during periods of economic crisis, since the governing party has to decide which

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groups will maintain and which will lose their benefits—thus possibly alienating one or more support groups.30 Thus, an examination of the historical roots of political parties gives some indication of the likelihood of conflict within those parties, since it identifies groups the party targets as supporters. The PLN grew out of the political turmoil of the civil war. The intellectual foundations for the party came from the Center for the Study of National Problems (Centro para el Estudio de los Problemas Nacionales), a nonpartisan group of students and professors from the newly opened University of Costa Rica, during the depression years in the 1940s. The political organization was developed from a faction of former president León Córtes’s Acción Demócrata led by José Figueres Ferrer. The Social Democratic Party, the immediate precursor of the PLN, was formed in 1945 as a result of a merger of these two organizations. The PSD played a leading role in the extraparliamentary opposition leading up to the 1948 civil war. During the 1948 election, the party threw its (somewhat limited) electoral weight behind the oligarchy’s candidate, Otilio Ulate Blanco, and his Partido Unión Nacional. When the Legislative Assembly annulled the presidential election, the PSD joined with Ulate’s PUN in support of Figueres’s more bellicose National Liberation Movement (Movimiento Liberación Nacional; MLN) in the 1948 civil war. After eighteen months in office, Figueres and his supporters set about creating a new political party, the PLN. The PLN was fashioned from the remnants of the MLN and the PSD in October 1951 with the publication of its first Carta Fundamental, which declared its vision of the world and the primacy of the state in “promoting the general welfare of the society as a whole” (Denton 1971:56). The wording bears a striking resemblance to that of the new constitution. From its inception the PLN was a multiclass party that was strongly anti-Communist but had an ideological and programmatic commitment to nonrevolutionary economic and social reform. 31 Various Liberación administrations have maintained their commitment to social democratic development, but individual presidents have emphasized different aspects of the program. Before the 1980s, the major tenets of the program were never challenged, and no major operational institutions for social democratic development were dismantled. As we will see in Chapter 5, though, during the 1980s and 1990s the very foundations of the social democratic development path were questioned and gradually dismantled—not by the conservative PUSC but by the PLN itself. In 1985, the PLN had 367,000 members. When Oscar Arias Sánchez won the party’s nomination for the 1986 presidential election, 250,000 Liberación members turned out to vote (O’Maolain 1985:75). In the 1997 PLN election, which nominated José Corrales Bolaños as the party’s presidential

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candidate, only 161,000 party members voted (La Nación, June 2, 1997). Other than helping to select the party’s presidential and vice presidential candidates, the party rank and file have had little voice in party affairs. This situation is being reviewed, and the rank-and-file membership may be granted more input to the party’s decisionmaking process. Between 1948 and 1997, party leadership generally dominated the candidate selection process (discussed earlier). Anti-Liberación Parties Before the legal formalization of the Partido Unidad Social Cristiana as a single party in December 1983, Costa Ricans generally classified their political preferences as either “liberacionista” or “anti-liberacionista.” The first anti-Liberación coalitions were formed in the early 1960s, but they were unstable alliances whose component members changed with each election. In 1970, the secretary general of the anti-Liberación coalition defined the coalition by noting that “we of the Unificación [Unification coalition], in essence, are those Costa Ricans who are neither in agreement with the theses, procedures and points of view of the National Liberation Party nor with the political behavior of [its] leaders” (quoted in Hughes and Mijeski 1973:46). Twenty years later, serious political differences among the antiLiberación coalition parties remained; even during the anti-Liberación Carazo administration (1978–1982), each coalition party maintained its historical identity and behaved as if it were completely autonomous. For example, members of the electoral coalition tended to caucus on their own within the Legislative Assembly rather than with other coalition partners. Carazo’s PUN coalition, the immediate precursor to the PUSC, was so riddled with internecine fighting that its legislative deputies voted as a bloc just once during its four years in the government. This lack of a unified political opposition to the PLN has been instrumental in facilitating the PLN’s “partial hegemony” (Vega Carballo 1992:208), at least until the early 1990s. Two broad strains of political thought permeated the anti-Liberación parties: the reformist ideas of former president Calderón from the 1940s and free enterprise as advocated by traditional exporters and importers whose economic interests were harmed by the PLN’s import substitution industrialization (ISI) policies (Rovira Mas 1988:21–23). Although an examination of the electoral laws suggests a pressing need for political compromise among these parties to dislodge the PLN from the executive branch, a number of factors have prevented the smooth and quick creation of a single anti-Liberación party. First, parties competed to dominate the coalition. Second, ideological differences existed among the parties. Third, and perhaps most important, the Electoral Code prohibited the new party

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from receiving the TSE funds it had secured through its component member parties during the previous election. The new PLN administration of Luis Alberto Monge facilitated a change in the Electoral Code, permitting the four political parties of the coalition to become a single party—the PUSC—and receive the TSE election funds owed to the constituent member parties (Aguilar Bulgarelli 1992).32 The PUSC and its antecedents have generally adopted economic policy positions to the right of the PLN. Their electoral platforms have advocated trimming the PLN state-led economic growth model, with cuts in the size of the public sector and increased reliance on market mechanisms to determine economic decisions. Whereas these parties have generally received support from conservative businesspeople, the landed class, and private-sector professional workers, they have also garnered consistent support from blue-collar workers and marginalized sectors of society. This unusual situation is largely a result of the social and economic policies of President Calderón in the 1940s and the domination of the anti-Liberación parties by his son, Rafael Angel Calderón Fournier. The parties have also promised to maintain the state-supplied education and welfare services. Third Parties and the Left Some parties are still personal election machines, and they exist in name only. One example is the Independent Party (Partido Independiente; PI), which splintered from the PLN before the 1958 election and, led by former PLN leader Jorge Rossi, contributed to the defeat of the PLN’s presidential candidate. Although Rossi returned to the PLN before the next election, the PI party label was used subsequently by many politicians. In 1986, for instance, Eugenio Jiménez Sancho used the label in his presidential bid without having a formal party machine. His objective was to protest the lack of policy programs of the PLN and the PUSC. Another personalistic election machine in the modern period was the National Movement Party (Partido Movimiento Nacional; PMN), which was created for former president Mario Echandi’s presidential bid in 1982 and then disappeared (Ameringer 1992:215). Third parties proliferated in the 1998 election campaign, when thirteen parties contested the presidential election and twentythree contested the Legislative Assembly elections. Not since the 1940s have parties of the left had any significant influence on government policymaking. Table 3.3 shows a steady decline in both the size of the left vote and the number of seats held in the Legislative Assembly since 1978. Leftist parties generally contest elections as coalitions, but because of political differences and the internecine battles among those parties, the coalitions have been very weak and short-lived. In 1986, for example, two left coalitions were competing for the left vote.

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In 1994, no left candidate ran in the presidential election, and the parties won no representation in the Legislative Assembly. In the 1998 election, Pueblo Unido garnered less than 1 percent of the presidential vote and again gained no parliamentary seat.

Interest Groups Oscar Arias Sánchez (1971:76–78), former president of Costa Rica, notes that modern Costa Rican democracy is “the democracy of groups” and that it is “the group and not the individual which has sufficient potential to be a political subject.” He states that “the strongest and cleverest group buys the largest quantity of merchandise: laws, decrees, regulations, etc.” (Arias, quoted in Sanders 1986:72). Thus, any examination of policymaking in Costa Rica requires an understanding of the groups that “buy” the most important laws, decrees, and regulations. The open nature of the Costa Rican polity and the wide dispersal of policymaking powers give interest groups multiple access points through which they can attempt to influence the policymaking process. Interest group tactics can be summarized in two broad categories: direct and indirect lobbying. Indirect lobbying is the most visible; it involves a series of public actions by interest groups to influence public opinion and thus indirectly influence the voting behavior of deputies. The most common of these tactics is the use of paid advertisements (campos pagados) in national newspapers, principally in La Nación, the country’s leading daily paper. Other indirect actions include demonstrations, strikes, and issue-based public discussions organized by interest groups. The effectiveness of such actions has not been systematically studied, but it is easy to point to anecdotal evidence of cases where deputies have changed their policy positions in response to changes in public opinion or disruptive mass actions. Perhaps more influential, but equally difficult to measure, are interest groups’ direct lobbying actions. Because the 1949 constitution widely devolved policymaking power, interest groups can lobby effectively at different levels; they can lobby individual deputies, heads of Autonomous Institutions, executive members, or the various pre-candidates of the government party either by force of argument or by contributing to their campaign funds.33 Pre-candidates are useful lobbying targets, since they generally control a significant number of deputies in the assembly and can thus affect deputies’ votes more effectively than can the president. Some interest groups have used the newest branch of the Supreme Court, the Sala IV, to challenge legislation they failed to change or stop during the policymaking process. For example, in the 1990s, labor unions representing

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workers at the ICE challenged the allocation of a cellular telephone contract to a foreign company, claiming the ICE was constitutionally guaranteed a monopoly over telephone service provision in Costa Rica (EIU 1995[2]). Interest groups, then, are active political actors and make an important contribution to policy formation in Costa Rica, but their effectiveness is still in dispute. Two interest groups that are very important in most Latin American countries but that are notable for their lack of significance in Costa Rica are the military and university students. Although the military executed a successful coup in 1917–1919, it has been a relatively marginal political force in Costa Rica (Vega Carballo 1981). The institution’s prestige, political influence, and size have never matched those of its counterparts in neighboring Central American countries and declined still further after its eviction from the government in 1919. During the Calderón and Picado administrations in the 1940s, the degeneration of the military continued when it became a partisan tool of the governing party, regularly abusing its authority. In 1947, for example, during an antigovernment business strike (Huelga de Brazos Caídos), the military joined with Communist irregular forces to ransack and plunder strikers’ shops and businesses (Denton 1971:44; Ameringer 1997; Tovar 1996b). The military’s actions contributed to the increased levels of political uncertainty. When the civil war began, it proved to be ineffective against the insurgents led by José Figueres. In the immediate aftermath of the civil war, the military was disbanded, and in a highly symbolic ceremony the army’s Bella Vista garrison in San José was turned over to the Education Ministry to become the National Museum (Museo Nacional). The military was formally proscribed by the 1949 constitution and was replaced by a civil guard and a rural guard, which have been kept small, are “poorly trained and poorly paid,” and have a 50 to 90 percent turnover after elections (Ameringer 1982:47). Even during the Central American political and military turmoil in the 1980s, when U.S. military aid to Costa Rica expanded from zero in 1981 to $11 million in 1985 (Barry and Preusch 1986:85), the Guardias received better training and equipment but remained politically insignificant. Historically, student groups have been apolitical and have rarely engaged in collective political activity. Students have typically been disinterested and silent in national debates, unless those debates directly affect their welfare and education. On one such occasion in 1967, the Legislative Assembly was attempting to write a constitutional amendment to rein in the AIs’ policy independence, and it proposed to reduce the percentage of the national budget automatically going to universities. The students declared a strike and took to the streets to protest the proposed changes. The students were successful; the Legislative Assembly abandoned its plan

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(Denton 1971:48). In 1970, students demonstrated against plans to approve an aluminum mining contract with the multinational company ALCOA (Cerdas Cruz 1991:313; Tovar 1996c), but such actions are exceptions regarding student political behavior. As Arias Sánchez (1971) points out, a number of other organizations in Costa Rica have a direct and influential impact on political life and on the content of legislation. Next I briefly highlight the most important interest groups in Costa Rica. Labor Since its inception, Costa Rica’s labor movement has been organized to pursue both political and economic goals. This dual role of the unions resulted in a rapid rise in labor’s political significance in the 1930s and 1940s and contributed to its equally rapid decline in the post–civil war period. During the 1930s and 1940s, labor developed into a major political player. The most powerful unions were those of the Communist-organized and controlled Confederation of Costa Rican Workers (Confederación de Trabajadores de Costa Rica; CTCR). Through the connection with the Communist Party, organized labor exercised considerable influence over government economic and social policy as a constituent part of the Calderón-Picado-Mora governing coalition from 1943 to 1948. The shortlived political influence resulted in significant reforms, many of which survived long after the Communist Party was banned and its unions destroyed. In the post–civil war period, the political importance of labor has been severely reduced, primarily through a series of legal constraints and political differences among union confederations. Competition among labor confederations also existed during labor’s political peak. In direct response to the growing success of the Communist-dominated unions, in 1943 the Catholic Church created fifteen new unions and a rival union confederation, the Confederación Costarricense de Trabajadores Rerum Novarum (Aguilar Hernández 1989:32–33). Because of a personal agreement between Manuel Mora, the leader of the PVP, and Archbishop Sanabria, de facto leader of the CCTRN, much cooperation developed between the confederations. During the Picado administration, the self-proclaimed apolitical CCTRN, under the leadership of Padre Benjamin Nuñez, became increasingly disenchanted with the government and shifted its support to the opposition. The result was a serious split between the two confederations, with the CCTRN supporting the insurgents and the CTCR supporting the government during the war. The split created the preconditions for the labor movement’s post–civil war demise (see Aguilar Hernández 1989: chapter 1).

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The years since the civil war have been less than kind to the labor movement, which has had to fend off attacks from multiple directions. In the immediate postwar period, the junta banned the Communist PVP and its affiliated unions of the CTCR—the largest confederation in the country—which reduced the number of unions by more than 80 percent (Aguilar Hernández 1989:70). But other changes in institutional rules had more profound, harmful long-term effects on organized labor. The destruction of the CTCR left the CCTRN without competition from any union confederation. The CCTRN, though, did not take advantage of its new position. Instead, many of its leaders (including its founder, Padre Benjamin Nuñez, and future president Luis Alberto Monge Alvarez) left to join the newly created PLN. The loss of effective leadership in the CCTRN caused the confederation to atrophy. When the PLN won control of the government in 1953, a new challenge to traditional unions emerged. The PLN created and fostered the development and growth of rival solidarity unions (Solidaridad). Solidarity unions act like “company unions” and do not subscribe to the class-based, confrontational tactics of traditional unions (they reject the use of strikes as a bargaining tool) or engage in any political activity. The PLN government also created a nationwide collective bargaining mechanism through national wage boards that gave traditional unions little role in establishing wages and remuneration. Coincidentally, this system gave workers one less reason to join a union. There are financial incentives for workers to join a solidarity union rather than traditional class-based ones, including employee savings schemes to which both employees and employers contribute. The interests of workers are further tied to those of their employers, since employees could potentially become part owners of the company. Although the early growth of solidarity unions was slow, it has increased rapidly since the Solidarity Law of 1984, which granted even more economic benefits to workers belonging to solidarity unions, including low-interest loans, profit sharing, and many low-cost services (Dabene 1992:201). By 1989, 1,475 solidarity associations existed, with a total membership of more than 143,000 (CEPAS 1989:25, 67). These unions have become the union of choice for the influx of new multinational companies investing in Costa Rica. In 1990, more than 90 percent of these corporations used solidarity unions (Euromoney 1990:10). A series of legal measures was also introduced to weaken labor as an independent political and economic actor. A string of labor laws makes it difficult for unions to call strikes and leaves union leaders vulnerable to dismissal. For a union to call a strike, 60 percent of its affected members must sign a petition. The petition must then be presented to a judge, who decides if the union has a legitimate reason to go on strike. In the meantime,

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the employer has the right to dismiss the workers involved (Vanderink 1990:181–208). The Labor Code protections, then, cover only the small number of strikes ruled appropriate by a judge. Whereas government actions are clearly important causes of organized labor weakness, political differences among competing confederations have exacerbated the problem. In 1993, approximately 14 percent of all workers belonged to labor unions (not including the solidarity unions), which were divided among six competing labor confederations.34 Because of political differences among the confederations, they rarely act collectively to serve the interests of their members. Organized labor is highly concentrated among white-collar, public-sector workers (where 60 percent are organized), whereas just 7 percent of private-sector workers are unionized (MTSS 1995:17).35 Whereas organized labor was an important political actor in pre–civil war Costa Rica, after the war the initial harsh antilabor government repression was followed by years of legislation unfavorable to unions, the creation of a rival system of labor organizations, and continuing internecine fights among the union confederations. Thus, the labor movement has generally been influential only in the public sector and, until the disastrous strike in 1984, in the banana regions. Since the onset of the economic crisis and attempts by various governments to reduce the size and role of the state, public-sector unions have been spurred into direct action, forcing concessions and promises from their employer—the state. As we will see in the following chapters, with the privatization and austerity measures successive governments have advocated since 1982, labor has once again become a major influence in policy debates. Although the increasingly militant public-sector unions have not significantly improved their members’ economic situation, they have been successful in scaling back, blocking, and slowing economic reforms they believe are detrimental to their members. Business Associations Although Costa Rica has an organization—the Costa Rican Union of Chambers and Associations of Private Enterprise (Unión de Cámaras Costarricense y Asociaciones de Empresa Privada; UCCAEP)—that aggregates the interests of thirty of the country’s largest business associations, it has been relatively ineffectual. This outcome is in part a result of the organization’s charter, which requires that it take action only on issues that affect all of its members, and of its practice of consensus decisionmaking. Furthermore, its member organizations offer it a very small resource base. Historically, two of the most vocal chambers, the Chamber of Industry (Cámara de Industrias) and the Chamber of Commerce (Cámara de Comercio), have had fundamental disagreements concerning the use of tariff

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protection. The Chamber of Industry campaigned successfully in the 1950s and 1960s to erect tariff protection and initiate a government-sponsored program of import substitution industrialization. The Chamber of Commerce, with its emphasis on free trade, lost out. The most recent changes the government has implemented in economic policies have reversed the fortunes of the two chambers, and the Chamber of Commerce has regained some of its political influence. Until relatively recently, the most important sector of the economy has been the agricultural sector. The potential political power of this sector, though, has been hampered by its organization along both regional and crop lines. The peak organization, the Chamber of Agriculture (Cámara de Agricultura), created in 1947, has lost its early political significance as a result of internal political machinations. Some agricultural chambers that have been relatively successful in spite of the political difficulties of the peak organization include the National Chamber of Coffee Growers (Cámara Nacional de Cafetaleros) and the chambers of banana and sugar producers (González Vega and Céspedes 1993:24–25). According to many observers of Costa Rican politics, one of the most influential business interest groups is the National Association for Economic Growth (Asociación Nacional de Fomento Económico; ANFE) (see, for example, Arias Sánchez 1971:79). Its membership includes conservative businesspeople, civil servants, intellectuals, and politicians from both major political parties, which allows it easy access to policymakers. The ANFE was founded in 1958 to promote liberal economic ideas, such as free trade, free markets, private enterprise, and a reduced role for the government. Although recent governments have implemented policies closer to the ANFE’s ideological position, its importance as an interest group is probably overstated. Recently, a former president of ANFE observed that it was incredulous to claim the ANFE was responsible for changing government economic thinking. The ANFE, he noted, had spent more than thirty-five years advocating its Liberal economic agenda and arguing that the stateled economic development model was inefficient, to no avail (interview, San José, Costa Rica, November 1992). Charles Denton (1971:47) claims the ANFE is not directly influential but that its policy position stakes out an extreme free-market parameter that has permitted other critics of the country’s development model to appear more moderate and, subsequently, more acceptable to legislators and voters. International Financial Institutions International financial institutions (IFIs), ignored in the Arias Sánchez (1971) study, are included here as an interest group because of the significant impact

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they have had on the domestic economic policymaking process. Because Costa Rica’s economy is small, relatively minor injections of international funds can have a major impact. For IFIs, then, loaning or granting money to Costa Rica with attached conditionality can be a very cost-effective method of influencing domestic economic and social policy. In the 1960s, for example, the promise of economic aid from the Kennedy administration’s Alliance for Progress contributed to Costa Rica’s decision to join the Central American Common Market, something it had been resisting for years (Wilson forthcoming a). The dispersal or promise of international aid, though, does not always translate into policy choices in line with the donor’s preferences. In the 1960s, the United States Agency for International Development (USAID) offered loans to and actively lobbied the Costa Rican Legislative Assembly to change the country’s tax code and professionalize the national guards. The USAID was partially successful concerning the tax code but was unsuccessful with regard to the national guards (Denton 1971:51). Since the early 1980s, IFIs have become increasingly significant in promoting and facilitating the gradual switch from state-led economic growth to neoliberal, free-market practices. Even though IFIs appear to have been successful in changing the economic development model, however, most governments have either failed to implement or have only partially implemented IFI conditionality (Haggard 1986; Ames 1987; BulmerThomas 1988; Kahler 1989; Wilson 1992, 1994, 1996a). The key IFIs operating in Costa Rica include the World Bank (IBRD), the International Monetary Fund (IMF), the Inter-American Development Bank (IADB), and the USAID. Each of these IFIs has offered loans and grants to Costa Rica with conditionality attached. Indeed, these institutions have often strengthened their negotiating position by making their loans conditional on Costa Rica also agreeing to the conditions of other IFIs. Hence, if the government failed to agree to meet the conditions of one IFI, it would lose access to all international loans from major IFIs. As we will see in Chapter 5, this conditionality has been important because it has strengthened the position of neoliberal technocrats within the governing parties—the PLN and PUSC alike—and private-sector interest groups (Wilson 1992, 1994). The USAID merits special attention as an interest group in Costa Rica because of the extent of its involvement during the economic crisis of the 1980s. In over fifty years of operations in Costa Rica, the USAID has granted more than $1 billion and loaned more than half that amount. The vast majority of those funds were dispersed during the 1980s. In addition to specific policy reforms the USAID helped to facilitate through loan conditionality, it was also instrumental in creating two lasting institutions. The USAID facilitated the creation of the Ministry of Exports to promote

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the exportation of nontraditional goods, which it funded from 1983 to 1987. The second institution was the Coalition for Initiatives in Development (Coalición Costarricense de Iniciativas para el Desarrollo; CINDE), which quickly became one of Costa Rica’s most influential interest groups (Clark 1993:41, 187). Since its inception in 1983, CINDE, with its well-connected leadership and considerable financial reserves, became a formidable interest group, spending at least 20 percent of its budget on public relations efforts directed at influencing public opinion and legislators’ votes. CINDE’s goal was an export-led, free-market approach to the economic crisis and postcrisis economic development (Clark 1993:187). Part of CINDE’s effectiveness in lobbying for neoliberal economic policy reforms resulted from its considerable resources, which allowed it to employ noted former government economists to critique existing laws and bills in the Legislative Assembly and, more important, to draft policy alternatives. Some CINDE position papers were presented to the Legislative Assembly and eventually became law (Clark 1993:196–197, 204). The Catholic Church Even though more than 85 percent of the population is formally Catholic, historically the Catholic Church has been relatively weak and, except for a brief period of intense political activity in the 1940s, has played a very minor political role. During the colonial period, Costa Rica’s relative poverty was reflected in the poverty of the church, a situation that weakened the church’s position in relation to the state. The lack of Indians meant there was little need for priests in the region; therefore, there was little base-building wealth. Also, “the Costa Rican Church’s subordination to the Diocese of Nicaragua prevented the Church from becoming an economic power in its own right” (Williams 1989: 98, 170–171). As a result, the church was unable to play either a significant political role or the dominant economic role as financier it fulfilled in other Central American countries. This remained true during the period after independence, when the number of anticlerical Liberals grew throughout the region and challenged the church’s position. The church did not become an important political actor in Costa Rica until the tumultuous years of the 1940s, when, as noted earlier, it founded a union confederation and entered into a governing coalition with Calderón’s party and the Communist Party. With the end of the civil war, the destruction of the Communist Party and the Communist-controlled unions, and the death of Archbishop Sanabria, the church again became politically insignificant. For much of the postwar period, the church has played a very passive political role. In the 1980s, Charles Ameringer (1982:73) described the church as financially

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poor, employing a small number of clergy, and ceding most of its traditional social and welfare functions—including addressing family issues and domestic problems such as alcoholism and prostitution—to the state. The Catholic Church became more vocal with the onset of the economic crisis in the late 1970s and throughout the 1980s. In the 1990s, the church has demonstrated increasing concern with the economic and social consequences of successive governments’ reductions in social spending as a result of neoliberal economic policies. The church entered into the political debate during the 1993 election campaign when it issued a pastoral letter demanding improved redistribution of income and better social services (Sojo 1995:69). MCRL Since its inception in 1961, the Free Costa Rica Movement (Movimiento Costa Rica Libre; MCRL) has been one of the most vociferous political organizations in the country. The MCRL is a well-financed, far-right paramilitary group that uses its significant funds to fight communism (very broadly defined). In the 1970s and again in the early 1980s, the MCRL was implicated in plans for extraparliamentary action against the constitutional government (Ameringer 1978:260; interview with former cabinet ministers in San José, July 1990). Although no conclusive evidence has surfaced to support or squash the rumors, at the very least the MCRL, with its vitriolic attacks on the Legislative Assembly and its incessant “red baiting,” contributed to an atmosphere of political uncertainty during both periods. In a democratic country that is generally very tolerant of political ideas, it seems strange that the MCRL has any influence on government policy. Part of its influence comes from senior politicians in both of the major parties who are or have been members of the MCRL. For example, during the Monge administration, Benjamin Piza Carranza, a founder of the MCRL, was appointed minister of security. The group trains its members in guerrilla warfare tactics and periodically ignores democratic process and engages in direct action. During the 1980s, its members stormed the Nicaraguan Embassy in San José and, claiming the marchers were Communists, physically attacked an international peace march in 1985 as it passed through San José. News Media The news media, although not an interest group per se, has a significant function as the facilitator of political discussion, which takes place in the country’s six daily newspapers and more than twenty television stations.

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The most important newspaper is the conservative daily, La Nación, which has a circulation of 113,000 and receives about 70 percent of all print media advertising revenue. La Nación also owns another, more sensationalist paper, Al Día, which has a circulation of approximately 35,000. Other papers include La Prensa Libre (50,000 copies) and Diario Extra (100,000 copies), which maintain independent political positions, whereas La República (60,000 copies) supports the PLN. La Nación, as the country’s leading daily newspaper, is necessarily the paper of choice for interest groups and political parties that want to use paid advertisements to reach the electorate. The paper prints regular columns from the MCRL and the ANFE that appear not as paid advertisements but as part of the paper’s regular reporting and editorializing. Parties and interest groups with views diametrically opposed to those of the newspaper are frequent advertisers in attempts to influence public opinion and thus to influence debates in the Legislative Assembly or electoral outcomes.36 In recent interviews, labor leaders have complained bitterly that they have been regularly refused paid advertising space in La Nación (Taylor 1996). Thus, the paper’s conservative editorial bias extends even to the type of political advertisements it is willing to carry.

Conclusion The 1949 civil war marked a watershed in Costa Rica’s political and economic life. This chapter highlights the most important of the new institutional rules that were written into the 1949 constitution, which significantly altered the country’s political life after the civil war. These new rules conditioned the behavior of political actors, which, in turn, had a major impact on policy choices, formation, and implementation. Other policy changes were not part of the constitution but have had important ramifications for political life. Most notable among the innovations after the civil war were the abolition of the standing army, the nationalization of the banking system, and the major blows dealt to the previously powerful labor unions. Although the consequences of the new institutional rules were not immediately apparent, their effects have become clear over time. The new electoral laws and the prohibition on presidential reelection and immediate legislator reelection, for example, have facilitated the development of a two-party political system with two multiclass parties. The reelection restrictions have changed the behavior of individual politicians, who in their search to extend their political careers, offer their allegiance to likely presidential contenders rather than to the incumbent president. As we will see

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in Chapters 4 and 5, this behavior has important ramifications for party discipline and, consequently, for the policymaking process. The 1949 constitution also distributed political powers widely through the creation of Autonomous Institutions. This distribution has both increased the number of relevant actors in the policymaking process and made it difficult for elected government officials to control the actions of significant parts of the state. To better understand the policymaking patterns discussed in Chapter 4, it is crucial to understand why some groups, such as labor, are weaker than might be expected. An understanding of the institutional rules that govern the political process in Costa Rica also facilitates a better understanding of how and why certain economic and social development models were pursued at different times and with different intensities, as well as why governments that disagreed with the development models found it so onerous to reverse them. The rules described in this chapter provide the context in which governments make decisions and explain both elite and mass political behavior.

Appendix An example from the 1962 election, when there were still more than two major parties, illustrates how seats are allocated in the proportional representation system and how the electoral law encouraged the formation of anti-Liberación electoral coalitions. With 4 percent of the electorate living in Limón, the TSE allocated three seats to the area. In the 1962 election, 14,966 valid votes were cast; thus, the number of votes necessary to win a seat in the national Legislative Assembly (quotient) was calculated as follows: 14,966 = 4,988 3 The party vote share was the following. Table 3.A Legislative Assembly Election Results, Limón, 1962 Party

Votes

Quotient

Seats

First-Round Seat Allocation Partido Liberación Nacional Partido Republicano Partido Unión Nacional Partido Acción Democratica Popular Partido Renovación Nacional Limonense

6,773 6,607 1,047 414 125

4,988 4,988 4,988 4,988 4,988

1 1 0 0 0 (continues)

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Vote Remainder

Seats

Total Seats

1,785 1,619 1,047 414 125

1 0 0 0 0

2 1 0 0 0

Second-Round Seat Allocation Partido Liberación Nacional Partido Repúblicano Partido Unión Nacional Partido Acción Democratica Popular Partido Renovación Nacional Limonense

If the PR and the PUN had maintained their previous electoral coalition, they would have won the second seat rather than the PLN. The fact that the remainder is not carried over to the national level clearly has ramifications for the ability of smaller national parties to win representation. These election results from Limón show the important advantages afforded larger (broader) parties and highlight the pressure on like-minded parties to form electoral coalitions. Source: Adapted from Costa Rica: Election Fact Book, February 6, 1966 (1966:16).

Notes 1. Although it is readily accepted that Otilio Ulate won the disputed 1948 election by around 10,000 votes (see Bulmer-Thomas 1987, for example), the ballots were destroyed in a fire, which prevented any recount that might have definitely resolved the question of who actually won. 2. Although the legal basis for the junta’s rule was never clarified, the UlateFigueres Pact afforded the junta eighteen months in office with the potential for a further six months if Figueres deemed it necessary. The junta members were principally friends and supporters of Figueres. 3. Cardona had been one of the earliest supporters of Figueres’s military campaign against Calderón. The coup claimed six lives, and twenty-nine were wounded. It was the last attempted coup in Costa Rica (Ameringer 1978:86–87; Tovar 1996a). 4. For one year before and six months after a national election, the number of permanent magistrates of the TSE is increased to five (Constitución política de la República de Costa Rica, Articles 100–101, 1988:22). 5. For a discussion of the concept of a two-party system, see Rae (1967) and Sartori (1976:185–192). Sartori’s (1976:88) criteria for distinguishing a two-party system follow. “(i) Two parties are in a position to compete for the absolute majority of seats; (ii) one of the two parties actually succeeds in winning a sufficient parliamentary majority; (iii) this party is willing to govern alone; (iv) alternation or rotation in power remains a credible expectation.” Even though general elections in Costa Rica have not always produced absolute majorities in the Legislative Assembly, there have always been one-party governments, which falls within Sartori’s definition. 6. For the 1994 election, the distribution of seats among the electoral districts was San José twenty-one, Alajuela ten, Cartago six, Heredia five, Guanacaste five, Puntarenas six, Limón four (Tribunal Supremo de Elecciones 1994:124). 7. In 1991, the Supreme Court ended this practice, stating that it gave the two major parties an unfair advantage (Lehoucq and Wilson forthcoming). But this change came only after the system had encouraged and facilitated the dominance of the two major parties.

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8. There is a movement within the Legislative Assembly to amend the constitution to reduce the level of state funding for political campaigns. The PLN proposed to reduce the figure to 1 percent of the budget, whereas Juan Guillermo Brenes of PUAC wants a figure of 0.4 percent (La Nación, December 31, 1995). 9. Occasionally, these obstacles are not enough to keep dissidents within the ranks of the major parties. In the 1970s, Rodrigo Carazo Odio, a protégé of José Figueres, left the PLN, created his own party, and won the 1978 presidential election by joining a coalition with the major anti-Liberación parties. Such occurrences, though, are relatively rare. 10. Between 1953 and 1962, the Legislative Assembly had forty-five members. The number was then increased to the current fifty-seven. 11. This is no guarantee of the bill’s success. Many bills (including presidential pet projects) have failed to become law even when they were discussed in special sessions of the Legislative Assembly. 12. Bills vetoed by the president must be returned to the Legislative Assembly with the reasons. The assembly often incorporates those ideas into the existing bill and returns it to the president. In that sense, the veto is just another step in the fashioning of a bill rather than its death knell. 13. According to Hughes and Mijeski (1973:38), presidential decrees are seldom challenged, even if they do extend beyond existing law. The lack of resources and professional staff in the Legislative Assembly makes it difficult to investigate and challenge presidential decrees. 14. One opposition deputy, Alexánder Salas, argued that it was “ridiculous . . . in times of globalization” to require that the president seek permission to leave the country (La Nación, June 17, 1997). Some presidents have ignored this constitutional stipulation (Article 139). For example, during José Figueres’s final term as president (1970–1974), he repeatedly left the country even when the Legislative Assembly refused permission. More recently, presidents have respected the Legislative Assembly’s rulings. Oscar Arias, for instance, was repeatedly refused permission to travel abroad to discuss his Central American peace plan. 15. The motivation for introducing term limits is discussed extensively in Carey (1996:chapter 2). 16. The Budget Affairs Committee, with eleven rather than nine members, is the exception. The six permanent committees are Economic Affairs, Budget Affairs, Government and Administration, Social Affairs, Judicial Affairs, and Agriculture and Natural Resources. 17. The only previous case of a government minister being censured by the Legislative Assembly came in October 1971. Fernando Batalla, the minister of agriculture and a close friend of President Figueres, was censured in a twenty-five to twenty-four vote for using his government office to speculate on international currency movements. He purchased $95,000 to import cattle from the United States just hours before a devaluation of the Costa Rican colón (Ameringer 1978: 265–266). 18. This is not to suggest that the “anti-Liberation” parties have not been in favor of creating and using AIs, only that the PLN governments have created the overwhelming majority of AIs (Jiménez Castro 1986). 19. Rowles (1985) provides an interesting study of the origins of ITCO, highlighting the divisions within both the country and the governing PLN with respect to land reform. Rowles argues that those divisions resulted in a weak law that the courts could interpret very conservatively. 20. Among that number were representatives of various factions within the PLN, including the neoliberals (Manuel Castillo Morales); the social democrats

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(José Miguel Corrales Bolaños); Margarita Penón de Arias, the wife of immediate past president Oscar Arias Sánchez; and Rolando Araya Monge, nephew of former president Monge. 21. It is not in the interest of sitting deputies who wish to extend their political careers to harm the party’s reelection chances. Even though deputies cannot be reelected, their party must win the next presidential election so they can be appointed to a new political post outside the assembly. 22. This argument is fully developed in Taylor (1992). To become a candidate for the presidency of Costa Rica, one must not have held a cabinet position or been a deputy for a full year before the election. Therefore, some of the most experienced deputies and ministers resign their positions a year or more before the election to become pre-candidates for the party nomination. The governing party thus loses the talents of some of its best people. 23. Tartter (1984:196) notes that a two-thirds vote of the PLN caucus determines the party line; “in most cases the line is not enforced, but individual deputies tended to follow the voting lead of influential party figures.” 24. The rarity of roll call votes would appear to create an additional problem for party leaders in maintaining party discipline. In Costa Rica, though, all fiftyseven deputies sit at a single U-shaped table, which permits party leaders to keep track of their copartisans’ votes. The party’s Ethics Tribunal has extensive powers with which to discipline deputies or members, ranging from a simple written admonishment to expulsion from the party (La Nación, January 21, 1997). 25. This case illustrates the lack of immediate sanctions the party has to enforce discipline on policy votes, but it is unusual in that the factional fighting over who should become the party’s presidential candidate had ended, and the person responsible for allocating political positions if the party won the election had already been identified. Thus, to vote against Arias’s instructions would almost guarantee the end of one’s political career. 26. Carey (1996:107–110) notes that even when the Legislative Assembly has allocated the PE funds, the president can hold up or refuse to fulfill the allocation. Between 1974 and 1982 (when presidents enjoyed only partisan pluralities rather than majorities in the Legislative Assembly) the level of allocation of the PE funds was considerably lower than during the period 1982 through 1994, when presidents had majority support in the assembly. 27. This process of selecting prospective deputies will change for the 2002 election season. For that and subsequent elections, candidates will be selected in open primaries. 28. There is considerable debate over the use of the label social democratic in reference to the PLN. See, for example, Romero Pérez (1982) and Schifter Sikora (1981, 1985). Gudmundson (1984) provides a review of the debate. 29. This number does not include José Figueres’s junta government, which lasted eighteen months, or the administration of Otilio Ulate Blanco, who served from 1949 to 1953 as a result of the Ulate-Figueres Pact. 30. At times, factional fighting has been very severe, resulting in a lack of policy direction or, more rarely, in desertion from the party. One significant example of this extreme response to party infighting happened in 1958, when Jorge Rossi left the party because of a factional fight. He contested the presidential election, split the PLN vote, and thus helped the anti-Liberación coalition to win the presidency. Rossi and most of those who left with him rejoined the PLN after the 1958 election. 31. For a detailed political history of the PLN see Ameringer (1982); Castillo Morales (1989); Crosby (1976); Delgado Rojas (1983); Jonas Bodenheimer (1984); Oduber Quirós (1985); Salazar (1982); and Salom Echeverría (1991).

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32. The four parties were Partido Republicano Calderonista, Partido Renovación Democrática, Partido Democrata Cristiana, and Partido Unión Popular. President Monge’s support of reform of the Electoral Code was given in exchange for PUSC support of his economic measures (Chalker 1995:18). 33. Interviews with business and labor groups, conducted by Michelle Taylor (1996), reveal that those groups tend to concentrate on lobbying the executive and legislative branches of government rather than the heads of Autonomous Institutions. Taylor’s subsequent interviews with the heads of AIs confirmed these conclusions. 34. Less than 75 percent of organized workers belonged to any of the six confederations. Almost 30 percent of unionized workers belonged to independent unions (more than 40 percent of all unions), which are not affiliated with confederations (Lara 1995:81–83; Lehoucq and Wilson forthcoming). 35. For a fuller description of the underlying reasons for Costa Rica’s weak labor unions, see Aguilar Hernández (1989); Rojas Bolaños (1979); and Donato and Rojas Bolaños (1985, 1987). 36. During the contra war of the 1980s, La Nación carried a four-page insert called “Nicaragua Hoy” that had a strongly pro-Contra, anti-Sandinista stance. At the same time, the paper occasionally ran political advertisements from the Sandinista government.

4 The Creation and Consolidation of the Social Democratic Model

Although historically Costa Rica has enjoyed higher levels of gross domestic product per capita (GDP/C) than its bordering countries, it was only after the end of the 1948 civil war that the country’s economic growth significantly overshadowed that of its regional neighbors. Figure 4.1 illustrates that before the civil war, Costa Rica’s economy grew at much the same rate as the economies of other countries in the region, but after the war a considerable gap emerged. This rapid and prolonged period of economic growth was accompanied by a highly stable democratic government and a dramatic improvement in social indicators. The economic and social transformation of the postwar period took place under a new constitution, with new political institutions—and, for much of the period—under the governance of the social democratic Partido Liberación Nacional. The PLN quickly became the dominant political force in postwar Costa Rican politics. Since the end of the civil war, the PLN has controlled the executive branch in seven of twelve elections and has dominated the Legislative Assembly in all but three administrations. Many commentators have concluded that the postwar record is a direct result of the PLN’s economic and social agenda; consequently, the PLN is generally credited with fathering the postwar economic and social model (Ameringer 1982; Bell 1971; Busey 1962; English 1971; and Gudmundson 1984). The PLN’s electoral dominance, however, does not entirely explain Costa Rica’s economic and social metamorphosis between 1948 and 1982. Drawing on the institutional framework and political dynamics outlined in Chapter 3, this chapter shows how the social democratic model advocated by the PLN was not adopted immediately after the war but evolved incrementally over the subsequent thirty-year period. The chapter also addresses the puzzle of why opposition parties, even when in government, 81

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Dollars

Figure 4.1 Central American Gross Domestic Product Per Capita, 1920–1984 (1970 prices)

Year

Source: Bulmer-Thomas (1987:table A.3, 312–313).

were not only unable to reverse the social democratic development model but sometimes supported and expanded it. As was noted in Chapter 3, the 1949 constitution built on the economic and social reforms of the Calderón Guardia (1940–1944) and Picado Michalski (1944–1948) administrations and expanded and formalized the economic and social role of the state by establishing the “legal foundation for a new modernized state with an unmistakable interventionist orientation” (Rovira Mas 1989a:132). Although the principle for increased state intervention in social and economic issues was written into the new constitution, the PLN moved timidly to pass policies that would realize those goals. Consequently, two patterns of policy implementation need to be explained. Why did the PLN apply its proclaimed program so gingerly, especially in the immediate post–civil war period? And why were antiLiberación governments unable to enact substantial reversals of the PLN’s state interventionist economic policies? The PLN’s creation from the merger of the Social Democratic Party and the less ideological, more militaristic National Liberation Movement guaranteed internal divisions that would prevent the development of coherent, strong support for a particular policy program, even though agreement existed on broad ideological grounds and policy goals. The PLN, though, had the advantage of being the first party in government and of

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dominating the Legislative Assembly for much of the period after the promulgation of the new constitution. Thus, the party was able to strengthen its policy changes with institutional adjustments, such as the creation of Autonomous Institutions, which made the social democratic model more resilient to change even under non-PLN governments. Additionally, the PLN, in part, viewed its programs to increase government employment and create new entitlement programs through tax and tariff incentives to industry as fostering the formation of new social sectors that might become loyal to the PLN and dependent on its programs. Costa Rica’s postwar economic and social development model falls into three distinct periods.1 The first period (1948 to 1962) began with a new constitution after the civil war and ended when the newly elected PLN government of Francisco Orlich took Costa Rica into the Central American Common Market and simultaneously embarked on an import substitution industrialization process.2 During the second phase (1962 to 1972), the state played an active role in facilitating the growth of privatesector industrialization and expanded its social welfare function. The third period (1972 to 1982) was characterized by an increased role of the state in the provision of social welfare goods, as well as active participation in the supply of goods and services traditionally provided by the private sector. This chapter examines the growth of the state-led economic development model, showing both the reasons for its slow growth and why opposition parties, when in government, failed to reverse the policies. The chapter charts the development of what has been called Costa Rica’s social democratic development model and highlights the important consequences post–civil war institutions, the party system, international economic ideas, and the international economy had on governments’ economic policy choices and strategies. The chapter concludes with a summary of the economic and social outcomes of thirty years of the social democratic development model.

Emergence of the PLN’s Development Model (1948–1962) At the time of the civil war, Costa Rica’s economy was still dominated by the agricultural sector. More than two-thirds of the population lived in the country, and two-thirds of the workers were agricultural, principally in the agroexport sectors of coffee and bananas. Although some nonagricultural growth had taken place, both industry (11 percent of the workforce and 13 percent of GDP) and public-sector expenditure (less than 6 percent of GDP) remained of marginal importance. Agroexporters remained the dominant sector and continued to wield significant sway over government economic policy (González-Vega and Céspedes 1993:75–76).

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Although José Figueres and his Army of National Liberation came to power in 1948 promising a “Second Republic” in which Costa Rica would be transformed through diversification and industrialization, he was only partially successful in putting his vision of a radically restructured economy into practice. The junta, though, did lay the legal and financial foundations for an increasingly interventionist state in both the economic and social spheres. Four major reforms legislated by decree have had long-lasting effects on the Costa Rican polity and development strategy. First, the junta created a series of AIs, which have played an important part in policymaking and implementation. Second, the junta nationalized the banking system.3 This nationalization, which created the National Banking System (Sistema Bancaria Nacional; SBN), was without precedent in the Americas. Third, the government took a series of actions against organized labor (see Chapter 3), which left labor very weak politically and incapable of organizing effectively for either economic or political gains (Vanderink 1990; Aguilar Hernández 1989; Rojas Bolaños 1979; Donato and Rojas Bolaños 1985). Finally, the junta abolished the military, although that reform had little significance on development strategy. The major goal of nationalizing the banks was to grant the state monopoly control over the country’s savings. This move allowed the government to control the direction and nature of economic growth and to channel increased funds to social development programs, such as health and education. Figueres likened the control of credit to control of other public services, like water and postal delivery, for example, which he argued should not be run by the private sector but should be directly controlled by the state. Capital, he believed, should be given “a fruitful orientation [and] put to work for the advantage of the majority” (quoted in Ameringer 1978:70–71). The junta also contended that it would be impossible to industrialize the country without state control of credit (Gil Pacheco 1982:255). Part of capital’s new “fruitful orientation” included the creation and funding of a series of AIs, including the ICE (the state-owned monopoly provider of electricity and telephone services), and the allocation of credit based on developmentalist rather than profit-maximizing criteria. Subsidized electricity from ICE gave Costa Rican industry the cheapest electricity in the region (Sojo 1984:46), whereas the nationalized banks offered credit at discounted interest rates (sometimes even negative real interest rates) to targeted industries—for instance, small farmers, agricultural diversification, and manufacturing. 4 Thus, the nationalization measures permitted the state, for the first time, to actively direct economic and social development. The nationalization measures also had political implications. First, they effectively punished private bankers for supporting the defeated Calderón-Picado administrations by ending their political influence over

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economic development (Arias Sánchez 1984a:195; Bulmer-Thomas 1987: 124). The banking nationalization measures also permitted later PLN governments to expand the size of the state by increasing its functions and thus adding to its capacity to employ more people in state-owned companies and administrative positions—a major element of the PLN’s electoral support coalition (Sánchez Machado 1985:35–37). The weakening of organized labor is discussed in Chapter 3; suffice it to say here that the banning of the Communist Party and its affiliated labor confederation, together with the atrophy of the competing Catholic Church–led labor confederation, reduced the influence of organized labor in the immediate postwar period. New antilabor laws that made organization and collective action difficult, the introduction of government wage boards, and the creation of solidarity organizations (in effect, company unions) effectively removed workers’ incentive to join unions and weakened unions’ capacity to organize. Except for the public sector, unions were very weak and had little influence on public policy during this period. Beyond these four profound reforms (bank nationalization, the creation of Autonomous Institutions, the antilabor legislation, and the abolition of the military), the junta’s achievements were limited. Its eighteen months in power were largely taken up by political battles with supporters of former president Rafael Angel Calderón Guardia, including a fullscale invasion sponsored by Nicaraguan dictator Anastasio Somoza in December 1948. On the domestic front, the anti-Calderón alliance quickly disintegrated, with Figueres’s one-time associate, Otilio Ulate Blanco, leading the domestic opposition to the junta. The junta’s capacity to implement radical reforms was significantly reduced when Ulate’s PUN won a crushing landslide victory in the December 1948 Constituent Assembly elections, which left just four of the thirty-four members sympathetic to the junta. The parliamentary opposition resulted in the rejection of the junta’s draft constitution, and many of its projects were stymied (Ameringer 1978). When the junta transferred control of the executive to Ulate in November 1949, it had achieved only partial success. Although the Constituent Assembly had rejected the junta’s draft constitution, a combination of resignation threats from Figueres and astute political maneuvering by the four Social Democratic Party (the PLN’s precursor) deputies resulted in a constitution that included many of the institutional reforms and social guarantees advocated in the original draft. The junta’s term in office, although it produced few of the radical reforms it had promised, was thus successful in creating the institutional bodies and regulations necessary for the state to intervene effectively in the control of the economy and the provision of social services at a later date. It also began the process of creating

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what were believed to be the necessary preconditions for industrialization in three principal ways. First, the state improved the infrastructure and became the major supplier of electricity, water, and telecommunications. Second, state-funded improvements in education, health, and income redistribution facilitated the expansion of the domestic market and improved the quality of the workforce. Third, the state took control of the country’s capital and established new investment criteria to encourage agricultural diversification and the nascent manufacturing sector. The junta’s mission of national reconciliation, though, was far from complete. The major daily newspaper, La Nación, summed up the junta’s eighteen months in government as “a storm of hatred.”5 The junta also experienced a serious internal division between its “radical” and “conservative” wings, which prevented it from speaking with a single voice.6 The split became so grave that in April 1949 Minister of Public Security Edgar Cardona attempted a golpe de estado (military coup). Although the golpe was unsuccessful, it characterized the divisions within the junta and the highly charged political atmosphere in which political and economic reforms were taking place. Rovira Mas (1989b:23) characterizes the Ulate administration as “a brief oligarchic restoration” with a return to a reliance on an expanding agroexport sector and few new policy reforms, but with the exception of the junta’s 10 percent wealth tax, Ulate made no attempt to reverse the junta’s institutional reforms. The government created only one new AI, the Central Bank of Costa Rica (Banco Central de Costa Rica; BCCR), in 1950. The AIs, though, slowly began to grow and expand their operations without executive or legislative directives. President Ulate did not share Figueres’s enthusiasm for transforming the economy; instead, he headed a very conservative government. In the economic sphere, this conservatism was exemplified by his commitment to maintain the value of the colón, achieve budgetary and balance-ofpayments surpluses, reduce the public debt, and bring inflation under control (Salazar 1981:173). These goals were easily achieved as a result of an expansion in international markets and the consequent rapid increase in the price of coffee. Foreign earnings from coffee ballooned from slightly more than U.S.$11 million in 1949 to more than U.S.$24 million in 1952 (Cerdas Cruz 1991:300). These economic conditions gave Ulate little reason to reconsider his government’s commitment to the traditional agroexport development model based on the cultivation and export of coffee and bananas. Although it did not expand the economic and social functions of the state, the Ulate administration also did not denationalize the banks, dismantle the new Autonomous Institutions, or attempt to reverse any other important measures enacted by the junta (Salazar 1981:173).

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The National Liberation Party The leadership of the old Social Democratic Party and the former members of the junta used their time out of office to create a new political party, the PLN, in 1951. The institutionalization of an ideologically based, centerleft party gave the PLN an electoral advantage over the opposition parties, which, as discussed previously, tended to be more personalistic election machines tied to specific leaders rather than programmatic parties and which, as a result of the electoral laws discussed in Chapter 3, frequently formed coalitions to contest elections. Although they ran routinely as antiLiberación coalitions, these parties had little to keep them united beyond a dislike of the PLN and thus faced programmatic and personalistic disagreements once in office. The PLN, with José Figueres as its presidential candidate, contested the 1953 election. Whereas the PLN used the campaign to declare its intention to implement social, economic, and administrative reforms, the opposition focused on Figueres’s probity and rumored international obligations to the Caribbean Legion, which, it was feared, would involve Costa Rica in wars against regional dictators.7 Figueres and the PLN won a landslide victory, with 65 percent of the vote and thirty of the forty-five seats in congress (see Table 4.1). Figueres’s platform promised to end poverty and to improve the living standards of all Costa Ricans. He defined the goals for his second term in

Table 4.1

Presidents and Legislative Representation, 1948–1982 Executive

Legislative Assembly Seats

Year

President

Party

May 1948– Nov. 1949a 1949–1953 1953–1958 1958–1962 1962–1966 1966–1970 1970–1974 1974–1978 1978–1982

José Figueres Otilio Ulate José Figueres Mario Echandi Francisco Orlich José J. Trejos José Figueres Daniel Oduber Rodrigo Carazo

Junta PUN PLN PUN PLN PUN PLN PLN Unidad

PLN

PR

PUN

PD

4b 4 30 20 29 29 32 27 25

— — — 11 19 26 22 16 27

33 33 1 10 8 — — — —

— — 11 — — — — — —

Left Other

— — — — 1 — — — 4

8 8 3 4 — 2 3 14 1

Sources: McDonald and Ruhl (1989:178–179); Rovira Mas (1989b:22, 1995:4, 6, 8); Wilson (1992:46, 50). a. The Constituent Assembly elected in 1948 also served as the Legislative Assembly during the Ulate administration. b. Although the PLN did not exist at this point, the four seats were won by its principal precursor, the Social Democratic Party.

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office: “We now seek to diversify national production, so that we do not depend so heavily on coffee, bananas, and cocoa. We have found that, aside from encouraging current activities, it is opportune to promote other businesses that can provide us [with] new sources of national income” (Figueres quoted in Doryan-Garron 1988:17). Whereas Ulate viewed the expansion of international markets and high coffee prices as evidence that the agroexport model was fundamentally sound, Figueres saw the increased revenues as a tool to implement his state-led industrialization program by increasing the social and economic roles of the state. The main method to expand the role of the state was to create more AIs to facilitate the state’s increased economic role, the creation of a mixed economy, and the attainment of the government’s development goals. As one example, the state expanded the National Production Council (CNP) and used it to formulate the National Fisheries Plan. Through its fisheries plan and in conjunction with private-sector involvement, the CNP created a new industry. The CNP bought fish dockside at a guaranteed fixed price, transferred it to San José in refrigerated railcars on the state-owned railroad, and sold it at fixed prices in the capital city to retailers, restaurants, and hotels. The plan was completely financed, at very low interest rates, by funds from the nationalized banks (Ameringer 1978:114–145). The state, then, acquired a key role in planning, financing, and facilitating the development of the fish industry. The PLN encouraged the expansion of state activity for political reasons, too. During the 1950s, the number of jobs in the public sector increased from 6 percent of the active population to 10 percent; the population grew by more than 35 percent during that time (Salazar 1981:206; Bulmer-Thomas 1987:310). The PLN also used the fiscal surplus generated by President Ulate’s Conservative economic policies to grant public employees a thirteenth month of salary (aguinaldo), a policy that still exists (González-Vega and Céspedes 1993:135). This move may have served as a means of redistributing income, but it was also a way of securing votes for the PLN. Despite President Figueres’s landslide victory in 1953 and his administration’s economic successes, at the end of his four-year term in office the party’s prospects for maintaining control of the executive and the Legislative Assembly were not good. Figueres’s continued machinations with foreign adventurers in Costa Rica overshadowed his economic record. In the lead-up to the 1958 election, the government was very unpopular, the PLN had experienced its first profound split, and the major opposition parties had temporarily put aside personal politicking and formed an electoral coalition. The PLN lost the 1958 presidential election for two main reasons. First and probably most important, Jorge Rossi, a disaffected PLN leader, left the party and contested the election as leader of the PI. 8 The split

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resulted from a disagreement over how the PLN should be administered rather than from diverging ideology. Consequently, the PI campaigned on a platform similar to that of the PLN, and its leadership was made up almost exclusively of former PLN cadres. Its presence in the election effectively divided the Liberación vote. Second, the anti-Liberación parties rallied around the candidacy of former deputy Mario Echandi Jiménez, whom President Figueres had elevated to the status of hero because of his heavyhanded reaction to Legislative Assembly opposition following the second Calderonista invasion from Nicaragua in 1955.9 Echandi won the presidency, but his coalition failed to dislodge the PLN’s control over the Legislative Assembly. Jorge Rossi and his four elected deputies quickly realigned with the PLN deputies, which gave the PLN bloc a three-vote majority. Further exacerbating the situation, the anti-Liberación coalition sat in the assembly as two separate parties, the Calderonista Partido Republicano and Echandi’s PUN, rather than as a unified political bloc. Thus, the PLN could protect its evolving development model on three levels. First, it could do so in the Legislative Assembly by introducing legislation or blocking bills sponsored by the executive. Second, the Autonomous Institutions, described by Echandi as “wasteful and unproductive,” were not subject to presidential policy directives and thus were able to maintain and in some cases expand their programs. Third, the bureaucracy was hostile to Echandi’s “free enterprise” electoral platform and still remained loyal to the PLN, the party that had appointed them and that granted them job security. Because responsibility for many of the economic and social reforms introduced by the Figueres administration were in the remit of Autonomous Institutions, the reforms were thus institutionalized and were more resilient against attacks by non-PLN executives. The Industrialization Debate Both the junta and the PLN championed the need to end Costa Rica’s dependency on the exportation of primary products, principally coffee and bananas. International markets for these goods were volatile and fluctuated widely, resulting in large variance in the country’s foreign currency earnings and its capacity to import manufactured goods. When international prices declined significantly, the entire economy went into crisis. For example, in 1928, Costa Rica produced 16.5 million kilograms of coffee, which sold for U.S.$0.60 per kilogram. With the onset of the Great Depression, Costa Rica’s increased coffee production (24.5 million kilograms) sold for just U.S.$0.27 a kilogram. Thus, whereas output increased by almost 50 percent, because of the collapse of the international price of coffee, its revenues declined by more than a third—which was especially damaging since coffee accounted for 70 percent of exports (Ameringer 1982:25).

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The junta’s policies initially generated considerable opposition from the previously dominant coffee elite. According to Anthony Winson (1989:7), the coffee oligarchy resisted the state’s attempt to control an increasing share of the surplus generated by the cultivation and exportation of coffee. But the coffee sector was one of the two major foreign income earners, and the junta viewed it as an obvious source of much-needed state revenue to fund its development projects. The junta, therefore, although clearly interested in weakening the political power of the old coffee elite, did not want to damage the most productive sector of the economy. Consequently, much of the surplus generated by coffee was reinvested in rural development projects, the most ambitious of which was the revitalization of coffee production. Thus, although the coffee elite had to bear much of the cost of reorienting the economic development plans of the junta and subsequent governments, its economic position was strengthened rather than weakened by the agricultural policies. As the state increased credit flows and technical advice to farmers, the larger farmers were better able to gain access to state-controlled investment funds (Winson 1989:8). Helen Jacobstein (1987:chapter 6) offers considerable evidence to support Winson’s (1989) argument by showing the extent of state intervention in helping coffee growers to increase their output and efficiency. Farmers were also encouraged to diversify their production into other agroexport products such as cotton and cattle. Also, whereas PLN governments introduced many reforms to help rural workers, promised land reform was only hesitantly adopted and timidly implemented and thus never seriously threatened the coffee elite’s interests. Indeed, in some cases the owners of large farms encouraged squatters to take over land so they might be compensated by the state at a better price. The agriculture sector, then, was neither abandoned nor neglected when the PLN pursued its development projects, and the PLN reforms helped to consolidate the economic position of the prewar coffee elite. Another agricultural reform was the renegotiation of the United Fruit Company’s contract, which increased the state’s share of the company’s profits to 42 percent. The UFCO also had to increase its workers’ minimum wage, which was already double that of coffee workers (Jacobstein 1987:chapter 6). The solution to the vulnerability caused by the dependence on unstable coffee markets and other staple exports, according to the PLN, lay in export diversification and in industrialization. A campaign by the newly created Chamber of Industry to pressure the government to adopt a pro industrialization law began in earnest during the first PLN administration and was eventually concluded in 1959. During that period, seven draft industrialization laws were prepared, but only three reached the floor of the Legislative Assembly.

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Even with the PLN’s declared proindustrialization program, control of the executive, and huge majority in the Legislative Assembly, the government did not venture beyond facilitating infrastructure and agricultural diversification. In 1953, the Chamber of Industry submitted a draft of an industrialization law to the Ministry of Agriculture and Industry that included a request for protective tariffs and access to subsidized credit from state banks. The bill was presented to the Legislative Assembly but generated little support and failed to be adopted by the PLN-dominated committee. The failure to follow the economic program of the PLN’s principal economist, Rodrigo Facio Brenes, to reduce the “preeminence of coffee [and] the nation’s dependency on external markets” (Facio Brenes 1982:168) resulted in part from a boom in international coffee prices and revenues, which belied the need for industrialization. There was also a rising concern that industrialization would bring economic chaos, an idea promoted by the Chambers of Agriculture and Commerce, among others. Costa Rica, they argued, should exploit its comparative advantage in agroexport production and not “create a fictitious economy based on industry.”10 According to Costa Rican economists González-Vega and Céspedes (1993:134), “Nationalistic fears about foreign investment, and the absence of industrialists among the main PLN leaders, prevented the [party] from openly supporting the industrialization bills debated during those earlier years.” Furthermore, although the dominant economic development paradigm of comparative advantage was coming under attack, no clearly identifiable, empirically proven alternative development strategy had emerged that might readily be followed. A second attempt to convince the government to adopt an industrialization law came in 1955, when the Chamber of Industry sent the president another draft industrialization bill. This time, the bill sparked a major negative lobbying and publicity campaign by various chambers concerned with commerce and importers and agroexporters.11 The draft bill was not sent to the Legislative Assembly for consideration (González-Vega and Céspedes 1993:86). As economic conditions began to deteriorate, the Echandi administration (1958–1962) responded initially by sending an Economic Promotion Plan (Plan de Fomento Económico) to the Legislative Assembly, where it was supported by the PLN deputies. Its principal intent was to bail out the traditional agroexporters with state-owned bank credits and funds that were borrowed from international commercial banks and funneled through the state banks.12 Industrialists, who had celebrated the passage of the economic promotion plan, were very disappointed with its implementation and complained loudly that the agricultural sector should not receive the lion’s share of the available funds. But the law’s architect, Agriculture Minister Jorge Borbón, argued, “It is essentially the agricultural activities which face the greatest difficulties, and, therefore, they deserve the greatest

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attention from the central government. We are essentially a country of farmers, and only an agricultural boom can sustain a manufacturing boom. If the majority of Costa Ricans, who are farmers, are left to their fate, we cannot expect much from the opportunities for the industrialists” (quoted in González-Vega and Céspedes 1993:90).13 In response to the growing economic problems (declining export prices and a serious balance-of-payments crisis), the Echandi administration attempted to use the state banks to encourage diversification of the economy. The traditional export sector, though, received the major share of financial help. State bank funds were used to underwrite coffee harvests and guarantee minimum prices. Other measures aimed more directly at export diversification encouraged locally owned banana production, and production of cattle and sugar received a major boost. At the same time, the exchange rate was devalued by more than 18 percent, which made Costa Rican exports more competitive in international markets and increased exporters’ income (Brenes 1990:101–103). Although Echandi was an advocate of the traditional agroexport development model, it was during his administration that the country adopted its first full-scale industrialization law (Ley de Protección y Desarrollo Industrial) in 1959. The original bill was passed by thirty-two deputies but was vetoed by Echandi. The veto, in turn, was overridden in September 1959 with the support of the Chambers of Industry and Commerce (Jacobstein 1987:134). A number of factors contributed to shaking the deputies’ faith in the traditional agroexport sectors of coffee and bananas and encouraged them to think about industrialization as an alternative development path. First, when the government took office, coffee prices were experiencing a significant decline. Between 1953 and 1958, coffee prices declined more than 40 percent, illustrating clearly the inherent weakness and vulnerability of an agroexport model based almost exclusively on coffee and bananas.14 Furthermore, Costa Rica’s regional rivals, El Salvador and Guatemala, had already implemented industrialization laws that offered foreign and domestic manufacturing enterprises tax incentives to invest in their countries. These changes gave increased weight to the arguments of the Chamber of Industry and the PLN majority in the Legislative Assembly concerning the pressing need to start an industrialization program for fear of being left behind economically by regional neighbors. Compounding the need for a new economic model were rapid population growth (the population had increased by 60 percent since the civil war) and rising levels of urban unemployment. Interestingly, the change in the relative strength of different interest groups as a direct result of events outside the country was related to the change in economic policies, especially the movement toward the creation

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of a single market for Central America and the declining terms of trade and consequent need to find new products to give the country a more stable income source. Increasing pressure from the U.S. government, the severity of the economic crisis, and new international development ideas pushed the Echandi government to reconsider the role of traditional exports and to ponder the Chamber of Industry’s arguments in favor of industrialization. The Chamber of Industry threw its support to the PLN in the 1962 election. The PLN promised to promote industrialization and to ratify the CACM integration treaties. Costa Rica finally joined the CACM in November 1963, after considerable pressure from U.S. President John F. Kennedy, who threatened to withhold Alliance for Progress benefits from Costa Rica if it refused to join. During the four governments of the first period, an economic and social policy pattern gradually emerged. Although the two PLN administrations were significantly more aggressive in implementating economic reforms and policies, it was not until the Echandi administration, when external factors caused Costa Rica’s economic situation to deteriorate, that any real progress was made toward industrialization. Furthermore, changes in the international realm of development began to supply the intellectual foundations and empirical evidence necessary to facilitate at least a cautious embrace of ISI policies by politicians from both major parties.15 It is noteworthy that the Conservative governments of Ulate and Echandi were unwilling or unable to reverse the policy direction of the PLN governments, even though President Ulate enjoyed a huge legislative majority. This failure was largely a result of the institutionalization of PLN reforms in AIs, the weakness of the presidential office, and the reliance on a political coalition that was still highly fragmented, thus allowing the PLN—the country’s only institutionalized party—to maintain control of the assembly from 1953 until 1974. The PLN’s failure to aggressively implement an industrialization program while in government (1948–1949 and 1953–1958) was a result of economic conditions that made it unfavorable to change development models, as well as of a lack of internal policy cohesion within the PLN.16 Coffee prices were very high through the mid-1950s, and the country’s internal market was poorly developed and incapable of sustaining even the early stages of an industrialization process.17 During the PLN’s first elected term in office, the government used the boom in agroexports to support the creation of a stronger domestic market, which it believed was a precondition for industrialization. In his first annual presidential address to the congress, President Figueres noted that “without a doubt, a portion of the new wealth must be distributed as salary and wage hikes. Gradual increases are indispensable, not only for socially just reasons so that workers share in the product of national labor, but also for reasons of economic

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necessity, in order that the increasing production of consumer goods can be sold” (Figueres 1954:6). In spite of its public opposition to an industrialization process, it was during the Echandi administration that an industrialization policy was finally adopted. Although Echandi vetoed the bill, the PLN supported the bill in the Legislative Assembly along with the Calderonista deputies. Although the PLN had only timidly pushed its industrialization policies, it did lay many of the foundations that made industrialization more realistic. The PLN introduced a series of measures it believed would create an internal market large enough to support a domestic manufacturing industry and improve infrastructure (roads, ports, railroads, and so forth). The numerous AIs it created were assigned technical tasks to fulfill without political interference from the Legislative Assembly or the executive branch. The PLN used presidential decrees to increase tariffs on many imported consumer durables, which laid the groundwork for future import substitution industrialization programs.18 And it used its majority in the assembly to push through the 1959 industrialization bill. The government’s attempts to improve the efficiency of agriculture and to diversify its output were significantly more impressive than the weak attempts to encourage the manufacturing sector. Coffee yields per hectare increased by more than 100 percent, from 373 kilograms in 1950– 1951 to 800 kilograms ten years later. This improvement was possible because of cooperation between the Ministry of Agriculture and the stateowned Banco Anglo Costarricense, which created and financed a plan that underwrote new varieties of coffee, introduced the application of fertilizers and pesticides, and funded improved irrigation systems. The state also sponsored agricultural diversification by creating a cattle export industry, which was virtually nonexistent in 1950. The industry grew to U.S.$100,000 in exports in 1957 and reached U.S.$2.7 million by 1962 (Bulmer-Thomas 1987:154–158). Manufacturing, on the other hand, grew only slightly from 13.4 percent of the GDP in 1950 to 14 percent on the eve of the wholehearted application of the ISI program in 1962 (GonzálezVega and Céspedes 1993:162).

State-Led Industrialization Within the CACM (1962–1972) When Jorge Rossi and his supporters returned to the PLN, the reunified party won the 1962 election on a proindustrialization, pro-CACM platform.19 The PLN gained control of both the executive branch, with Francisco Orlich as president, and the newly expanded Legislative Assembly, with 51 percent of the seats. The new government used the Echandi administration’s Ley de Protección y Desarrollo Industrial as the basis of a

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shift in the economic development model. Instead of emphasizing traditional exports, Orlich’s government adopted an ISI process that emphasized domestic production of manufactured consumer goods that had previously been imported. To that end, one of the new president’s first acts was to send a bill to congress to ratify the Central American Common Market agreement and to move Costa Rica to full membership in the regional trade pact. The Legislative Assembly took over a year to approve Costa Rica’s entry into the CACM. Eduardo Lizano comments that this delay was caused by a struggle between merchants and industrialists (Jacobstein 1987:140). The return of the PLN, though, signaled the beginning of a new era of expanding state intervention in an attempt to resolve both economic and social problems. Joining the CACM marked the resolution of the long debate concerning the most appropriate development strategy. The debate was not limited to the relative merits of agroexport versus industrialization but included a second debate among the proindustrializing lobby over what type of industrialization was most suitable. The argument that industrialization should be based on locally produced raw materials, with the new industrial sector integrated into other key sectors of the economy, was set aside by Costa Rica’s entry into the CACM, which encouraged the importation of both foreign investment and raw materials with no concern for locally produced materials (Doryan-Garron 1988:19). Membership in the CACM constituted the de facto adoption of an ISI strategy. The Effects of Import Substitution Industrialization The main goal of the ISI strategy was to replace imported finished goods with locally produced ones, thus reducing Costa Rica’s dependence on volatile international markets for its economic well-being. Protective tariffs were erected to help local manufacturers expand their production and improve their efficiency until they could compete in international markets. But the country’s small domestic market, even after years of PLN policies to increase consumers’ disposable income, remained a roadblock to investment in manufacturing projects. The PLN believed Costa Rica’s inclusion in the CACM would remove one of the principal barriers to industrialization—small market size. The CACM imposed a high common external tariff while simultaneously reducing tariffs among the member countries to encourage trade in manufactured goods produced in Central America. The government also introduced a series of specific incentives to attract foreign capital and encourage local production, including tax incentives, subsidized credit from the nationalized banks, subsidized energy from the state-owned ICE, and an overvalued exchange rate, which encouraged the importation of raw materials and capital goods and discouraged

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exports. As a result of these incentives, Costa Rica became “the most highly protected country in the region” (Rapoport 1978:705). Although the incentives were designed to expire after a specified number of years, they were regularly extended at the behest of the affected industrialists. According to Eduardo Lizano (1989:146), President Orlich’s chief economist, the “raison d’être of integration was the need to promote industrialization and find solutions to the problems arising from the old export-oriented growth model. The expanded markets and protectionist tariffs that accompanied economic integration proved to be the key to the industrialization of the isthmus.” The political ramifications of the change in development strategy to ISI policies involved the growth of an industrial elite that was directly dependent on the state, rather than on market conditions for its well-being. Another outcome was the expansion of state employment, which, according to Luis Garita (1989:137–141), grew rapidly in the postwar period and facilitated the consolidation of a new social group—the bureaucracy. With the return of the PLN in 1953 and the adoption of a Civil Service Statute, the Civil Service was both professionalized and depoliticized. The statute ended the policy of using civil service jobs as political rewards and instead introduced a merit system for recruitment and promotion and gave state workers a high level of job security (Garita 1989:138–139). The 1953 statute, though, did not start with a clean slate. Instead, the PLN filled the government positions with its own supporters and granted them job security, thus guaranteeing a bureaucracy friendly to the PLN’s goals and aspirations (Garita 1989:138–139). As noted in Chapter 3, public employees are the best-organized workers in the country; more than 60 percent are unionized, compared with just 14 percent as the national average and 7 percent in the private sector (MTSS 1995:20). The expansion of the number of public-sector workers led by default to increases in unionized workers and in PLN supporters. 20 Public-sector employment grew from 6 percent of the labor force in 1950 to 10 percent in 1958 and 12 percent in 1974; factoring in unemployment, the state occupied about 15 percent of the active labor force in 1974 (Garita 1989:140). The PLN’s active support of an ISI policy and its pledge to join the CACM forged a close link between the party and the nascent industrial sector; nearly 70 percent of Chamber of Industry executives were members of the PLN (Vega 1982:135). The role of the government, though, was still limited to providing the private sector with the necessary preconditions to facilitate a more diverse and industrial-based economy. The state was to build roads, develop social welfare programs, promote protectionist measures for the infant industries, and to allocate investment capital through the state banks (Vega 1989:141). The incentives, though, made it more difficult for incoming administrations to roll back the expanding function of the state in the economy.

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Once an incentive was established—for example, a protective tariff or a government job—it took on the characteristics of an entitlement program. Such incentives, as Paul Pierson (1994) points out, are very difficult to reverse because of the possiblility of losing the subsequent election. The ISI programs and CACM market opportunities spurred economic growth in Costa Rica, but they also laid the foundations for some serious medium-term problems. 21 Tax incentives were seldom revoked; instead, they were extended on a case-by-case basis, which removed industrialists’ incentive to become more efficient. The tax and exchange rate incentives encouraged the development of capital rather than labor-intensive production, which meant the new industries had a low absorption rate for the rapidly increasing labor force. These incentives also promoted the use of imported rather than locally produced raw materials, which belied the motivation for ISI—a reduction in trade dependence—and produced a growing international trade imbalance. These factors had a negative impact on the trade deficit, which multiplied from less than U.S.$10 million in 1962—the last full year before Costa Rica joined the CACM—to U.S.$92 million ten years later (IMF 1984:234; Doryan-Garron 1988:21).22 The effect of the incentives on the exportation of manufactured goods was rather pronounced. These goods expanded from 14 percent of total exports in 1963 to 28 percent in 1966 and reached a record high of 34 percent in 1974. Four-fifths of those exports went to the other countries within CACM’s highly protected markets (González-Vega and Céspedes 1993: 169). A Challenge to the Model In the run-up to the 1966 elections, the major anti-Liberación parties learned from their disastrous performance in 1962 and put aside their animosities and differences to rally behind the candidacy of Professor José Joaquín Trejos Fernández and the coalition Unificación Nacional. 23 Although the coalition won control of the executive branch with promises to promote private enterprise and reduce the role of the government in the economy, it failed to win a majority in the Legislative Assembly. President Trejos, like President Echandi before him, had only minority support, with just twenty-six of the fifty-seven seats. The PLN remained the majority party with twenty-nine seats, and the right-wing, personalistic Revolutionary Civic Union Party (Partido Unión Cívica Revolucionario; PUCR) won two seats. Although the PLN lost control of the executive, it retained an absolute majority—by one seat—in the Legislative Assembly. The task of governing accentuated the coalition’s programmatic incoherence. A survey of the 1966–1970 congress conducted by Oscar Arias Sánchez (1984b:191–194) found that almost 50 percent of deputies, regardless of party affiliation, thought the current level of state intervention

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should be maintained. Almost 18 percent, though, believed state intervention should be reduced. The fact that not all PUN deputies agreed on intervention reflects in part the diverse ideas of the two major parties that composed the PUN coalition. Of the twenty-two coalition deputies who answered the questionnaire, one described himself as being on the “extreme right,” eleven said they were of the “moderate right,” three were “centrists,” and seven were “moderate leftists.”24 Even though President Trejos lacked a legislative majority and a significant number of his copartisans believed the role of the state should not be reduced, he launched the most serious attempt to rein in the PLN’s development model. In 1967, President Trejos sent a bill to the congress with the intention of ending the state banks’ monopoly on public deposits (a cornerstone of the PLN’s development model), thereby allowing the reestablishment of private banks in Costa Rica. The bill was the first attempt to challenge the social democratic development model head-on and fostered the first national debate on nationalized banking. A well-funded campaign organized by the Committee for Private Banking (Comité por Banca Privada) generated “one of the most intense and best financed pressure group activities in Costa Rican history, including a media blitz, door-todoor and letter writing campaigns, public rallies, and lectures” (Ameringer 1982:69). Although the Comité professed its apolitical nature, there was little doubt that it was the PUN’s extraparliamentary mouthpiece (Arias Sánchez 1987:93). The PLN deputies argued that state-owned banking should be maintained because it had been successful; national income per capita had doubled in the previous twenty years (the population had also doubled), agriculture had been diversified, and the state-controlled banks had permitted Costa Rica to take full advantage of the CACM (Arias Sánchez 1984b: 195). In the final vote, the PLN deputies voted as a bloc and, with one defecting PUN deputy, defeated the bill thirty to twenty-seven (Wilson 1994). Although it failed to end the state banks’ monopoly, the Trejos administration was able to tinker with the edges of the development model by reducing government spending and increasing revenues through the introduction of the country’s first sales tax in an attempt to bring the government budget back into balance. When President Trejos took office, government revenues had been increasing at a rate of 8 percent per year, whereas government expenditures were rising at almost 12 percent per year. In 1968, the administration responded to the increasing trade deficit (both within and outside of CACM) by creating a new Autonomous Institution, the Center for the Promotion of Exports (Centro de Promoción de las Exportaciones; CENPRO), which gave the state primary responsibility for promoting the exportation of new agricultural products and industrial goods to new markets outside of the CACM (Brenes 1990:110–111).25 The

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following year, the Trejos administration cemented a bipartisan agreement that created another state bank, the Banco Popular, to encourage local development projects.26 The PLN could congratulate itself for successfully defeating the most important attempt to reverse the social democratic development model— the banking reforms—but other actions by the Trejos administration reveal that not all of the coalition was fundamentally opposed to increasing the role of the state. The cuts in government expenditures and increases in taxes were not another attempt to decrease the role of the state but instead were efforts to reequilibrate the government’s budget. Belying the supposed hostility of the Trejos administration were its deliberate moves to expand the role of the state in other areas of the economy through the creation of the CENPRO and the Banco Popular.

The Entrepreneurial State (1972–1982) Between the civil war and the 1970 election, Costa Rica’s society and economy experienced significant changes. Population had more than doubled, from 800,000 in 1950 to 1.73 million in 1970, and GDP per capita (calculated in 1966 terms) had increased from 2,066 to 3,212 colones. The structure of the economy had changed in response to government policies and external stimuli. Agriculture’s share of GDP declined from almost 41 percent in 1950 to 22.5 percent in 1970, whereas manufacturing grew from 13.4 percent to 18.3 percent of the total. Commerce grew slightly, from 19.1 percent to 21.0 percent, whereas the central government almost doubled its share of GDP, from 5.4 percent in 1950 to 10.6 percent in 1970.27 As a share of exports, coffee and bananas declined from 97 percent in 1950 to almost 61 percent in 1970. At the same time, exports of manufactured goods increased from 10 percent in 1950 to nearly 28 percent in 1970 (González-Vega and Céspedes 1993:148–169). Between 1960 and 1970, poverty levels declined from more than 50 percent of families to less than 30 percent (Seligson, Martínez, and Diego Trejos 1996:10). In brief, by the start of the 1970s, Costa Rica’s economy was significantly more diverse, prosperous, and open than it had been in 1950. The foundations of the final stage of the PLN’s social democratic development model were laid in 1972 with the creation of the Costa Rican Development Corporation (Corporación Costarricense de Desarrollo, S.A.; CODESA) and ended in 1982 when the PLN captured both the executive and legislative branches in a landslide election victory after four years in opposition. During this third period, two consecutive PLN administrations significantly increased the role of the state in the production of goods and services through the Autonomous Institutions, the rapidly growing CODESA,

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and the Refinadora Costarricense de Petroleo, the state-owned oil refinery and monopoly petroleum supplier.28 During the final four years of the period (1978–1982), Rodrigo Carazo and the anti-Liberación coalition Unidad controlled the executive branch and had a plurality of seats in the Legislative Assembly but still failed to significantly curtail the activities of the state.29 This period was characterized by a significant increase in direct state economic intervention in the production and distribution of goods and services, a major expansion of social welfare benefits, and a series of legislative bills to reverse some of the previous thirty years’ political decentralization. Increased state intervention was reflected in the creation of CODESA in 1972, although CODESA’s rapid growth came only during the second PLN government between 1975 and 1978 (Vega 1982:44). The expansion of benefits was enacted through two new Autonomous Institutions created for the “War on Poverty.” The third task was carried out by a series of legislative bills, which granted the executive increased control of the Autonomous Institutions to allow more effective government economic planning, better coordination among AIs, and more efficient spending of public funds (Sojo 1984:75). Figueres’s election to a third presidential term in 1970 began an eightyear period of PLN government. The PLN promised to expand and improve the programs the party had implemented in previous terms in office and to further diversify the economy. No major new economic policy innovations were promised, although Figueres did announce his intention to wage a War on Poverty. Increasing Economic Intervention CODESA was created in 1972 with the overwhelming support of the private sector, which believed it would complement private-sector activities. Originally, CODESA was to act as a holding company and development bank, with one-third of its capital from the private sector and two-thirds from the state. CODESA was to extend loans to private manufacturing and agroindustry companies and to directly produce goods and services the private sector was unwilling or unable to supply. Once it had established a new company and made it viable, CODESA was to sell that company to the private sector. The new entity was controlled by seven directors: three private-sector representatives (one from the Chamber of Agriculture and two from the Chamber of Industry) and four directors appointed by the government. Private-sector support for CODESA gradually declined and eventually became overtly hostile in response to the organization’s encroachment into areas of economic activity that traditionally had been the exclusive

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preserve of the private sector. Private-sector organizations objected to the high fees charged to administer foreign loans, CODESA’s poor management of its subsidiaries, and the political allocation of jobs within CODESA and its subsidiaries. Private-sector support was further eroded by the increased competition not only for markets but also for capital. CODESA’s enterprises were regularly unprofitable and consequently siphoned off a disproportionately large percentage of available investment capital. For example, between 1976 and 1977, 96 percent of funds allocated by CODESA went to its own enterprises, with just 4 percent appropriated for private-sector projects.30 At its height, CODESA controlled or owned fourteen companies and absorbed 18 percent of available credit while contributing less than 2 percent to the GDP and employing only 0.3 percent of the total labor force (González-Vega and Céspedes 1993:142). The traditionally close relationship between the PLN and the Chamber of Industry quickly collapsed, largely because of CODESA’s investments in areas that competed with the private sector. By CODESA encroaching on the industrialists’ economic turf, a wedge was effectively driven between private-sector industrialists—historically a loyal partisan group— and the PLN. In 1976, the dispute between the PLN government’s representatives on the CODESA board and those of the Chamber of Industry reached a climax when the president decreed that the chamber’s representatives be removed from CODESA (Wilson forthcoming a). The extent of the degeneration of relations between the PLN and the Chamber of Industry can be seen in the changing political affiliations of the chamber’s top officials. Before the peak of the crisis, 69 percent of the chamber’s leaders were members of the PLN, and only 31 percent were aligned with opposition parties. At the time of the 1978 election, Chamber of Industry leaders’ membership in the PLN had declined to 44 percent, and affiliation rates with opposition parties had increased to 56 percent (Vega 1982:137). The War on Poverty After the inflationary period of the 1973–1974 oil crisis, the government used its control of the National Wage Council (Consejo Nacional de Salarios; CNS) to implement a policy that, for the first time ever, had an explicitly redistributive intent. Government policy increased the wages of the lowest-paid workers by 41 percent, whereas wage increases for the highest-paid workers were restricted to just 10 percent (inflation was more than 26 percent). This policy clearly narrowed wage differentials (Gon zález-Vega and Céspedes 1993:113, 170). The election of Daniel Oduber (PLN) in 1974 marked the first time in post–civil war Costa Rica that a party had governed for two consecutive

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terms (1970–1974 and 1974–1978). This continuation in government facilitated the PLN’s major expansion of social services, including the universalization of social security, the creation of a national health plan, and the introduction of family allowances. José Figueres’s War on Poverty in 1971 created two new Autonomous Institutions: the Instituto Mixto de Ayuda Social,31 which provided education, food, and housing subsidies to families without incomes; and the Fondo de Desarrollo Social y Asignaciones Familiares, which funded programs to promote preventative medicine, free school meals, pensions for poor people, and the supply of potable water in rural areas through sales and payroll taxes. In FODESAF’s first twenty years, it distributed more than $1 billion to poverty alleviation programs (Seligson, Martínez, and Diego Trejos 1996:24–25). IMAS was assigned to eliminate poverty by 1978 by redistributing 2 percent of the national income to the poorest 20 percent of the population. Increasing administrative costs swallowed up much of the payroll tax created to fund the program, and the food and other benefits tended to be allocated more widely than just to the targeted group (González-Vega and Céspedes 1993:140–141). High international coffee prices and easily accessible international loans facilitated increases in both the supply of state-sponsored social services and public-sector employment. For example, the government expenditure on public health care rose from $2.20 per capita in 1970 to $8.10 in 1979 (while population growth continued at between 2.5 and 3.0 percent per year). During the same period, state education funding increased from $20.60 to $35.10 per person per year (in 1970 prices), income redistribution policies increased real wages by 30 percent in urban areas and 45 percent in rural areas, and per capita GDP (calculated in 1966 prices) increased by more than 33 percent while unemployment remained low (Bulmer-Thomas 1987:215, 219; González-Vega and Céspedes 1993:148, 156). Once again, the PLN had created a series of entitlement programs, which made the task of reversing the increasing scope of state intervention progressively more difficult. Centralizing Political Power Since the 1970s, growing concern about the actions of the AIs, from both within and outside government has resulted in a series of administrative reforms that have centralized more power in the executive, a significant reversal of the pattern of the previous thirty years. Three such moves to limit the AIs’ autonomy came during the Figueres administration (1970– 1974). First, almost immediately after he took office, the so-called 4/3 law was passed, which granted the executive control over the appointment of directors. The executive named four members to the AI executive boards

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and the second-largest party in the congress nominated three. This law was intended to give the executive political control of the institutions, but the AIs maintained administrative autonomy. A second measure, passed in 1973, amplified the intent of the first by creating a new position, the executive president, for each AI. The executive president was appointed by and responsible to the president. The third reform, also passed in 1973, created a coordinating board within the Planning Ministry to synchronize the actions of the AIs with the plans of the president (Vega 1982:41–42).32 The creation of CODESA, with its unlimited access to state bank resources, and the nationalization of RECOPE, with its capacity to generate profits from the sale of petroleum, undercut the increased executive control of the AIs because the surplus capital of CODESA and RECOPE financed the activities of other AIs. Other AIs, such as the University of Costa Rica, were constitutionally guaranteed funding, which made it necessary to change the constitution to control those institutions. A number of AIs, then, still exercised considerable freedom within their policy bailiwicks, whereas others actually increased their responsibilities beyond the original intention of their founders—even after increased political control by the executive had been enacted. Challenging the Model The election of Rodrigo Carazo in 1978 was typical of anti-Liberación victories. Carazo and the Unidad coalition captured control of the executive branch of government but failed to win an absolute majority in the Legislative Assembly. Unidad won just twenty-seven of the fifty-seven seats, and the PLN remained the major opposition party with twenty-five seats. For the first time since 1962, a leftist coalition won representation in the Legislative Assembly, taking four seats. Even with only a plurality in the Legislative Assembly, Carazo began to attack the PLN development model. Carazo was highly critical of the manufacturing sector and argued that it should either be forced to survive without significant government aid or be allowed to perish. To that end, in 1979 Carazo introduced a National Development Plan that proposed to change the emphasis of government support for development away from incentives for ISI industries and toward agroexport products and to reduce the size of the state (OFIPLAN 1980). The plan was effectively blocked in the Legislative Assembly by a coalition of many of Carazo’s copartisans and PLN deputies. Indeed, Unidad’s lack of cohesion was reflected in the fact that its deputies successfully voted as a bloc only during the annual elections for congressional officeholders (Nelson 1989:146). In addition to the absence of legislative support from his Unidad coalition and the presence of an inflexible PLN faction in the Legislative

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Assembly, Carazo had to contend with factional fighting within his own cabinet. An extreme example occurred when his first vice president, Rodrigo Altmann Ortiz, disassociated himself from the Carazo administration and announced his intention to “declare war on the president.”33 As the government coalition disintegrated, subsequent reform attempts were abandoned. At the same time an economic crisis rapidly enveloped the country, forcing the administration to scramble to regain control over the downward-spiraling economy. The speed and depth of the crisis that unfolded were completely unexpected; as a USAID report commented, “no one could have predicted the [extent of the economic crisis] even as recently as five years ago, when the country was enjoying an extraordinary coffee bonanza” (Robert Pratt quoted in González-Vega 1984:51). Carazo’s election, therefore, coincided with the unfolding of Costa Rica’s worst economic crisis since the Great Depression. Costa Rica’s high growth levels ceased at the end of the 1970s. The Sandinista’s revolutionary war and subsequent victory in Nicaragua and the incipient revolutionary war in El Salvador virtually ended the CACM (see Céspedes, Gon zález, and Jiménez 1990). The disintegration of the CACM closed the only viable market for domestically produced manufactured goods, which were produced behind very high protective tariff barriers and thus were not competitive in outside markets. In 1979, for example, manufactured goods represented 29 percent of the country’s total exports, but 80 percent of those goods were exported to CACM member states. Over the following four years, Costa Rican exports to the CACM declined by 40 percent (FLACSO 1991:78). The soaring price of oil imports coupled with the collapse of international coffee prices caused the country’s terms of trade to decline from 114 in 1978 to just 69 in 1983, which meant the capacity to import goods and services declined by almost 40 percent (Wilson 1994:153). Costa Rica had taken advantage of high international coffee prices in the 1970s and low-interest loans from international banks to cover the country’s perpetually large trade deficit. The improved access to international capital was also directed toward the government’s increasing social expenditures rather than to productive capital (Montealegre 1983:282; Inter-American Development Bank 1981:413). The result was that by 1983 Costa Rica’s international debt had reached U.S.$4 billion, one of the largest per capita debts in the world. The cost of servicing the debt had risen from a manageable U.S.$60 million in 1977 to U.S.$510 million in 1982. During the same period, underemployment and unemployment increased from 11 percent to 24 percent, inflation rates topped 90 percent, and real disposable income declined by more than 40 percent (Wilson 1994:153). The government lacked adequate reporting mechanisms to analyze expeditiously the seriousness of the problem, which encouraged deputies to

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think the economic crisis was less grave than it really was. Consequently, deputies from the government’s Unidad Party were hesitant to implement policies that might adversely affect their supporters (Feinberg 1984:104). Although President Carazo had not caused the economic crisis, his response and his lack of control over the Legislative Assembly, the Autonomous Institutions, the bureaucracy, and his own cabinet made it difficult to either implement an effective austerity program or quickly adjust the economy. As the economy spiraled out of control, Unidad deputies looked to further their own political careers by aligning themselves with the likely next presidential candidate rather than designing solutions to the crisis. The government’s first response was to increase government expenditure on public works programs, expand public employment, and increase taxes. Although the public works programs went ahead, the Legislative Assembly blocked the tax increases. As a result, the public-sector deficit grew to 12 percent of GDP (Nelson 1990a:184). The Legislative Assembly repeatedly blocked Carazo’s attempts to resolve the economic crisis, especially attempts to adjust taxes, the domestic price of oil products, and the colón’s international exchange rate. Finally, in complete frustration, Carazo attempted to bypass the Legislative Assembly by using his decree power to devalue the currency. Deputies challenged the decree action and successfully requested that the Supreme Court rule it unconstitutional (Nelson 1990a:200). The continuing economic crisis also brought international financial institutions such as the IMF, the World Bank, and USAID into the debate on Costa Rica’s economic policy, which further fractured the president’s legislative support and exacerbated disagreements within the cabinet. In 1981, for example, Finance Minister Hernán Sáenz had convinced the IMF to grant a bailout loan of U.S.$300 million to be dispersed over three years. The government, for its part, agreed to implement a series of economic reforms, including devaluing the currency to encourage exports and discourage imports; reducing government expenditures, particularly public-sector wages and subsidies on basic goods and services; lifting price controls on electricity and gasoline; reforming the tax code; and improving tax collection (Rinehart 1984:68–69). Considerable public protests against the measures by the Chambers of Industry and Commerce resulted in the decrees being revoked by Carazo and in Minister Sáenz’s resignation.34 The IMF responded to the government’s failure to continue the reforms and its unwillingness to address the rapidly growing deficit by ending the loan disbursements and ceasing negotiations with the Costa Rican government. In 1981 President Carazo became so frustrated with the IMF demands that he expelled the IMF’s Costa Rican mission, stating that given the choice “between eating and paying the external debt, we cannot accept anything other than the first option”

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(Carazo Odio 1989:392). But by then, his congressional coalition was irreparably damaged and had turned its interest to the 1982 election.

Public Policy Outcomes The policy outcomes of four decades of social democratic development policies are impressive. Table 4.2 shows the outcomes for some of the most important social indicators. The development of socialized medicine precipitated a decline in infant mortality rates, whereas life expectancy, another indicator of social well-being, also improved significantly from 56 years in 1950 to 73 years in 1980. Education improved at all levels, with illiteracy rates tumbling and access to higher education expanding to allow proportionately more college-age students to enroll than was the case in many developed Western European countries.35 Improvements in social welfare were not restricted to the major urban areas but also, if to a lesser extent, extended to rural areas. For example, access to clean drinking water in rural areas improved from 53.3 percent of residents in 1969 to more than 80 percent in 1983 (FLACSO 1991:179). As social well-being in Costa Rica changed for the better, economic indicators improved significantly. Population growth increased at a rate of 2.5 percent per year between 1968 and 1977, whereas gross national income per capita increased more than 70 percent (Banco Interamericano de Desarrollo 1987:445; World Bank 1990:8–9). Figure 4.1 shows the major improvements in GDP per capita, especially from 1948 until the onset of the economic crisis. The figure also reveals the extent to which Costa Rica’s economy grew more rapidly than the economies of its neighbors. Whereas GDP per capita tells us nothing about the distribution of income,

Table 4.2

Selected Social Indicators, 1950–1980

Indicator

1950

1960

1970

1980

Illiteracy Infant mortality rate (per 1,000 live births) Life expectancy (years) Population with sewage disposal (%) Households with electricity (%) Physicians (per 1,000 population) Population with health insurance (%)

21.2 95.0 56.0 48.0 40.0 3.1 8.0

14.3a 80.0 63.0 69.0 51.0 2.8 15.0

10.2b 67.0 65.0 86.0 65.0 5.6 39.0

6.4c 21.0 73.0 93.0 79.0 7.8 79.0

Sources: Rosero Bixby (1985); González-Vega and Céspedes (1993:55); FLACSO (1991:165). a. 1963 b. 1973 c. 1985

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the Physical Quality of Life Index (PQLI) can capture general improvements in the standard of living; that is, it reflects the benefits accruing to the general population as a result of economic growth and public policy initiatives. In 1977, for example, Costa Rica’s PQLI was 87, a full 20 points higher than El Salvador’s, the region’s next highest PQLI. Nicaragua had a PQLI of just 53.36 The improved economic and social conditions and in raising the overall standard of living of Costa Ricans resulted from the development model created and slowly implemented after the civil war.

Conclusion Former President Daniel Oduber Quirós (1985:272) argues that the economic development model was followed from 1948 through 1978 because the “model was respected . . . by different parties that occupied the government.” The real story, though, is less straightforward. This chapter shows that there was not a single model but a model that was transformed over three distinct periods. The evidence also suggests that some sectors of society wanted to dismantle much of the social democratic model. Between 1953 and 1974, even when anti-Liberación coalitions controlled the executive branch, critics of the model never managed to wrestle control of the Legislative Assembly from the PLN. Since the Legislative Assembly is key in the passage of laws, a hostile congress was one more hurdle for anti-Liberación executives to overcome to reverse the social democratic model. As an ideological party, the PLN was committed to implementing a new social democratic development model. The slow pace of implementation and the lack of significant retrenchment by anti-Liberación governments indicate that other factors besides party label were important in the creation and implementation of the model. Even though the PLN was committed to an industrialization process, it paid only lip service to the idea until the economic crisis of the late 1950s highlighted once again the shortcomings of an economic model based solely on the exportation of primary products. Costa Rican governments, PLN and anti-Liberación alike, were encouraged to adopt industrialization policies by the U.S. government, which pressured Costa Rica to join the Central American Common Market. Membership in CACM was the de facto start of an industrialization program. New development theories, particularly those promoted by Raúl Prebisch and the Economic Commission for Latin America (ECLA), were slowly becoming widely accepted, and they facilitated the rationalization for the switch to increased state intervention and the implementation of import substitution industrialization

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policies. The gradual nature of the economic reforms and the fact that no major disruption of the traditional agricultural sector resulted perhaps kept opposition to a minimum. Institutional factors permitted and facilitated the expansion of state intervention by giving government agencies considerable policy autonomy and, in some important cases, financial autonomy. By the end of the 1970s, almost 200 AIs existed, many of which enjoyed significant policy autonomy. Before 1978, anti-Liberación coalitions in the government faced major problems in reversing state expansion and sometimes even found themselves promoting the model. The anti-Liberación governments were coalitions of parties, rather than a single party and the glue that united them for general elections was a strong dislike of the PLN rather than any agreement on particular programs. Consequently, the coalitions failed to agree on clear policy platforms. The parties had fought on opposing sides during the civil war and had very different ideas about the nature of the state and the economy. The Republican Party of Calderón was committed to an interventionist state, whereas the parties of Ulate and Echandi, for example, wanted a return to a free-market economy based on the exportation of primary products, with only a minor role for the state. The prohibition on immediate reelection helped to split coalitions because the electoral laws encouraged deputies to support the pre-candidate they believed would most likely lead the coalition in the subsequent election rather than to the sitting president—even one from their own party coalition. The PLN, of course, was affected by the same political calculus, but there were two significant differences. During the first thirty years or so of its existence, the PLN was dominated by a handful of people who advocated broadly similar policy ideas. Only with the passing of the old guard in the early 1980s did party discipline become increasingly weaker as it became less obvious who the party leaders were. The PLN was also a highly institutionalized party with a permanent political organization right down to the local level; that is, the party existed as a party between elections, and there was no doubt that it would contest elections with a welldefined program. This stood in stark contrast to the transitory nature of the anti-Liberación coalitions whose composition and leadership were not necessarily evident before the election campaigns. This weakness left the opposition parties at a decided disadvantage in their electoral challenges to the PLN. The capacity of anti-Liberación governments to roll back the expansion of the state in the economy was severely limited for a number of reasons. First, once an AI had been created, its autonomy from the Legislative Assembly and the executive branch permitted it to take on a momentum of its own. These agencies were often charged with broad tasks, such as ending poverty or fostering industrialization, which allowed them to create

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entitlement programs for both individuals (welfare benefits and health care) and businesses (tax incentives and tariff protection). Once programs had been established, incentive structures were in place, welfare programs had been enacted, and patterns of wage and salary negotiations had been created, it became increasingly difficult politically for any government to end programs that had come to be thought of as entitlements. The model, then, was rather firmly established among the political elites and the population who had experienced tangible benefits. During much of this period, there was no real, tested alternative model; thus, when the economic crisis hit at the end of the 1970s, it was unclear that the social democratic model was irreparably damaged, and no clear alternative model was ready to be implemented.

Notes 1. I use key events or legislative bills to determine the starts and ends of the three phases. Different authors have used other dates while still noting similar changes in the development strategy. See, for example, Doryan-Garron (1988; 1990); González-Vega and Céspedes (1993); and Vega (1982). 2. The ISI development strategy was popularized by influential Argentine economist Raúl Prebisch when he was director of the United Nations Economic Commission for Latin America (ECLA). The basic argument held that any country could develop through a process of industrialization, which could be implemented by creating protected domestic markets and tax incentives to encourage investment in nascent industries to produce goods that had previously been imported. 3. Figueres (1956:128) argues that nationalizing the banks in 1948 was the PLN’s most important social and economic measure. 4. Sojo (1984:49) notes that in 1974, for example, interest rates for productive services ranged from 8 to 12 percent per annum, whereas those for commerce were 18 percent. The inflation rate for 1974 was more than 26 percent, which meant the real rates of interest were actually negative (González-Vega and Céspedes 1993: 170). 5. Some of the more aggressive actions the junta took against its opponents included forming special tribunals to try members of the ousted regime, dismissing large numbers of public employees, and abrogating the Mexican Embassy Pact, which had brought the war to an end. The junta also imprisoned more than 3,000 people and exiled leaders of Calderón’s Republican Party and the Communist Party (Ameringer 1978:71–73). 6. The “radicals” included Padre Benjamin Nuñez, who headed the Labor and Social Welfare Ministry; the Conservatives included Fernando Valverde (minister of government and police) and Edgar Cardona (minister of public security) (Ameringer 1978:68). 7. The details of the activities of the Caribbean Legion are contained in Ameringer (1974). The group’s activities within Costa Rica during and after the civil war are elaborated in Ameringer (1978). 8. Rossi tells a slightly different story. He maintains that he and the members of his “tendencia” were expelled rather than voluntarily leaving from the PLN. He

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also notes that neither he nor his supporters rejected any part of the PLN’s ideology (Delgado Rojas 1983:109). 9. Figueres had accused Echandi of treason and of being sympathetic to the Calderonista invasion. When the PLN majority in the Legislative Assembly voted to remove immunity from Echandi and one of his colleagues so they could be tried for treason, all of the opposition deputies boycotted the assembly. After eight months, the courts refused to try the two deputies, and the boycott was ended. As Ameringer (1978:128) notes, “Echandi was transformed from a politician with little following to a hero of the anti-figuerista forces.” 10. Statement by the Chamber of Foreign Manufacturers’ representatives, quoted in González-Vega and Céspedes (1993:85). 11. A number of commercial chambers acted together to lobby the assembly, arguing that the industrialization bill would cause serious economic problems and that they could not “accept measures which, under the pretext of aid to the industrial sector, will undermine the country’s economic structure, to the evident harm of the consumer” (González-Vega and Céspedes 1993:86). 12. This represented the first time funds from overseas were used for productive capital rather than infrastructure (González-Vega and Céspedes 1993:136). 13. Minister Borbón was also the president of the Coffee Office (Oficina del Café), which explains in part the overwhelming emphasis given to resuscitating the traditional export sector rather than the industrial sector. 14. In 1957, coffee and bananas still accounted for 75 percent of the country’s exports. 15. It was only during the 1950s and early 1960s that ECLA’s arguments became a powerful explanatory tool for underdevelopment and also offered practical advice on how countries might industrialize and move closer to developed states. The importance of economic ideas for the policymaking process is well documented by Peter Hall (1986, 1989) for western industrialized countries and by Kathryn Sikkink (1991) for Latin American cases. 16. As was noted in Chapter 3, during this period the PLN was a broad political church that sought members from all sectors of society. The policymaking body of the PLN, the National Congress, highlights the weak position of industrialists, who were granted just fifteen delegates—less than 7 percent of the total (Delgado Rojas 1983:108–109). Furthermore, during this period no industrialists were among the PLN’s senior leadership. 17. Although PLN administrations wanted to cultivate the domestic market as a means of encouraging industrialization (Figueres 1954), considerable evidence suggests that a country as small as Costa Rica could not have facilitated an industrialization process based on its small domestic market, regardless of how well developed it was. Indeed, this concern caused even Raúl Prebisch, the main advocate of the ISI policies, to argue that the countries of Central America needed to create a single market to benefit from the economies of scale. 18. A report by the University of Costa Rica noted that the motivation for the tariffs was to increase government revenue rather than to consider them part of some larger industrialization program (UCR 1959). 19. In 1961, the CACM replaced bilateral and trilateral trade agreements among Guatemala, Nicaragua, Honduras, and El Salvador. 20. The number of unionized workers in the public sector is even higher, since some workers’ organizations are registered as associations rather than unions even though they carry out the same functions as unions. The most notable professional association is the National Teachers’ Association, which has more than 26,000 members.

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21. The weaknesses of the CACM and the underlying causes of its eventual collapse are examined thoroughly in Inforpress Centroamericana (1983) and PérezBrignoli and Baires Martínez (1983). 22. Furthermore, some manufacturing investment was “value subtracting.” That is, it left the country as a whole in a worse economic condition than it was before the investment took place. 23. The coalition was composed of the parties of three former presidents: Otilio Ulate’s Conservative Partido Unión Nacional, Rafael Angel Calderón’s populist Partido Republicano, and Mario Echandi’s small Authentic Republican Union Party (Partido Unión Republicana Auténtica; PURA) (Costa Rica 1966). Ulate and Calderón were bitter enemies during the 1948 civil war, so their agreement to form an electoral coalition showed a willingness to bridge not just ideological differences but also personal loathing. 24. The corresponding numbers for the twenty-three responding PLN deputies were one “moderate right,” one “centrist,” and twenty-one “moderate leftists” (Arias Sánchez 1984b:191–194), which constituted a much more cohesive bloc. 25. Since Costa Rica had the highest levels of GDP per capita and of real disposable income, it is not surprising that Costa Ricans could purchase more CACMmade consumer durables than their neighbors. Consequently, Costa Rica imported more manufactured goods from other CACM countries than it exported, resulting in a serious trade imbalance. 26. International loans were used to encourage the rapid expansion of the banana and cattle industries, whereas technical and financial aid to coffee growers was reduced (Brenes 1990:111). 27. Other sectors, including construction, expanded their share from 21.2 percent of GDP in 1950 to 27.6 percent in 1970. 28. RECOPE was founded in 1963 with a 15 percent state investment. In 1973, in response to the international oil crisis, the state increased its holdings to 65 percent. The following year, RECOPE was nationalized (Sojo 1984:169). RECOPE also lent money to state enterprises and became an active partner in a number of companies. 29. Carazo was a former PLN leader who left the party for personal rather than ideological reasons after a failed challenge to win the party’s nomination in the 1970 presidential election. Although his own ideas on social issues were similar to those of the PLN, he believed the role of the state in the economy had grown too much and should be curtailed. 30. Vega (1982:105) notes that 4 percent is an overestimation, since more than 60 percent of that sum was in the form of guarantees rather than actual capital allocations. 31. As has been typical of the ad hoc nature of the creation of new AIs, IMAS duplicated some of the functions of other AIs. For example, both IMAS and the housing agency, the National Institute of Housing and Urban Planning (Instituto Nacional de Vivienda y Urbanismo; INVU), have remits to eradicate slums. 32. Deputies were still in a weak position to oversee the actions of the AIs. Whereas nearly all PLN deputies in the 1970 congress believed the Legislative Assembly should oversee the other branches of government, including the AIs, none of the anti-Liberación deputies thought the assembly should do so. One Unión Nacional deputy argued that “the Assembly has been sticking its nose into places it doesn’t belong” and added that overseeing the AIs and overseeing the other branches of government were “administrative problems, not legislative ones” (Fernando Lara Bustamante, former PUN deputy and cabinet member, quoted in Hughes and Mijeski 1973:38).

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33. Although the vice president distanced himself from the president, he did not resign (Carazo Odio 1989:537). Carazo’s (1989) autobiography contains a very spirited defense of his administration and offers his own account of the economic crisis and the difficulties of governing with a divided coalition and an uncooperative Legislative Assembly. 34. The most heavily contested decree required that business loans that had been contracted at a low official exchange rate be repaid at the much higher freemarket rate. The finance minister resigned immediately after the president’s action (Nelson 1990a:1984). 35. The proportion of college-age students attending institutions of higher education was 24 percent in Costa Rica, compared with 23 percent in Switzerland and 22 percent in the United Kingdom (Seligson 1990:455). The number of students enrolled in higher education in Costa Rica increased from less than 13,000 in 1970 to more than 50,000 in 1980 (FLACSO 1991:168). 36. The PQLI offers a glimpse of possible cross-national differences in the quality of life. The PQLI is a weighted average of measures of life expectancy at birth, infant mortality, and adult literacy (Weeks 1985:43–44). These indicators reflect the success or failure of public policy in each country.

5 The PLN and the Politics of Neoliberalism

During the campaign for the 1982 general election, the PLN claimed the severe economic crisis was the result of mismanagement by incumbent President Carazo’s Unidad administration. The PLN also asserted that its candidate, Luis Alberto Monge, would end the crisis and restore the high standards of living that had characterized the late 1970s. Although the PLN campaigned on its traditional social democratic platform, once in office President Monge introduced a series of austerity measures designed to reassert government control over the economy and bring an end to the economic crisis. The austerity measures succeeded in reducing inflation and imposing some order on the economy. Once the worst of the economic crisis was over, the PLN government disregarded its traditional economic and social policies and initiated a series of structural reforms, a move that began the gradual reversal of the economic model the PLN had advocated for the previous thirty years.1 These reforms reduced the role of the state in the economy, switched the emphasis from ISI to free-market programs, and encouraged the export of nontraditional agricultural goods to markets outside the CACM region. The government simultaneously sought to restrict the scope and the depth of the welfare state. Thus, in an unexpected turn of events, the PLN—the party that had led the expansion of the role of the state—introduced bills to the Legislative Assembly to sell key state-owned companies, reform the government’s bureaucracy and employment, and prune the welfare state. The economic crisis of the late 1970s and the 1980s marked a major turning point in the application of the social democratic development model. The Unidad administration (1978–1982), although committed to significant economic reforms, ultimately found itself expanding rather than reducing the role of the state in response to the worsening economic 113

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conditions. The irony of the 1980s was that the initiator and facilitator of the process of dismantling the social democratic development model was the social democratic PLN rather than the more conservative PUSC, the political party that had promised repeatedly to bring about the necessary changes. Since 1982, both the PLN and PUSC governments have gradually disassembled the institutional arrangements that constituted the social democratic model and instead have pursued market-driven neoliberal economic policies. This change in the guiding economic idea and its consequent policies poses a number of questions. In the contemporary period (1982–1998), governments have successfully implemented important economic and social reforms. Why and how were changes possible in the current period but not in earlier periods? Why did the PLN in particular position itself in the vanguard of the neoliberal economic reforms, even when those policies harmed its own traditional support groups? Furthermore, how was the PLN able to twice win reelection after its adoption of neoliberal economic policies? In other words, how did the PLN avoid bearing the electoral costs when its policies contradicted the interests of its traditional support base? In the first three general elections following Monge’s victory in 1982, the PLN won twice (1986–1990 and 1994–1998) and the PUSC won one election (1990–1994). Although none of these administrations campaigned on a clear neoliberal platform or publicly proposed to dismantle the role of the state, each government has implemented economic and social measures that significantly contradicted its election promises and incrementally reduced the state’s function in the economy and in the provision of social services.2 This chapter explores the reasons Costa Rica’s social democratic model was gradually disassembled, as well as the way the model was dismantled. It also analyzes how parties have attempted to minimize the electoral costs of their policy shifts. The chapter concentrates on the policies of the PLN for two reasons. First, during this period the PLN has deviated the most of any party from its traditional economic and social policies and provides a starker contrast between a traditional policy program and actual policy implementation. Second, the PLN has not been severely punished for its policy deviations and instead has twice captured the presidency, whereas the PUSC has served only a single term in office. The PLN has thus had more opportunity to change Costa Rica’s policy paradigm and has done so with surprisingly low electoral costs. The question of how the PLN was able to be reelected while abandoning its traditional policies and implementing policies that harmed its own support base can be answered with reference to three factors. First, the party in government pursued strategies that defrayed the direct costs of the economic and social adjustments for voters. It also introduced compensatory

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policies to protect the lower strata of society, thus alleviating the adverse effects of cutting the welfare state as part of its electoral support base and thereby minimizing electoral costs. Also, not all neoliberal reforms were unpopular. Whereas state banking, for example, was a major issue for the PLN and had important ramifications for the development strategy, it elicited little support or opposition from voters. To many voters, the SBN banks were synonymous with long lines, inefficient service, and low returns on savings.3 Thus, even if some interest groups were agitating against particular reforms, no political price necessarily had to be paid by the government leading the change in economic policies. A second component of the explanation of how the PLN repeatedly won reelection involves the institutional rules that influence the behavior of political parties both in and out of government. These rules permit candidates to distance themselves plausibly from the policies of their party’s government. Thus, candidates can credibly present policy programs that conflict with those of the incumbents and are much closer to the preferences of the electorate, which enhances the likelihood of gaining or retaining the support of traditional voters. A third element in the explanation of gaining reelection is the ability of parties in government to blame international financial institutions for the economic measures and thus avoid being blamed for unpopular policies. The use of conditionality has allowed many governments to claim they had to follow the economic prescriptions of the IFIs.

The PLN’s Initial Response to the Economic Crisis Policy Shifts Under Monge The PLN’s 1982 landslide election victory, which resulted in control of the executive branch and thirty-three of fifty-seven congressional seats, came during the lowest point of the country’s worst economic crisis since the Great Depression. The economic crisis, generally an unavoidable consequence of international economic conditions, was exacerbated by the poor economic management of the previous Carazo administration.4 With polls showing that the PLN had a very comfortable lead over the PUSC, Monge and the PLN campaigned on their traditional social democratic platform without needing to make unrealistic promises or explicitly state what the party would do once in office. The PLN blamed Carazo and his administration for the economic crisis, and voters generally believed the PLN propaganda. As a result, large numbers of traditionally non-PLN supporters voted for the PLN in 1982 in hopes that the party could end the economic crisis and restore their pre-1980 standard of living. Thus, in February

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1982, the PLN won an overwhelming electoral victory, with the largest share of the popular vote since the civil war. In March 1982, just before President Monge took the oath of office, a poll found that 54 percent of Costa Ricans believed a great likelihood existed that the new president would pull the country out of the economic crisis. If people who were “somewhat optimistic” that President Monge would resolve the crisis were included, the proportion of respondents who had faith in the new government increased to 95 percent (Feinberg 1984: 107). This extraordinary level of public support gave the incoming government considerable freedom to enact unpopular policies in attempts to resolve the economic crisis.5 The new PLN government, having warned the electorate that there was no “magic formula,” initially responded to the economic crisis with a series of orthodox economic stabilization measures to halt the rapid decline in the economy.6 By midterm, Monge could boast of significant success: Inflation had been reduced from over 90 percent to 32 percent, and the huge trade imbalance had been eradicated. By 1983, the fiscal deficit, which stood at more than 14 percent of GDP in 1981, had been reduced to 3.4 percent. That same year, for the first time since the start of the crisis, the economy showed signs of positive growth, and GDP grew by 7 percent the following year. Unemployment and underemployment also declined, and capital flight was reversed, with up to $100 million repatriated (Nelson 1990a:185). Students of Costa Rican politics feared the economic austerity measures and the accompanying financial cutbacks in social programs would cause a major deterioration of the welfare state. They expected that the poorest Costa Ricans would have to bear the brunt of the costs of adjustments through deteriorating health and social indicators and increased poverty (Wilson forthcoming a; Feinberg 1984:107; Ameringer 1982:108, 120). Those fears, though, were never realized. Instead, the government rotated the costs of economic adjustment across many sectors of society.7 For example, in its fight against inflation, the government lengthened the work week and imposed a blanket wage freeze, which negatively affected workers. In the face of numerous strikes to protest these measures, the government initially held firm but subsequently introduced a partial wageindexing policy that rose periodically parallel to increases in the cost of the canasta básica (literally, a basic basket) of twenty-one goods. As a direct result of this policy switch, the real income of lower-paid workers increased 10 percent between 1983 and 1984 (Céspedes, Di Mare, and Jiménez 1985:71). Other austerity measures included reductions in government subsidies, a freeze on government expenditures, tax increases, and a change in the tax burden from production to consumption taxes. Although these measures

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facilitated the stabilization of the economy, they belied confusion within the government as to which economic development model to pursue once the worst of the economic crisis was over. This lack of direction was reflected in the government’s dealings with international financial institutions and frequent backtracking on economic policy measures. After eighteen months of austerity measures and consequent increased levels of popular protests, especially by the unionized public employees, President Monge sided publicly with the protesters and argued that the austerity measures were the result of IMF conditionality and were undermining the social fabric of the country (La Nación, December 20, 1983). Monge refused to sign a new IMF standby agreement, ended some austerity measures, and increased social spending (Wilson forthcoming a). Thus, much as President Carazo had done in the early 1980s, Monge was able to shift the blame for his economic and social policies to the international financial institutions and claim credit for the increased social spending. Although the PLN controlled the executive branch and enjoyed a considerable majority in the congress, legislating a solution to the economic crisis was not easy. In the first half of Monge’s term in office, the cabinet became a battleground for two major PLN factions: the newly ascending neoliberals and the previously dominant social democrats. Although the two groups agreed on the need for extensive short-term austerity measures to bring the economy out of its tailspin, much less agreement was found on the need for long-term structural adjustments. Like the electorate that had voted for the PLN in 1982, much of the cabinet believed the economic crisis was directly related to external economic conditions and Carazo’s mismanagement and thus saw no pressing need to rethink the economic development model or legislate painful structural adjustment policies (Nelson 1990a:186). The neoliberals believed the state-led economic development model should be abandoned, not because it was ineffective but because the model had acted like a good medicine that had cured the patient and should now be discontinued.8 In late 1983, the government made its first attempt to generate a new development plan. The plan included significant structural adjustments to reorient the economy to take account of changes in the international economy and the inherent weaknesses of the social democratic model. Because of the disparate interests represented in the cabinet, the document that emerged from the cabinet-level review bore little resemblance to the original document and was left to gather dust (Nelson 1990a:186). After a major cabinet reshuffle in 1984, a new direction in economic development became apparent. The important economic and financial portfolios were allocated to notable neoliberal technocrats, including French-trained economist Eduardo Lizano, who became president of the Banco Central de Costa Rica. Those neoliberals, with their close ties to international financial

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institutions and the USAID, proposed a new model that contradicted the basic tenets of traditional PLN economic and social policy and represented a critical departure from the old model. Even when the cabinet was unified in favor of the new model, the passage of economic reforms was still slow and incremental. Why the PLN embarked on the neoliberal economic development path has been a point of considerable debate that has pitted powerful international financial institutions against domestic political actors. Competing Explanations It is often argued that leftist parties introduce neoliberal economic reforms because IFIs insist on agreement to and implementation of certain conditions before releasing loans (Payne 1994; Valley 1990; Huber and Stephens 1992; Honey 1994; Stokes 1997; Branford and Kucinski 1988; and Siddel 1987). This explanation is intuitively appealing and seems to account for the PLN policies of the 1980s and 1990s. But a closer examination of evidence from Costa Rica shows that whereas IFIs are important actors in the choice of economic and social policies, their role has been significantly overstated, leaving little scope for variation across countries. That is, domestic actors are given a very small role in the formulation and implementation of policy. A number of authors have noted the power of IFIs in the policymaking process of small countries with open economies, especially since the onset of the economic crisis and the debt crisis of the late 1970s and 1980s. In the case of Costa Rica, it has been argued that the social democratic model was abandoned as a direct result of intervention from IFIs, especially the USAID (Clark 1993, 1995; Edelman 1985; Honey 1994; Lara 1995; and Rivera Urrutia 1982, 1986). An examination of the changes in the banking law, however, shows that although pressure from IFIs was clearly important, it was less directly relevant. IFI pressure shifted neoliberal PLN members into key government positions and created organizations to carry out functions similar to those of various government agencies. But as the debate over the Ley de la Moneda (a controversial banking reform law discussed in detail later in this chapter) illustrates, much of the motivation for implementing the neoliberal agenda came from within Costa Rica, particularly within the PLN. The repeated failure of various governments to meet IFI demands and the eventual breakdown of loan agreements between the IMF and both the Monge and Carazo administrations also hint that IFI conditionality might have been a necessary factor in the change in the model but was not, on its own, a sufficient condition (see BulmerThomas 1988; Wilson 1992, 1994, 1996a). The case study of banking reforms, discussed later, illuminates this relationship between IFIs and governments’ policy choices. Even with considerable pressure from IFIs and a severe economic crisis, deputies in

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the Legislative Assembly were not guaranteed to pass the necessary reforms. Indeed, in the case of President Carazo, high levels of pressure in the form of IFI conditionality resulted not only in failure to adopt the neoliberal economic strategy but in complete rejection of the measures. Carazo went so far as to expel the IMF delegation from the country, to refuse further dealings with the institution, and to implement more stateled solutions to the economic crisis (Carazo Odio 1989). Although the Monge administration quickly repaired relations with the IFIs, which have been maintained by all subsequent administrations, significant battles have still taken place over policy choices—especially when policy prescriptions have clashed directly with the reelection strategies of the governing party.9 Empirical evidence shows that historically most governments that have signed conditional loan agreements with the IMF have failed to follow through on their promises to comply with the neoliberal conditionality. Miles Kahler (1989), for example, argues that IMF conditionality is not rigidly applied and that governments realize it is not. Thus, even with loan conditionality, some scope exists for policy differences on the part of the borrowing country. Paul Mosley (1987) notes that technical difficulties make it hard for IFIs to monitor the policy process in borrowing countries. The findings of these studies are supported by Stephan Haggard (1986), who shows that the overwhelming majority of agreements between the IMF and governments end in suspension or failure. Barry Ames (1987: 214) argues that it is hardly surprising that IFIs have experienced “such difficulty in imposing stringent conditions on Latin American debtors” since the neoliberal measures severely limit governments’ ability to implement policies that would improve their “political survival strategies.” Huber and Stephens (1992:76) also note that “it is no wonder that footdragging and various forms of resistance short of complete confrontation are the order of the day.” Although none of these authors denies the significance of IFIs, they all note the importance of domestic political actors in the selection of economic policies. In the case of Costa Rica, the major international financial institutions included the International Monetary Fund, the World Bank, and, perhaps most important, the United States Agency for International Development.10 These institutions also strengthened their bargaining power vis-à-vis the Costa Rican government through the use of “cross-conditionality.” That is, one IFI would refuse to engage in loan negotiations until the government agreed to meet the conditions of one or all of the other major IFIs. For example, in 1987, the Paris Club (a cartel of European and U.S. banks) refused to renegotiate Costa Rica’s huge international debt until it signed a new IMF agreement (EIU 1987 [1]:17). On another occasion, the USAID applied cross-conditionality to its loans, refusing to release funds to the Costa Rican government until it signed and implemented the conditions of a World Bank structural adjustment loan (SAL).11

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A brief examination of the relationship between the USAID and the government of Costa Rica lends support to the argument that IFIs force neoliberal economic policies on unwilling leftist governments. Martha Honey (1994) details the full extent of relations between Costa Rica and the USAID with considerable evidence to illustrate the USAID’s overwhelming dominance in the policymaking process. Honey argues that the USAID has used both loan conditionality and direct grants to foist its economic policies on the various governments, especially those of Presidents Monge and Arias. Institutional constraints on changing the economic development model, which thwarted earlier attempts by anti-Liberación administrations, were also partially reduced with help from enormous injections of economic assistance from the U.S. government. Historically, the United States had given Costa Rica little economic assistance. During the first thirtyfour years after the civil war, for example, Costa Rica received just over U.S.$242 million, an average of just U.S.$7 million per year. As Figure 5.1 shows, as the economic crisis worsened, the funds increased slightly; when the PLN took office in 1982, U.S. economic assistance increased rapidly to almost U.S.$52 million and more than quadrupled to U.S.$214 million in 1983. Funding levels remained high for much of the 1980s, reaching a record high in 1985 of U.S.$220 million and then gradually declining to approximately U.S.$6 million in the mid-1990s. In the mid-1980s, Costa Rica became, on a per capita basis, the second largest recipient of U.S. economic aid. A major motivation for the enormous increase in USAID funds was an attempt by the U.S. government to recruit democratic Costa Rica to brand the leftist Sandinista government in Nicaragua a Communist dictatorship

Figure 5.1 U.S. Aid to Costa Rica, 1980–1995 250

U.S.$ (millions)

200 150 100 50 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Year Sources: Edelman (1985:41); Lara (1995:147).

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and to facilitate the operations of the U.S.-sponsored contra rebels in their attempt to violently overthrow the Sandinista government. The Monge administration secretly permitted contra rebels to build military airfields and to operate out of northern Costa Rica while simultaneously taking a hard line against the Managua government. As Figure 5.1 shows, in 1986, when Oscar Arias took office and pursued his Central American peace accord (for which he was awarded the 1987 Nobel Peace Prize) in spite of official U.S. objections, funding from the United States declined significantly. Martha Honey (1994) and other authors have detailed this arrangement, which eventually became public during the Iran-contra hearings in Washington, D.C. Although economic aid to Costa Rica increased rapidly during the early 1980s, the neoliberal economic reforms prescribed by USAID were slow to take hold. Senior members of the USAID mission became increasingly frustrated at the slow pace of economic reform, and two significant measures were implemented to speed up the process. The first change was to replace loans with grants. Before 1983, the vast majority of U.S. economic aid was in the form of loans, but after 1983, nearly all aid was in the form of grants. Grants were not subject to political overview by the Legislative Assembly, whereas all international loans had to be approved by the assembly. Thus, the shift to grants removed a political bottleneck to the rapid application of neoliberal economic reforms while simultaneously giving the USAID more freedom to allocate its money, effectively circumventing the Legislative Assembly, and facilitating the creation of organizations designed to undertake privatization and other programs favored by the USAID. These new institutions were founded and funded by the USAID to further depoliticize and speed up the economic reform process. They were designed to eventually become private, self-financing institutions that could carry out specific tasks that had previously been carried out by the government agencies and Autonomous Institutions. Because of their replication of state functions, critics dubbed the institutions the “parallel state.”12 Table 5.1 lists the major USAID institutions and the existing Costa Rican agencies whose task was replicated. The new institutions covered a range of tasks. For example, the Private Council on Agriculture and AgroIndustry (CAAP) promoted nontraditional agricultural exports, a task already in the remit of the Ministry of Agriculture. Another institution created by USAID was the Agricultural School for the Humid Tropics (EARTH), a private agricultural college that offered classes similar to those at existing state-funded institutions of higher education. The USAID entered into the social assistance arena with the Association of Costa Rican Development Organizations (ACORDE), an umbrella organization that funded nongovernmental organizations (NGOs). In 1986, ACORDE granted U.S.$4.9 million to NGOs, a task already carried out by the

122 Table 5.1

COSTA RICA Major USAID Institutions and Their Costa Rican Counterparts

USAID Institution

Costa Rican Institution

PIE (Investment Promotion Program) CINDE (Coalition for Initiatives in Development) FINTRA (Transitionary Investment Fund) CAAP (Private Council on Agriculture and Agro-Industry) EARTH (Agricultural School for the Humid Tropics)

CODESA (Costa Rican Development Corporation) CENPRO (Center for the Promotion of Exports and Investment) N/A MAG (Ministry of Agriculture)

ACCCR (Association of Highways and Roads in Costa Rica) PIC (Private Investment Corporation) SFP (Private Finance System) ACORDE (Association of Costa Rican Development Organizations)

UCR (University of Costa Rica), UNA (National University); and other government-funded educational and research institutions MOPT (Ministry of Public Works and Transportation CODESA’s banking function Competes with the SBN FVO (Federation of Voluntary Organizations); DINADECO (National Directorate of Community Development)

Sources: Honey (1994:98); Lara (1995:151).

National Directorate of Community Development, a government agency, and the Federation of Voluntary Organizations, a private-sector organization. The most important USAID institution was the Coalition for Initiatives in Development (CINDE), created in 1983 with a function similar to the government institution CENPRO. CINDE’s advantage over the government’s agency is reflected in the institutions’ budgets. Between 1984 and 1989, CINDE’s average budget was more than seven times that of CENPRO (Honey 1994:120). Thus, it is easy to understand why CINDE could exert more influence over the export promotions program than the underfinanced CENPRO. The USAID’s second effect on the policymaking process was its cultivation of a new technocratic elite. Many high-ranking politicians in both the PUSC and PLN governments have worked for one of USAID’s parallel institutions or done consulting for the USAID.13 The institutions helped to cement an alliance between leading Costa Ricans and the senior management of the USAID. The USAID seemed to epitomize the importance of IFIs in Costa Rican politics when it played a major role in the creation of a new government ministry, the Ministry of External Trade (MINEX), which worked closely with CINDE. The ministry, in conjunction with USAID, helped to push three significant export promotion bills through the Legislative Assembly in 1984. In 1985, MINEX and CINDE pressured the government to allow private free-trade zones, and by 1990 all such zones were in private hands. The Export Contract Law was written by consultants hired by CINDE, which shows CINDE was important enough to contract the best neoliberal economists to examine issues and to provide

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legislative solutions for the executive branch to submit to the Legislative Assembly for debate and possible adoption (Honey 1994:120–123). The export incentive laws created free-trade zones, maquila industries, and export contracts. These measures were devised to increase foreign investment in Costa Rica and to encourage the production of new industrial and nontraditional agricultural exports (NTAEs) to regions outside of the Central American Common Market. Beyond reforming the banking laws, the Monge administration began to slowly reorient the economic base away from import substitution industrialization toward an export-led economic growth model that emphasized the exportation of NTAEs. This shift was in part a recognition of the growing political instability in the rest of the region, which made relying on demand from the protected Central American Common Market unviable (interview with Oscar Arias, St. Louis, May 1991). The attempts to reorient the economy were relatively successful. The Monge administration passed legislation in 1983 to encourage NTAEs to third markets (i.e., markets outside the moribund CACM). The growth of this sector was rapid, with NTAEs increasing from U.S.$90 million in 1983 to U.S.$1.1 billion by 1993 (Sojo 1995:18). By 1992, NTAEs had become the largest export sector, accounting for more than 40 percent of total exports. Whereas the largest NTAE activity—textiles—accounted for more than 70 percent of the total, other high-value products such as fish and shrimp, cut flowers, plants, and pineapple also developed as important exports. The state-funded incentive to encourage NTAEs was the Tax Credit Certificate (Certificado de Abono Tributario; CAT), a tax rebate of up to 20 percent of a company’s NTAEs. The irony is that the growth of this sector was achieved with considerable government intervention and subsidies from IFIs, all in the name of the free market (USAID 1992:41; Clark 1995:182, 185, 205). CATs, a very expensive incentive package, account for 6 percent of government expenditure but generate low levels of return on the state’s investment. For every dollar spent on CATs, NTAEs increased only an additional U.S.$1.35 (Clark 1995:198).14 Encouragement for this sector has come not just from a series of tax measures in Costa Rica but also from the U.S. government in the form of the Caribbean Basin Initiative (CBI), which granted NTAEs duty-free access to the U.S. market. More than 70 percent of NTAEs are sold in the United States (USAID 1992:41; Clark 1995:182, 185, 195). But U.S. producers reacted to the success of Costa Rican producers’ export drives to the U.S. market, which they saw as unfair competition. For example, U.S. producers convinced U.S. authorities to impose a 20 percent duty on imports of Costa Rican cut flowers, arguing that the Costa Rican government’s income and import tax incentives granted to the country’s 150 growers constituted unfair competition (EIU 1987[1]:10).

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Clearly, regardless of the outcome of efforts to switch government development incentives away from industrial production for the highly protected Central American market to NTAE to unprotected world markets, the USAID was an important player in economic policy generation in Costa Rica. But even though the USAID has been the most heavily involved IFI in Costa Rica, its role has been overstated. Many important politicians from the PLN have argued that even without any international pressure, 90 percent of neoliberal reforms during the Monge administration would have been implemented (Wilson 1994:156).15 Interestingly, the pace of neoliberal reform increased rather than decreased as the level of funding from and involvement of USAID’s Costa Rican mission declined in the early 1990s. Indeed, Costa Rica is currently going through a significant wave of deregulation, privatization, and efficiency improvement in the public sector that is more extensive than anything undertaken during the height of USAID involvement in the policymaking process even though USAID funds have returned to their traditionally low levels. This is not to ignore the important role of IFIs and foreign governments in the encouragement of the neoliberal economic development model. The shift in the policy paradigm cannot be fully explained, however, without a close examination of domestic actors’ role in accepting or rejecting economic advice from IFIs, even when considerable pressure is brought to bear on the recipient government. As will be seen in the Ley de la Moneda reforms described later, the USAID played an important facilitating role in their adoption. Without the volition of important Costa Rican policymakers, though, the reforms might have languished in the assembly’s Finance Committee.16

Reorienting the Economy In Latin America, the term neoliberal is politically loaded and is synonymous with austerity measures, unemployment, economic hardship, and poverty—especially for the lower and middle classes. Representatives of those sectors—leftist and populist political parties and labor unions—generally reject the neoliberal model and oppose any government that chooses to implement it. Neoliberalism also has negative connotations for many in Costa Rica, a country in which very few politicians claim to be neoliberals or declare their support for the neoliberal economic agenda. Although both major parties have implemented neoliberal reforms, they have done so incrementally and without the immediate depth of reforms instituted in countries like Columbia in the mid-1980s or Peru in the early 1990s. 17 That is, no “shock” therapy has been applied in Costa Rica. Instead, consultation with all affected groups is still carried out, and groups affected by

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the reforms generally become beneficiaries of compensatory policies that lessen possible economic dislocation and hardship. As a consequence, reform occurs slowly, and as is discussed later, political parties can minimize the electoral costs of implementing the reforms. According to neoliberal postulates, the economic role of the state should be very limited. Although the Costa Rican state no longer plays the same role it did during the 1970s, it remains active in economic planning and the provision of incentives to encourage certain types of production. That is, whereas the state is less involved in the production of goods and services, it is a major facilitator of the new economic development path— offering tax incentives to nontraditional agricultural exports—and is still the largest provider of social services. The reduction of the role of the state, though, has been significant and came about as a result of a series of policies passed by PLN and PUSC governments. Those policies included outright privatization, contracting out, deregulation, increased competition, and changes in eligibility requirements for government entitlement programs. Privatization The privatization of state-owned companies is perhaps the most obvious and clearest sign of the extent of neoliberal reforms.18 Although privatization has been a key part of the neoliberal economic project, the first privatization measures predate the economic crisis and the neoliberal agenda. During the first year of the Carazo administration (1978), a very timid privatization law, the Regulation of the Sale of Shares in Public Enterprises Law (Ley de Regulación de la Venta de Acciones de Empresas de Propiedad Pública), created the legal framework for the sale of state companies.19 Before any significant effort could be made to divest the state of its companies, the economic crisis of the 1980s changed the priorities of the Carazo government. A more extensive privatization process began in the second half of the Monge administration. Yet even after more than sixteen years of privatization programs, the process remains incomplete. Aided and abetted by the USAID and other IFIs, the government began a privatization process with the intention of selling off the inefficient state-owned companies of CODESA, also a state-owned holding company. A USAID-funded report identified the financially precarious condition of CODESA’s component companies, noting that CODESA had amassed debts of over U.S.$180 million (Honey 1994:107). CODESA, with its almost unlimited access to Central Bank credit, was swallowing more than one-third of the available credit, effectively crowding out private-sector borrowers. Also, CODESA had exceeded its original remit and became a major competitor of private

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companies. This unwelcome competition for markets and capital facilitated the generation of a sizable anti-CODESA coalition that included businesspeople, technocrats, the print media—especially La Nación—and elements of both the PUSC and the PLN (Honey 1994:106–107; Brenes 1990:130). Few believed the status quo was an option for CODESA and its companies; instead, the policy debate concerned the question of how rather than if the companies should be privatized.20 The move to privatize CODESA was part of the Law of Financial Equilibrium of the Public Sector (Ley para el Equilibrio Financiero del Sector Pública), often referred to as the Emergency Law. To facilitate the privatization of CODESA’s companies, in 1984 the USAID founded and funded a private holding company, the Transitional Investment Trust (Fiduciaria de Inversiones Transitorias; FINTRA), with a U.S.$175 million grant. FINTRA was to purchase CODESA’s companies one by one and to administer them until a private investor could be found to buy them. Despite an appropriate legal framework, USAID funds, and conditionality pressure, privatization was slow and laborious. In the case of CODESA and its companies, the process was not ended until 1997, almost fourteen years after it started. Contracting Out Two state-provided services, health care and education, are good examples of sectors in which the state has attempted to reduce its role without resorting to outright privatization. State sponsorship of health care facilitated its universalization during the economic boom of the 1970s. Although coverage decreased slightly in 1981 in response to the economic crisis, universal coverage returned by the end of the decade. The CCSS, the state body charged with administering health care, made strenuous efforts to maintain universal coverage even as its budget was systematically reduced.21 As a result of budget cuts in the 1980s and 1990s, the CCSS relied increasingly on the private sector to fill the void and provide services previously supplied by the state. For example, in the 1980s five programs were introduced that offered a significantly larger share of the medical market to private, for-profit companies.22 Two of the more ambitious programs, Enterprise Physicians and Mixed Medicine, which grant private companies a central role, serve about 17 percent of the population covered by the CCSS. Although the average number of visits to the doctor per capita is higher in the newer programs than in the CCSS program, the average cost of operating the clinics is about 25 percent of the per capita costs of the CCSS program (Mesa-Largo 1994:98). The CCSS also signed contracts with private pharmacies, which

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resulted in more rapid delivery of medicines and reduced the long lines that characterized the CCSS pharmacies. Further, the private pharmacies operate at about 50 percent of the cost of the state-owned ones. These examples highlight the way private companies were granted increased access to the medical market, which traditionally had been controlled by the CCSS. That is, decisions were made by the head of the CCSS, an Autonomous Institution, independent of the Legislative Assembly. The still-dominant position of the state as the principal supplier and guarantor of medical coverage, the initial small scale of the changes, and the patient benefits through shorter lines and improved service all served to facilitate the privatized solution. Deregulation and Ley de la Moneda The preferred path through which to reduce the role of the state has been incremental deregulation of state-controlled economic sectors. For example, the outright sale of the original four state banks that constituted the state-dominated financial sector was not attempted until the mid-1990s. Instead, the goal of increasing the participation of private banks in the financial sector was achieved, albeit very gradually, through a series of banking reforms that began with changes in the Ley de la Moneda in the early 1980s (discussed in the next section) and has been followed with incremental deregulation of banking reform laws by all subsequent administrations. The privatization of the financial sector is a good illustration of both the slow pace of economic reform and the way neoliberal reforms have been adopted. The next section examines in detail the initial banking reforms that were proposed in the early 1980s. The process through which the reforms were adopted illustrates the relative importance of different actors in the policymaking process. The Ley de la Moneda was very similar to the financial reform measure the anti-Liberación administration of José Trejos Fernández (1966–1970) attempted in 1967, which failed to overcome considerable parliamentary opposition from PLN deputies who argued in favor of the state banking system as a cornerstone of the country’s postwar economic success (Arias Sánchez 1984b:195; Wilson 1994:156). Yet in early 1983, it was a PLN president, Luis Alberto Monge, who sent a bill to the PLN-controlled congress to initiate a slow process of denationalizing the banking system. In December 1982, the United States Agency for International Development agreed to loan the Costa Rican government U.S.$56 million and to grant U.S.$8 million if the Legislative Assembly passed reforms to improve the efficiency of the financial system by March 1983.23 Although the country was in the depths of the worst economic crisis in its history and

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desperately needed international reserves, the financial reform legislation did not become law until August 1984, more than a year and a half after the USAID-imposed deadline. It is also interesting that the original talks between the USAID and the Monge administration did not mention denationalizing the state banking system. Instead, private interest group leaders—particularly private bankers—in conjunction with neoliberal technocrats from the governing PLN, lobbied both the executive and legislative branches of the government and the USAID mission in Costa Rica to support a series of more extensive banking reforms. Those reforms effectively precipitated the beginning of a denationalization process by deregulating the banking system and removing the monopoly on deposits that the state had granted the SBN banks. One high-ranking neoliberal PLN technocrat candidly recalled that “some people in the administration, myself included, tried to use the multilaterals to fight within the PLN, to use USAID, to use the IMF, to use the World Bank. Sometimes we would try and sell them some ideas so that they would not be presented as my ideas, or XX’s ideas, but would appear like the World Bank or USAID was pushing an idea. Sometimes we were able to go through the back door to get our [neoliberal] ideas accepted” (interview, San José, June 1990). 24 The original bill President Monge and the finance minister sent jointly called for far-reaching banking reforms, but it was quickly rejected by the assembly’s Finance Committee.25 A second, more modest finance reform bill was sent to meet USAID’s loan conditionality; that bill included no measures that would have led to the denationalization of the SBN. As the second bill began its slow progress through the Legislative Assembly’s three plenary debates and Finance Committee review, the original bill reappeared as an amendment to an unrelated budget bill.26 The presentation of multiple bills to achieve the same broad objective sheds some light on the significance of IFI conditionality for economic policies. It is important to note that the second bill would have met USAID’s conditions for the 1982 loan agreement, and the promised funds would have been released. The previously rejected bill included reforms that went considerably beyond the improvements requested by the USAID and was highly contentious as well. Thus, the introduction of a bill that contained the seeds of the SBN’s denationalization—part of the foundation of the social democratic development model—was not the result of IFI conditionality but came from within Costa Rica, specifically from the governing PLN. This fact became even more apparent when the USAID released the loan and grant money more than six weeks before the final debate and vote on the bill in August 1984 (Wilson 1994:168). Because the banking reforms involved a change in the law, they required legislative approval (by a simple majority vote); thus, the support

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of a majority of deputies had to be solicited.27 On paper, this would appear to have been relatively easy since the PLN had a clear majority (thirtythree of the fifty-seven seats), but weak party discipline, the forthcoming elections, and the contentious nature of the bill (which reversed a fundamental part of the PLN program) made the bill’s passage slow, laborious, and difficult. The executive branch could not easily control the votes of its partisans in congress and had to use strong-arm tactics on its own deputies and seek votes from opposition deputies as well. The PLN’s parliamentary party caucus adopted a position in favor of the reforms and instructed all PLN deputies to vote for them (Carey 1996: 142–144). But the party’s deputies failed to unite around the bill and instead formed three informal but distinct factions. One bloc of ten PLN deputies refused to support the bill, which they believed would denationalize the banking system; they argued that the state banking system might need to be “improved, modernized [and] modified, but never destroyed” (Jurado del Barco 1984:27). A second group of fourteen PLN deputies, with an eye to perpetuating their political careers, aligned with Carlos Manuel Castillo—one of two candidates thought likely to win the party’s nomination—who supported the bill. A third bloc of nine PLN deputies initially stood against the reforms but in the final vote either voted in favor of the changes or abstained (see Brenes 1990; Wilson 1994). During the first year of the debate on the Ley de la Moneda, the PLN deputies opposed to President Monge’s bill received support from the PLN president of the assembly, Jorge Villanueva Badilla. The PLN opposition used the assembly president’s powers to push the bill far down on the assembly’s agenda. When it finally was discussed, other parliamentary procedures were employed to further impede the bill’s progress. Motions to return the bill to the Finance Committee for further examination were frequently tabled, as were a multitude of amendments. Any deputy could table an amendment and could speak to each amendment for thirty minutes, which generated an effective filibuster. The deputies’ goal was to hold up the bill in congress for so long that the economy would improve significantly and demands for far-reaching economic reform would abate (Wilson 1994:159). These strategies succeeded in preventing a third and final reading of the bill before the July 31 parliamentary recess. But the PLN deputies who opposed the changes in the law were not the only ones engaged in the debate. PLN deputies aligned with pre-candidate Castillo were joined by many opposition PUSC deputies in support for the bill. They also received support from private-sector interest groups, many of which wanted to participate in a liberalized banking market after the passage of the law. Two important factors changed before the final reading of the bill. The annual Legislative Assembly election of its president was won by Bernal

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Jiménez Monge, a leading businessman and personal friend of President Monge who was committed to pushing the reforms through the congress. A related factor involved control of the assembly’s agenda. Since the regular session of the assembly had ended, the president called an extraordinary session, during which he had complete control of the agenda: The sole item on the agenda was the third reading of the Ley de la Moneda. Deputies endured a twenty-hour debate during which they were unable to leave the assembly building, and the president’s bill was finally passed (Edelman 1985:43). Although it was not apparent until after the final passage of the bill that domestic political actors had initiated and championed the banking reform legislation, international actors played more than a tangential role in its adoption. President Monge had used the secrecy surrounding the loan agreement with the USAID to claim that it was necessary to pass the Ley de la Moneda reforms to receive the injection of much-needed foreign capital. What was not clear until later was that the reforms contained in the bill went much further than those required by the USAID and that the funds that were supposed to be conditional on the passage of the bill had already been released. The nine PLN deputies who had voted consistently against the measure and then switched their votes to support the bill did so even though they thought the new banking system would damage the state’s capacity to implement its traditional state-led economic development model and believed that the changes ran counter to their party’s stated policy. In interviews conducted some years after the debate, some legislators claimed to have switched their votes out of personal loyalty to the president; the majority asserted that the president had requested their votes because passage of the bill was necessary to meet USAID conditionality and to win the release of the promised loan and grant funds. One deputy recalled the pressure from the USAID and PLN neoliberal technocrats as being akin to voting with “a gun to [his] temple” (interview, San José, June 1990). Whereas the change in the banking legislation was a major step in opening the banking system to competition from private banks, it was only the start of a very slow process that has been debated in each subsequent administration, both PUSC and PLN. In 1988, during the Arias administration (1986–1990), for example, a second major change in the banking legislation was proposed.28 Whereas similar groups lined up in support and defense of the state banking system, the rift within the PLN became serious and was played out both within the Legislative Assembly and in an acrimonious pre-candidate election campaign. The president and much of his economic team enthusiastically favored the changes, but the PLN hierarchy outside the Legislative Assembly and many PLN deputies actively campaigned against the reforms. And as the president was encouraging

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deputies to vote in favor of the bill (part of a World Bank SAL on which a U.S.$100 million loan was dependent), the nonparliamentary PLN leadership filed charges with the party’s ethics tribunal against any PLN deputy who voted for the bill. A further step in the denationalization of the banks was taken in 1995, when another bill progressed slowly through the Legislative Assembly that ended the state banks’ monopoly on access to checking accounts and for the first time in the country’s history allowed private banks to compete on an equal basis with the three remaining state banks. Thus, private banks could attract checking accounts and have ready access to the Central Bank’s reserves. Estimates projected that more than 30 percent of checking accounts would leave the state banks and move to private banks (La Nación, December 8, 1995). Banking reform has been typical of the way privatization was introduced in the 1980s and 1990s; it has been a very slow and controlled process, and the state banking system still plays a significant role. What has changed is that the SBN’s monopoly of access to citizens’ savings has been severely restricted, as has its capacity to allocate those resources for developmentalist ends. 29 Instead, banking reforms have encouraged the private sector to establish new banks and capture the more lucrative markets. According to Carlos Sojo (1995:37), by 1991 private bankers had captured more than 50 percent of all credit to the profitable private-sector investment market.30 In early 1997, the PLN executive proposed yet another change to the banking system, this one involving the outright sale of the state-owned banks. After many years of various governments denying that they intended to privatize the banking system, the final stage of the process is being met with much less opposition than existed in the 1960s or even at the start of the gradual reforms in the early 1980s. The reform of the Ley de la Moneda illustrates the complexities of Costa Rica’s policymaking process and illuminates the interaction and relative importance of different political actors (both domestic and international) in influencing economic policy choices. The analysis of the legislative process for this single—albeit important—piece of legislation shows the typical policy process and highlights the political calculations made by politicians at different levels, which, in turn, affect their voting behavior. The case study also illustrates the difficulty of passing policies in Costa Rica, even when a party controls both the executive and legislative branches of government. The banking law also highlights the different political calculations that motivate the expansion and contraction of the role of the state. Unlike the expansion of the welfare state or the economic role of the government, for which politicians like to take credit since such expansion generates support

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coalitions, retrenchment programs are political orphans for which politicians want to avoid blame rather than take credit, since some constituencies will experience cutbacks. Paul Pierson (1994:1) concludes that “retrenchment is a distinctive and difficult political enterprise” because voters tend to “react more strongly to losses than to equivalent gains.”

Electoral Laws and Economic Reforms The electoral laws also have a direct effect on the pace and content of policies emanating from the Legislative Assembly. The ban on immediate reelection of deputies and the prohibition on presidential reelection turn sitting presidents into lame ducks and encourage deputies interested in perpetuating their political careers to look to party leaders outside of the parliament. This situation has led to the creation of a virtually permanent election campaign, which emphasizes the importance of factions within political parties as deputies attempt to tie their political futures to the party’s next presidential candidate.31 This factionalism, coupled with weak party discipline, has resulted in only a very slow metamorphosis of the economic development model. The president, who has few decree powers, must build a support coalition in the assembly for each new economic reform that requires legislative approval. Presidential candidates, though, operate on a different political calculus. The candidates want to win the support of as many important sectors as possible and are disinclined to back policies that might harm a potential support group. Since the careers of the sitting deputies are tied to the fortunes of the presidential candidate rather than to those of the incumbent president, this situation often translates into very slow legislative action by the president’s copartisans in congress. The slow pace of reform, although frustrating to IFIs, has had a side benefit of permitting the manufacturing sector—which has traditionally relied on extensive government support and tariff protection—to reorient its production with a minimum of disruption. Another side benefit affects the government’s reelection probabilities. Gradual reforms that target specific sectors are unlikely to inspire as strong a reaction as a series of rapid “shock” reforms, as were used in Peru and Ecuador, for example.32 A related cause of the slow pace of economic reform is the law that requires presidential aspirants to resign from their government positions at least a year before a presidential election. Consequently, Carlos Manuel Castillo, president of the Central Bank and a leading proponent of the neoliberal reforms, resigned in early 1984 to seek the party’s nomination for the 1986 presidential election. His departure left the economic reformers without their principal advocate in the cabinet and resulted in a return to

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less austere policies, which included a budget proposal with a very large built-in deficit. The IMF objected and, along with USAID, pressured the congress to pass the 1984 Emergency Law, which considerably reduced the proposed deficit. The loss of Castillo’s economic leadership helped to produce a yearlong standoff between the Legislative Assembly and the IMF (Nelson 1990a:186). In August 1984, a new economics team was in place—led by the new Central Bank president Eduardo Lizano Fait—and a series of economic reforms was begun, but the parliamentary party was already degenerating into competing factions behind the major contenders for the party’s presidential nomination. Thus, the changes in the economic development model were slowed considerably by leading political figures who wanted to further their political careers. Another factor in the slow pace of the reforms is that the PLN has never adopted a coherent, unified position on the reforms and on privatization in particular. Instead, vociferous public discussion (with a fair amount of blame allocation) has taken place among the different bodies that make up the PLN. In 1988, for example, when President Arias proposed selling a 60 percent share in a state-owned telephone company and a 40 percent stake in the state-owned power generation company, five months of vitriolic public debate ensued among PLN members (Rojas Bolaños and Sojo 1995:45). The two companies’ unionized workers conducted a series of strikes, which, together with discord within the PLN, pressured Arias to withdraw his proposal. A relatively new avenue through which the pace of privatization can be affected is an appeal to the Supreme Court to declare various economic measures unconstitutional. For example, in 1994 the Sala IV (the constitutional chamber of the Supreme Court) ruled that the government’s attempt to privatize the telecommunications industry through deregulation was unconstitutional.33 This tactic has also been used to protect the economic interests of groups adversely affected by neoliberal economic reforms. Food grain producers, for example, appealed to the Sala IV to prevent the elimination of price and credit subsidies traditionally paid by the state. As Lowell Gudmundson (1996:84–85) notes, “Virtually every major economic interest group faced with the loss of its former protection or subsidy during the 1980s has appealed to the Sala IV.” The increasingly interventionist judiciary has brought a new element to the economic policymaking process. Prior to the economic crisis, nearly all judicial review was favorable to the government, but this outcome is no longer a certainty. Consequently, interest groups have a new bargaining chip with which to force the government to consider their situation before making its final policy decisions; if it does not do so, they can challenge the unfavorable policies through the Sala IV.34

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Some PLN deputies in the Legislative Assembly used parliamentary procedures to create a series of obstacles to the quick privatization of CODESA’s companies. These deputies argued against the president’s plan and claimed the state should retain ownership of CEMACA (a cement company) and FERTICA (a fertilizer company). One small victory for the antiprivatization deputies was the assignment of the task of evaluating the net value of the state-owned companies to the comptroller general’s office, which they knew would consistently overvalue the companies’ assets.35 The PLN’s lack of a cohesive privatization policy was exacerbated by the ongoing pre-candidate race to win the party’s nomination for the 1990 election. The legal separation between the party in government and the party’s nonparliamentary hierarchy, as well as the presence of several precandidates, facilitated the policy division among the different groups, all of which claimed to represent the real voice of the party. The nonparliamentary PLN leadership had expressed concern over the political effects of the neoliberal economic policies of President Arias (and Monge before him), arguing that they were a reversal of the party’s traditional interventionist policies and were undermining the electoral support coalition, especially by alienating workers and peasants who had become increasingly restive. 36 The leadership argued that certain key industries, including power generation and supply and telephone services, should remain under state control (Rojas Bolaños and Sojo 1995:45). The difficulties FINTRA experienced in trying to sell CODESA’s component companies encouraged administrations subsequent to Monge to find other avenues of privatization. President Arias, for example, transferred ownership of the huge state-owned sugar refinery, Central Azucarera Tempisque, to its 2,000 employees, who subsequently operated the company as a cooperative (interview, St. Louis, 1991). A more common method of reducing the role of the state in the economy has been through deregulation. Previously protected government monopolies were deregulated to allow competition from private companies, and services previously provided by state-owned companies or agencies could now be contracted out to private companies. These avenues were less sensitive politically than selling the companies and permitted a gradual transformation of the economy without massive economic disruption, although they have not been without controversies or setbacks.

Neoliberal Policies and Reelection Strategies Since 1982, the two principal political parties in Costa Rica—especially the PLN—have repeatedly implemented economic policies considerably at variance with their campaign promises. The PLN has not only regularly

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campaigned on a social democratic platform but has had many years in government to implement those policies and to use them to build its electoral support base. The PUSC, which has often campaigned on populist platforms, has exhibited a preference for freer markets and less government intervention in the economy.37 Here I concentrate on the PLN, which has experienced the more pronounced programmatic shift. Despite the party’s frequent and profound divergence from both its campaign promises and its traditional platforms, it has successfully won reelection in the 1980s and 1990s. By examining key PLN policy shifts, I explore the political dynamics that help to explain how political parties that implement policies vastly distant from their electoral promises can still win reelection. During the 1980s and 1990s, the policies that contradict the PLN’s campaign promises and reverse its traditional policy programs have included reductions in funding for education and health, reductions of agricultural incentives for basic grain producers, and lowered tariff protection for the manufacturing sector—all of which appear to harm the groups that have historically supported the PLN. Although the actions of PLN governments might appear politically irrational, in presidential elections during the 1980s and 1990s the PLN and PUSC together consistently garnered more than 97 percent of valid votes (Rovira Mas 1995:4). This surprising outcome can be explained with reference to the institutional rules and strategies the party adopted to implement reforms. The institutional rules include the electoral laws and laws that delimit the behavior of parties, which together allow parties to campaign without taking blame for the policies of the incumbent—even one from the same party. The strategy for implementing reforms was to avoid the shock tactics favored by some IFIs and instead to pass the reforms gradually to minimize their immediate and direct costs for the electorate and to avoid provoking an immediate political reaction. For example, in 1988, when grain farmers protested against cuts in subsidies for agricultural products, the government responded by establishing six commissions with representation from all interested groups to investigate the reforms (EIU 1988[4]:17). The government thus appeared to be doing something on behalf of its constituency, and farmers’ interest groups appeared to have some input into the policymaking process. Both PLN and PUSC governments have followed three major strategies to avoid blame allocation: obfuscation, division, and compensation (Pierson 1994). Obfuscation, the manipulation of information about policy changes, is perhaps the most important strategy. “Information is a scarce and valuable political resource” that, because it is unequally distributed, gives the state the upper hand (Pierson 1994:19–20). The government can make it difficult for potential opponents of a policy reform to gain the information necessary to contest it. Another form of obfuscation governments

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can use is to stagger the introduction of a reform so its full effects might not be felt until many years later, by which time the cause of the problem will be less clear, opposition will be more difficult to organize, and the party may have already been reelected to another term in office. An example of this type of obfuscation would be allowing pensions to decline in real terms by awarding increases at a slower pace than inflation over a number of years (Weaver 1988). Implementing these strategies lowers the possible electoral costs of the reforms, since the costs are not necessarily immediately apparent. Cutbacks in publicly provided services are politically difficult, because the changes affect large numbers of people at once who might organize in response. A divisive strategy could lessen political opposition by targeting the groups affected. For example, in the case of universal, free health care, the government might tighten the entitlement requirements so some groups are affected and others are not. This tightening process can be repeated over the years until very few people receive the governmentsupplied service or it no longer exists. The recipients of any publicly provided good are necessarily a heterogeneous group, with income, sex, age, and geographic divisions governments can use to “divide and conquer” possible opponents to a reform. The final strategy governments can use is compensation. Governments can offer benefits to groups adversely affected by reforms—for example by encouraging appealing private-sector alternatives. “Grandfather clauses” can be used to exclude current recipients of specific policies and thus quiet the opposition. For example, fees for higher education could be introduced that exclude currently enrolled students.38 During the Monge administration (1982–1986), the potentially damaging austerity measures were tempered by new targeted social compensation schemes that provided temporary food aid and support to the poor (credit and job training), and the Social Council was established in 1983 to coordinate the work of the various Autonomous Institutions involved in social policy.39 Other compensation schemes for the poor were established during the Arias administration (1986–1990). These programs included the Family Housing Subsidy (BFV), which Arias had promised in his campaign, and a targeted education program (Educational Computer Science Program; PIE) designed to improve the quality of basic education for poor children. Both programs contained extensive private-sector components. Compensation for labor groups included the reintroduction of employment benefits and improved access to credit for microenterprises, sponsored by the Ministry of Labor (Ministerio de Trabajo y Seguridad Social; MTSS) (Trejos 1995:152). Calderón (1990–1994) continued the compensation strategy begun by Monge. He increasingly targeted government social programs to shield the

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poorest sectors of society from the effects of economic reforms. As had the Arias administration, Calderón attempted to increase the role of the private sector in the provision of health and educational services. Calderón introduced a Food Coupon and School Subsidy program that allowed the BFV to turn its subsidized loans into grants (Trejos 1995:152–153). The case of banking denationalization discussed earlier in this chapter is a telling example of obfuscation. The government denied that its intention was to denationalize or weaken the state banking system, which one Costa Rican economist claimed “is as important to us as the monarchy is to the British” (interview, San Pedro, June 1990). By stating that banking reform was both a necessary modernization (not a denationalization) measure and part of a conditional loan agreement from the USAID, the government made it difficult for opponents of the reform to recognize its true nature or mobilize support against it. Another area of cost-cutting reforms in which the government used a strategy of division was pensions. Like the banking reforms, these changes were implemented over a long period of time.40 The efficiency of the bureaucratic agency charged with administering the country’s pensions—the CCSS—has been improved, and the ages for early retirement and for employee contributions to the pension program have been increased, as have the costs of opting for early retirement. In 1992, the PUSC government reformed the civil service’s expensive pension programs, which had granted lucrative pension rights to public servants. All new CCSS employees were prohibited from joining civil service pension plans and instead had to join the less costly pension plans available to all other workers.41 In 1997, the CCSS proposed gradually increasing the minimum retirement age to sixtyfive over a thirty-year period.42 In the long term, all citizens will be adversely affected by these costcutting reforms in the country’s pension plan, principally through the higher contribution cost and retirement age. Politically, though, the effect appears to have been muted, in part because the reforms have been introduced gradually and their effects will not necessarily be felt for many years. Furthermore, because the civil service pension plans in particular have been attacked, the general population may feel an unjustified privilege has been removed. For civil servants, a grandfather clause permits workers covered by the special programs to remain in those programs; only new hires are excluded from the privilege.43 Health care is another area in which neoliberal reforms have resulted in significant cuts in government funding but the political backlash has been muffled. In 1970, less than 39 percent of the population was covered by the state-sponsored health care programs; by 1979, that number had more than doubled to over 84 percent. Whereas real spending on social policy was 1 percent higher in 1992 than it had been in 1980 and consumed a

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larger proportion of government expenditure, it was 20 percent lower in real per capita terms (Trejos 1995:154–155). Politicians can point to the increase in absolute dollar expenditures as an illustration of their commitment to social policies such as health care, even though as the population has increased, per capita levels have declined significantly. Another example of blame avoidance and obfuscation can be seen in the cuts in the education budget. Even though the level of education expenditure declined during the 1980s and 1990s, the effects of the reduced funding—which could potentially result in increased illiteracy or lower graduation rates—have not yet materialized. Future governments may have to account for the long-term consequences of declines in educational standards, but the incumbant government can reallocate increasingly scarce government funds to other social expenditures where the negative effects of the reforms might become more rapidly apparent. For example, since 1982, successive governments have routinely diverted funds for capital investment such as infrastructure to other areas. By 1995, public investment in real terms had declined almost 40 percent since 1982 (La Nación, March 4, 1996). The degeneration of roads, sewers, and bridges is not likely to become apparent for years. It is assumed that all neoliberal reforms necessarily harm the middle and popular classes and consequently are politically costly to the governments that implement them. Some neoliberal reforms, though, such as the gradual privatization of the banking sector, have significantly limited the government’s capacity to pursue economic development strategies and have been relatively well received. The end of the state banking monopoly has resulted in improved services and has encouraged much of the population to switch to the private banks rather than keep their accounts with the state-owned banks. Thus, governments have been able to capitalize on the perceived benefits to the population not directly harmed by reforms. The Importance of Electoral Laws for Reelection Strategies Voters can punish political parties for deviating from their campaign promises by voting for another party or not voting at all. As noted in Chapter 2, electoral laws make the formation of new parties relatively easy, but they simultaneously create serious barriers to those parties’ electoral success and have allowed the PUSC and the PLN to dominate political life. The relevance of the barriers to the success of third parties is reflected in those parties’ failure to win a significant number of seats in the Legislative Assembly. Since the onset of the economic crisis in the late 1970s and the switch to neoliberal economic policies, votes for third parties have not increased; instead, the opposite has been the case. The third-party left,

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the group perhaps in the best ideological position to capitalize on the abrogation of the social democratic model and the economic hardships experienced by many PLN supporters, failed to win increased electoral support. As Table 5.2 shows, the vote for the third-party left reached a peak in the relatively prosperous late 1970s. With the onset of the economic crisis, the percentage of leftist votes declined in each subsequent election. In the 1998 election, the presidential candidate for the left-wing Pueblo Unido received less than 1 percent of the vote, and no representation was secured in the Legislative Assembly (TSE 1994; Wilson forthcoming c). Other small parties have also failed to transform the austere economic situation and policy deviations of the two major parties into a political advantage. As Table 5.2 shows, in 1978 various nonleft third parties received 10 percent of the national vote, which translated into just one seat in the assembly. Although their representation doubled after the 1982 election, the parties still received just 10 percent of the vote. By 1986, even with the continuing economic crisis, nonleftist third parties collectively did not increase their vote or seat share. In the remaining elections their vote share increased slowly, to 4 percent in 1990 and 7 percent in 1994. Even though these parties won four seats in the 1994 election, their level of electoral support was still lower than it was before the onset of the economic crisis. 44 Clearly, none of these parties represents any serious threat to the

Table 5.2

Presidential and Legislative Assembly Election Results, 1978–1998 PLN

Year 1978 1982 1986 1990 1994 1998

President Rodrigo Carazo Luis A. Monge Oscar Arias Sánchez Rafael A. Calderón José Figueres Olsen Miguel Angel Rodríguez

PUSC

Left

Others

Turnout

Party

(S)

V

(S)

V

(S)

V

(S)

V

(%)

PUSC PLN PLN PUSC PLN PUSC

(25) (33) (29) (25) (28) (23)

39 55 52 47 45 35

(27) (18) (25) (29) (25) (27)

43 29 46 51 41 41

(4) (4) (2) (1) (0) (0)

8 6 4 2 1 1

(1) (2) (1) (2) (4) (7)

10 10 2 4 7 24

81 79 82 82 81 70

Sources: McDonald and Ruhl (1989:178–179); FLACSO (1991:198–199); South America, Central America, and the Caribbean (1991:211); La Nación, February 11, 1994; Rovira Mas (1989b:22; 1995:4, 6, 8); TSE (1994:124); Wilson forthcoming c. (S) Number of seats won. V Percentage of total valid votes received. PLN—Partido Liberación Nacional. PUSC—Partido Unidad Social Cristiana was created in 1983, transforming the broad antiLiberación electoral coalition, Coalición Unidad, which had contested the 1978 and 1982 elections, into a single party. Left—Generally represents coalitions of left-wing parties that contested elections. Others—The most successful “third” parties have been regional parties such as the Partido Unión Agrícola Cartaginés (PUAC).

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dominance of the two major parties, although after the 1994 election they had some impact on the policies of President José Figueres’s minority government.45 This lack of electoral success by third parties has facilitated the convergence of the two major parties on issues of economic policy. In the case of the PLN’s adoption of neoliberal policies, the collapse of the third-party left has eliminated a potential home for disaffected left-wing PLN supporters because there are no credible parties to the left of the PLN. Those voters must choose to vote for a nonideological regional party, switch to the PUSC, stay with the PLN, or abstain. Until the 1998 elections, evidence suggests that Costa Ricans reliably participated in the electoral process. Table 5.2 reveals that abstention rates in general elections have remained relatively stable at around 20 percent of the electorate since 1962, when voting was made compulsory and Calderón’s Republican Party reentered electoral politics.46 The changes that occurred in the 1998 elections are discussed in Chapter 6. Multiple Party Leadership Part of the explanation of reelection in the face of broken campaign promises lies in the organization of the parties and the electoral laws, broadly defined, that establish the institutional framework within which political parties operate. One such institutional rule is the legally mandated separation of leaders in the permanent party outside of the government from the country’s leaders. This division produces parallel hierarchies within each of the parties, which facilitates factional fighting as different leaders claim to speak on behalf of the party.47 The two parts of each party also respond to different political imperatives. The party in government is subject to real-world constraints in the enactment of policy, whereas the nonparliamentary party is interested in getting the party reelected and thus must maintain its broad appeal. The two segments of the party are not in competition with each other, but if the government’s policies are not part of the electoral strategy of the nonparliamentary party, the latter can and does attempt to campaign against the governmental policies and tries to influence the votes of deputies in the Legislative Assembly. This situation becomes especially pronounced as the pre-candidate races near their climax and the general election approaches. The constitutional prohibition on reelection has compounded this separation of the parties. Presidential candidates can credibly present themselves as offering an election manifesto that is very different from the policies of the incumbent, even when the incumbent is from the same political party. For example, during the pre-candidate race for the 1998 election, a government report indicated a slight increase in poverty levels. The opposition

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PUSC candidate, Miguel Angel Rodríguez, as expected, blasted the Figueres administration for the increase and promised to reverse the trend if elected to the presidency. More interestingly, though, the leading PLN precandidate, José Miguel Corrales, stated that he was “in complete agreement” with Rodríguez’s criticism and joined in the attack on the PLN government’s economic and social policies (La Nación, February 3, 1997). Candidates’ blame avoidance, though, is not limitless. When Rafael Angel Calderón—a former cabinet minister under President Carazo—competed for the presidency as the PUSC candidate in 1982, he could not convince voters that he was blameless for the economic crisis or that he would be able to solve the economic problems if elected. Calderón took a drubbing in the election, which the PLN won by a landslide. Whereas the formal rules afford individual candidates the space to present policy positions that are different from those of their copartisans in government, another law mandates the formal separation of the party in the parliament from the nonparliamentary party. With different leaders for each party sector and with those sectors facing different political imperatives, the nonparliamentary party often stakes out a position that differs significantly from that of the parliamentary party or the executive branch. In the case of the PLN, for example, the law allows both the party’s precandidates and the party leadership to maintain their commitment to social democratic programs even as the party in government is abandoning those programs. The pre-candidates promise that if returned to office, the party will implement social democratic rather than neoliberal economic policies; that is, it will not repeat the mistakes of the current administration or stray from the “correct” development path. The party can promise, with a certain level of persuasion, that a new government of the same party will be significantly different. No successful presidential candidate has run on an electoral platform calling for neoliberal restructuring or proposing extensive neoliberal economic programs and the dismantling of the social welfare state. Instead, candidates usually present populist fronts concerning social policy, obfuscate on economic policy during the electoral process, and then implement neoliberal economic reforms once in office with no need to consider reelection. During the 1986 election campaign, for example, Oscar Arias Sánchez, the PLN’s presidential candidate, emphasized the fundamental need for regional stability in Costa Rica’s economic recovery with the slogan “Peace with Arias” and promised to use government resources to build 80,000 new low-income houses. Thus, candidate Arias sidestepped the issue of the application of neoliberal economic policies by the incumbent PLN administration of President Monge and attempted to present himself as an old-style Liberacionista by emphasizing his commitment to an

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ambitious state-funded housing program. Once in office, however, Arias channeled much of his energy into resolving the fratricidal Central American crisis, for which he won the Nobel Peace Prize in 1987. Arias did initiate a program to build more low-income housing—a highly visible if very expensive social program—and initially appointed two leading proponents of state intervention to his cabinet. But in a policy dispute in 1988, Arias sided with the president of the Central Bank, Eduardo Lizano, and Minister of Finance Fernando Naranjo, both outspoken neoliberals, and against the cabinet’s leading social democrats, Agriculture Minister Alberto Esquivel and Minister of Planning Ottón Solís. After a reshuffle, Arias’s cabinet was perhaps “the most neoliberal in all of Latin America, with the exception of Chile” (interview with a former Arias cabinet member, June 1990). The separation of the two party bodies is well illustrated by an example from the Arias administration. The appointment of both neoliberals and social democrats to his cabinet initially promoted party cohesion but also guaranteed a level of policy indecision or at least vacillation during the first half of the administration. Arias’s second annual address to the Legislative Assembly was attacked by PLN and opposition deputies alike as “superficial and rhetorical.” Many representatives believed Arias’s economic policies lacked coordination, which reflected a lack of leadership. The PLN parliamentary party’s displeasure with the president’s performance became manifest when Arias’s own deputies blocked a major part of his legislative agenda, including banking reform and privatization legislation. The nonparliamentary party was also unhappy with his performance and publicly embarrassed him by rejecting his nominee for secretary general of the party (EIU 1988[3]:14). Until the mid-1970s, when José Figueres won the nomination for a third presidential term, presidential candidates were generally selected during a series of meetings of party leaders, who eventually announced an “heir apparent” to the public and to party members. After the mid-1970s, the nomination process was opened up, which permitted more candidates to engage in public competition for the party’s nomination. This practice had a direct effect on the policymaking process and on the party’s political cohesion, since the sitting deputies formed alliances with the competing candidates. The PLN’s pre-candidate race for the 1990 election revolved around two main contenders, Rolando Araya Monge (nephew of the former president), representing the left wing of the party, and Carlos Manuel Castillo (former Central Bank president), representing the increasingly important neoliberal wing. Although the two candidates had major differences concerning the appropriate economic development model, during the election campaign the topic was rarely addressed; when it was, Castillo sounded

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like a traditional social democrat, supporting the basic interventionist model of economic development.48 The anti-Liberación parties, which ran in the 1978 election under the Unidad coalition label and eventually became a single party (PUSC) in 1983, have long been dominated by Rafael Angel Calderón Fournier (“Junior”), the son of the prewar president. Calderón lost the 1982 and 1986 presidential elections before finally defeating the PLN candidate, Carlos Manuel Castillo, in 1990. Calderón won 51 percent of the presidential ballots compared with 47 percent for the PLN, and his party gained a legislative majority (twenty-nine seats). Calderón conducted a very astute campaign; he emphasized his father’s central role in the creation of the country’s welfare system and promised to reinvigorate the social reform policies, which appealed to the poorer voters. Calderón also embraced the popular Arias Peace Plan, a reversal of his bellicose 1986 campaign position, thus removing a political advantage of the PLN candidate. He promised to reverse the PLN government’s agricultural policy, which discouraged basic food production and favored imported food rather than food self-sufficiency.49 He also resorted to demagogic promises, such as promising free housing for the poor to win the votes of poorer citizens, rather than discussing economic policy (Gudmundson and Woodward forthcoming; Wilson 1996a:10). One indication that political parties do not necessarily see themselves as responsible for the policies of their own governments came during the 1994 election campaign when the PLN presidential candidate accused the PUSC leadership of extreme neoliberal inclinations. The country’s political commentators quickly pointed out the irony of the accusation, noting that the two PLN administrations in the 1980s had initiated the neoliberal model (Lara 1995:13). One consequence of Calderón’s undisputed leadership of the PUSC was his increased ability to control the votes of the party’s deputies in the congress. When Calderón became president, though, he no longer exerted the same control; as a lame-duck president he could no longer help the deputies extend their political careers. By the time of the 1994 pre-candidate selection period, the PUSC was engaged in the same public debates and splits as the PLN had generally experienced.

Conclusion The institutional hurdles inhibiting third parties’ electoral success have encouraged groups that disagree with the current party policy or leadership to remain within their present parties. As a consequence, the two major political parties are characterized by informal competing factions trying to

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capture control of the party from within. For example, even after the exceedingly bitter fight between Rolando Araya and Carlos Manuel Castillo in the 1990 PLN pre-candidate race, Araya, the losing candidate, stayed in the party and eventually became party president.50 Oscar Arias, who was publicly snubbed by the nonparliamentary leadership, remained an active member of the PLN after leaving office. Arias campaigned for his wife, Margarita Penón de Arias, against the eventual winner, José María Figueres, son of the former president. Arias, his wife, and José Miguel Corrales, another pre-candidate, refused to publicly endorse Figueres’s candidacy during the general election, which illustrated the discord within the party. In the final days of a very tight election campaign, Arias was pushed to make a public statement supporting the PLN, but he refused to mention Figueres’s name and advocated only that voters support the PLN (Lara 1995:14). The party, then, has not become neoliberal. Instead, certain key figures in the party who hold prominent and influential policy positions are sympathetic to the neoliberal model and gain support from party factions. Thus, voters do not appear likely to punish the PLN at the polls because of the transgressions of individual members. Combined with strategies to limit the immediate harm neoliberal reforms cause for voters, this voter tolerance may account for the fact that despite repeatedly abandoning its campaign promises and reversing its traditional policies, the PLN has succeeded in gaining reelection.

Notes 1. This change under the Monge administration was particularly surprising, since Monge himself had a reputation as a stalwart of the party’s social democratic wing. He was a founding member of the PLN, served as vice president of the Socialist International, edited the social democratic labor paper, Combate, and was secretary general of the PLN for fifteen years. 2. A fourth election in February 1998 produced a narrow victory for Miguel Angel Rodríguez and the PUSC, but the party failed to win an absolute majority in the Legislative Assembly. The election is discussed in Chapter 6. 3. One indication of popular discontent with the services of the state banks was the significant proportion of people who, when given the choice, deposited their money in the new private banks rather than keeping it in the state banks. 4. Richard Beck, a leading businessman, claimed that “Carazo mismanaged the economy about as much as you could do without wanting to” (interview, Heredia, Costa Rica, June 1990). 5. A former president of the BCCR noted that the economic crisis in the early 1980s was so bad that “people were willing to accept the medicine [austerity measures]. Labor unions, the business class, entrepreneurs, and politicians all knew that something had to be done. That is why the government was able to introduce increases in bus fares and so on without much negative response from the people” (interview, San Pedro, Costa Rica, June 1990).

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6. These policies included tough exchange rate controls and the unification of the official and free-market exchange rates, coupled with large increases in utility rates, restrictions on wage increases (below the rate of inflation), and major increases in taxes. The government also negotiated a standby agreement with the IMF for U.S.$106 million for 1983, which facilitated payments to creditors and underwrote the economic stability package. Costa Rica’s stabilization program encouraged the Paris Club to negotiate a rescheduling of the country’s huge external debt (Nelson 1990a:184–185). 7. Interview with a former president of the Central Bank, San Pedro, Costa Rica, June 1990, who stated that the austerity measures were “applied to all social groups. People who were being hurt by the measures were able to see that all other people were being hurt and that it was not just them.” 8. This attitude was expressed frequently in interviews with politicians and businesspeople in Costa Rica. The medicine metaphor belongs to Eduardo Lizano, former president of the BCCR (interview, San José, Costa Rica, June 1990). 9. Bulmer-Thomas (1988:219) notes that the IMF has had only marginal success in persuading Costa Rican governments to follow its neoliberal prescriptions, especially with regard to balanced budgets and reductions in public spending. 10. The four governments of the 1980s and 1990s negotiated several IMF agreements and three major World Bank structural adjustment loans (replete with conditions). The USAID provided substantial aid in the form of grants and loans over the period and was more closely involved at a micro level than the other two IFIs. 11. The USAID did not always side with other IFIs to cajole the government of Costa Rica to accept its neoliberal economic ideas. On at least one occasion, USAID, together with the World Bank, came to Costa Rica’s rescue by persuading the IMF to grant a sizable loan with significantly less stringent conditions (Edelman 1985:44). 12. This term was coined in 1988 by John Biehl, a Chilean-born economist and close personal adviser to President Arias. According to Biehl, these agencies effectively duplicated the functions of existing government institutions and intended to encourage the atrophy of government agencies and their ultimate replacement by the new private bodies. 13. This group includes some of the country’s most important political leaders—notably Thelmo Vargas, Fernando Narranjo, Guido Fernández, Federico Vargas, Eduardo Lizano, and Manuel Dengo, all of whom served as cabinet ministers or as heads of major Autonomous Institutions. 14. CATs also came under attack because the tax rebates are given mainly to a small number of large companies, with twenty-six companies receiving more than 50 percent of CATs (Clark 1995:198). 15. This account of the economic reforms of the 1980s was relayed to me by various politicians, including two key neoliberals from the early 1980s, Central Bank president Carlos Manuel Castillo and Finance Minister Federico Vargas Peralta. 16. Bulmer-Thomas (1988:217) comes to a similar conclusion. He argues that whereas IFI pressures “have been enormously important, internal pressure in favour of a change [in the economic model] have also been present.” He also notes that internal pressures for change predate IFI pressures and that the internal factors facilitated the adoption of neoliberal measures by Costa Rican governments in the 1980s. 17. For a discussion of economic reforms in most Latin American and Caribbean countries, see Williamson (1990a, 1990b); for the case of Peru, see Stokes (1997).

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18. Governments across Latin America and the Caribbean point to their success in privatization as a key indicator of their commitment to market reforms. For example, the People’s National Party government in Jamaica claimed in 1992 that it had divested 90 percent of its public enterprises, making it the most successful country in the region in terms of privatization (Jamaica Outlook 1992:6). 19. The sale of state enterprises was highly regulated, limiting individual private ownership to just 2.5 percent of a company’s total stock and prohibiting the sale of companies to foreigners (Wilson forthcoming a). 20. The debate was over whether the companies should be privatized as employee-owned cooperatives or as regular private corporations. See, for example, González-Vega and Céspedes (1993:120); Lara (1995); and Rojas Bolaños and Sojo (1995:43). 21. Even though public health expenditures did not decline in absolute terms, the more meaningful per capita figures fell by more than 50 percent in constant colones between 1980 and 1989 (Mesa-Largo 1994:98). 22. The programs, Enterprise Physicians, Mixed Medicine, Capitation, Local Health Systems, and Contracts with Private Pharmacies, are discussed in detail by Mesa-Largo (1994) and by Seligson, Martínez, and Diego Trejos (1996). 23. The government was never held to this deadline, which reflects a recognition that it was unrealistic. Policymaking in Costa Rica has traditionally been a very slow process that involves extensive debates and consultations with representatives of all interested groups. See Arias Sánchez (1971); Wilson (1992, 1994); and Carey (1996). 24. The technocrat’s claims were substantiated by both a senior USAID official who was involved in the negotiations and a cabinet colleague (telephone interview with USAID official, April 1991). Ottón Solís (interview with author in San Pedro, Costa Rica, June 1990), former minister of planning, argued that the USAID did not force the banking denationalization on the Costa Rican government but that it was “in agreement with the ideology and so went along with it. They [USAID] were like a catalyst and they were used to help promote a [neoliberal] agenda, and they never denied that certain things were their conditions.” Private-sector representatives, such as Richard Beck, former head of CINDE and the Union of Chambers, claimed private business groups behaved similarly to the PLN technocrats and that USAID’s agenda “was nothing more than what [the neoliberal] economists and the private sector were wanting” (interview, Heredia, Costa Rica, June 1990). 25. The Finance Committee voted unanimously to reject the bill, arguing that the changes in the banking laws would leave the state banks at a competitive disadvantage compared with the new private banks (Wilson 1994:157). 26. At the insistence of President Monge, the bill was reintroduced as an amendment by PLN deputy Guido Granados, a member of the assembly’s Finance Committee (Brenes 1990:75). 27. This controversial effort to denationalize the state banking system and the consequent damaging internal struggle within the PLN could have been avoided if Figueres had made nationalization of the state banking system part of the constitution in 1948 or during his term in office in 1953, when the PLN had more than a two-thirds majority in congress. It is much more difficult to amend the constitution than to change a single piece of legislation, so it is doubtful whether the denationalization of the SBN could have taken place. The reason Figueres did not write the nationalization measure into the constitution is unclear. 28. This legislation was a response to the collapse of ten private financial intermediaries between late 1987 and early 1988. According to its architect, Eduardo

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Lizano, the bill would modernize the state banking system, but its critics argued that it was another step in the gradual process of privatizing the banking industry (EIU 1988[3]:16). 29. Indeed, one of the principal state banks and the oldest in the country, Banco Anglo Costarricense, after engaging in some questionable speculative deals, insider trading, and influence peddling, went bankrupt in September 1994, having lost $130 million on dollar-denominated Venezuelan government bonds (see editions of La Nación during September 1994). 30. One of the major proponents of denationalization was Richard Beck, owner of Atlas Eléctrica, the largest manufacturer of consumer durable goods in Central America. He was also former head of the state-owned CODESA, the USAID-created CINDE, and the Chamber of Commerce. He is currently the owner and president of BANEX, one of the country’s largest and most profitable private financial institutions. 31. After he lost the 1990 election, Castillo immediately declared himself the “leader of the opposition,” a nonexistent position in Costa Rican politics but a clear indication to his rivals that he intended to seek and capture the PLN nomination in the next election, four years hence. 32. In the case of Ecuador, President Bucaram served just six months in office before he was impeached by the Legislative Assembly for “mental incompetence.” Bucaram had been elected on an antineoliberal, populist platform, but once in office he introduced far-reaching neoliberal reforms that undermined his support base and resulted in a general strike. The Legislative Assembly took advantage of the chaos and passed a motion of impeachment in February 1997 (La Nación, February 7, 1997). 33. The government had granted a private U.S. company a license to operate a cellular phone business in Costa Rica. The workers at ICE, the state-owned telephone and electric company, appealed to the Supreme Court, claiming the telecommunications industry was a protected monopoly administered by ICE (EIU 1995[2]:24). 34. Although this is an important transformation in the role of the Supreme Court, it has received inadequate academic attention. For the most important work to date in Spanish, see Murillo Víquez (1994); in English, see Handberg and Wilson (1997). The Sala IV has not become the sole domain of groups wanting to reverse the neoliberal agenda but has also been employed by interest groups to promote privatization. For example, in 1994, a libertarian think tank attempted to have the court declare the state-owned petroleum company’s monopoly on the production and distribution of fuels unconstitutional (Latin American Weekly Report, April 1994). 35. An example illustrates the effect of this overvaluation on the privatization process. The comptroller general’s office valued the state-owned aluminum company, ALUNASA, at U.S.$50 million, which was the price FINTRA had to pay. FINTRA had to reduce the price to U.S.$3 million before a buyer could be found for the company (EIU 1988[3]:15). 36. Labor disputes had turned into increasingly violent confrontations between strikers and the civil guard. During a peasant demonstration against the eradication of subsidies on basic grains, the Guardia Rural used tear gas and nightsticks to quell the demonstrators. The Arias administration eventually responded to the peasants and reversed its decision to end the subsidies. In response, the World Bank immediately suspended part of a U.S.$80 million SAL (EIU 1987[1]:16–17). 37. This in part reflects the divergent component interests that make up the PUSC, including a strong Social Christian faction. It was Calderón’s Partido Republicana that pushed the first major series of welfare measures in the 1940s.

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38. Many of the ideas used here to understand the retrenchment of the Costa Rican welfare state are informed by Paul Pierson’s (1994) examination of the conservative administrations of U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher. 39. This increased government control over the Autonomous Institutions was made possible by the General Public Administration Law passed in 1979. Improved control permitted a more efficient response to the condition of the poor (Trejos 1995:152). 40. Pensions are very expensive recurrent expenditures. Along with sickness and maternity benefits, pension programs absorb about 90 percent of total government expenditures on social insurance and family allowance in Latin America and the Caribbean. Nearly every country in the region has initiated some form of pension reform since the early 1980s (Mesa-Largo 1994:89). 41. In 1987, the state spent 1.5 percent of its GDP on pension contributions; the civil service pension plans swallowed up 68 percent of that fund. Of the total expenditure on pensions, 42 percent went to the 20 percent of pensioners in special retirement programs, and the other 58 percent covered the remaining 80 percent of the population in the regular CCSS pension program (Mesa-Largo 1994:90, 99). 42. La Nación, January 31, 1997. The actual retirement age is fifty-nine and eleven months for women and sixty years and eleven months for men. Publicsector unions immediately began to plan a general strike (La Nación, February 12, 1997). 43. In 1995, the PLN government attempted to reform the teachers’ pension plan. The reform proposals were withdrawn when the teachers’ union led a national strike that closed the schools for thirty-two days. 44. Part of the explanation for the increased representation in the assembly lies in the fact that these parties tend to be regionally based. Thus, their electoral support is generally concentrated in a single district rather than spread across the entire country. 45. Since many of these regional parties are predominantly interested in returning pork to their constituents, it is not uncommon for them to trade votes with the government party in exchange for partidas específicas funds controlled and allocated by the government party (Carey 1996:107–109). 46. The actual cause of the significant drop in voter abstentions from 1962 onward is in some dispute. Since the return of the Calderonistas to electoral politics and the introduction of compulsory voting happened simultaneously, it is difficult to establish which of the two is the primary cause. 47. In January 1997, for example, at least nine individuals had some claim to speak on behalf of the “real” interests of the PLN. 48. Many businesspeople viewed Castillo’s “interventionist” posturing as an attempt to get elected but expected him to change once he was in office (interview with Richard Beck, Atlas Eléctrica, Heredia, Costa Rica, June 1990). Having lost the presidential election, Castillo was elected to head the PLN in 1991. He immediately pledged to block the PUSC government’s privatization efforts and to reverse PLN advocacy of the neoliberal economic measures applied by the Monge and Arias administrations. Castillo was elected leader of the nonparliamentary party with 95 of the 140 possible votes (EIU 1991[3]:20). 49. Arias recognized that the reduced level of economic support for small farmers, in particular for basic grain producers, was harming part of the PLN’s traditional support base. He had begun to reverse his own government’s policy toward

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the agricultural sector a year before the 1990 election (interview with former president of the BCCR, San Pedro, 1992). 50. As discussed in Chapter 2, there have been two notable incidences of PLN leaders deserting the party to establish rival electoral forces: Jorge Rossi in the 1960s and Rodrigo Carazo Odio in the 1970s.

6 Conclusion

This book has analyzed Costa Rica’s political and economic development from Christopher Columbus to the inauguration of current president Miguel Angel Rodríguez with an emphasis on the period since the 1948 civil war. Contrary to what earlier research had claimed, Costa Rica’s colonial experience did not translate directly into a stable democracy after the civil war, and contrary to what many observers of Costa Rican politics had feared, the country’s democratic system did not fall victim to the economic crisis of the 1980s and become a nondemocratic system that mirrored other Central American countries. Nonetheless, despite the continuity of democracy, Costa Rica’s institutions, politics, and economic decisions underwent considerable modifications in response to the economic crisis. In conclusion, I highlight some of the most important points of the previous chapters and outline some changes currently occurring, especially those related to the campaign and election of the current president and Legislative Assembly.

Stability and Change in Democratic Institutions Costa Rica’s democratic origins perhaps lie less in the mythical bucolic “rural egalitarianism” of the colonial and postindependence periods than in the institutional arrangements of the post–civil war period. Costa Rica’s colonial experience was clearly different from that of its regional neighbors. The country was an unimportant, remote outpost of the Spanish Empire, with little gold or subduable Indian labor, which discouraged Spanish settlement in the area. But the notion of an egalitarian rural democracy in the colonial and postindependence periods was little more than a fiction. Only with new 151

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institutional arrangements in the postwar period did all politically significant groups acquire a fair chance to win free, open, honest elections for the presidency and the congress. The creation of a fourth branch of government, the nonpartisan TSE, guaranteed the honest conduct of elections and the tabulation of votes. Thus, any major party (except the Communist Party and the exiled Republican Party) could plausibly expect to take control of the government if it garnered sufficient popular support to win a general election. Once in office, the party could anticipate serving a complete term and, within the democratic rules of governance, implementing its policy agenda. By contrast, in the nineteenth and early twentieth centuries, control of the government was more likely to result from nondemocratic actions rather than from honest democratic elections. Although governments became increasingly certain that they would complete their constitutionally mandated terms, prior to the 1948 civil war many presidents failed to serve full terms because of nondemocratic actions of the opposition. Furthermore, before the war the franchise for national elections—although expanding gradually—had been restricted, and electoral fraud was common. Indeed, one of the major underlying causes of the civil war was the perception that former President Calderón was about to perpetrate major electoral fraud with the goal of permanently excluding opposition groups from gaining control of the government. The postwar institutional arrangements removed much of this fear. Even though the PLN has dominated the political landscape for much of the postwar period, other parties have frequently captured control of the executive branch and occasionally of the Legislative Assembly. Even the Republican and Communist Parties, which were initially outlawed and prevented from participating directly in elections, took part through front organizations until the ban against them was lifted in the 1960s and 1970s, respectively. The postwar electoral laws facilitated the gradual formation of a twoparty system. Various electoral rules encouraged anti-Liberación parties to form electoral coalitions, which helped them win control of the government but often left them disunified once in office and incapable of reversing the expansionary policies of the PLN. (The full effects of the party system on the policymaking process are discussed in Chapters 4 and 5.) In essence, the anti-Liberación coalitions included a very broad range of policy ideas, from the Social Christian Party’s emphasis on social programs and an interventionist role for the state to the Conservative ideas that proposed an end to the state-led economic development model and embraced the free market. Although policy disagreements also existed within the PLN (often fairly serious ones), over time the proponents of state-led economic and social development won out. Thus, until the early 1980s the

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PLN’s record in government was marked by a gradual expansion of the role of the state in both economic and social issues. The failure of antiPLN coalitions to reverse that trend was the result of disunity among their members, their frequent failure to win control of the Legislative Assembly along with control of the executive, and the wide dispersal of policymaking autonomy granted to various government institutions. Although state intervention in both the economy and social policy predates the civil war, only after the conclusion of that war did the institutional framework exist to allow large-scale state intervention. This book illustrates how governments used those institutions to foster the state-led economic development model and how the institutions also protected that model from retrenchment by any government that might want to dismantle it. Protection of the model was built into the institutions through the broad dispersal of policymaking powers. But as the state became larger, even PLN governments found it necessary to reform the institutional arrangements; as a result, since the 1970s executive control over policymaking bodies, especially the Autonomous Institutions, has gradually increased. Although the reforms were intended to give the executive better control over state expenditures, the full ramifications were not felt until the 1980s and 1990s, when both PLN and PUSC governments began to gradually reorient the economy away from the state-led model toward a neoliberal one. The institutions established in the postwar period are not unique in their capacity to generate a stable democracy, but Costa Rica’s particular constellation of institutions produced political incentives that have conditioned the behavior of politicians, bureaucrats, interest groups, businesspeople, and voters since the end of the civil war. For instance, the prohibition on presidential reelection and limitations on the reelection of deputies condition the behavior of politicians. To extend their political careers, politicians generally align themselves with and work for a party precandidate in the hope that the candidate will win the party’s nomination and the subsequent presidential election. Once elected, new presidents generally reward their supporters with political appointments within the bureaucracy, Autonomous Institutions, the cabinet, or the diplomatic service. But the cycle then begins again, and they must seek out the next potential president. The lack of reelection opportunities weakens party discipline, which is further diminished by other electoral laws that mandate the clear separation of the party in parliament from the party’s permanent nonparliamentary body. This policy results in very weak parties with few mechanisms to control the votes of their representatives in government, which, in turn, makes it very difficult to pass unpopular policies, even when the president’s

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party enjoys a majority in the Legislative Assembly. In 1995, for example, President Figueres signed a pact with former President Calderón of the PUSC in an attempt to amass enough support in the Legislative Assembly to pass unpopular economic reforms. The closer it is to a general election, the less likely it becomes that the president will receive the support of his or her copartisans, who are looking to the party’s next presidential candidate. That person, in turn, will necessarily separate himself or herself from any unpopular policies of the incumbent. The ramifications of these electoral laws on policymaking, then, are extensive, and these laws rather than any separation of powers between the executive and the Legislative Assembly are the underlying cause of the country’s slow policymaking process. The increased control over the policymaking activities of the Autonomous Institutions illustrates that institutional rules are not static but can and do change over time. Perhaps the most important reform that has taken place since the new institutions were established was the creation of a fourth chamber (Sala IV) of the Supreme Court in 1989. Traditionally, the Supreme Court had interpreted the constitution very literally. Appeals to the court were difficult, costly, and very slow (Murillo Víquez 1994). Before 1989, the court heard very few cases, and few decisions ever went against the government. In the fifty-one years prior to the establishment of the Sala IV, 347 cases of unconstitutionality were brought before the Supreme Court, and 327 of those were resolved (Murillo Víquez 1994:73). Each year since the creation of the Sala IV, more than 350 cases have been filed and almost 340 decisions rendered on questions of constitutionality. The court’s overall workload has grown from almost 2,300 cases in 1990 to more than 7,400 cases in 1996 (Poder Judicial n.d.). In the case of the courts, a serious backlog of cases, a string of corruption cases, and a general decline in public approval of the court system led deputies to vote overwhelmingly in favor of the new court, although its actions were probably not anticipated by the politicians who voted for its creation. In interviews conducted in August 1997, the general secretary of the Sala IV, Gerardo Madríz, was careful to play down the court’s political significance. Deputy Ottón Solís, however, was highly critical of the court, claiming it had killed many bills he had wanted to push through the congress (interviews with the author, San José, August 1997). The change to an aggressive, activist constitutional court has had a significant impact on the behavior of political and economic actors. Government bodies, ministries, the Legislative Assembly, Autonomous Institutions, and the executive branch must be more cautious and deliberate in their policymaking. For example, without taking into account cases of unconstitutionality, 4,169 cases of “protection” (amparo) were brought against José Figueres Olsen’s PLN administration between May 1994 and

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August 1997. In each of these cases, individuals or groups alleged that the decisions of specific government ministries had adversely affected their livelihoods (La Prensa Libre, September 23, 1997). Whereas historically interest groups would have approached political party leaders in the executive and legislative branches, the creation of the Sala IV opened a new avenue through which to affect government policies. The massive growth in the number of cases brought before the Sala IV reflects its perceived importance and the ease with which people can direct their appeal to that body. The increase in cases may also reflect a growing frustration with the two major political parties, which in the 1980s and 1990s repeatedly campaigned on one set of economic and social policies but implemented a different set. Thus, in contemporary Costa Rica the Legislative Assembly and other government decisionmaking bodies can no longer pass legislation without explicitly considering both the bill’s constitutionality and its impact on individuals’ rights. The ease with which people can appeal to the Sala IV is reflected in a 1997 case filed by a ten-year-old schoolboy from a very poor neighborhood in San José. The handwritten claim was filed against a bus company whose buses were habitually late and consequently caused him to be late for school (Sala IV, case no. 5040-97). This case reflects the growing importance of the Supreme Court. Indeed, one of the very first cases heard by the Sala IV in 1989 concerned Trinidad Fuentes Ortega, popularly known as don Trino, who for more than twenty-five years had sold cigarettes and flavored ice drinks from a cart outside the Legislative Assembly. The Ministry of Public Security ruled that he would have to stop selling his wares in that location during the 1989 Summit of the Americas. Don Trino appealed to the Sala IV, which ruled in his favor and allowed him to keep his stall in operation in its usual location. The courts have also become an avenue for other interest groups such as labor unions and business groups to promote or protect their agendas. For example, in the early 1990s the unionized workers at ICE, the stateowned power and telephone company, appealed to the Sala IV against a government decision to allow a private foreign company to operate in the country’s cellular phone market, which the unions feared was a first step in privatizing the industry. The court agreed with the unions and nullified the private company’s contract with ICE; the decision was based on ICE’s constitutionally guaranteed monopoly over telephone services. Thus, the government was not allowed to privatize ICE or any part of it without changing the constitution, a slow and difficult process. Business and Conservative groups have also used the Sala IV to promote their interests or to hamper the implementation of government policies they dislike. For example, in the mid-1990s the neoliberal think tank ANFE appealed to the Sala IV to challenge the monopoly granted to the

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state-owned oil company, RECOPE, to refine and sell gasoline. If successful, this legal action would move the country closer to the privatization of state-owned companies than perhaps any single piece of legislation considered by the Legislative Assembly since the mid-1970s. New constraints on the behavior of politicians, interest groups, and voters evolve over time, and political actors adjust their behavior accordingly. New rules or modifications of existing rules are a result of political pressure from and frustration among politicians and voters. The reining in of the policy autonomy of Autonomous Institutions was a result of the increased frustration of government officials and business groups. Successive presidents found it increasingly difficult to control the agencies’ policy agenda. The AIs were expanding their functions and were often competing with each other or with the private sector. Thus, whereas autonomy had been initiated as a means of preventing unfriendly governments from enacting retrenchment, an unintended side effect was that autonomy also made it difficult for the creators of the institutions to control them.

The 1998 Election Campaign and the Party System Miguel Angel Rodríguez, the 1994 PUSC candidate, became the party’s only candidate for the 1998 election when Luis Fishman and Guillermo Madriz retired from the race early in the campaign. With no divisive intraparty competition, the PUSC could present a solid, unified front to the electorate and rally its members around Rodríguez very early in the campaign. By May 1996, the PUSC campaign team had already been formed. The PUSC selected its candidates for the Legislative Assembly in March 1997 and began to spend millions of colones on television and newspaper advertisements. The PLN, in contrast, had an open primary with three main contenders: Carlos Manuel Castillo, Wálter Coto, and the eventual winner, José Miguel Corrales. Castillo withdrew early, but the fight between Corrales and Coto was drawn out and bitter. The primary vote was a landslide victory for Corrales (72.6 percent of the vote versus 27.4 percent for Coto), but the victory was marred by accusations of voter fraud. Corrales, who for many years had campaigned against all forms of corruption, refused to accept the nomination until the fraud charges were investigated by the TSE. In August 1997, the TSE finally ruled that fraud had occurred but was not pervasive enough to require another election (La Nación, August 19, 1997). A similar bitter intraparty dispute began in August 1996 over the question of how the party should select its congressional candidates. Corrales wanted an open primary, as did the rank-and-file members, but the party leadership decided to postpone open primaries until 2002. Corrales took

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his case to the Sala IV, which eventually ruled against him and allowed the party to select its congressional candidates without open primaries (La Nación, September 6, 1997). The candidates were eventually selected at a national PLN meeting but not until six months after the PUSC had its candidates in place and working for the election. In many ways, Corrales appeared to be running not just against the PUSC candidate but also against the various sectors of his own party. As if the battle with the party hierarchy concerning the selection process for congressional candidates had not done enough damage to relations between the candidate and the party, Corrales went on public television to denounce three candidates on the party’s preliminary list for corruption (La Nación, September 12, 1997). Corrales had used his reputation for honesty and integrity and his long-standing criticism of the neoliberal policies of various governments, PLN and PUSC alike, to establish himself as a candidate who would tolerate no corruption and who would return the PLN to its social democratic roots. He argued consistently for an active, interventionist role for the state in both economic and social issues. For example, in early 1997, a government report noted that poverty levels had increased slightly. Rodríguez, the PUSC presidential candidate, strongly criticized the Figueres administration. Corrales joined the attack, stating that he was “absolutely in agreement” that the government was to blame for the increase. He also blamed Rodríguez, who he noted had been part of the team that had signed the bipartisan Figueres-Calderón pact in 1995. Corrales believed the pact was directly responsible for austerity measures introduced by the Figueres administration that were the underlying cause of the increase in poverty (La Nación, February 3, 1997). As in previous election campaigns when presidential candidates distanced themselves from incumbents from the same party, Corrales could plausibly separate himself from the actions of his copartisan in the executive branch. Corrales’s strategy, then, was to position himself as a challenger promising to reinvigorate much of the traditional PLN model and as a “clean,” incorruptible candidate willing to end the public corruption he claims is pervasive in Costa Rican society. In the final six months of the election campaign, he appeared not to have been tarred with responsibility for the unpopular policies implemented by his copartisans in the incumbent administration.

The February 1998 Election A record thirteen candidates contested the 1998 presidential election, surpassing the previous record of eight in 1974. Opinion polls conducted by

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all three major polling companies in Costa Rica, though, showed that the competition was really between the two major parties. From August 1997 onward, the polls revealed a 10 percent advantage for PUSC candidate Miguel Angel Rodríguez over José Miguel Corrales of the PLN. The final vote count, however, revealed a narrow 2.44 percent victory for Rodríguez, a margin of less than 34,000 votes. As a result of split-ticket voting, the PUSC’s narrow presidential victory did not translate into majority control of the Legislative Assembly; 5 percent of Rodríguez’s supporters voted for non-PUSC candidates in the Legislative Assembly election. The PUSC controls twenty-seven seats in the assembly compared with twentythree for the PLN and seven for third parties. The polls were more accurate in predicting the high levels of dissatisfaction with the major parties and with electoral politics more generally. Abstention levels rose to more than 30 percent, 10 percent higher than the norm of the previous thirty-six years. The reason for this abstention has not been systematically studied, but it is likely related to a learning process among voters who are perhaps beginning to recognize a pattern in Costa Rican electoral politics. Politicians can promise whatever they wish to get elected, but even parties that have historical and programmatic ties to certain economic and social programs will not necessarily implement those policies once in office. Responding to the predictions of massive abstentions for the 1998 election, conservative columnist Jaime Daremblum (La Nación, July 28, 1997) argued that the cause was “disappointment over the performance of the current [PLN] administration . . . [which] has made voters very skeptical.” But it appears that the disappointment was broader than that. PUSC and PLN supporters seem to have stayed away from the polls in equal numbers. Rodríguez won the 1998 election with almost 61,000 fewer votes than he received when he lost the 1994 presidential election. But even with popular dissatisfaction with the two major parties, the two-party system appears to be solid, at least in the short term. Although a large number of people did not plan to vote for the two major parties, third parties do not appear to be capitalizing on that disaffection. The overwhelming majority of respondents who indicated they would not to vote for the two major parties had no intention of voting for any other party either (La Nación, August 17, 1997). The high levels of alienation from the major political parties have caused concern among political commentators and politicians, with newspapers in Costa Rica running articles on the unusual phenomenon. In the long term, though, if the major parties do not change, third parties might increase their share of the vote. There are few barriers to entry for new parties, as witnessed by the twenty-seven parties registered by the TSE for the 1998 elections. Whereas most of those parties operate at the

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provincial or municipal level, thirteen parties fielded candidates for the presidential or legislative elections or both (La Nación, August 1, 1997). Adding to the third parties’ possible long-term success are new campaign financing rules that remove the secrecy surrounding campaign contributions, restrict those allowed to contribute to political campaigns, and limit how much they can contribute. The old system helped the major parties, as donors are likely to give money to parties that can implement policies that could potentially benefit them—in other words, parties that are likely to govern after the election. Because parties must now declare the origin of all campaign funds, the main parties have experienced a major decline in nonstate campaign contributions. And although state funding still favors large parties since the money is distributed on the basis of votes received in the previous election, the reduction in nonstate contributions should diminish the financial inequity for small and new parties, thus effectively leveling the electoral playing field (La Nación, April 24, 1997). The president of the Partido Independiente, José Alberto Cubero, blames third parties’ lack of electoral success on more than their financial disadvantage. Cubero complains that voters know little about the smaller parties because the news media refuses to cover their ideas and campaign events. Cubero concludes that “if the press helps us more, the [election] result will be different” (La Nación, August 17, 1997). Other third party leaders, such as the president of the Communist Vanguardia Popular, Humberto Vargas, note that the behavior of small parties in the Legislative Assembly and local governments makes them indistinguishable from the major parties. This argument is supported by Carlos Paniagua, the general manager of Unimer, an election polling company. Paniagua argues that minor parties have not taken positions sufficiently distinct from those of the major parties and thus have not escaped voter dissatisfaction with those parties (La Nación, August 17, 1997). Although both the PLN and the PUSC claimed they wanted a clean campaign and intended to debate issues of importance facing the country, the campaign tended to revolve around name calling and accusations rather than ideas and issues (La Nación, June 14 and 18, 1997). The most important issues in the election appeared to be internal party electoral fraud and corruption. The importance of corruption to voters was reflected in the precipitous decline in support for Rodríguez after he visited Carlos Hank González, a Mexican politician and businessman being investigated in the United States for drug money laundering (La Nación, June 29, 1997). Rodríguez’s popularity dropped from 41.6 percent on May 6 to 25.0 percent on June 18, 1997. The PUSC, in turn, missed no opportunity to mention the electoral fraud committed during the PLN’s presidential primary election.

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Even though both parties have implemented numerous neoliberal policies since the early 1980s, no successful presidential candidate has been elected on an explicitly neoliberal platform. In the 1998 presidential election, José Corrales led the PLN in a campaign based on the party’s traditional social democratic platform and rejected neoliberal solutions. Yet in the 1980s, every PLN government implemented economic and social reforms that cumulatively have undermined the foundations of the party’s professed economic development model. Corrales has consistently campaigned against the concept of privatizing state-owned companies and services since his time as a deputy in the 1986–1990 Legislative Assembly, when he was a thorn in the side of then president Oscar Arias Sánchez. Arias claims Corrales is a demagogue who is opposed to the IMF and the World Bank and favors small peasants and the poor (interview, St. Louis, Missouri, May 1992). Since three successive PLN administrations have implemented neoliberal economic reforms, the overwhelming support for the antineoliberal Corrales appears to reveal a significant gap between the party leaders and the party rank and file. The PUSC program, although decidedly more open about its intended use of neoliberal measures to develop the economy, advocates a continued role of the state in providing social services and facilitating economic growth.

Is the Social Democratic Model in Costa Rica Dead? The introduction of the social democratic model was a very gradual process that passed through three distinct phases starting in 1948 and ending in 1982. Since 1982, the model has been slowly whittled away. No rapid far-reaching economic reforms have occurred. Even when considerable changes have been made in the development model pursued by the government, important parts of the old model always survive. For example, whereas the early PLN governments took Costa Rica into the Central American Common Market and introduced import substitution industrialization programs, they did not abandon the agroexport sector. Coffee growers and processors were major beneficiaries of increased state intervention in the post–civil war period. Government resources were used to improve the efficiency and profitability of the agroexport sector, whereas the land reforms promised in the PLN election campaigns were only timidly pursued. Similarly, reforms to the state-led economic growth model have gone to great lengths to maintain benefits to groups that have viewed the programs as entitlements. Thus, although the state plays a smaller role in the

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economy, it is still a major player in creating economic incentives for businesses and supplying a multitude of social welfare benefits, such as insurance, health care, education, and similar benefits. Neoliberal PUSC candidate Rodríguez proposed lowering the cost of electricity to businesses in Costa Rica so they could reduce their production costs and become more competitive in international markets. He argued that such a plan was merely an extension of the benefits guaranteed to Intel to entice that company to make a major investment in Costa Rica (La Nación, September 11, 1997). Rodríguez also promised he would not carry out the incumbent government’s plan to reduce protective tariffs on agricultural products, which was part of an international agreement Costa Rica had already signed and which had become an important issue for the agricultural sector (La Nación, September 2, 1997). These two policy initiatives are instructive since they illustrate that even Rodríguez, with his long public record of support for neoliberal economic measures, shied away from neoliberal policies that were likely to be unpopular with his party’s supporters. None of this is to suggest that no differences can be seen in economic and social services after four neoliberal administrations. In some important areas, the state has reduced its role considerably. In the area of health, innovations in the provision of health care and the inclusion of private hospitals and clinics have allowed the state to be less directly involved while attempting to maintain the country’s traditionally high health care standards. Another area that has changed significantly as a result of neoliberal reform is the financial sector. The great political debate that surrounded the initial reforms in the 1980s was silent when the Figueres administration initiated the process for the outright sale of some state banks. But although the state is becoming increasingly less directly involved in banking (it is still the most important player), it has introduced regulations that effectively push the private banks to fulfill some of the functions previously undertaken by the state. For example, in 1995, when the Legislative Assembly was discussing reform that would grant private banks access to current accounts and to the rediscount facilities of the Central Bank, an amendment was passed that permitted the reform to take place but that conditioned access on the private banks agreeing to channel 15 percent of their deposits to Costa Rica’s state banks and small businesses at subsidized interest rates. Factions within the PLN that had fought long battles to maintain the position of the state banks now recognize that private banks are more efficient and believe they can achieve the same goal of channeling subsidized credit to key industries by forcing the private banks to lend in the same manner as the state banks once did (interview, San José, August 1997). The social democratic model that defined Costa Rica from the end of the civil war until the 1980s was characterized by considerable state

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involvement in directing the economy and by the government’s active role as an investor, employer, designer, and sponsor of development strategies. This model, if not dead, is at least muted. Nonetheless, important parts of the social democratic agenda have been kept alive, such as the creation of alternative development strategies. The most important legacy may be the idea that the state bears responsibility for the economic well-being of its citizens. The strategies governments use in pursuit of this goal are—and have been—the subject of political debate. Few Costa Ricans, though, would deny that the state does have a responsibility to ensure a prospering economy. Thus, it is not inconceivable that the old democratic model developed after the civil war may be—although probably with modifications—resurrected in the future.

Acronyms and Abbreviations

ACORDE AD AI ANFE BCCR BFV CAAP CACM CAF CAT CBI CCSS CCTRN

CENPRO CEPN CGT CINDE CNE

Association of Costa Rican Development Organizations Acción Demócrata (Democratic Action) Autonomous Institution Asociación Nacional de Fomento Económico (National Association for Economic Growth) Banco Central de Costa Rica (Central Bank of Costa Rica) Family Housing Subsidy Consejo Agropecuario Agroindustrial Privado (Private Council on Agriculture and Agro-Industry) Central American Common Market Central American Federation Certificado de Abono Tributario (Tax Credit Certificate) Caribbean Basin Initiative Caja Costarricense de Seguros Sociales (social security bureaucracy) Confederación Costarricense de Trabajadores Rerum Novarum (Costa Rican Confederation of Workers, Rerum Novarum) Centro de Promoción de las Exportaciones (Center for the Promotion of Exports) Centro de para el Estudio de los Problemas Nacionales (Center for the Study of National Problems, El Centro) Confederación General de Trabajadores (General Confederation of Workers) Coalición Costarricense de Iniciativas para el Desarrollo (Coalition for Initiatives in Development) Consejo Nacional Electoral (National Election Council) 163

164 CNP CNS CODESA CTCR ECLA FINTRA FODESAF GDP GDP/C HDI IADB ICE IFI IMAS IMF INVU ISI ITCO MCRL MINEX MLN MTSS NGO NTAE OFIPLAN PD PE PI PIE PLN

ACRONYMS AND ABBREVIATIONS

Consejo Nacional de Producción (National Production Council) Consejo Nacional de Salarios (National Wage Council) Corporación Costarricense de Desarrollo, S.A. (Costa Rican Development Corporation) Confederación de Trabajadores de Costa Rica (Confederation of Costa Rican Workers) Economic Commission for Latin America Fiduciaria de Inversiones Transitorias (Transitional Investment Trust) Fondo de Desarrollo Social y Asignaciones Familiares (Family Allowances and Social Development Fund) gross domestic product gross domestic product per capita Human Development Index Inter-American Development Bank Instituto Costarricense de Electricidad (Costa Rican Institute of Electricity) international financial institution Instituto Mixto de Ayuda Social (Combined Institute for Social Assistance) International Monetary Fund Instituto Nacional de Vivienda y Urbanismo (National Institute of Housing and Urban Planning) import substitution industrialization Instituto de Tierras y Colonización (Institute of Land Settlement) Movimiento Costa Rica Libre (Free Costa Rica Movement) Ministry of External Trade Movimiento Liberación Nacional (National Liberation Movement) Ministerio de Trabajo y Seguridad Social (Ministry of Labor) nongovernmental organization nontraditional agricultural exports Oficina de Planificación Nacional (National Planning Office) Partido Democrático (Democratic Party) Partidas Específicas (Special Projects) Partido Independiente (Independent Party) Educational Computer Science Program Partido Liberación Nacional (National Liberation Party)

ACRONYMS AND ABBREVIATIONS

PMN PNI PQLI PR PSD PUAC PUCR PUN PURA PUSC PVP RECOPE SAL SBN TSE UCCAEP

UCR UFCO UN USAID

165

Partido Movimiento Nacional (National Movement Party) Patronato Nacional de la Infancia (National Child Welfare Agency) Physical Quality of Life Index Partido Republicano (Republican Party) Partido Social Demócrata (Social Democratic Party) Partido Unión Agrícola Cartaginés (Cartago Agricultural Union Party) Partido Unión Cívica Revolucionario (Revolutionary Civic Union Party) Partido Unión Nacional (National Union Party) Partido Unión Republicana Auténtica (Authentic Republican Union Party) Partido Unidad Social Cristiana (Social Christian Unity Party) Partido Vanguardia Popular (Popular Vanguard Party) Refinadora Costarricense de Petroleo (Costa Rican Petroleum Refinery) structural adjustment loan Sistema Bancaria Nacional (National Banking System) Tribunal Supremo de Elecciones (Supreme Electoral Tribunal) Unión de Cámaras Costarricense y Asociaciones de Empresa Privada (Costa Rican Union of Chambers and Associations of Private Enterprise) University of Costa Rica United Fruit Company Unificación Nacional (National Unity) United States Agency for International Development

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Index

Acción Democrática, 33, 63 Agriculture: Chamber of Agriculture, 71; colonial, 11–12; diversification of, 86, 90, 94; economic dominance of, 83; efficiency of, 94; monoculture production in, 28; political power of, 71; reform of, 90; self-sufficient, 11–12, 13 Agriculture and Natural Resources Committee, 78n16 Aguilar Chacón, Manuel, 18, 20 Al Día (newspaper), 75 Alliance for Progress, 72, 93 Altmann Ortiz, Rodrigo, 104 Ambulatory Law, 20 ANFE. See Asociación Nacional de Fomento Económico Araya Monge, Rolando, 79n20, 142, 144 Arias Peace Plan, 143 Arias Sánchez, Oscar, 37n13, 47tab, 60, 66, 78n14, 79n20, 97, 121, 133, 134, 136, 139tab, 141, 142, 147n36, 148n49, 160 Army of National Liberation, 34, 42, 43, 84 Asociación Nacional de Fomento Económico (ANFE), 71 Association of Costa Rican Development Organizations, 121 Austerity, 105, 113, 116, 117, 124, 144n5, 145n7 Authoritarianism, 2, 14, 19, 20, 22, 29–30 Autonomous Institutions, 53, 54–57, 56, 59, 62, 76, 78n18, 80n34, 83, 84, 86, 88, 89, 93, 98, 99, 102, 103, 105, 108, 111n31, 111n32, 127, 136, 148n39, 153, 154 Balance-of-payments, 86, 92

Banana industry, 26–28, 38n22, 83; development of, 26; foreign control of, 26; labor demand in, 26–27 Banco Anglo Costarricense, 94, 147n29 Banco Central de Costa Rica, 55tab, 86, 117, 132, 142, 161 Banco Popular, 99 Banking system, 21; coffee elites in, 25; denationalization of, 128–132, 137, 146n24, 146n27; monopolies in, 98; nationalization of, 43, 75, 84, 98, 109n3; privatization in, 138; reform of, 99, 123, 127–132; state-controlled, 96. See also Banco Anglo Costarricense; Banco Central de Costa Rica; Banco Popular; National Banking System; Sistema Bancaria Nacional Batalla, Fernando, 78n17 Beck, Richard, 144n4, 146n24, 147n30 Bloque de Obreros y Campesinos, 27, 30, 31, 32, 33, 34, 36, 42, 68, 69, 152 Borbón, Jorge, 91, 110n13 Boston Fruit Company, 26 Budget Affairs Committee, 52–53, 78n16 Bureaucracy, 33, 89, 96, 105 Business associations, 70–71 Cádiz Constitution (1812), 15, 17 CAF. See Central American Federation Caja Costarricense de Seguros Sociales (CCSS), 33, 55tab, 126, 127 Calderón Fournier, Rafael Angel, 65, 143 Calderón Guardia, Rafael Angel, 23, 31, 32, 34, 38n28, 39n31, 42, 43, 54, 64, 77n3, 82, 84, 85, 108, 109n5, 111n23, 136, 137, 139tab, 141, 147n36, 152, 154

179

180

INDEX

Cámara de Agricultura, 71 Cámara de Comercio, 70, 71 Cámara de Industrias, 70, 71, 90, 91, 92, 101 Cámara Nacional de Cafetaleros, 71 Capital: access to, 29, 104; allocations, 111n30; attracting, 95; competition for, 101, 126; flight, 116; foreign, 29, 95, 130; international, 104; investment, 96, 101, 138; productive, 104, 110n12; state control of, 86; surplus, 103 Carazo Odio, Rodrigo, 47tab, 64, 78n9, 87tab, 100, 103, 104, 105, 112n33, 113, 115, 117, 119, 125, 139, 141, 149n50 Cardona, Edgar, 44, 77n3, 86, 109n5 Caribbean Basin Initiative, 123 Caribbean Legion, 34, 43, 87 Carranza Ramírez, Bruno, 22 Carrillo Colina, Braulio, 20, 21, 25 Carta Fundamental, 63 Castillo Morales, Carlos Manuel, 79n20, 129, 132, 142, 143, 144, 145n15, 147n31, 156 Castro, Juan Diego, 53 Catholic Church, 6, 10, 32, 34, 38n29, 68, 73–74 CATs. See Certificado de Abono Tributario CCSS. See Caja Costarricense de Seguros Sociales CENPRO. See Centro de Promoción de las Exportaciones Center for the Promotion of Exports, 98 Center for the Study of National Problems, 33 Central America: colonial experience in, 10–11; political stability of, xi, 19, 123; single market for, 93, 110n17; social indicators, 1, 2, 2tab; unification plans, 17, 37n13. See also Central American Federation Central American Common Market, 27, 37n11, 72, 83, 93, 94–99, 98, 104, 107, 110n19, 111n25, 123 Central American Federation, 17, 18, 19, 21, 37n11, 37n14 Centro de Promoción de las Exportaciones (CENPRO), 98 CEPN. See Center for the Study of National Problems Certificado de Abono Tributario (CATs), 123, 145n14 Chamber of Agriculture, 71 Chamber of Commerce, 70, 71 Chamber of Industry, 70, 71, 90, 91, 92, 101 CINDE. See Coalición Costarricense de Iniciativas para el Desarrollo Civil Guard, 43 Civil Registry, 46

Civil Service Statute, 96 Class: cleavage, 12; conflict, 31; dominant economic, 43; lower, 62, 124; middle, 27, 32, 62, 124; stratification, 11, 13; urban, 62 Coalición Costarricense de Iniciativas para el Desarrollo (CINDE), 73, 122, 146n24, 147n30 Coalition for Initiatives in Development. See Coalicíon Costarricense de Iniciativas para el Desarrollo Coffee industry, 83; beneficios in, 25; development of, 23, 37n18; elites in politics, 19, 21, 22, 23; exports, 24, 25, 86; international prices in, 91; state role in, 23, 90; trade, 24 Coffee Office, 110n13 Colonialism, 3, 4, 9–16 Comisión Nacional de Asuntos Indíginas, 55tab Committee for Private Banking (Comité por Banca Privada), 98 Communist Party, 5, 27, 30, 31, 32, 33, 34, 36, 42, 68, 69, 109n5, 152 Confederación de Trabajadores de Costa Rica (CTCR), 68, 69 Confederación General de Trabajadores, 30 Consejo Nacional de Producción, 55tab, 56 Consejo Nacional de Salarios, 101 Consejo Nacional Electoral, 23 Constituent Assembly, 44–45, 85 Constitutional Court. See Sala IV Constitutions, 5, 19, 21, 22, 37n16, 41, 46, 51, 81, 82, 85 Corporación Costarricense de Desarrollo, 55tab, 99, 100, 101, 103, 125, 126, 134, 147n30 Corrales Bolaños, José Miguel, 61, 63, 79n20, 141, 144, 156, 157, 158, 160 Corruption, 15, 32, 33, 159 Cortés Castro, León, 31, 33, 45, 63 Corte Suprema de Justicia, 45, 53, 57–58, 61, 66, 105, 133, 154, 155 Costa Rica: in Central American Federation, 18–19; civil war in, 3, 5, 27, 32–35; colonial experience, 3, 9–16; democratic tradition in, xi, 1, 4, 9, 35, 81, 151; education access in, 2; as gobernación, 15; health care in, 1, 2tab; historical elites in, 10, 11, 15–16; independence period in, 16–32; literacy in, 2, 2tab, 21, 106, 106tab; myth surrounding democracy in, 9–16; political stability in, 19, 43, 45; population growth, 11–12, 88, 92, 98, 99, 102; settlement of, 10; social democratic model in, 81–109; social indicators in, 1, 106, 106tab, 107; standard of living, 2

INDEX Costa Rican Confederation of Workers, 27 Costa Rican Development Corporation, 99 Coto, Wálter, 156 Credit: access to, 136; control of, 84, 91; flows, 90; increase in, 90; subsidized, 91, 95, 133 CTCR. See Confederación de Trabajadores de Costa Rica Cubero, José Alberto, 159 Currency, 18; devaluation, 105; earnings, 89; foreign, 27, 89; maintenance of value, 86 Debt: crises, 118; external, 145n6; international, 119; public, 86; rescheduling, 145n6 Decisionmaking: consensus, 70; political, 41 Defensor de los Habitantes, 57 Democratic Party. See Acción Democrática Dengo, Manuel, 145n13 Deregulation, 124, 125, 127–132, 134 Deuda política, 49 Development: alternative, 92; economic, xi, xii, 1, 3, 6, 18, 23–29, 72, 85, 117; infrastructure, 18, 23, 24; local, 99; market, 29; models, xii, 4; rural, 90; social, 1, 23, 35, 84; urban, 11–12 Diario Extra (newspaper), 75 Dictatorships, 2, 14, 19, 20, 22, 29–30 Echandi Jiménez, Mario, 47tab, 65, 87tab, 89, 91, 92, 93, 94, 108, 110n9, 111n23 Economic: adjustments, 105, 114, 116; austerity, 116, 117, 124, 144n5, 145n7; crises, xi, 3, 4, 7n2, 27, 32, 89, 92, 93, 104, 105, 113, 115, 116, 118, 119; development, xi, 1, 3, 6, 18, 23–29, 72, 85, 117; diversification, 92; diversity, 27; growth, 24, 27, 28, 65, 81, 84, 116; institutions, 5, 9; integration, 28, 96; liberalism, 20, 22, 71; planning, 125; policy, 32, 41, 68, 72, 93, 124; reform, 6, 28, 31, 35, 63, 89, 105, 108, 114, 118, 132–134; rights, 42; stabilization, 116, 117, 145n6; stratification, 11 Economic Affairs Committee, 78n16 Economic Commission for Latin America, 107, 109n2, 110n15 Economic Promotion Plan, 91 Economy: colonial, 15–16; household, 14; industrial-based, 96; international, 24–29, 117; management of, 43; reoriention of, 124–132; structural changes in, 99 Education, 84, 86, 102, 135, 138; compulsory, 22; higher, 111n35; public, 18; religious, 38n29; secondary, 22 Elections: annulment of, 63; campaigns, 6, 49, 50, 78n8, 156–157; candidate

181

selection, 6; closed-list proportional representation in, 46; competitive, 9; Constituent Assembly, 44tab; direct, 21; fraud in, 33, 36, 37n17, 61–62, 152, 159; funding, 49, 50, 50tab; legislative, 46, 47, 48tab, 49, 76, 76tab, 77n6, 77tab; municipal, 46, 54; noncompetitive, 19, 20; open, 5, 9, 46; presidential, 1, 21, 36, 46, 49, 50, 63, 78n9, 79n22, 87, 88, 99; runoff, 50; strategies, 138–143; supervision of, 45; timing of, 50 Electoral Code, 61, 64 El Salvador, 1, 2, 2tab, 10, 36n3, 37n18, 92, 104, 107 Emergency Law (1984), 133 Encomienda, 10, 12, 36n3 Enterprise Physicians, 126, 146n22 Esquivel, Alberto, 142 Ethics Tribunal, 60, 79n24 Exchange rate: controls, 145n6; devaluation of, 92; free-market, 145n6; incentives, 97; international, 105; official, 145n6; overvaluation of, 95 Export Contract Law, 122 Exports: alternative, 24; competitive, 92; development of, 24; diversification, 90, 92; earnings, 24, 27, 37n18; encouraging, 105; incentives, 123; manufactured, 99; nontraditional, 72–73, 121, 123, 125; prices, 92; primary, 89; staple, 90; taxes, 24; traditional, 92, 95 Facio Brenes, Rodrigo, 91 Family Housing Subsidy, 136 Fernández, Guido, 145n13 Fernández Oreamuno, Próspero, 22 Ferrocaril Eléctrico al Pacifico, 55tab Figueres Ferrer, José, 19, 33, 34, 39n32, 39n34, 42, 43, 47tab, 56, 63, 67, 77n3, 78n9, 78n14, 79n29, 84, 87, 87tab, 88, 89, 93, 99, 102, 110n9, 146n27 Figueres Olsen, José María, 47tab, 139tab, 140, 141, 142, 144, 154, 157 Finance Committee, 129, 146n25 Financial institutions, international, 6, 71–73, 105, 117, 123, 124, 145n11; conditionality terms, 72, 115, 117, 118, 119, 120, 128; cross-conditionality, 119; effect on policymaking, 118 Fishman, Luis, 156 Fondo de Desarrollo Social y Asignaciones Familiares, 55tab, 56, 102 Free Costa Rica Movement (Movimiento Costa Rica Libre, MCRL), 74 General Confederation of Workers (Confederación General de Trabajadores), 30

182

INDEX

General Public Administration Law (1979), 148n39 “Generation of ’89,” 22 González, Carlos Hank, 159 González Flores, Alfredo, 23, 28, 29 Government: branches, 51–53; corruption in, 15, 32, 33; employment, 62, 70, 83, 88, 96, 102, 105; judicial branch, 57–58; lobbying, 66; local, 54; policies, 38n29; revenues, 28, 98, 110n18; separation of powers in, 41, 45 Government and Administration Committee, 52, 78n16 Great Depression, 5, 104 Gross domestic product, 1, 81, 82fig, 94, 99, 101, 105, 111n25, 116, 148n41 Guardia Gutiérrez, Tomás, 21–22 Guardia Rural, 147n36 Guatemala, 1, 2, 2tab, 10, 12–13, 15, 36n3, 92 Guerra de la Liga, 20 Health care, 1, 2, 45, 84, 86, 102, 126, 135, 137, 146n21 Honduras, 2tab, 82fig Housing, 136, 141, 143; subsidies, 102 ICE. See Instituto Costarricense de Electricidad IMF. See International Monetary Fund Imports: consumer, 94; discouraging, 105; disruption of, 28; manufactured, 89, 111n25; taxes, 28 Import substitution industrialization, 64, 71, 83, 93, 94, 95–97, 103, 107, 109n2, 110n17, 123 Income: declines, 104; disparities, 13, 14; disposable, 104, 111n25; distribution, 1, 4, 74, 86, 88, 102, 106, 106tab; from coffee, 25; minimum wage, 31, 90; national, 98, 106; real, 104, 111n25, 116; sources, 93 Independent Party. See Partido Independiente Industrialization: debate on, 89–94; import substitution, 64, 71, 83, 93, 94, 95–97, 103, 107; incentives for, 110n17; laws, 27, 91, 110n11; policy, 94, 107; preconditions for, 93; private sector, 83; promotion of, 96; state-led, 94–99 Infant mortality, 1, 2, 106, 106tab Inflation, 101, 104, 109n4, 113, 116 Infrastructure, 86, 110n12; and coffee industry, 24; development, 18, 23, 24; improvements in, 94 Institutions: colonial, 11–12; defining, 3; economic, 5, 9; financial, 6; importance

of, 3; international, 4, 6; judicial, 18; modification of, 4; political, 3, 4, 5, 9, 18, 27, 41–77, 81; United States Agency for International Development, 122tab Instituto Costarricense de Acueductos y Alcantrillados, 55tab Instituto Costarricense de Electricidad (ICE), 55tab, 57, 67, 84, 95, 147n33, 155 Instituto Costarricense de Turismo, 55tab Instituto de Asesoría y Fomento Municipal, 55tab Instituto de Desarrollo Agrícola, 55tab Instituto de Desarrollo Agropecuario, 55tab Instituto de Tierras y Colonización, 55tab, 56 Instituto Mixto de Ayuda Social, 55tab, 56, 102 Instituto Nacional de Aprendizaje, 55tab Instituto Nacional de Seguros, 55tab Instituto Nacional de Vivienda y Urbanismo, 55tab Instituto Nacional Sobre Alcoholismo, 55tab Inter-American Development Bank, 72 Interest groups, 3, 5, 6, 66–75; business associations, 70–71; Catholic Church, 73–74; labor, 68–70; media, 74–75; military, 67; students, 67–68 Interest rates, 109n4 International Monetary Fund (IMF), 105, 117, 119, 128, 133, 145n6, 145n9, 145n11, 160 Investment: capital, 96, 101, 138; criteria, 86; fears of, 91; foreign, 91, 95, 123; incentives, 92, 109n2; manufacturing, 111n22; public, 138; state, 90, 111n28, 123 Jiménez Monge, Bernal, 129–130 Jiménez Oreamuno, Ricardo, 28, 30, 38n25 Jiménez Sancho, Eugenio, 65 Jiménez Zamora, 21–22 Judicial Affairs Committee, 78n16 Judiciary, 57–58 Keith, Minor, 26 Kennedy, John F., 93 Labor: codes, 38n29, 42, 70; coercion, 14; colonial, 10, 11, 36n3; confederations, 68, 70, 80n35; laws, 69, 85; legislation, 45; markets, 26–27; movement, 69, 70; political power of, 68; social division of, 13; strikes, 27, 66, 69, 70, 116, 133, 147n36, 148n42; unions, 5, 6, 27, 31, 42, 45, 66, 70, 75, 80n35, 84, 110n20, 124, 144n5

INDEX Labor Code, 70 Land: access to, 10; apportionment to heirs, 12; colonial, 11; control of, 11; distribution, 4; holding, 12, 13; reform, 78n18, 90; tenure, 13, 14, 56 Law of Foundations and Guarantees, 20 Laws: banking, 146n25; campaign, 49; electoral, 5, 6, 7, 41, 45, 132–134, 152; industrialization, 27, 92, 110n11; labor, 69, 85; modifications of, 6; proindustrialization, 90; vagrancy, 36n3. See also Ambulatory Law; Emergency Law; Export Contract Law; General Public Administrative Law; Law of Foundations and Guarantees; Regulation of the Sale of Shares in Public Enterprises Law Legislation: labor, 45; social, 31; union, 70; veto power, 46 Legislative Assembly, 51, 63, 72, 78n8, 78n10, 79n26, 89, 91, 94, 99, 105, 113, 121, 127, 152, 154; allocation of seats, 47; committees in, 52, 53; elections, 1 Ley de Bases y Garantía, 20 Ley de la Moneda, 118, 124, 127–132 Ley de Protección y Desarrollo Industrial, 94 Life expectancy, 1, 106, 106tab Literacy, 2, 21, 106, 106tab Lizano Fait, Eduardo, 117, 133, 141, 145n8, 145n13, 146n27 Lobbying, 66 Madriz, Guillermo, 156 Marín, Matilde, 60 Market(s): access to, 123, 127; competition for, 101, 104, 126; cultivation of, 110n17; development, 29; domestic, 86, 93, 95, 109n2, 110n17; expansion, 86, 88, 96; external, 91; free, 71, 72, 73, 123; integration, 28; internal, 94; international, 28, 86, 88, 89, 92, 95; mechanisms, xii, 65; reform of, 146n18; stability of, 90; volatility, 89, 95 Mayo Negro, 60 Media, 74–75; bias, 75 Mexican Embassy Pact (1948), 35, 41–42, 109n5 Mexico, 17 Military: abolition of army, 43; civilian control of, 21; coups, 7n2, 36, 86; dictatorships, 29–30; proscription of, 5, 67; replacement of, 43; weakening of, 30, 34, 67 Mixed Medicine, 126, 146n22 MLN. See Movimiento Liberación Nacional Models: agroexport, 88, 92; challenges to, 103–106; economic development, 6, 72;

183

export-led, 73, 96, 123; import-export, 28; neoliberal, xii, 113–144; rural democracy, 9, 11, 21, 36n3; rural-egalitarian, 4, 151; social democratic, 4, 6, 81–109; social development, 23, 63; state-led, xii, 6, 65, 72, 81–109, 82 Monge Alvarez, Luís Alberto, 47tab, 80n32, 113, 115, 116, 117, 121, 123, 124, 125, 128, 129, 130, 136, 139tab, 144n1, 146n26 Montealegre, José María, 21 Mora Fernández, Juan, 18 Mora Porras, Juan Rafael, 21, 24, 25 Mora Valverde, Manuel, 30–31, 68 Morazán, Francisco, 20, 21 Movimiento Costa Rica Libre, 74 Movimiento Liberación Nacional (MLN), 63, 82 Municipal Code, 54 La Nación (newspaper), 75, 80n37, 86, 148n42 Narranjo, Fernando, 142, 145n13 National Association for Economic Growth, 71 National Banking System, 84 National Chamber of Coffee Growers (Cámara Nacional de Cafetaleros), 71 National Development Plan, 103 National Election Council, 23 National Fisheries Plan, 88 National Liberation Movement. See Movimiento Liberación Nacional National Liberation Party. See Partido Liberación Nacional National Movement Party. See Partido Movimiento Nacional National Production Council, 88 National Republican Party, 31, 32, 34, 38n27 National Union Party. See Partido Unión Nacional National Wage Council, 101 Neoliberalism, 113–144 Nicaragua, 1, 2tab, 30, 37n18, 43, 73, 89, 104, 107, 120, 121 Nuñez, Padre Benjamin, 68, 69, 109n6 Oduber Quirós, Daniel, 47tab, 87tab, 101, 107 Oficina del Café, 55tab Oficina de Planificación Nacional, 56 Orlich Bolmarcich, Francisco, 47tab, 83, 87tab, 94, 95, 96 Paramilitary groups, 29–30, 74 Paris Club, 119, 145n6

184

INDEX

Partido Acción Cívica, 44tab Partido Confraternidad, 44tab Partido Constitucional, 44, 44tab Partido Independiente, 65, 88, 89 Partido Liberación Nacional (PLN), xii, 4, 5–6, 6, 46, 47tab, 48tab, 50tab, 58, 60, 62–64, 72, 76tab, 77tab, 78n8, 78n18, 81, 82, 87–89, 99, 101, 102, 103, 107, 113, 114, 115–124, 126, 134, 135, 139tab, 141, 143, 153, 156 Partido Liberal, 44tab Partido Movimiento Nacional (PMN), 65 Partido Movimiento Republicano Popular, 44tab Partido Reformista (PR), 30 Partido Republicano, 47, 48tab, 76tab, 77tab, 140 Partido Social Democrática (PSD), 33, 34, 44, 44tab, 63 Partido Unidad Social Cristiana (PUSC), 47tab, 48tab, 50tab, 58, 60, 63, 64, 72, 114, 115, 122, 126, 130, 135, 139tab, 141, 143, 153, 156, 158 Partido Unión Agrícola Cartaginés (PUAC), 60, 61, 139tab Partido Unión Cívica Revolucionario (PUCR), 97 Partido Unión Nacional, 34, 44, 44tab, 47, 47tab, 48tab, 49, 63, 64, 76tab, 77tab Partido Vanguardia Popular, 30, 31, 58 Patronage, 15, 62 Patronato Nacional de Infancia, 55tab, 56 Penón de Arias, Margarita, 79n20, 144 Picado Michalski, Teodoro, 23, 31, 32, 33, 42, 45, 68, 82, 84 Piza Carranza, Benjamin, 74 Plan de Fomento Económico, 91 PLN. See Partido Liberación Nacional PMN. See Partido Movimiento Nacional Policy: changes, 135; compensatory, 125; debates, 3; directives, 89; economic, 32, 68, 72, 93, 124; formation, 67; implementation, 82; import substitution, 64, 71, 83; industrialization, 94; influencing, 72, 131; information on, 135; institutional effect on, 3; interventionist, 82; neoliberal, 134–143; outcomes, 106–107; redistributive, 62; reformist, 32; social, 32, 68, 72, 93; structural adjustment, 117; unpopular, 116; wage indexing, 116 Policymaking, 66, 146n23; control of, 154; economic, 41; effect of financial institutions on, 118; influence on, 41; patterns, 76; political, 72; political institutions in, 5; power, 66 Political: autonomy, 15, 17; campaigns,

78n8; careers, 62; compromise, 64; coup attempts, 23; decentralization, 99; decisionmaking, 41; development, 18–23; dynasties, 22; institutions, 3, 4, 5, 9, 41–77, 81; liberalism, 22; organizations, 74; policymaking, 72; power, 5, 15, 41, 45, 90, 102–103; rights, 42; stability, xi, 21, 43, 123; succession, 22; violence, 19, 39n34, 45 Political parties, 3, 5, 30–32, 58–66; antiLiberación, 64–65; coalitions, 46, 108; cohesion in, 59; conflict within, 62–63; discipline and control in, 59–62; factionalism in, 59, 62, 79n20, 79n29, 104, 132, 143–144; leftist, 65–66, 80n33, 124; multiclass, 62, 63; opposition, 4, 19, 22, 32, 60, 63, 64, 81–82, 83; politics of, 6; populist, 124, 135, 141; registration of, 49; Special Projects funds for, 60, 79n26; state funding for, 49, 50; third, 7, 50, 65–66, 138, 158. See also Confederación General de Trabajadores; Ethics Tribunal; National Republican Party; Partido Liberación Nacional; Partido Republicano; Partido Social Democrática; Partido Unidad Social Cristiana; Partido Unión Agrícola Cartaginés; Partido Unión Cívica Revolucionario; Partido Unión Nacional; Partido Vanguardia Popular; Reform Party; Social Democratic Party Politics: coffee elites in, 19, 21, 22, 23, 32, 90; electoral, 45; formulation of, 6; implementation of, 6; institutional rules of, 3, 41–77; multiparty, 47; of neoliberalism, 113–144; party, 6; personalism in, 19, 38n24, 58, 65; urban, 31 Poverty, 1, 2, 10, 11, 14, 73, 99, 102, 124 Power: centralized, 20, 102–103; Church, 22; competition for, 45; decentralization of, 51; devolution of, 41, 51–53, 56; dispersion of, 5; distribution of, 41; individual, 52; legislative, 52; monopoly on, 13; policymaking, 66; political, 5, 15, 41, 45, 51–53, 90, 102–103; separation of, 41, 45 PR. See Partido Republicano La Prensa Libre (newspaper), 75 Prices: coffee, 86, 91, 92; determination of, xii; domestic, 105; export, 92; guaranteed, 92; international, 89, 91, 102, 104; subsidies, 133 Private Council on Agriculture and AgroIndustry, 121 Privatization, 121, 124, 125–126, 138, 146n18, 146n19, 146n20 Production, 99; agricultural, 13; coffee, 25; diversification of, 88, 90; domestic, 95;

INDEX expansion of, 95; manufacturing, 104; monoculture, 28 PSD. See Partido Social Democrática PUAC. See Partido Unión Agrícola Cartaginés PUCR. See Partido Unión Cívica Revolucionario PUSC. See Partido Unidad Social Cristiana Quijano, Manuel, 20 Refinadora Costarricense de Petroleo (RECOPE), 55tab, 57, 100, 103, 111n28, 156 Reform: agricultural, 90; banking, 99, 123, 127–132; economic, 6, 28, 31, 35, 63, 89, 105, 108, 114, 118, 132–134; institutional, 85, 86; land, 78n18, 90; market, 146n18; Municipal Code, 54; neoliberal, 114, 115, 124; pension, 148n40, 148n41; policy, 86; “shock,” 132; social, 31, 35, 63, 89, 114; structural, 113; Tax(es), 72, 105 Reform Party, 30 Regulation of the Sale of Shares in Public Enterprises Law, 125 Repartimiento, 10 Repression, 42 La República (newspaper), 75 Republican Party. See Partido Republicano Revolutionary Civic Union Party. See Partido Unión Cívica Revolucionario Rights: economic, 42; political, 42; workers’, 45 Rodríguez, Miguel Angel, 47tab, 139tab, 141, 144n2, 151, 156, 158, 159, 161 Rodríguez Zeldón, José Joaquín, 22 Rossi, Jorge, 65, 79n29, 88, 89, 94, 109n5, 149n50 Rural Guard, 43 Sáenz, Hernán, 105 Sala Constitucional. See Sala IV Sala IV, 57–58, 133, 154–155, 157 Salas, Alexánder, 78n14 Sanabria y Martínez, Víctor Manuel, 31, 38n29 Sandinistas, 104, 120, 121 SBN. See Sistema Bancaria Nacional Sector, manufacturing, 86, 94, 103, 132 Sector, private, 88; borrowing in, 125; industrialization, 83; provision of basic services through, 137; unions in, 70, 96 Sector, public: deficits, 105; downsizing, 65; efficiency improvement in, 124; employment, 62, 70, 83, 88, 96, 102, 105; expenditures, 83; growth in, 49;

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investment in, 138; unions, 70, 96, 110n20 Sistema Bancaria Nacional (SBN), 84, 128 Social: adjustments, 114; benefits, 9, 34; change, 6, 30; compensation, 136; conditions, xi; development, 1, 23, 35, 84; divisions, 16; duality, 11; groups, 27; indicators, 1, 81, 106, 106tab, 107; inequality, 4; insurance, 148n40; interventions, 28–29; legislation, 31; policy, 32, 72, 93; programs, xii; reform, 31, 35, 63, 89, 114; security, 31, 42, 45, 102; services, 102, 125; spending, 117; stratification, 11, 13, 35; structure, 13; welfare, xii, 23, 83, 99 Social Affairs Committee, 78n16 Social Christian Unity Party. See Partido Unidad Social Cristiana Social Council, 136 Social Democratic Party, 27, 33, 34, 63 Social Guarantees, 38n29, 42 Society: changes in, 99; colonial, 11, 12, 13, 15, 16; hierarchical, 14; Indian, 12; oligarchic hegemony in, 28; organization of, 11; rural egalitarian, 11, 151; state role in, 6, 28–29, 33 Solidaridad, 69 Solidarity Law of 1984, 69 Solís, Ottón, 142, 146n24, 154 Somoza García, Anastasio, 43, 85 Soto Alfaro, Bernardo, 22 State: banking system control, 84; campaign funding, 49, 50, 50tab; and coffee industry, 24, 25; control of credit, 84, 91; deemphasis on, xii, 71, 113, 124–132; economic role, xii, 5, 6, 9, 23–28, 62, 82, 88, 96, 97, 99–101, 113, 125; employment, 62, 70, 83, 88, 96, 102, 105; entrepreneurial, 99–106; intervention, 3, 5, 9, 23, 28, 41, 82, 84, 90, 95, 97–98, 99–101, 102, 107, 108, 123; investment, 111n28, 123; parallel, 121; social role, 6, 28–29, 33, 82, 88; welfare, 2, 7n2, 9, 56, 83, 113, 115 Structural adjustment, 117, 119, 145n10 Subsidies: basic goods, 105; credit, 95, 133; electrical, 95; housing, 102, 136; price, 133; reduction in, 116 Supreme Court. See Corte Suprema de Justicia Supreme Electoral Tribunal. See Tribunal Supremo de Elecciones Tariffs, 70–71, 91, 94, 95, 104, 110n18, 123, 132, 135 Tax Credit Certificate, 123

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INDEX

Tax(es): adjustments, 105; codes, 72, 105; consumption, 116; on exports, 24; import, 28; incentives, 92, 97, 109n2, 125; increases, 105, 116, 145n6; injustices, 28; payroll, 102; production, 116; reform, 72, 105; sales, 98, 102; wealth, 43, 86 Tinoco Granados, Federico, 19, 28, 29, 30, 37n16 Trade: agreements, 110n19; balances, 97, 98, 104, 111n25, 116; coffee, 24; dependence, 97; free, 71, 123; monopolies, 18; pacts, 95; regional, 95; terms of, 93, 104 Trejos Fernández, José Joaquín, 47tab, 87tab, 97, 98, 99, 127 Tribunal Supremo de Elecciones (TSE), 45, 46, 49, 61, 65, 77n4, 152, 156 Tropical Trading Company, 26 TSE. See Tribunal Supremo de Elecciones UCCAEP. See Unión de Cámaras Costarricense y Asociaciones de Empresa Privada Ulate Blanco, Otilio, 34, 42, 44, 47tab, 63, 77n1, 79n29, 85, 86, 87tab, 88, 108, 111n23 Ulate-Figueres Pact, 42, 44, 77n2, 79n29 Unemployment, 92, 96, 104, 116, 124 Unificación Nacional, 97 Unión de Cámaras Costarricense y Asociaciones de Empresa Privada (UCCAEP), 70 Unions: company, 69; labor, 5, 6, 27, 31, 42, 45, 66, 70; solidarity, 69 United Fruit Company, 26, 27, 38n23, 90

United States: economic aid to Costa Rica, 72–73, 120, 120fig, 121; exports to, 27; military aid to Costa Rica, 67; in Nicaragua, 30 United States Agency for International Development (USAID), 72, 104, 105, 118, 119, 120, 121, 122, 122tab, 124, 125, 127, 128, 130, 133, 145n10, 145n11, 146n24 Universidad Estatal a Distancia, 55tab Universidad Nacional, 55tab University of Costa Rica, 27, 38n29, 55tab, 57, 63, 103 Uruguay, 7n2, 54 USAID. See United States Agency for International Development Usury, 21, 25 Vargas, Humberto, 159 Vargas, Thelmo, 145n13 Vargas Peralta, Federico, 145n13, 145n15 Vásquez de Coronado, Juan, 15, 16 Villanueva Badilla, Jorge, 129 Violence, political, 19, 39n34, 45 Volio Jiménez, Jorge, 30, 38n25, 38n26 Voting: age, 46; behavior, 66; eligibility, 19, 21; expansion of franchise, 23, 46; registration system, 21, 45; turnout for, 46, 48tab, 158 War of the League, 20 War on Poverty, 56, 100, 101–102 Wilson, Woodrow, 29, 38n23 World Bank, 72, 105, 119, 128, 131, 145n10, 145n11, 147n36, 160

About the Book

How does one explain Costa Rica’s political stability? What features, for example, have allowed the country to respond to its profound economic problems in patterns so different from those prevailing in the region? In addressing these questions, Wilson provides a comprehensive study of Costa Rica’s political and economic development from the colonial period to the present, with an emphasis on its contemporary political economy. Like many other Latin American and Western European countries, Costa Rica adopted a state-led model of economic growth in the postwar period but abandoned it in the 1980s in favor of free-market–oriented neoliberalism. Wilson’s cogent analysis traces this shift, in the process exploring the major conflicts in modern Costa Rican politics. Bruce M. Wilson is assistant professor of political science at the University of Central Florida.

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