1938: Costa Rica

Expropriation of the properties of a North American owned subsidiary of the Electric Bond and Share Company, representing an investment of $3,000,000, was voted by the Costa Rican Congress in August but, since Costa Rica's Constitution calls for payment before expropriation and since funds for compensating the owners were not available, the actual taking over of the properties did not seem imminent. It is thought that the step was taken to give President Leon Cortes authority to negotiate an agreement with the electric company. The National Electric Board has had nationalization of electrical services under consideration for years. It may be that Mexico's expropriation policy and the interpretation in Latin America of President Roosevelt's Pan-American Day speech as recognition of the principle of expropriation on payment of the original investment minus depreciation, may have influenced this move of the Costa Rica Government. The valuation of the electric company's properties was increased in May for assessment of direct taxes and back levies. In October, Germany offered to establish competing electric plants, equipped with German machinery, credit payments to be made in coffee at the rate of 25,000 sacks annually.

Since coffee is the chief product of Costa Rica, the 6 per cent increase in cost of living in 1937 is attributed largely to the lower price of that commodity following Brazil's abandonment of its price maintenance policy. This shift in policy led Costa Rica to reduce the coffee export tax. Reduced revenues make desirable a reorganization of the taxation and revenue system of the country, and the government has engaged a Chilean expert to recommend necessary changes. The budget for 1937, which estimated expenditures at 32,597,872 colones, revenues at 32,804,000 colones, stood as a working basis for 1938. The United Fruit Company will invest $10,000,000 in developing 4,000 hectares in the uncultivated Pacific coast region of southern Costa Rica, according to a contract approved July 21, which calls for an export tax of two cents a bunch on bananas for the next fifty years.

There has been little change in the political situation during the year except that by the Congressional elections held Feb. 13 the Cortes administration regained majority control of the Congress.