818.51/976a: Telegram
The Acting Secretary of State to the Minister in Costa Rica (Scotten)22
152. The Costa Rican Minister of Finance is urgently requesting that this government arrange a prompt loan of $1,000,000 to the Costa Rican Treasury to enable it to pay off the Bank of Costa Rica (not the National Bank) and a number of private firms for supplies and services made available to the government, especially in connection with operations of the Fomento Ministry. The Minister states that at the moment revenues and expenditures are about on even keel, but that this backlog is very difficult and is causing serious political consequences due to the attitude of the creditors. The Minister, after first requesting all sorts of fantastic arrangements, has now settled upon increasing the $4,600,000 credit to $5,600,000 on the same conditions, with a proviso that $1,000,000 of the total may be immediately devoted to paying off the old accounts. The Minister admits that, although much of the accounts arises originally from imports, the government is obligated to pay in colones, and there is no immediate exchange problem but rather a local budgetary difficulty.
The Department fully appreciates the difficult political situation of Costa Rica and the economic difficulties arising out of the effects of the war and especially the shipping situation. At the same time, the United States has already agreed upon an extensive program of cooperation, especially in connection with highways,23 and it is loath to enter into arrangements for directly financing budgetary deficits. [Page 242] In this particular case, consideration is being given to the extension of some type of loan of perhaps somewhat less than $1,000,000 on shorter terms, perhaps as much as five years.
The Minister of Finance at first stated that the arrangement could not in any way be carried out through the National Bank for political reasons, and that the Costa Rican Government cannot go to the National Bank for assistance in this matter for similar reasons. He has now indicated that he will reconsider various proposals when he returns next week to Costa Rica.
Pending the completion of the arrangements for the $1,000,000 credit the Minister of Finance has requested the Export-Import Bank to authorize the release of $500,000 of the proceeds of the gasoline tax now on deposit in the National Bank of Costa Rica in accordance with the Article 9 of the $4,600,000 loan contract. The funds withdrawn would be redeposited in the National Bank of Costa Rica as soon as the $1,000,000 loan was approved. Such an arrangement would appear to require the approval of the National Bank which is a party to the loan contract.
Please give the Department by Monday24 when Escalante plans to leave Washington, your evaluation of the political factors involved particularly in view of the resignation of Volio25 who was primarily concerned with the highway construction arrangements.