Comprehensive Study Guide: Costa Rica in the 20th Century

Historical Models of the Costa Rican State (1821-1940)

The political-institutional development of Costa Rica during the $19^{th}$ and early $20^{th}$ centuries was characterized by structural and ideological transformations rather than a linear progression. Understanding the ultimate establishment of the Liberal State requires an analysis of the preceding models. The first of these was the Patriarchal State ( $1821-1840$ ), associated with the first Head of State, Juan Mora Fernández. This era focused on consensus-based politics and the creation of foundational legal texts, such as the Pacto de Concordia (also known as the Pacto Social Fundamental Interino de Costa Rica). The economy was based on small-scale subsistence, though early incentives for coffee cultivation began here.

As coffee became highly profitable in British markets, power centralized into the hands of a coffee-growing elite, leading to the Oligarchic State ( $1840-1870$ ). Dominated by figures like José María Castro Madriz and powerful families such as the Mora, Montealegre, and Blanco families, this model concentrated decision-making among large landowners and processors in the Central Valley. Private commercial interests dictated foreign policy and finance, creating an exclusive social system and strict control over the peasant workforce.

In $1870$ , General Tomás Guardia Gutiérrez took power through a military coup, breaking the traditional oligarchy's direct control and establishing the Liberal State ( $1870-1940$ ). Underpinned by European positivism and liberalism, this regime prioritized public order, material progress, secularization, and aggressive integration into global capitalist markets. Key reforms included secularizing cemeteries (moving them to municipal control), establishing civil marriage as the only legally valid form, approving divorce laws, and expelling Jesuit orders.

The Olympian Generation and Liberal Modernization

By the end of the $19^{th}$ century, the nation was guided by the Generación del Olimpo (Olympian Generation), a group of intellectuals, educators, and politicians who believed in science, secular education, and urban modernization. A shift occurred from communal oral traditions to the dominance of the written word. The growth of printing shops allowed for the mass circulation of official newspapers, statistical bulletins, opinion journals, and literary pamphlets, which helped model the identity and symbols of the Costa Rican homeland.

A landmark event was the Reform of Mauro Fernández in $1886$ , specifically the Ley General de Educación Común. This law transferred control of education from municipalities and religious orders to the central State, declaring primary education to be secular, free, and mandatory. To sustain this, secondary schools like the Liceo de Costa Rica ( $1887$ ), the Colegio Superior de Señoritas ( $1888$ ), and the Instituto de Alajuela were founded to train elites and gradually alphabetize the workers. Prominent thinkers of this era included Joaquín García Monge (editor of Repertorio Americano), Roberto Brenes Mesén, Omar Dengo, José María Zeledón (author of the National Anthem), Solón Núñez, and Rogelio Fernández Güell.

High culture and bourgeois distinction were manifested in the construction of the Teatro Nacional in $1897$ , funded by a specific tax on coffee exports. This period also saw the creation of cultural institutions like the National Library, the National Archives, and the National Museum. Elite social life centered on the Club Unión, while the masses adopted football, introduced by students returning from England. Financially, the period saw the expansion of commercial banking, led by the Banco Anglo Costarricense and the Banco de Costa Rica, which provided the credit necessary for the coffee industry.

The Agro-Export Model and Secondary Economic Activities

The Liberal economy relied on the agro-export model, a dependent scheme linking public finances to the international sale of coffee and bananas. At the start of the $20^{th}$ century, coffee accounted for over $60\%$ of total export value. This led to high vulnerability to international price fluctuations in markets like London or New York, resulting in fiscal crises during the administrations of Rafael Iglesias Castro ( $1898$ ) and during the Great Depression of $1930$ .

Secondary economic activities during this period included:

Cacao: Produced in the Caribbean lowlands, often on lands abandoned by the United Fruit Company (UFCO) due to soil exhaustion or Panama disease. This sector collapsed in $1929$ due to global market contraction and African competition.
Cattle Ranching: Located in the North Zone and the Dry Pacific (Guanacaste). Early stages were marked by legal conflicts over a lack of fencing. Eventually, improved pastures and breeds like Cebú were introduced. Land ownership was dominated by large estates (latifundios) owned by Central Valley residents.
Mining: Focused in the Montes del Aguacate, Tilarán, and Abangares during the "second mining cycle" ( $1880-1940$ ). Controlled by U.S. corporations linked to Minor Cooper Keith, such as Abangares Gold Fields, which exported high-purity gold and silver to the United States. The sector declined after $1930$ due to exhausted veins and capital flight.
Sugar: Grown in western Alajuela (Grecia, Naranjo, San Ramón), Cartago, Guanacaste, and Puntarenas. Processing occurred in traditional animal-powered "trapiches" and medium-scale mills. The industry was stimulated by domestic consumption and mandatory raw material delivery to the National Liquor Factory (FANAL), a state monopoly.

The Social Reforms of the 1940s and the State of Necessity

In $1940$ , Dr. Rafael Ángel Calderón Guardia assumed the presidency as World War II closed European markets, causing unemployment and inflation. His government shifted toward the "Benefactor State" (State of Necessity), forming a pragmatic alliance with Monseñor Víctor Manuel Sanabria Martínez (Catholic Church) and Manuel Mora Valverde (Communist Party/Vanguardia Popular) to implement deep reforms. These reforms included:

University of Costa Rica ( $1940$ ): Restored state higher education after the closure of the University of Santo Tomás in $1888$ , promoting social mobility.
Caja Costarricense de Seguro Social (CCSS) ( $1941$ ): An autonomous institution managing social insurance for workers regarding illness, maternity, disability, old age, and death. It utilized a tripartite funding system from the State, employers, and employees.
Constitutional Guarantees ( $1943$ ): Chapter V was added to the $1871$ Constitution, elevating labor rights to a constitutional level.
Labor Code ( $1943$ ): A unified legal body regulating worker-employer relations. It established the $8$ -hour workday ( $48$ hours weekly), minimum wage, severance pay (auxilio de cesantía), paid vacations, and the right to strike and unionize.

The 1948 Civil War and the Second Republic

Social reforms angered agrarian elites and commercial groups (Chamber of Commerce), who accused the government of communist influence. Opposition gathered around Otilio Ulate Blanco (Union Nacional) and the Center for the Study of National Problems. Tensions peaked after the $1948$ elections. Although Ulate won, the Congress (aligned with Calderón) annulled the results on March $1$ , $1948$ , citing alleged irregularities and a fire at the Colegio Superior de Señoritas that destroyed ballots.

This triggered a five-week Civil War led by José Figueres Ferrer and the National Liberation Army, operating from the La Lucha farm. The war ended with the Pact of Ochomogo and the surrender of government forces. Figueres led the Founding Junta of the Second Republic for $18$ months, enacting several structural decrees:

Abolition of the Army ( $1$ December $1948$ ): Announced at the Bellavista Fortress, reallocating defense funds to health and education.
Nationalization of Banks: Decree-law No. $71$ gave the state a monopoly on deposits and credit, democratizing access for small farmers.
$10\%$ Capital Tax: An emergency tax on large fortunes to fund post-war reconstruction.
1949 Constitution: Created the Supreme Tribunal of Elections (TSE) as a fourth power, granted the right to vote to women, Afro-descendants, and indigenous populations, and established Autonomous Institutions to prevent presidential authoritarianism.

The Developmentalist State and the ISI Model

Starting in the $1950$ s, influenced by CEPAL, Costa Rica adopted the Industrialization by Substitution of Imports (ISI) model. The goal was to end dependence on agro-exports by fostering local manufacturing through three mechanisms: aggressive protective tariffs on foreign goods, industrial incentive laws (tax exemptions for local machinery/materials), and joining the Central American Common Market (MCCA) in $1963$ . Supporting this growth were several Autonomous Institutions:

ICE ( $1949$ ): Managed electricity (e.g., Arenal and Cachí projects) and telecommunications.
INVU ( $1954$ ): Handled urban planning and social housing to reduce urban overcrowding.
AyA ( $1961$ ): Centralized water and sewage systems, significantly lowering infant mortality.
INA ( $1965$ ): Provided technical training to create a skilled workforce for the industrial sector.

This industrial focus led to the "rural exodus," where families moved from Guanacaste or the North to the Gran Área Metropolitana (GAM). This caused rapid, disorganized urban growth and the rise of informal settlements.

The 1980 Economic Crisis and Structural Adjustment

In $1980$ , under President Rodrigo Carazo Odio, the ISI model collapsed due to rising oil prices, heavy external debt, and falling prices for coffee, bananas, and meat. Costa Rica faced inflation over $80\%$ and massive currency devaluation. To receive aid from the IMF and World Bank, the country implemented Structural Adjustment Programs (PAE I, II, and III). These programs mandated:

Public Spending Reduction: Labor mobility (incentivized layoffs), hiring freezes, and the privatization of CODESA companies.
End of Agricultural Protection: Eliminating subsidies and minimum prices for domestic grains (corn, beans, rice) provided by the National Production Council (CNP).
Trade Liberalization: Rapid reduction of tariffs and import taxes.
Export Incentives: Creating Free Zones with tax exemptions to attract Foreign Direct Investment (IED) and utilizing Tax Allowance Certificates (CAT) to diversify non-traditional exports.

Contemporary Globalization and Challenges

Trade liberalization culminated in the CAFTA-DR treaty, ratified via referendum in $2007$ . The current economy rests on three pillars: Advanced Manufacturing (medical devices, precision instruments), Global Services (call centers, software, back office), and Sustainable Eco-tourism (managed by SINAC). Agricultural exports now focus on non-traditional items like pineapples and ornamental plants.

However, this model faces modern challenges documented by the rise of the Gini Coefficient (increasing inequality). The central government faces a chronic fiscal crisis due to debt and the tax exemptions granted to Free Zones. Additionally, the growth of informal employment and underemployment challenges the funding of the universal healthcare and pension systems managed by the CCSS.