Council On Hemispheric Affairs

MONITORING POLITICAL, ECONOMIC AND DIPLOMATIC ISSUES AFFECTING THE WESTERN HEMISPHERE

Tuesday, 5 July 2005

COHA MEMORANDUM TO THE PRESS

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Releases_2005/05.67_Costa_Rica’s_Fall_From_Grace.htm

• Costa Rica is no “Switzerland of Latin America,” but merely one more banana republic.
• The recently-initiated investigation of current Costa Rican president Abel Pacheco is the latest in a string of presidential corruption scandals in the country.
• Three former presidents have also been implicated in fraudulent transactions, causing ignominious resignations from the leadership positions from important bodies like the Organization of American States (OAS) and the World Economic Forum.
• The overseas’ interests behind the corrupt dealings include government agencies and private corporations in Taiwan, France and Finland.
• The recent investigations have severely damaged Costa Rica’s reputation as a bastion of democracy and public rectitude.
• In order to salvage the nation’s ravaged international image, the current investigations must be carried out in a scrupulously professional manner and any responsibility for dishonest transactions must be determined.

On June 1, Costa Rican President Abel Pacheco agreed to a parliamentary inquiry into the funding of his 2002 presidential campaign, his travel records and his business contacts. Now the fourth president in a row to be implicated in a string of government corruption scandals, Pacheco hitherto has been a strong advocate for the official investigation of dishonest practices by state officials, calling corruption “a cancer” that was eating away at the Central American country. Pacheco’s predecessors, former Presidents Rafael Angel Calderon, Jose Maria Figueres and Miguel Angel Rodriguez have all been accused of corruption and the abuse of their offices and are currently facing investigation by Costa Rican authorities. Calderon and Rodriguez are under house arrest after serving short prison sentences, while Figueres remains in Switzerland, issuing letters to the Costa Rican government insisting on his innocence and claiming that his political enemies are behind the charges against him.

Past Presidents

Calderon (president from 1990-1994) is charged with receiving nearly $500,000 from a Finnish government loan to Costa Rica intended for the purchase of medical supplies. Figueres (1994-1998) allegedly confessed to receiving about $900,000 in various commissions from Alcatel, the French cellular telephone company, during his presidency. Finally, Rodriguez (1998-2002) is under investigation for allegedly demanding approximately $1.2 million of a $2 million commission that Alcatel paid to the former president’s close associate, Jose Lobo in exchange for helping to finalize a deal between the corporation and the state-run Telecommunications and Power Institute. Last October, the growing revelations of his being implicated in mushrooming scandals forced Rodriguez to step down from his post as OAS secretary general, which he had just assumed, and Figueres to give up his position as the head of the World Economic Forum. These withdrawals under the worst of circumstances should serve to remind the outside world that it has been a long time since Costa Rica has deserved to be called the “Switzerland of Latin America;” rather its broad-band corruption and steamy politics far more accurately should see it as merely one more smarmy Central American banana republic, as the recent CAFTA debates once again affirmed. In those debates, all of the Central American presidents covered up the fact that the regional free trade area produced much more of a “win” for the U.S. than it did for their countries.

Not Over Yet

The current president, Pacheco, is accused of a string of indiscretions, including irregularities in his 2002 campaign financing. According to Costa Rican law, donations to political campaigns cannot exceed $28,000, and there can be no foreign donations. Pacheco’s campaign received and acknowledged contributions of $100,000 from Alcatel and $500,000 from various Taiwanese businessmen. In addition, the Costa Rican government partially paid for two trips Pacheco took to Seville last year, where he met with Spanish businessman Bernardo Martin Moreno. Moreno, who arranged to have published a book by Pacheco, later just happened to have won the state-controlled right to develop the Papagayo area of Costa Rica as a tourism destination. Pacheco also appointed Moreno the honorary consul for Costa Rica. In another twist, former chief protocol officer Jorge Arce, who accompanied Pacheco to Spain, resigned on May 30 after it was revealed that he had previously worked for Moreno. The legislative investigation of Pacheco’s activities is ongoing, even though the president himself continues to maintain his innocence.

International Actors

Characteristically, Costa Rica’s corrupters are foreign governments or overseas’ corporations. For example, there is a longstanding relationship between Taiwan and Costa Rica, the latter being one of a dwindling number of countries that still recognizes Taiwan’s independence from China. There is little question that such diplomatic recognition is the motive behind the Costa Rican government’s skewed dealings with the Asian nation, though in a statement to the Taiwanese press last October, a spokesperson for Taiwan’s Ministry of Foreign Affairs insisted that any government money given to Costa Rica is intended to foster the Central American country’s “national development,” not to buy diplomatic support for Taipei..

In addition, in 2001, Finland loaned the Costa Rican social security system $39.5 million with which to purchase advanced medical technology on the condition that San Jose purchase at least half the equipment it needed in this sector from Finnish corporations. The president of Costa Rica at the time, Rafael Calderon, allegedly received a kickback from the Finnish director of the state-sponsored program. Last April, the Finnish ambassador to Central America pledged to reform the nation’s foreign aid format, acknowledging that the terms of the 2001 loan invited corrupt transactions.

Outside Reactions

The international response to these scandals has been surprise, consternation and perhaps even some pleasure due to Costa Rica’s somewhat ill-deserved reputation of being the “Switzerland of Latin America.” But the myth goes on, as was seen last year when the Latin American Caribbean and Central America Report described corruption in the country as “minimal.” Since the corruption scandals broke last October, however, several international organizations have criticized Costa Rica’s lack of transparency. According to an article in the San Jose daily La Nación, a March report co-sponsored by the OAS and the Swedish-based International Institute for Democracy and Electoral Assistance found Costa Rica’s system of contributions to political campaigns as “linked to practices that go against public interest.” According to the report, individuals and corporations are known to have bribed legislative and executive officials to “’ease’ appointments, bids, loans, bills, decrees and regulations for the benefit of the donors.”

Declining National Morale

All of these scandals have had a debilitating impact on Costa Rican public opinion. According to international watchdog organization Transparency International, Costa Rica is the second most pessimistic country when it comes to corruption; in December 2004, 61 percent of Costa Ricans expected government corruption to get worse within three years, which is a dramatic increase from 32 percent in 2003.

The Costa Rican daily La Nación conducted a survey of the country’s registered voters in May, finding that 32 percent would abstain from voting in national elections if they were held at that time. Also, the survey found that 12 percent of Costa Ricans are unsure of whether to vote in the upcoming November 2006 elections. The newspaper blames this alarmingly high percentage on “a weakening of democracy, particularly because of misuse of powers and the inefficiency of politicians.”

Grave Implications

Costa Rica’s fall from grace has significantly affected the country’s international image. Long a “model of Latin American stability and prosperity,” according to Mark Kaufman in the Washington Post, Costa Rica has been best known for its high literacy rate and democratic strengths as well as its low level of violence and domestic discord. But the seemingly endless corruption scandals plaguing the nation have gone a long way to disable the very spirit of democracy thought to be entrenched in the Costa Rican mentality. The country’s fate and bona fides now rest on the government’s investigative machinery; judicial probes now being carried out must be honest and exacting in order to save the once-respected nation from the complete destruction of its already fast-fading reputation.

This analysis was prepared by COHA Research Associate Sara Evans.

July 5, 2005

For More Information:

“Alcatel’s Costa Rican kick-backs scandal unfolds.” Le Monde. 6 November 2004.

Alvarez, Ronald. “Pacheco’s corruption troubles.” UPI. 21 January 2005.

“Ambassador says Finland will reform aid to Costa Rica.” La Nación. 21 April 2005.

“Around 32% of voters would abstain in Costa Rica’s elections were held now.” La Nación. 19 May 2005.

Chen, Melody. “DIPLOMACY UPROAR: The embassy in Costa Rica said it had no information about the reported donations to the former president of the Central American nation.” Taipei Times. 15 October 2004.

“Corruption at the Caja?” Latin American Caribbean and Central American Report. 25 May 2004.

“Costa Rica: Spending commission censures Pacheco.” Caribbean & Central America Report. 14 December 2004.

“Costa Rican corruption scandal shows no sign of abating.” EFE News Service. 28 October 2004.

“Former OAS chief jailed in Costa Rica graft probe.” Reuters News. 29 October 2004.

“Former President of Costa Rica, Calderon, is granted house arrest; Another ex-President goes home.” La Nación. 24 March 2005.

Kaufman, Marc. “OAS Chief Resigns under cloud; former Costa Rican president accused of taking bribe at home.” The Washington Post. 9 October 2004.

Kimer, James T. “Costa Rica: Corruption Scandals.” NACLA Report on the Americas. Vol. 38, Issue 4. 1 January 2005.

Mencias, Eileen A. “Corruption in RP seen to worsen,” Manila Standard, 13 December 2004.

“Myths shattered, a corrupt Costa Rica rethinks history,” Latin America Database, Gale Group. 4 November 2004.

“Not so Swiss after all: Bribery scandals engulf Costa Rica.” Economist, Vol. 272, Issue 8403. 27 November 2004.

“Pacheco faces parliamentary inquiry.” Latinnews Daily. 2 June 2005.

“Pacheco fails to shake off scandal fallout.” Latin American Weekly Report. 7 December 2004.

“ Report says donations to Costa Rican political campaigns have been excessive;

Reprimand for political donations.” La Nación. 31 March 2005.

“World Economic Forum CEO resigns amid Alcatel Costa Rica corruption probe,” AFX News. 29 October 2004.

The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being “one of the nation’s most respected bodies of scholars and policy makers.” For more information, please see our web page at www.coha.org; or contact our Washington offices by phone (202) 223-4975, fax (202) 223-4979, or email coha@coha.org.

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Memorandum to The Press 05.67

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