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port Is restricted to use within the Bank

No. E 130

RESTRICTED

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

Economic Department

Prepared by:

... Andrew C. Huang

EXTERNAL DEBT OF COSTA RrCA

January 3, 1951

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II ..

III.

IV.

EXTERW.L DEBT 0::::' (OST1. RICA

Table. of Contents

Debt OUtstanding

Service payments

~eve1opmentof Present Defaults

Earlier Developments of Costa Ricafs External Debt

Table I: Public F.xterna1 Lebt of Costa Rica.

1

3

3

4

Table II: Lstimated Interest and Amortization payments on the External Debt of Costa Rica.

Table II-A: Estimated Interest and Amortization payments on the External Debt of costa Rica.

Appendix I: 1939 Plan of Debt lldjtl.stlJent.

Appendix II: The 1885 Debt Adjustment Plan.

Appendix III: The 1897 tebt Adjustl;;ent Plan.

Appendix IV: The 1911 ~e bt Adjustment Plan"

EXTERNAL DEBT OF COSTA RICA

I. Debt OUtstanding

As of November, 1950 the public external debt of costa Rica amounted to the

equivalent of UoS" $25 million~~ of which about $14,,6 million is in U.,Se do:"lars,

$8.4 million in sterling and $2 million in French Francs. Except for the E::pcrt-

Import Bank loans of ~6Q5 million, all costa Rican long-term external debts are in

complete defaulto

The composition of the debt, shown in detail in Table I, may be

as follOV,rs:

External Debt of Costa Rica

(A) Uo S. Dollar Obligations

10 Bond Issues 2Q Export-Import Bank Loans

Sub-Total

(B) Sterling Bond~

(C) French Franc Bonds

Total

Note: For footnotes and details, see Table I~

(A) U,. S. Debt

8,101 6,489

14,590

8,420

1,904

~4,914Y

The U .. S" dollar debt consists of four bond issues and t';;o ,-,xport-

Bank loans. Of the four defaulted bond issues, three ~Jere contracted primarily for

refunding.. purposes:

a) 7% bonds of 1926-51, originally issued for ~:;8 million with ~:!:,5.4 million

now outstanding ..

~ Excluding a Spanish loan of $4 million and service arrears estimated at $12 0 4 million (For details, see Table I).

- 2·-

b) S% bonds of 1932-:-S1, originally issued for $1.6 million vdth $1 0 2

million nO''1outstanding.

cj 5% bonds of 1933-49, originally issued for $0 .. 5 million i'ith $0 0 4 million

no,'l outstanding ..

The :nurth, the 7-1/2% bonda ·of 1927-49 issued for $1 0 8 million pith $1.2 Mil .....

lion nOi-' outstanding, "1as negotiated to defr~.y the expense of the electrification

of the Pacific Raih'ayo

The tHO Jlb:port-,Import Bank loans, originally totalling $7 million, gl'.cl no,-,

outstanding in the amount of $605 million, \'rere obtained to pay for the con~truc­

tion of the Pan American Highvrayo Se:rvice on these loans is being maintai:::ed

according to the agreement of January 1946, \·,h1ch provides an annU8.l pesment of

$350,000 duriL.g 1946-50" Payments thereafter i,'lill be subject to further negotia­

tions ",hich are exnected to take place by early 1951.

(B) The Sterling Obligations

The debt conpri.ses three bonJ.s floated bet,-teen 1911-1933. The 5% bone,s of

1911-58, issued for t,2 million "ith bl{l4 million no," outstanding ~,ere largely used

for the refunding of earlier debts ancl to a smaller extent for public "rorks and

other Government expenditures o The S% bonds of 1933-53 for~246fOoo, with

t,224,OOO nO"1 outstanding, 'IIlere issued in lieu of unpaid interest on the 5% 1911-58

bonds o The 6~& I,tortgage Bonds of 1912-42, issued for ±,189,OOO and nOt'1 reduced to

b20,000, "tere for financing construction projects"

(0) French Franc Debt

The 5% Gold Franc lOan of 1911-56 r~resents Costa Rica's only obligation

outstanding in francs, The bonds, issued in the original amount of Fr. 35 million

and now reduced to Fr. 5.8 mi1lion t \-rere utilized to retire the Pacific RailvTaY

bonds and other internal debts.

- 3 -

II. Service Payments

If service were to be resumed on the contractual basis, total pro:ected

service requirements in 1950 on the Costa Rica foreign debt, inclusive of the :ElXPOI,·t··

Import Bank loans9 ,",ou1d amount to 10 million dollars, declining to $3.4 miE:'on in

1951 and then to an annual a·.,erage of $2.5 million during 1952-56" The to'~a1 debt

would be paid off 'lith $1 0 8 million around 1958. (See Table II for details).

" , . Estima.ted Service Pllyments on the Externnl Deb!; of Costa P.ica. on the

Contractus.l Basi s

(In Million U"S" Dollar Equivalents)

Total ~-----

Sel'vice by CurrAnr~ieu OuLstanding Amortiza- Service U"S" -$ to Fl'., F

~ ~ebt tion Interest PR.yments Debt ~ j2ebt

1950 25,,0 8,,8 1,,3 10.1 8,,4 104 0.,3 1951 16 .. 2 207 0.7 3 .. 4 1 .. 7 194 0,,3 1952 1),,5 2,,2 006 2,,8 101 104 O,d 1953 11,,4 2,,2 0 .. 5 2.7 100 It4 0.,) 1954 9<·1 L,9 0,,4 2,,3 1 0 0 L,O 00 3 1955 7.3 1.9 0,,3 202 00 9 1,,0 00 3 1956 5,,4 2 .. 0 0 0 2 2.2 0,,9 1.0 0.3 1957 3.4 L7 0,2 109 0,,9 1.,0 1958 1.7 1..7 00 1 1.8 00 8 1 .. 0

If, hO\'Jever, service on the debt "rere to be resumed on the basis of a debt

adjustment plan similar to that of Chile, an initial payment of $300,000 in 1950

"'Quld be required, fallowed by annual payments of $1.,4 million bet,·re(;m 1951-1958

and $510,000 thereafter. Around 1963 the total indebtedness could be entirely re­

deemed Hith a final payment of $290,000. (For details see T2.bJ.e II-A) 0

III~ Development ,of Present Defaults

An acute shortage of foreign exchange during the denression ~eriod compelled

the Costa Rican Government to discontinue its external debt services. In August

1932 the Government announced the suspension of services on the exter!lc"31 debt for

three years; the interest due for July 1933 and July 1936 on the 7% dollar bonds

-4-

of 1926. the 7-1/2% bonds of 1927 and the 5% sterling bonds of 1911 "Tere, hm"ever.

paid currently by 5% funding bonds of 1932-19330 This scheme 'IITaS maintained up to

about the end of 19360 In 1937 the January coupon on the 5% sterling bonds of

1911 and the 5fo funding bonds of 1933 went into default and have remai!'.ed de:in-

quent ever sinceQ

Under the 1939 Dollar Debt Adjustment Plan,1I the interest due for 19~)9-41

on dollar bonds "Tas resumed for three years at 30%, and the arrear coupons a'~ 1~

of the face value of the bonds. This scheme '·tas in operation until Noveriter 19410

Since then all dollar bonds have been in complete default.,

In 1940 the Government offered to resume interest payments on the 6% ster­

ling mortgage bonds of 1912 at 3% per annum for all unpaid coupons bet"reen 1936

and 1937; at 4% for all subsequent coupons; and the amortization at a rate suf-

ficient to redeem the amount outstanding by 19460 In 1941 service on this debt

,,,as again suspended and has remained so sineet>

The 5% gold franc bonda of 1911 llave been in default since Septenber 1933

as a result of the Government's refusal to maintain service on a gold basis as

stipUlated in the loan contracto

Negotiations are no", reported under ",ay in Ne1'1 York for a final aslju.stnent

of the Costa Rican external debto Until the final details are available, the es-

timates herein given of interest and amortization charges must be regarded as

tentative co

IV. Earlier Developments of Costa Rica f s Public Extern:"!.l ~abt ,

The first external lOans secured by Costa RicaEJ consisted of:

11 The Foreir,n :Bondholders l?rotac-tive Co~Cl1t Inc .. t life", York, dit'l not consider this offer fair enough for recommendation but tho'l+ght it 'Ii/as the first step in the right direction tQV!ards a fair and sufficient one in the future. (See Appendix I for the details of the plan)o

?J Excluding the 1/l2th (1,13.000) of the 6% Central America.n Federation Debt of b163,OOO assumed by Costa Rica in 1827 Rnd paid off about 85% in cash in 1840.

... ·5.,..

a) The e% ~l million loan of 1871 and

b) The 7% '2.4 inillion loan of 1872.

Both of them became delinquent in 1874 ~nd remained so for about a decade u~til

they were redeemed at a 50% reduction of the prinoipal by a new 4-5% b2 million

Consolidated External Debt according to an agreement with the British Bond­

holders in 1885. The principal provisions of this debt adjustment plan ara

shown in Appendix I7.

The le85 Consolidated External Debt went into default in 1895 for atout

2 years. In 1897 a new arrangement was made whereby the interest on the 1385

bonds was soaleddo\Jll to 2-1/2 - 'Yfo (see Appendix III for details).

Between 1901 and 1910 the Government again def9.ulted several times. Not

till 1911 was a new debt adjustment made, with the approval of tha British

Bondholders, whereby the 1885 bonds were oonverted into the 4-5% Gold Refunding

Bonds totalling b2 million with 25~35% reduotion in the principal (see Appendix

IV for details). In addition to the Gold Refunding Bonds, a French loan in the

amount of 35 million francs was also floated in the same year, in conjunction

with the retirement of the Pacific Railway Bonds and other domestic debts.

Between 1911 and 1931 the public external debt was fully serviced. In

the same period three new external loans -- one in sterling and two in U. S.

dollars were obtained, namely:

a) 1912 6% Mortgage Bonds,for internal construction, :b18B,720.

b) 1926?% Bonds, for funding of internal debt and public works, $8 million.

c) 1927 7-l/'Z% Pacifio Railway Bonds, in payment of German Electric

Company, :~l. 8 million.

Since 1931, only ,three additional bondstthe Funding Bonds of 1932-33,

have been issued, all of them in payment of delinquent interest coupons of

,earlier debts as mentioned in Section II.

Tal~I_, PUBLIC :SX'I':SR:TAL DI;B1·' O]!' COSTA RICA

Pal~e J. Amount • Denominations

out- Purposes and Service reeord.. Amount issued sta,nding terms

----------------------------------------~------~ 1. Dollar oblJgations (in thousands) a) Bonds

7% External Secured Sinking Fund Gold bonds 1926-1951

7 1/2% Pacific Raib'lay bonds 1927-1949

5% Funding bonds 1932-1951

5% Pacific R.sdl'v~ Funding Bonds 193.3-49

Sub-total

b) Intergovernment loans. Exyort-Import Bank (10/)1/50)

Credit no. 275, 1940-·50 Credit no. 330, 1942-50

Sub-total Total dollar obligations

2. Sterling obligation§ 5% 1911-1958 bonds

6% Mtge. bonds, 1912-1942

Continued on page 2.

$ 8,000

1,800

1·.578

473

11,8S1

5,000 2,000 7,000

$18,851

;b 2,000

189

$, 5t362

1,217

1~151 (12/31/ 48)

371 (12/31/48)

8,101

4-,631 1~8S8

61 489 $ 14,590

1,405

20 (12/31/48)

Retirement of In­ternal loans and public ''forks.

Electrification of Paciflc Ry.

Refunding of in­terest payments of 7% of 1926 bonds.

For interest fund­ing of Pncific By. bonds of 1927.

(Construction, rna­(terial & service

Refunding older de bts., public 1ilorks and govtt. purpoaes. For internal con-struction.

Ooupons in $500 & $1.000 interchangeable. Callable at par on Nov. It 1936 and therea.fter.

Coupons in $1,000. Sinlcing fund 2 1/2% p.a. payable S.A.

Ooupons in $111 and Co • -0/222. Payable S.A.

Coupons in $100. pa,yable S.A.

Ann. $350,000 and Int. 12-31-50, then i1e1.'1 term

Cou~ons in ~20t 100 and 500.

S.F. 2% p.a.

Under 1939 nlan interest resumed at 30%. None paid since Nov. 1941. S.F. in default nov. 1932;...1935. None paid Since May 1936. March 1, 1933 and subse~ quent S.F. payment in de­faultc Interest in de­fault since Sept. 1941~ Last interest paid Ivfay 1936. S.F. payment de­linquent since Nov. 1936. Last interest paid 3-1-36. Sept. 1, 1936 and subse­quent S.F. payment in defa'lllt.

Regularly serviced. Regularly serviced.

Interest un1')aid since Jan. 1937. S.F.·· suspended since 1932. Interest unpaid since July 1935. S.F. susl)ended since 1941. -

Table I~: PUBLIC E::T~.L:lJA.iJ DE.i.JT OJ? COSTA iUCA - Continued

Amoun·t Amount * Denominations . out- Purposes and

___________________________________________ l-s-s_u_e_d __ ~~anding terms

2. Sterling obligations 5% bonds 1933-1953

Total sterling obligations

J. Franc obligations 5% bonds 1911-56

4. SiJanish obligations

Fes. 35.000

3 1/2% Mtge. Brulk Bonds 1928 $ 4,000

* As of December 1949 unless otherwise indicated.

224

;b 1,649

5,827

For interest fund­ing of 5% bonds of 1911.

For redemption of Pacific Ry. Eonds ruld Internal debt.

For opening of the Mortgage Bank.

SUPPLI]iiENTARY STATrI~mNT

Coupons in ~20 and 100.

In 500

Sinking fund at 4% p.a.

The arrears of interest and principal maturities on the external debt of Costa Rica as of Dec. 1949:

Dollar Bonds 7%, 1926-51 7 1/2%, 1927-49 5%, 1932-51 5%, 1933-49

Sub--total

sterling Bonds 5;6. 1911-58 6%. 1912-42 5%, 1933-53

Sub-total Franc Bonds

5%, 1911-56 Total

Amount of Arrears $ 3,002,720

1.947.200 460,295 520,800

$ 5,9)1,015

$ 4,4)8,267 §:./ 105,213 -:g 707,426 if

$ 5,250,906

$ 1,233,995 £! * 12,415,916

.-Pa.2"e 2

Service record

Interest in default since Jan. 1937.

In March 1925 the Gov1t. of­fered to redeem outstanding amount at US $ 50 for Fcs. 500 bonds plus $1.25 interest.

Not available.

!E:/ At $4.86 per ~1 accord.ing to the original provision.

BJ At $2.80 ner ~l. SJ At 1 Gold"-Franc = US$ 0.3267.

Table IX: ESTHiAT3D HiT::.:R:JST AiID .AIvIOIZTIZATIOH PAY1cl31IT'S OU THE DZBT OF COSTA RICA

in thousQnds of UoS. dollars}

____ ---=D:::;;o::.;1=lar b~o=nd:::::.s=--____ _ __----==l:=;x=po rt-Inr:)or t Bank

Y Amount Payments Amount

ear t-' t - I . OU ~mor ~- n- T t ' oUt-standing zation terest 0 a_ stand,lng

1950 8,101 7,525 543 8~o68 6,577 1/ 1951 576 576 29 605 6,545 1952 5,726 ~~ 4~OO 1954 4~089 1955 3,271 1956 2,452 1957 1,634 1958 815 1959 1960

See footnotes on page 3.

_______ Paym.ent_s ____ ___ ,Amo~ti- 1n- Total zat~on terest

35 81B B19 819 818 B1B B19 819 815

265 262 229 196 164 131

9B 65 33

300 1,080 19 048 1v015

982 :;49 917 88Ly 848

Page 1 Total dollar debt

Amount Payments out- Amort i- In ... · Total standing zation terest

14~678 7,560 808 8,368 7,121 1,394 291 1,685 5,726 819 229 1,048 4,908 819 196 1.015 4,089 818 16L~ 982 3,271 818 131 949 2,452 819 98 917 1 t 634 819 65 884

815 815 33 848

Year

1950 1951 1952 195.3 19.54 1955 1956 1957 1958 1959 1960

INT".L:cTCS'I' AIm i.l'{OR':!:IZATION ?AYl'iENTS O1:J THE r;XT~RHAL D:Jl:JT OF COSTA RICA - Contd.

Amount out- il.luorti- IIlr4

standinf; zution terest

8,420 19 032 421 7,388 1,025 369 6,.363 1,076 )18 5,287 1,130 265 4,157 753 208 ),404 791 170 2,61.3 830 131 1,783 872 89

911 911 46

(E.xpressed in thcllsa'lds of U. S. dollars)

F;(c;n.'.~:'1.~.!.~ "be,po.!'!. Amount

Total out-:- Amo::ti- In- Total st~~~Lng zat~on terest

1\)453 1.904 234 95 329 1,,394 1.670 245 84 329 l i J94 1,425 258 71 329 Ip)95 1,167 271 58 329

961 896 285 44 329 961 611 298 31 329 961 313 31.3 16 329 961 957

__ l~a.g~ 2 G:;.'and total ?J

knount payments out- Amorti- Iv- Ttl

staudi~~tion terQs~ 0 a

25,002 160 179 IJ~514 11,362

9,142 7,286 5,378 3,417 1,726

8,826 2,664 2,153 2,220 1,856 1,907 1.962 1~691 1,726

1,32L~ 744 618 519 416 332 245 154

79

10,150 3,408 2,771 2,739 2p2'12 2,239 2,207 1,845 1,805

Note, This table assumes that all bonds will be paid according to contracte On the Export-Import Bank loru1, the payments slwwn in the table do not actually represent present contract arrangements~ The Government of Costa Rica agrees to pay $350,000 a year through 1950 and a settlement of the remainder is to be made at tha~ time o The pa;yments after 1950 merely represent a distribution of this remainder over an eight·-·year periodo These figures were dra\1I"n. up by the Export-Import Bank.

1/ As of November .30, 1949.

gj Excluding the Spanish loan due to inadequate informationo

Table I!: .. ~,: ESTULATED I:NT:SREST A..1ID AMORTIZATION PAYM,ElirTS ON THhl EXTERliAL DEBT OF COSTA RICA

(On a deb!; adjustment :DIan similar to thn.t of Chile) (Expressed in thousands of UoS., d.ollars)

~aj~e 1 Dollar bonds ~~c)or r.-Irr:nvr t Bank Total dollar bonds

Amount :E~mEJll'b s Amo'lmt _____ .J:.~ID_ __ Amount Pa;iments Year out- Amort1- IJ".- out- Amorti- In- out- Amorti- In-Total Total Total

s tanding _Z&tJ9IL~ teres'!; s!i:Ulding zaHon terest standinr.;: zation taJLest

19.50 8,102 6',.577 11 35 26.5 300 149 679 3.5 26.5 300 1951 8,102 81 122 203 6,545 818 262 1~080 14,647 899 384 1,283 19.52 7,.562 92 151 243 5,,72b 819 229 1,048 10,258 911 380 11;291 19.53 7,102 101 142 243 4,908 819 196 1,015 12) 010 920 338 1,258 1954 6~597 119 16.5 284 4,089 818 164 982 10,686 937 329 1,266 19.5.5 6,121 131 153 284 3,271 818 131 94~ 9,392 949 284 1,233 1956 5,597 144 140 284 2,452 819 98 917 8,049 963 238 1,201 1957 5$021 173 1.51 324 1,634 819 65 884 6,655 992 216 1,208 1958 4,444 191 133 324 815 815 33 848 5,2.59 1,006 166 1,172 1959 3,807 210 114 324 3,807 210 114· 324 1960 3,107 231 93 324 3,107 231 93 324 1961 2,337 254 70 324 2,337 254 70 324 1962 1,490 279 45 324 1,490 279 45 324 1963 560 168 17 185 560 168 17 185

See footnotes on page 2~

Table ;1 ",.:~ ESTIfiii'l.TED InTEllliST A~m .i\.1vl0l1TIZATION PAYf.:lEl1TS ON TBJJ IiXTERHAL DEBT OF COSTA RICA - Contd..

(On a cebt adjustment plan similar to that of Ohile)

(Ex)ressed in thousand.s of U.S. dollars) EEl~e 2

sterling bonds G"l.:'and total Amount Paym(3nhs Amount Pa;yments

Year out- Arnorti- Tn- out- Amorti- In-standing zation . ..t:~t

Total f>iieng,iD,g ze:Ug;Q, tSl;!;:esii

Total

19.50 4,617 19,296 3.5 265 300 19.51 4p 617 46 70 116 19,264 945 4.54 1,399 19.52 4p 309 .52 86 138 14,.567 963 466 1; L~29

19.53 4~o47 .58 80 138 16,0.57 978 lj.18 1,396 19.54 3,7.59 68 94 162 14,1}4.5 1,00.5 42.3 1.428 1955 3?488 7.5 87 162 12,880 1,024 371 1,39.5 19.56 31190 82 80 162 11,239 1,045 1,363 1957 2,861 99 86 18.5 9,.516 1,091 302 1,393 19.58 2~532 109 76 18.5 7,791 1,115 242 1,357 1959 2,169 120 6.5 18.5 5,976 330 179 509 1960 1,771 132 53 185 4,878 363 146 509 1961 1,332 145 40 185 3,669 399 110 509 1962 849 159 26 185 2,339 438 71 509 1963 319 96 9 105 879 264 26 290

See footnotes on page 3u

..

Ta bl e_!l'.::i~: Faa TrJ"OTE S

page .3

~ As of 11/30/49.

Notes: It has here been assumed that a debt ad,justment similar to that of Chile ,,,rould be agreed upon for

both the dollar and the ster1inc bonds. This \1I'ottld call for interest at the follo\dng rates: 1 1/2% in 1951; 2% in 1952-53; 2 1/2% in 1954-56; and 3% in 1957 and thereafter. There \vould be a 1% cumulative sinking fund" '

It was also assumed that all bonds would be bought in the open market at the fol1mving prices i 15 in 1951; 20 in 1952-53; 25 in 1951j.~56; and 30 thereafter.

Not shown in the table is the French franc bonds of 1911-,1956. These \vere gold franc bonds originally and the amount outstnnding is shoun as fr 5,811,000 or $'.6)903 in paper francs or $1,860,000 in gold francs" If a debt adjustment similar to the one mentioned above \vas made on these, the annual service after the 3% interest rate \"ras reached v{Culd amount to approximately $676 in paper francs or ~743tOOO in gold francs o

There is also mention in Moodyrs Investment Manual of a $4,000,000 loan of 1928 for the establish­ment of the Mortgage :aank.. This souroe renorts that in 14[W 19.36 an ngreement \'las entered into uith the Sranish bondholders t by which interest \vas'" reduced from 7c; to 3 1/2% and amortization \vas then paid at the rate of 4,; a year.. There are no current details about this loan ..

On the Ex-)ort-1ml'ort Bank: loan, the payments sho\m in the table do not actually represent present contract arrangements o The Government of Oosta Rica agrees to pay $350,000 a year through 1950 and a $ettlement of the remainder is to be nade at tL1at time o The payments after 1950 merely represent a distribution of this remainder over an eight-year periodo These figures \<Jere dravm by the Export.-Im.)ort Bank ..

•

~DIX I

1939 Elan of D~bt ~djustment

(1) !s to in~erest couRons attached to the 7-1/2% Pacific Railway Bonds. d~e SeE!!!!l'!0er' It 19L.2..L.§e:r:i..ep A to E. inclusive:

Coupons maturing March 1, 1939 to September 1, 1941, both inclusive, of the face amount of $37.50 each, will be pu:;:'chased at $11.25 eaoh on or s.f-toer the respectlve maturity dates thereof, except that the HaJ.~chl, 1939 COl'.pons will be purchased on or after the date of this notice.

Coupons which matured September 1, 1937 to September 1, 1938, both inclusive, of the faoe amount of $37.50 each will be purchased at $5 eaoh, as follows: S()ptembsr 1, 19J7 coupons will be purchased on or after September 1, 1939; Harch 1, 1938 coupons will be purohased on or after September 1, 19,P; and Sept$mber 1, 1938 ooupons will be purchased on or after Sdptember 1, 1941.

(2) !1s to intare.!~£ou~ns a~.tached to the 5% Paolfic Railway Fr:.nd::"!l::.~.!l9!l£.!! 2f 1933, due Septerob!r",l, 199:9:

Coupons maturing Harch 1, 1939 to September 1, 1941, b~th ino1u.sive, of the face amount of $7.50 each, will be purchaRed at $2.25 each on or after the respective maturity dates thereof, except tha.t the l1arch 1, 1939 ooupons will be purchased on or after the date of this notice.

Ooupons whioh matured Septem~er 1, 1936 to S9ptember 1, 1938, both inclusive, of the face amount of $7.50 eaoh will be purchaoed at $1.50 each, as follows: September 1, 1936 coupons will be purchased on or after SeptfJm;Jer 1, 1939; March 1, 1937 coupons will be purchased on or aft,er September 1, ::1.940; September 1, 1937 coupons will be purchased on or after S3ptember 1, 19'~; and March 1, 1938 coupons and September 1, 1938 coupons will h3 pc.rchased 011 and after snch dates, not later than September 1, 1941, as shall be announced by tho Government •

(3) As to interest c£~~.!!ached to the Ext.ernal Sequ:~~e1 S:1.nk1.nK1:~~'ld 1& .QolJL~nds, 1926. d·.lj NOYemne:"' 1.t..-1951:

Coupons maturing Nay 1, 1939 to November 1, 1941, both incluslve, will be purchased on or after the respective maturity dates thereof at ~10,50 each, in the case of coupons of the fa.ce amount of $35.00 each, atJ.G:.·t1.t $5~25 each, in the case of coupons of the face amount of $17.50 each.

CO'lpons whi()h matured Noyember 1, 1936 to November 1, 1938, both inclusive, will be purcbased at $5 each, in the case of coupons of the face amount of ~35.00 each, and at d;2.50 each, in the case of coupons of the face amount of $17.50 each, as follows: November 1, 1936 c::mpons will be purchased on or after November 1, 1939; May 1, 1937 coupons will be purchased on or aftar November 1, 1940; November 1, 1937 coupons will be purchased on or after November 1, 1941; and May 1, 1938 coupons and November 1, 1938 coupons will be purchaseci on and after such dates, not later than November 1, 1941, as shall be announced by the Government.

(4) As t2-!~~ ~oupons attached to-1he 5% Funding Bonds of 1932, due Eovember 1, 1951:

Coupons maturing May 1, 1939 to November 1, 1941, both inclusive, will be purchased on or after the respective maturity dates thereof at $1067 each, in the caae of ooupons of the face amount of $5. 55 ea~h, and at ,$.83 each, in the case of coupons of the face amount of $2,77 or $2.78 each.

APPENDIX I - Page 2

Coupons which matured November 1, 1936 to November 1, 1938, both inclusive, will be purchased at $1.11 each, in the case of coupons of the face amount, of $5.55 each, and at $056 each, in the case of coupons of the face amount of $2.77 or $2.78 each, as follows: Noyember 1, 1936 coupons will be pu.rchased on or after November 1, 1939; Hay 1, 1937 coupon3 will be purcha.sed 0:1 0:: after November 1, 1940; Novem'ber 1, 1937 cm).pons will be purchased on or aft8r November 1, 1941; and May 1, 1938 coupons and NoYember 1, 1938 coupons "'ill be purchased on or after 811Ch dates, not later than November 1, 1941, as shall be announced by the Government.

§.~: l"oreign Bondholders Protective Council, Inc., ~nnt"'.a1 Bm2.2rt 1'))3, p. 335.

The l885_Debt Adjustment Plan

(1) Creation of a New Consolidated External Debt for1.2 r OOO,OOO.

(2) Reduction of the principal of the 1871 loan (1.941,200), and 1872 (1.1,750,100), by 50%, the surplus Bonds to be used to pay the intsI'3st for the first two yeers, and the expenses of the Arrangement, Conver­sion, atc.

(3) The New Bonds to be divided into Series "A" for 1.525,000, and Series "B" bl,475,OOO; interest to be paid from lflt January, 1386, to 1st Jam'.ary, 1:388, at 5% on Series "A" and I.{/o on Series "B", after which tha GO'var~J;nent to pay 5% on both Series, but that on the "AYs" to be paid prefe:.rdT.t.ially.

(4) 1% Sinking Fund, oommencing in 1898, to be applied by half-yearly Drawings at par.

(5) For i.nterest arrears, viz.: 1.649,1,28 on the 1871 and 1.1,470,084 on the 18'72 Loan, fully paid Shares in the Costa Rica Railway Company, to be given at 1=.22. lOs. Shares for the arrears on each hl00 Old Bond.

(6) Interest to be secur~d by the issue at the beginning of each year, from 1st January, 1888, of "Customs Notes" for the total intereet of the.t year; the Notes to be B.ccepted for Import and Export Duties, and Payments in money not t.o be allowed until they lV'ere realized.

(7) The 1871 and 1872 Bonds to be held by the Coun~il until the 1st July, 1894, as a guarantee for the fulfillment of the Agreement. Upon default on any Coupon up to and including July, 1894, the Bondholders to revert to their rights under the Loan Contracts.

Source: ~nnual R~ort, 1938, C2~c~1 of the Corporation of FOI'sign Bondholders.

APPENDIX III

(1) Principal of the Debt to remain unchangsd.

(2) Interest on t~'e "A II Bonds to be reduced to Jlo, and on the "B" Bonds to 2-1/2%, to commonce with the Coupon of 1st October, lS97.

(3) The ~275,OOO of arrears of interest to 1st April, 1897, to be liquidated by ~131,562010s., ~31,562.10s. of which to be appropriated to e}~ensos on completion of the Arrangement. Certificates to be issued for Coupons Nos. 14 to 18 in arrear, at ~5 per ~12. lOs. o<'1erdue Coupons, and to La redeemed by drawings by the application of ~5,OOO per annum for twen';';y years.

(4) From 1st October, 1917, a non-accumulative Sinki~g Fund, of tlO,OOO per an~um, to be applied by tenders.

(5) The Debt Service to be remitted monthly.

(6) The existing Bonds to be stamped with the new conditions.

(7) If the Debt Service should remain in suspense for six months, the rights of the Bondholders under the 1885 A~rangement to be revived.

(8) Payments to be preferontial to those of any future loans.

Tr.,e 19;11 Debt Ad.ju.stm~ Plan

(a) [our to Five 26::': cent. Gold Refunding Bonds for }J2z09Q,OOQ.

Issued for the conversion of the External Debt and tea Internal Port Limon Sanitation Bonds, the balance of ~382,800 being reserved for the Gover~~a~t. By this Arrangem::lnt, for each I,lOO Bonds 1..1'1 th interest in arrear, the holc.3rs of "A" and "BII Bonds received ~75 and b65, respectbTely in New Bonds, and for each blOO Arrear Coupon Certificates of 1897, blOO in New Bonds.

The New Bonds to bear interest at 4% for the first tan years, and 5% thereafter, and to be redeemed on or before the 1st of January, 1958, bye. Cumulative Sinking FU:"ld or not l'3sS than 1% commencing on the 1st of Jall',;'.e l'y, 1921. The prinoipal and service of the Loan to corlstitute a first clla:;;g3 011

all Customs Dvties, the proportion i'or the service to be paiel each month. At the end of eaoh half-year at least five-sixt.hs of the amount, for the ear-rice of the ensuing half-year to be always in hand. No charge to be c:;'''E.a.ted UP01: the Customs Duti8s in prefe:t'Emce or equal to that grant.ed to the h01ders of th'3 Refunding Bonds, and no changes in thas~ Duties to be made ~rejudicial to the Bondholders' security. In the event of dofault for thirty days, the Gov'Gr:lment to consent to appotnt a Customs Agency having the sole right to collect all the Customs Duties by means of Certificat.es to be izsued for that purpose., the Customs Duties to be payable only in such Certificates.

For the redemption of the Bonds of the Pacinc Railway and of the Internal Debt. Redeemable in 40 years from 1st January, 1916, by half-yearly drawings commencing 1st April, 1916. Secured by a Firet Mortgage on the Alcohol and Liquor Monopoly, the amount for the service to be set aside daily by the Admin­istrator of the Revenues of the Republic, and handed over weekly to the Repre­sentative in Costa Rica. of the Bankers, for remittance to Paris. The said R.epresentative to have always in hai1d two months' interest in advance, the Government being bound, in the event of sixty days' default in the payment of the weekly installments, to surrender to him or to the Bankers the administra ... tion of the assigned Revenues. The Republic not to issue any ne',.] Loan within two years from the date of issue, and the Ban~ers to have a pref~rential right, under equal conditions, for a period of five years, in any new financial operation for a Loan,