COSTA RICA: Scandal in Paradise

A bucolic, balmy Central American paradise: that is how many Costa Ricans proudly regard their nation, and with good reason. In contrast to its neighbors, little Costa Rica (1.9 million people living in an area about the size of West Virginia) has a genuine democracy and no army to speak of. It also has the highest literacy rate and third highest per capita annual income (about $539) in Central America. Recently, however, both its tranquillity and its reputation have been somewhat impaired by the presence of fugitive American Financier Robert L. Vesco, who moved there a year ago and has remained in order to escape the subpoena jurisdiction of U.S. courts (TIME, May 21).

Shortly after his arrival, Vesco began investing heavily in the Costa Rican economy, to the tune of at least $25 million. He poured funds into low-cost public housing, a water works and the country's nationalized banks. Initially, Vesco was welcomed in Costa Rica as another potentially helpful American benefactor. Then came accusations that his investment money was part of a $224 million hoard that the U.S. Securities and Exchange Commission has charged him with "diverting" from Investors Overseas Services, the Geneva-based mutual-fund enterprise. Later came the unpleasant news that Vesco had been indicted, together with former Attorney General John Mitchell and ex-Secretary of Commerce Maurice Stans, for obstructing justice in connection with a $200,000 cash contribution that Vesco made to the Committee for the Re-Election of the President.

What bothers many Costa Ricans most is that Vesco seems to have invested in their popular President as well as their economy. Diminutive (5 ft. 3 in.) José Figueres, 66, known affectionately as "Don Pepe," is something of a national hero. In 1948, he successfully led a ragtag 700-man force against Communist revolutionaries and military reactionaries who were trying to destroy Costa Rica's democratic system. Don Pepe, who was elected to his second nonconsecutive presidential term in 1970, concedes that some of his business investments have gone sour in recent years. He readily acknowledges that his San Cristobal holding company, which produces, among other things, coffee bags made of sisal, "needed an injection of cash badly. I had been looking everywhere." Then he found Vesco.

The American financier paid more than $2,000,000 for 30% of the holding company. With the money Don Pepe bought new machinery that has increased the firm's output of coffee bags from 2,000,000 annually to 7,000,000. Since Vesco moved to Costa Rica, it turned out, Figueres' New York bank account has grown by $436,000—much of it transferred by a bank with which Vesco has had extensive dealings.

As news of Vesco's troubles—and of Don Pepe's relationship with the financier—spread through San José, the President went on the defensive. Don Pepe insisted that his relationship with Vesco had been strictly business. As long as the American breaks no Costa Rican law, Figueres sees no reason not to deal with him. He also explained, on a national-television broadcast, that the money deposited in his New York bank account was for such projects as support for the Costa Rican National Symphony Orchestra and a bank that helps artisans and small industries.