The Trouble with Costa Rica

1.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2.

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

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

Costa Rican law prohibits presidents from seeking second terms, and Arias was only able to run this year because the Supreme Court found the term-limit rule unconstitutional. Some saw the ruling as politically calculated. It placed Arias’s campaign under a cloud from the start, and as the campaign proceeded, he proved unable to excite people. Many voters saw him as a tired figure from the distant past, out of energy and out of touch with his people.

Luckily for Arias, the party that has been the main rival to National Liberation over the last half-century, called Social Christian Unity, has collapsed amid feuds and corruption charges. Ambitious politicians have formed several new parties seeking to take its place. The most successful among them is Ottón Solìs, who served as Arias’s planning minister in the 1980s. Solìs is an advocate of Costa Rica’s traditional social democracy. During the campaign, he portrayed himself as less eager than Arias to privatize the state-owned electrical institute, which is the country’s largest public company, less attracted to the export-driven economic model the United States is promoting in Latin America, and more concerned about social justice. He benefited from a widespread perception that Arias is too close to corporate interests, as suggested by his service as vice-president of the board of a large investment banking group, and by his family’s connections to agribusiness and to law firms that stand to profit by advising foreign investors.

The presidential campaign was devoid of passion. The only issue that sharply separated the two candidates was the Central American Free Trade Agreement (CAFTA), which would open markets in the United States to Costa Rican exporters but also allow American companies to sell their products freely in Costa Rica. All five Central American countries and the Dominican Republic have signed the agreement, and all but Costa Rica have ratified it. So has the United States. Costa Rica must make its decision soon, perhaps in the next few months.

Many Costa Ricans fear that the agreement would devastate their economy, drowning local businesses in a sea of American goods. They also worry about the ability of Costa Ricans to sell products ranging from fruit to handicrafts in US markets. For them, the agreement is a prime example of made-in-Washington “neoliberalism,” part of another United States attempt to exploit Central America. During the campaign, Solìs promised that if elected he would seek to “renegotiate” the agreement, though he never said precisely how. This may have been unrealistic, but it led many voters to see him as a defender of national values.

Arias took the opposite view. In speech after speech, he told voters that the free trade agreement would open new markets for Costa Rica, and that rejecting it would be monumental folly. He sharply rejected the suggestion, made by Solìs and other defenders of the welfare state, that the treaty should not be adopted as written because doing so would bitterly divide Costa Ricans. Populists and leftists who criticize Arias want to shape new policies in the traditional Costa Rican way, by seeking consensus among social forces. Arias scorns the idea of consensus, which he calls “the denial of leadership.”

“There never was consensus, not here or in any country in the world,” Arias told me when I visited him at his house in San José. “Democracies advance by majorities, and leadership is what creates majorities…. The free trade agreement is a good thing. Costa Rica has no choice but to insert itself more and more in the global economy. We need to tell Costa Ricans, ‘This is the way, there is no other way, so let’s not lose more time.'”

This debate has placed Arias in the unaccustomed position of siding with American and Costa Rican business interests against indignant Costa Rican nationalists. A previous generation saw Arias as a rebel who dared to defy the United States. The new generation sees him as part of the establishment and Washington’s errand boy.

“Arias goes around the world collecting honorary degrees by denouncing the brutality of neoliberal economic policies,” Solìs told me scornfully one afternoon. “He’s a factory of honorary degrees! Then he comes home and preaches the same doctrine that he denounces in other countries.”

Neither Arias nor Solìs has much in common with the demagogic, populist radicals who have recently emerged in Venezuela and other Latin American countries. Because Solìs opposed the free trade agreement, however, he was perceived as the less pro-American of the two. That helped him at the polls, and very nearly made him president.

By taking such a categorical position in favor of the free trade agreement, Arias showed an aspect of his character that is likely to prove either his undoing or the source of his success over the next four years. Costa Ricans have different words for it: conviction, determination, stubbornness, arrogance, egomania. In office, he will not be a conciliator. The times, he believes, do not afford him that luxury.

Arias insists that the best way to govern a divided country is to take principled positions and maintain them despite all opposition. Many Costa Ricans are looking for just the opposite. They want a conciliatory leader, one who will shape compromises among various social groups like those that have kept their country stable for generations. By rejecting that approach, Arias is taking a dangerous gamble.

Among the many Costa Ricans who fear the consequences is Luis Guillermo Solìs, who was a close aide to Arias during his presidency in the 1980s, but refused to support him in this campaign. Solìs, who is not related to the presidential candidate Arias barely defeated, considers his old friend self-centered, driven by vanity, and ill equipped to reunite a divided country.

“This is not the first time we’ve been at the threshold of social crisis,” Solìs told me when we met in a San José café. “In the past, we avoided crisis through dialogue that involved everyone in society. If we don’t do that this time, the country could dissolve into social violence. The extreme right could reappear, or some irresponsible leftist populist who doesn’t understand geopolitical realities could emerge. But Arias isn’t talking about dialogue. His line is, ‘I know what to do, you don’t, so shut up and do it my way.’ That is the opposite of what Costa Rica needs at this moment.”

3.

One afternoon I traveled with Arias on a campaign trip to Zarcero, a lovely farm town nestled in the fertile hills north of San José. In places like this, hundreds of thousands of Costa Ricans, many who farmed coffee, bananas, and cattle, rose from poverty to prosperity within the span of a single lifetime. “They’re all against the free trade agreement,” Arias told me as we arrived. “I have to convince them.”

We stopped at the central plaza, and I was immediately struck by how different this campaign was from past ones. Costa Rican election campaigns used to be extended carnivals. When a presidential candidate arrived in a town, he was greeted by fireworks and cheering crowds. This time there was none of that. Only a few people paid much attention when Arias entered Zarcero. Their disdain for politics and politicians was all too clear.

“Look at him!” a shopkeeper named Jaime Vargas said as he watched Arias from across the street. “Here we have not just a candidate, but probably the next president of Costa Rica. He’s talking to six people. Others are walking by without stopping. It’s an incredible sight, totally different from what we’re used to.”

I asked Vargas if he planned to vote. “We have this right,” he answered. “People died so we could have it. But now we vote only out of a sense of duty, not with conviction or enthusiasm. Things are bad. The country is divided. We’re disillusioned.”

Might Arias find a way out of this crisis? “He was president,” Vargas shrugged. “He’s part of it all.”

At the local assembly hall, a crowd of about two hundred people, most of them party faithful, was a bit more animated. Arias shook some hands as he made his way to the front, then took his seat on the dais with local politicians. The lights were dimmed so a film could be shown. It turned out to be a well-produced documentary about the Central American conflicts of the 1980s, particularly the contra war in Nicaragua, and Arias’s part in resolving them.

The film ended with scenes of Arias receiving the Nobel Peace Prize, and jubilant Central Americans cheering him. When the lights went up, however, there was only polite applause. Nothing in the film addressed the concerns Costa Ricans have today. It was an exercise in nostalgia, and reinforced the image of Arias as aloof and self-absorbed.

Arias’s speech that afternoon was typically dry and didactic. He did not tell a single story, make a witty remark, promise anything, or even ask anyone to vote for him. Instead he delivered a quasi-academic lecture that touched on the topics ranging from China’s export policies to the importance of competition in the telecommunications industry. He became animated only when arguing that free trade holds the key to Costa Rica’s future.

“A free trade agreement is a great opportunity, and opportunities are there to be taken,” he said. “A small country can be rich. You don’t have to be big to be rich.” Without the agreement, Arias insisted, “nobody, nobody, nobody is going to invest a cent in Costa Rica.” He cited Chile as an example of how countries can prosper by opening themselves to world trade. “It’s no accident that Chile is growing,” he said. “The reason that Chile is having so much economic success and creating so many jobs is that Chile has the most globalized economy in Latin America. That’s why we have to approve the free trade agreement.”

Acutely aware that many Costa Ricans fear their small economy could be crushed by the American behemoth if the trade agreement is approved, Arias reached for an analogy to his triumph over the superpowers during the 1980s. “Twenty years ago I wasn’t afraid of Ronald Reagan, Mikhail Gorbachev, or Fidel Castro, who wanted to wage war in Guatemala, El Salvador, and Nicaragua,” he told the crowd. “We wanted to end those conflicts at the negotiating table, and we did. Twenty years later, we don’t have to be afraid of the United States.” Again the applause was restrained.

Arias did not say much about world politics in his campaign, which was understandable in a country so deeply preoccupied with its own future. The distaste he feels for American foreign policy, however, has not softened since the days when he opposed the Vietnam War and the CIA-sponsored rebellion in Nicaragua. He has publicly condemned the United States invasion of Iraq. When I asked him how he viewed the Bush administration’s foreign policy, he said:

I believe in multilateralism. I believe the United Nations should be strengthened, not weakened. I believe that the theory of preventive war is an affront to the system of international law that has been built up over centuries. I believe that, to quote Octavio Paz, the foreign policy of the United States can be described by two words, arrogance and ignorance. Finally, I believe that what the world wants from Washington is that it wage war not only against terror, but also against poverty, inequality, illiteracy, sickness, and environmental degradation.

With these views, Arias could have become a hero to the many Costa Ricans who are estranged from the Bush administration. To win their votes, however, he would have had to oppose the free trade agreement. Because he refused to do so, many of them voted against him. That may have been a measure of his integrity, but it will complicate his effort to govern a country that has changed enormously since his last term as president. No matter how strongly he condemns the Iraq war and other aspects of American foreign policy, his support for free trade leads many to see him as an apologist for the United States.

Costa Rica is an eco-paradise that includes rain forests, cloud forests, tropical swamps, and long, pristine beaches, so it is not surprising that tourism is the country’s largest money-earner. The economy also has other strengths. Farmers are growing new crops—mango exports nearly doubled last year—and factory owners have found foreign markets for products from tires to aluminum sheets. In 1996 the American computer company Intel chose Costa Rica as the site for a new $300 million microchip factory. Foreign-owned companies that produce medical devices, including Abbott Laboratories and Boston Scientific, have invested hundreds of millions of dollars in Costa Rica. For a time this led to giddy hope that Costa Rica could emulate Ireland’s sudden leap to prosperity.

In a new book comparing the two countries, Foreign Investment, Development, and Colonization: Can Costa Rica Become Ireland?, the economist Eva Paus asserts that Costa Rica has considerable assets, including an educated labor force and proximity to the US market, but is hampered by “major challenges in infrastructure,” especially roads, air transport, and telecommunications, “lack of access to finance capital,” a “dearth of tax revenue,” “additional pressures from a large immigrant population from Nicaragua,” and the “absence of a cohesive government strategy.”

“In addition, the bribery scandals of 2004 cast a potentially long shadow over Costa Rica’s image of a country with no backroom deals,” Paus concluded. “Costa Rica is a long way from joining the tiger club.”

Arias told me that frustration over this state of affairs, along with his unabashed conviction that he is the only person in Costa Rica with the skills, vision, and experience to set the country right, is what drove him to seek the presidency again. “I had no choice,” he said with a world-weary sigh. “This country is bogged down, without leadership, without direction. Problems aren’t being resolved, just postponed. There just isn’t anyone else, although that may sound harsh. I don’t want to sound arrogant, but that’s the real reason. Before I returned to politics, I was a kind of national hero, a source of pride for everyone in this country. I was above domestic politics. Now I’m just another politician. I used to be loved. Not anymore.”

On May 8, Arias was inaugurated in a festive ceremony at the National Stadium in San José. Outside the gates, several thousand protesters chanted slogans against the free trade agreement. Arias made no concession to them. Instead he forcefully repeated his promise to be a decisive leader:

We cannot continue drifting without direction, interminably discussing everything, chasing the phantom of unanimity, wasting our best days as if time were not passing, as if history will stop to wait for little Costa Rica to overcome its anxiety.

A nation that fears the world, and cannot adapt to it, inexorably condemns its youth to seek success abroad. If it does this, it is less sovereign, less just, and less of a nation.

Arias now governs a nation that is not only politically polarized but also more deeply divided between rich and poor than at any time in its modern history. Many who live in the slums of Costa Rica are Costa Ricans who have been left behind by the country’s development. Even more are Nicaraguan. No one knows how many Nicaraguans have crossed the border and are now trying to make a living here, but most estimates put the number at 400,000 or more—10 percent of Costa Rica’s population. They are poor, often very poor, and have come to a neighboring country in search of better lives. Many of the women work as maids. The men take jobs Costa Ricans don’t want, either on construction sites or in the fields.

One of the slums where this underclass lives is La Carpio, on the outskirts of San José. Several taxi drivers were reluctant to take me there, saying the place was too dangerous. Twenty years ago, when the Central American wars were raging and I visited Costa Rica regularly, no place in the country was considered unsafe. Finally I found a city official, Pedro Valdìvia, who knows La Carpio well and agreed to drive me around.

“Everything here is illegal,” Valdìvia said as he maneuvered his pickup truck through a squalid jumble of precariously built shacks. “No one has papers. No one pays taxes. It’s very dangerous at night. Every place sells liquor. Many offer prostitutes, including children. There are drugs. A lot of people carry weapons. Crime is out of control. Police can’t come in at night, or if they come in, they don’t see anything.”

This picture of social decomposition is sadly familiar in slums across Latin America. What makes La Carpio so startling is the fact that it is in Costa Rica. It is two miles from the center of San José, two miles from Oscar Arias’s house, and across a narrow valley from a Maserati showroom.

A few days later, I visited Iván Molina, a historian and co-editor of a new collection of essays called The Costa Rica Reader. We spoke for a while about politics, and he told me that his country “has not been this polarized since 1948.” Then he pulled out La Miel de los Mudos, a thin book of the science fiction stories he writes as a hobby. He suggested I read one of his futuristic fantasies, called “February 2034.” In it, Costa Ricans fall victim to a mass hysteria called “electoral asphyxiation.” Thousands of increasingly frustrated people kill themselves every election day because there are no decent candidates.

Molina’s fantasy reflects the sense of disillusionment and fear of the future that I found throughout Costa Rica. A college student named Steven Chavez, whom I met in a San José bookstore, expressed this apprehension as well as anyone I met. He told me his country is still doing well compared to other Central American countries, but added unhappily, “Costa Rica is changing, and not for the better.”

—May 10, 2006