Storm In The Isthmus: The 1980s
Against all odds, Costa Rica in the 1980s and 1990s not only saw its way through the serious political conflicts of its neighbours, but also successfully managed predatory US interventionism, economic crisis and staggering debt. Like many Latin American countries, Costa Rica had taken out bank and government loans in the 1960s and 1970s to finance vital development. But in the early 1980s, the slump of prices for coffee and bananas put the country's current account in the red to the tune of millions. In September 1981, Costa Rica defaulted on its interest payment on these loans, becoming the first Third-World country to do so, and sparking off a chain of similar defaults in Latin America that resonated throughout the 1980s and threw the international banking community into crisis. Despite its defaults, Costa Rica's debt continued to accumulate, and by 1989 had reached a staggering US$5 billion, one of the highest per capita debt loads in the world. To compound the economic crisis came the simultaneous political escalation of the Nicaraguan Civil War . During the entire decade, Costa Rica's foreign policy and to an extent its domestic agenda would be overshadowed by tensions with Nicaragua on the one hand and with the US on the other. Initially, the Monge PLN administration (1982?86) more or less capitulated to US demands that Costa Rica be used as a supply line for the Contras, and Costa Rica also accepted military training for its police force from the US. Simultaneously, the country's first agreement for a structural adjustment loan with the International Monetary Fund (IMF) was signed. It seemed increasingly clear that Costa Rica was on the path both to violating its declared neutrality in the conflicts of its neighbours and to condemning its population to wage freezes, price increases and other side-effects associated with IMF intervention. In 1986 PLN candidate Oscar Arias Sanchez was elected to the presidency, and Costa Rica's relations with the US ? and, by association, with Nicaragua ? took a different tack. The former political scientist began to play the role of peace broker in the conflicts of Nicaragua, El Salvador, and, to a lesser extent, Honduras and Guatemala, mediating between these countries and also between domestic factions within them. In October 1987, just eighteen months after taking office, Arias was awarded the Nobel Prize for Peace , bringing worldwide attention to this tiny country. Though Arias had gained the admiration of political leaders around the world, he proved to be less than popular at home. Many Costa Ricans saw him as diverting valuable resources and time to foreign affairs when he should have been paying attention to the domestic agenda, while increasing prices caused by the IMF's economic demands meant that conditions in Costa Rica were not much improved
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