Costa Rica: Resisting Austerity

...Almost immediately the CUT-directed strike was declared illegal...

...In 1983, the government reported a marked rise in thirddegree malnutrition among children and expressed fears that this could reach "epidemic" proportions...

...After dozens of solidarity strikes by other unions throughout the country, the government reassessed its tactics and the workers won company compliance with contracts that had ended earlier strikes...

...Unemployment and underemployment continue to increase and the currency devaluation has severely eroded the purchasing power of most of the population...

...After 10 days, the government agreed to begin payment of back pay in three months, but when the time came the union caved in and signed a contract accepting a raise of only $11 per month...

...The situation worsened after the post-1973 rise in oil prices...

...Infant mortality, previously on a level comparable to developed countries, is climbing rapidly...

...This gained Costa Rica a four-year grace period for payments of principal and improved terms for meeting its interest obligations...

...Soon after taking office, the Monge Administration launched a massive campaign appealing to Costa Ricans to "tighten their belts" to help put the country back on its feet...

...For this reason, it was viewed with particular concern by the Monge government and the Costa Rican upper class...

...This incurred IMF wrath and led the United States to cut off aid to Costa Rica...

...When the FDT-led teachers stopped work in April because they had not received the $22 per month raise due since January, the government declared that it was simply unable to pay because it had no money...

...People were urged to live more simply by going back to locally produced goods, such as corn tortillas instead of bread made from imported wheat and wood-burning stoves instead of modern electric ranges...

...The wage increases won by public employees, the promises of stepped-up land redistribution and the struggle against electricity rate increases must be counted as victories for the Costa Rican people...

...More than any other struggle in recent years, the protest against electric rate increases galvanized massive resistance among sectors of the population which had previously been relatively unorganized and passive in the face of increasing poverty...

...The payment to foreign banks-an amount equivalent to one-half the country's annual export earnings-has made it difficult to acquire essential inputs for agriculture and industry...

...The CUT includes among its 70,000 members two of the most active sectors of the Costa Rican working class: the public employees and the banana workers...

...Investment Opportunities" Some of the results of the austerity program have, by the bankers' criteria, been gratifying...

...Why did the bubble burst in Costa Rica, a nation whose comparative prosperity once earned it the sobriquet of "the Switzerland of Central America...

...New Labor Federations In November 1980, two of the country's strongest labor organizations-the General Confederation of Workers and the National Association of Public Employeesjoined forces with various independent unions to form the United Workers Federation (CUT...

...Little effort was made in recent years to bring about changes in the country's productive structure which might have generated the wealth to pay for the social welfare programs or the conspicuous consumption of the large middle class...

...Widespread BANDECO advertising denounced the strikers as Soviet-inspired traitors...

...In August, public employee strikes multiplied, with walkouts by air traffic controllers and employees of the state-owned oil refinery, banks, hospitals, utilities and the insurance company...

...The massive land invasions prompted Monge to announce an emergency program on agrarian problems which will redistribute land to some 2,000 needy families each year until 1986...

...it will be necessary to declare the Communist Party illegal...

...But these victories also highlight the difficulties of applying reformist solutions in the context of IMF-imposed constraints on public spending...

...In mid-November, the legislature imposed a 1% tax on dollar remittances abroad in order to finance infant care centers...

...By 1980, the number had climbed to 41.7% and in 1982, 70.7% were defined as poor...

...Imports have declined, thus improving the trade balance...

...Long accustomed to this top-down reformism and the benefits of living in a welfare state, Costa Ricans have not formed the kinds of broad-based popular organizations which exist elsewhere in Central America...

...In the first nine months of 1983, there were more than 100 disputes between landowners and peasant squatters...

...Thousands of families refused to pay their electric bills, complaining that despite efforts to economize they were unable to pay rates which had risen almost 300% in two years...

...Government concessions to pressure from below inevitably bring conflicts with "Mister Fondo...

...The new administration of Luis Alberto Monge, however, which took office in May 1982, quickly acceded to the demands of what some Costa Ricans began to call "Mister Fondo...

...Costa Rican governments have traditionally promoted reforms as a way of avoiding the conflicts which have plagued the country's neighbors...

...After 63 days, the longest strike in Costa Rican history, the union won its principal demands and returned to work under the watchful eyes of a joint labor/management committee charged with enforcing the contract...

...Popular protest has not been limited to plantation laborers and urban workers...

...Shortly after the CUT was founded, the teachers and other unions opposed to the CUT's radical orientation created a competing labor federation, the 25,000 member Democratic Workers Front (FDT), many of whose leaders have ties to the governing social democratic party...

...Virtually bankrupt since 1981, Costa Rica has in the past year renegotiated its massive $4 billion public debt, one of the the highest per capita debts in the world...

...Most importantly, Costa Rica paid the banks $396 million in debt service in 1983...

...By 1981, the problems of stagnating export agriculture, dependent industry and growing debt brought a balance of payments crisis and led the government of then President Rodrigo Carazo to default...

...Banana workers on the Pacific coast struck in solidarity with their Caribbean counterparts...

...The walkout, widely viewed as a test of how labor would fare under the new administration, ended after 42 days when the government gave in to the physicians' demands...

...More and more families are now below the poverty line, with 38 incomes insufficient to purchase a "market basket" of basic utilities, school materials and 14 foods supposed to provide the calories required for normal development...

...aid is probably temporary, but if resources for reformist measures are not forthcoming and if opposition to austerity grows, there could well be a narrowing of the political space which Costa Rican unions and popular organizations have used to defend their interests...

...Worsening economic conditions during the last years of the Carazo Administration also sparked unrest among the militant banana workers, who struck several times and were faced with mass arrests, tear gas and police gunfire that, on one occasion, resulted in the deaths of two workers...

...In 1977, 24.8% of Costa Rican families were living in poverty, according to this definition...

...Both groups have cooperated, however, in demanding price controls for items in the government's "basic market basket...

...Most of these conflicts took place in the northern regions of Upala and San Carlos, and on lands owned by United Brands in southwestern Costa Rica...

...Carazo resisted the IMF's pressures, charging that "instead of helping us to get fair prices for our products in the international market, the IMF has asked us to spend less on every37update . update . update . update thing without considering what this would mean to the population...

...Jayne Hutchcroft, a graduate student at the University of Florida, taught anthropology at the University of Costa Rica from 1979-83...

...Soviet-Inspired Traitors" Workers in other sectors achieved lesser demands at much higher cost...

...Monge also confessed that he was receiving strong "pressures" from business groups and that "if they force me...

...The growing struggles in Costa Rica suggest that Monge may have been unduly optimistic about traditional tico complacency...

...In September 1982, workers at the Banana Development Company (BANDECO), a Del Monte subsidiary, walked off the job demanding a 17% wage increase and the rehiring of workers fired during a 1981 strike...

...Lacking funds to counter this barrage of attacks in the media, BANDECO strikers visited unions and popular organizations throughout the country to explain the reasons for their actions...

...Our medicine is bitter, but we have prevented the contagion...

...Across the board wage increases of $11 per month were granted, but only after Monge ordered Civil Guards to occupy the oil facility and threatened to meet other public employee strikes with force...

...Department of Commerce states that "despite its location in Central America, Costa Rica still offers favorable investment opportunities...

...Numerous unions and other groups sent food, clothes, medicine and money to the striking workers...

...Inflation, which was 65% in 1981 and 100% in 1982, has been brought down to about 20% in 1983...

...39update . update * update . update Massive Resistance to Rates In May, a national protest against electricity rate hikes was organized throughout the country...

...Throughout 1983, strikes have been on the rise, provoked in many cases by the government's failure to pay agreed upon cost of living increases...

...Like other developing countries, Costa Rica has long suffered from declining terms of trade, that is the increase in prices of industrial imports relative to traditional exports such as bananas and coffee...

...Many feared Costa Rica might yield to the contagion which is prostrating the rest of Central America," Monge recently declared...

...Civil Guards Jan/Feb 1984 were brought in to attack strikers, several of whom were shot and wounded...

...In return for the bail out, however, the International Monetary Fund (IMF), the World Bank and a consortium of 170 major banks have demanded strict austerity measures, including cuts in social welfare spending and public employment, huge increases in utility rates, higher loan costs for farmers, higher taxes, the sale of governmentBANDECO's newspaper advertisements blamed the union for breaking the contract...

...Many Costa Rican workers were not convinced by government sloganeering...

...Doctors in the state health system, their privileged status threatened by inflation, struck Monge's government in June 1982 for a $40 per month wage increase...

...Finally, while the Costa Rican state over the last three decades successfully expanded public services, created new employment in state-owned enterprises and built much-needed infrastructure, it did so largely with borrowed money...

...In 1980, Mexico and Venezuela agreed to provide petroleum on favorable terms, but the economic crisis ,in those countries has now reduced the credit available for Central America's oil needs...

...The col6n, which plummeted from 8.6 to more than 62 to the dollar between late 1980 and mid-1982, is holding steady at 44 to the dollar...

...Monge echoed BANDECO, calling the strikers terrorists and charging that "negative efforts to harm Costa Rica are already under way and [are] high-level decisions of the Third [Communist] International...

...Jan/Feb 1984 owned companies and an end to price subsidies for basic foods...

...The U.S...

...The labor situation did not improve once social democrat Luis Alberto Monge became president in May 1982, in spite of his long ties to AFL-CIO-sponsored union organizations...

...In one joint mobilization in 1981, the Carazo Administration, employing divide and conquer tactics, insisted on negotiating only with the FDT leadership...

...The recent advent of economic crisis and IMF-sponsored austerity is generating increased resistance, however...

...Ideological and tactical differences have largely impeded effective coordination between the two federations...

...Clearly, the social costs of austerity have been high...

...A major question now is whether the "reformist model" has run its course...

...Touting the slogan "Lo nuestro es mejor porque es nuestro" ("What's ours is better because NACLA Reportupdate . update . update . update it's ours"), government proclamations idealized the traditional peasant lifestyle and called for a "return to the land...

...The president warned, however, that no new squatter settlements would be tolerated...

...When the government later reneged on parts of an agreement that provided for food price freezes, public confidence in the FDT began to erode...

...Thirty-five major roads were blockaded by men, women and children for two days until the government-run utility company agreed to lower its prices...

...Public employees were ordered to work extra hours with no increase in pay...

...Further tightening of the purse strings reduces the state's ability to attenuate worsening poverty and may in turn generate increased resistance...

...Part of the reason why "investor confidence" is being restored is suggested by a recent report by the U.S...

...Marc Edeiman is the author of "Costa Rica: Seesaw Diplomacy" in the November/December issue of the Report...

...The limited industrialization which began in the 1960s helped little, since it was necessary to pay more for imported raw materials and machinery than was earned from manufactured exports...

...Agency for International Development, which notes that Costa Rican industrial wages are now the lowest in the Central American/Caribbean region, with the exception of Haiti...

...Economic growth has halted...

...The halt in U.S...

...The president also suggested that he would consider suspending constitutional guarantees if the situation worsened...