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Tough year for Costa Rican 'welfare state'

Central America's showcase democracy has survived a rough year. It may soon be entering a worse one.

This is the nation that gave President Reagan his warmest reception during his just-ended Latin America trip. The Reagan visit seems to have done a great deal to boost the morale of Costa Rica's hard-pressed social democratic government. But Costa Rica is struggling with one of the most acute economic crises facing any developing nation. There are no quick and easy solutions.

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Diplomats think that the Costa Rican economy could hit bottom next year, and that this might leave the small Central American nation of 2.3 million open to a ''destabilization'' effort by Cuba and Nicaragua. That would be a frightening prospect for a nation that has no regular army and a relatively unaggressive police force. But many of the experts seem to think that the solution, for the time being, has to be economic rather than military.

Costa Rica's main strength lies in its ordinary citizens. Their major enemies at the moment are inflation, unemployment, falling productivity, and the world's highest per capita external debt.

Previous Costa Rican governments lived far beyond their means. They built a welfare state unequaled in the region, thereby creating a public payroll that the country could not afford.

''We have had a big banquet, and now we have to pay the bill,'' says Guido Fernandez, the influential news director for the Costa Rican television station Channel 6.

''All that our politicians have thought about doing is creating new institutions,'' says Mr. Fernandez. ''They haven't thought enough about how to pay for all this.''

All of the government-subsidized institutions seem to lose money, including the government-owned banks.

''This is the only country in the world where the banks lose money,'' says Fernandez. ''Nobody wants to be the director of a bank.''

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Under the government of President Rodrigo Carazo Odio from 1978 to 1982, Costa Rica managed to increase its external debt from about $800 million to nearly $3 billion.

''Carazo ought to be shot,'' says Guillermo Von Breymann, president of Costa Rica's Bank for Agricultural and Industrial Lending (BANEX). ''He totally mismanaged things. . . . The country went on a credit binge. But that situation is absolutely disastrous. Given our level of productivity it's almost impossible to repay. . . .

''The only thing we can do is increase productivity,'' says Mr. Von Breymann.

He adds that US congressional support for President Reagan's Caribbean Basin economic initiative is ''absolutely essential,'' because it would allow Costa Rican products to enter the US market duty-free.

Following President Reagan's visit here, US Secretary of State George P. Shultz praised the efforts of Costa Rica's new president, Luis Alberto Monge Alvarez, to bring the economy under control. He noted that the inflation rate had been cut by a third and that the balance-of-payments situation had improved.

Not all of Costa Rica's problems are of its own doing, of course. In the late 1970s, when the price for Costa Rica's coffee dropped sharply and its oil import costs doubled, the nation's balance of payments deficit climbed.

But Costa Rica has a lot going for it. It has none of the poverty that led to civil war in El Salvador, none of the racial conflict that has torn Guatemala, and none of the concentration of power in one family that brought a revolution to Nicaragua.

The atmosphere of Costa Rica's capital, San Jose, is not one of crisis. Under a tropical blue sky, people are doing their Christmas shopping in this mountain-encircled city of concrete buildings and sheet-metal roofs.

''Destablization would be a very difficult thing to carry out here,'' said Von Breymann. ''This is a democratic country by tradition. People don't like totalitarian regimes.''

Von Breymann noted that when Salvadoran terrorists attacked a Japanese businessman here last month, it was ordinary citizens who prevented the man from being kidnapped.

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