Foreign Correspondence

[Amaunet]

Costa Rica Polarizes in a Leftward Shift



17 March 2006
In a result that surprised analysts and pollsters, Costa Rica's February 5 presidential election ended in a tie between the National Liberation Party's (P.L.N.) candidate Oscar Arias and Otton Solis who ran under the banner of his insurgent Citizen's Action Party (P.A.C.), which he formed after he split with the P.L.N. over economic policy. On February 7, with 87.3 percent of the votes counted electronically, Arias had a 40.5 percent share and Solis a tally of 40.2 percent leading Costa Rica's Supreme Electoral Tribunal (T.S.E.) to order a hand recount, which it had 30 days to complete.

On March 2, after a protracted process laced with challenges concerning polling irregularities from both sides, the T.S.E. announced that Arias had scraped through to a victory with 40.92 percent of the vote and a margin of 1.12 percent over Solis, who quickly conceded defeat and promised to lead a constructive and "stern" opposition.

On the eve of the election, polls had shown Arias -- who had served as the country's president from 1986 through 1990 and had received a Nobel Peace Prize for mediating an agreement that brought Central America's civil wars in El Salvador, Guatemala and Nicaragua to an end -- with a lead of 43 percent over Solis' 26 percent, and the remainder divided among a dozen other candidates. Analysts attributed Solis' surge to defections of voters from minor candidates and smaller parties, signaling a protest against Costa Rica's political establishment and a realignment of its party system that had fragmented in the 2002 presidential election.

The contest took on regional significance because the campaign was focused on Costa Rica's accession to the U.S.-backed Central American Free Trade Agreement (C.A.F.T.A.), with Arias taking a strong stand in favor of the pact and Solis insisting that it should be renegotiated. Although San Jose has been counted as an ally of Washington, mounting opposition to C.A.F.T.A. from rice farmers, small businesses and public-sector unions has stalled ratification of the treaty in the country's Congress, making Costa Rica the only Central American state that has failed to sign on. After the election, Arias acknowledged the "polarization" of the electorate over C.A.F.T.A. and promised "dialogue" with the opposition if he came out ahead in the recount, placing ratification in doubt regardless of the results at the polls.

Arias' moderation on C.A.F.T.A. was conditioned by Costa Rica's political realities. In concurrent elections for the 57 seats in the country's Congress, the P.L.N. fell short of a majority, picking up 25 to the P.A.C.'s 18, with the rest going to smaller parties. In addition, Costa Rica's powerful labor union -- the National Association of Public and Private Employees -- demanded a referendum on C.A.F.T.A. and threatened a "referendum in the streets" if one is not held. CONARROZ, the rice-growers association, has taken a similar position.

Threats of direct action are not idle -- in 2004, a flurry of strikes by public employees forced President Abel Pacheco to back down from plans for fiscal reform and to grant wage increases. Pacheco also acceded to putting C.A.F.T.A. ratification on hold. Although polling data show a slim majority of Costa Rica's public favoring accession to C.A.F.T.A., they also reveal that opponents of the pact are more intensely committed than are its proponents.

When the results of the recount were announced, Arias swung back to a firm pro-C.A.F.T.A. stance, asserting: "You should not have the least doubt that in this we will not cede." He made it clear that he would not cave in to street demonstrations, to which the labor movement responded that it would initiate its "referendum in the streets." Solis called for "dialogue" with Arias, reminding the new president that he had been chosen by only 25 percent of Costa Rica's eligible voters.

The fate of C.A.F.T.A. in San Jose will likely depend upon a decision by Costa Rica's Supreme Court on the issue of whether a simple or a two-thirds majority in the country's Congress is required for the agreement's ratification. A simple majority would be likely to ratify C.A.F.T.A. because the P.L.N. would have the support of several other small parties, whereas the chances of mobilizing a super-majority are much slimmer. Even in the case that only a simple majority is necessary, civil unrest and widespread opposition could convince Arias to back away despite his protestations to the contrary.

The Sources of Polarization

Social, economic and political polarization of the kind that crystallized in the presidential election was alien to Costa Rica in the last half of the twentieth century and only surfaced in the past five years when contradictions appeared between sectors of society that benefited from the country's new economy and high-tech industry based on foreign investment, and the established sectors of agriculture, domestic business and public services. That divide was starkly symbolized by the C.A.F.T.A. debate in which Arias represented the new economy and Solis championed the forces disadvantaged by Washington's brand of regionalism.

Until recently, Costa Rica was regarded as the most stable Central American country and a firm U.S. ally. With a population of 4.15 million, Costa Rica is the only state in its region that is ranked as an upper-middle income country on the U.N. Development Program's Human Development Index. It is also a functioning democracy where elections are free and fair, and transitions of power are peaceful. Socially, the country's stability is rooted in its early economy of small farming and the absence of sharp ethnic divisions in its heavily Spanish population. Costa Rica has been spared the social conflicts of its neighbors that have pitted rich against poor, and those of European ancestry against indigenous peoples and mestizos.

The more proximate source of Costa Rica's stability is the 1948 civil war, which followed a disputed election and brought the P.L.N. to power after 2,000 people had died over 44 days.

Under the guidance of Jose Figueres Ferrer, who became president, the P.L.N. drafted a constitution that abolished the armed forces -- eliminating military opposition -- and proceeded to set up a European-style welfare state, including a social security system and nationalization of banking and the electricity and telecommunications industries. Since then, the social reforms have guaranteed Costa Rica's stability and have provided the space for peaceful competition among political parties, all of which endorse the P.L.N.'s social contract, even though there have been disagreements on the margins.

Following nine years of P.L.N. rule after the civil war, the fragmented opposition coalesced into the Social Christian Unity Party (P.U.S.C.) and won the 1958 presidential election, ushering in a period in which Costa Rica had an effective two-party system and ideological divisions were muted. That era ended in 2002, when Solis' P.A.C. broke the duopoly and deprived the P.U.S.C. of a congressional majority.

The rise of the P.A.C. is mainly attributable to the intensification of the chronic fiscal weakness of the Costa Rican welfare state along with the emergence of the new economy.

In order to support the welfare state, the government runs a persistent deficit. In 1982, Costa Rica defaulted on its foreign debt, resulting in austerity measures that since then have restricted the scope of social spending. At present, government spending is 15 percent of G.D.P., whereas taxes total 12 percent of G.D.P. Debt now stands at 60 percent of G.D.P. and one-third of the government's budget is devoted to servicing it. The poverty level is stuck at 20 percent of the population and the wealth gap is widening.

As the social contract has frayed, Costa Rica has developed a booming tourist industry and has attracted investment by multinational corporations, including Proctor and Gamble, Glaxo Smith Kline, Baxter Healthcare, Rawlings Sporting Goods and, most notably, Intel. The success of the new economy is based on Costa Rica's attractiveness as a stable society with a well-educated population, which -- in turn -- is a result of the social contract. Yet the new economy has generated new interests that are favorable to neo-liberalism and free trade, setting off a backlash embodied in the P.A.C. and its ability to mobilize opposition to C.A.F.T.A.

The polarization engendered by the fiscal problems of the welfare state and the interests created by the new economy became complicated by a series of bribery scandals involving three former presidents -- Jose Maria Figueres (P.L.N.) and Miguel Angel Rodriguez and Rafael Angel Calderon, both from the P.U.S.C. The scandals played heavily in the fall of the center-right P.U.S.C., which won only four seats in the new Congress, and impaired the legitimacy of the established political class generally.

The new polarized two-party configuration that pits the P.L.N. against the P.A.C. is far from the mild center-right vs. center-left competition, in which the P.U.S.C. and the P.L.N. alternated in office and packed the state bureaucracies with their loyalists. Costa Rica has lost its temporary innocence.

Breakout of Polarization

The mounting frustrations among those disadvantaged by Costa Rica's economic conditions broke out sharply and crystallized around the issue of accession to C.A.F.T.A. during the presidential campaign.

The failure of the new economy and the tentative neo-liberal reforms that attended it to resolve the chronic debt problem through sufficient growth, and to draw enough of Costa Rica's population into it; the persistent high poverty level; the widening wealth gap; opposition to the possible privatization of parts of the telecommunications sector; and generalized fears about the future of the welfare state worked to draw diverse interests into a common position against C.A.F.T.A. that symbolized their discontents as well as representing direct expectation of losses.

The rising oppositional force led by Solis confronted a confident P.L.N., whose candidate Arias held a respected place in Costa Rican society and could credibly carry the anti-corruption banner as he promised continuation of established policies, including support of the social contract and C.A.F.T.A. membership.

As a center-left candidate, Arias acknowledged the frustrations of the less advantaged and committed himself to seeking higher taxes on the wealthy, greater social spending, infrastructure development, greater educational opportunities and a halt to the privatization of state companies. At the same time, he was firm in his position that his promises could not be fulfilled without steeped-up economic development that could only come through more free-market reforms to attract outside investment and especially through C.A.F.T.A.

Solis responded by calling C.A.F.T.A. a "factory of poverty," claiming that the agreement would ruin small-scale farming; disadvantage the domestic manufacturing sector, the banking sector, and small business; and weaken the state telecommunications monopoly in favor of foreign corporations that would skim off the most profitable franchises. Taking a populist line, he promised to "put people before foreign corporations" and to renegotiate C.A.F.T.A. to protect disadvantaged interests. In contrast to Arias, Solis -- an economist and former planning minister -- advocated an economic strategy based on self-generated development of domestic sectors, arguing that free trade would impede rather than enhance development.

The polarized positions of the candidates that reflected a polarized electorate and society occurred within a center-left discourse that did not question the social contract, yet opened up a divide over how it might best be preserved. Arias is a new social democrat in the European mold who accepts global capitalism as a given and works within its rules, whereas Solis is a contemporary Latin American populist who acknowledges the power of global capitalism but seeks to moderate and contain it with greater local and regional autonomy, and defense of disadvantaged interests. The absence of the right in Costa Rica's present two-party power configuration signals a decided shift to the left in the country's politics, even though Arias edged out Solis.

Facing a mobilized left opposition, Arias will be under pressure to back away from neo-liberal positions. He has stated that he does not want to divide Costa Rican society, yet he seems equally determined to push for accession to C.A.F.T.A. Solis and the interests that have coalesced around him are also aware of the importance of preserving social peace, yet seem determined to resist accession to the point of taking direct action. The nuanced tensions between the new government and opposition guarantee that Costa Rica's will be one of the most indicative political situations to watch as Latin America finds its way into multipolar regionalism.

Conclusion

The dozen presidential elections that have occurred and will take place in Latin America over the year beginning in November 2005 are being used as a gauge by analysts to determine whether the region is moving left and is being drawn away from Washington's sphere of influence and closer to the orbit of the emerging southern power center of Brazil and Venezuela, which represent respectively the social democratic and populist currents of independence from the Washington Consensus.

Thus far, the leftward shift has been confirmed in varying degrees in Honduras, Bolivia, Chile, Haiti and now Costa Rica. Only in Bolivia has a decisive change occurred in the direction of populism, but in the other cases -- although the new presidents are not anti-U.S. -- the underlying political landscape no longer includes strong neo-liberal formations. Washington has expressed acquiescence in all the results and is particularly satisfied with Arias' victory.

Before the presidential election, U.S. Ambassador to Costa Rica Mark Langdale warned that the reputation of the country as a good place for U.S. companies to invest would "suffer" if C.A.F.T.A. was not ratified. His comments were not well received and may have added fuel to Solis' rise.

Now that Arias has been elected, commentators have agreed that Washington is breathing a sigh of relief. However, its comfort may be short lived. Ratification of C.A.F.T.A. by Costa Rica's Congress is far from certain and -- even if it occurs -- will not heal the country's social divide and might further polarize its politics.

In the short term, the completed Latin American elections in the 12-month cycle indicate a mild erosion of U.S. influence. In the longer term, Washington is likely to face more severe challenges as disadvantaged sectors of Latin American societies press demands for social defense and push for regional autonomy and development.

Report Drafted By:
Dr. Michael A. Weinstein



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