PUBLIC UTILITIES: Electric Ax

In Costa Rica’s beautiful up-to-date capital, San José, sirens last week blared the death-knell of the very company which supplied them with power—big Electric Bond & Share Co.’s little Costa Rican affiliate which supplies San José and 32 nearby towns with electricity. For a year the Central American Republic’s unicameral Congress has engaged in a tiff with Bond & Share. Bond & Share sought a new franchise for its affiliate, asked permission to charge higher rates. The Congress considered the proposed rates exorbitant. Month ago the Congress broke the resultant deadlock by voting 40 to 1 to expropriate the company.

Unlike Mexico, which expropriates private property, then pleads inability to pay, Costa Rica is obliged by its Constitution to pay first, then expropriate. Last week President Léon Cortés Castro approved a plan to dig up the necessary payment—a Government bond issue mortgaging the firm’s $3,000,000 power plant. The sirens which acclaimed future Government control of a U. S. public utility were premature, however. Three million dollars would be a staggering amount for agricultural Costa Rica’s 591,000 inhabitants to kick in for such a bond issue at home. Abroad, the Republic has already piled up external debts of some $19,000,000, on which it has recently been unable to make payments. But for Costa Rica’s Congress expropriation was a good ax to hold over the company’s head in hope of getting lower rates.