The Limón REAL Project
Creating a Free and Autonomous Region in Costa Rica

by
Rigoberto Stewart
,
President of the Asociación Limón REAL

Limón REAL logo

Project Overview

Imagine that one had the opportunity to invest in Hong Kong at the close of World War II, but with the benefit of today's hindsight. For many of us the lesson proved by the thriving economy developed on that tiny, resource-less rock is as profound as it is obvious: economic freedom and prosperity are inextricably linked, and half-measures in either beg ultimate failure.

A new Hong Kong is in the making. The Limón REAL Project will transform the Province of Limón (Costa Rica) into an island of liberty and prosperity (REAL is the Spanish acronym for "Free and Autonomous Region"). This will be done by securing autonomy for the people of Limón, coupled with absolute economic freedom and other individual liberties. Autonomy, however, will not entail separation from Costa Rica, but a framework of principles that will protect individual liberty in the autonomous region.

The Region

Costa Rica is a small and relatively poor Central American republic wedged between Nicaragua and Panama. Its land area is home to approximately 3.8 million people, mostly mestizos, who are a mix between Spanish and Indian. Limón is one of seven provinces and stretches along the entire Caribbean seaboard. It accounts for 18 percent of the land area of Costa Rica but only 8.9 percent of its population (see table below)1. To put that into perspective, Limon province is slightly smaller than the State of Connecticut.

Comparative Characteristics of Costa Rica and the Province of Limón
Characteristic Costa Rica Limón
Size (km2) 51,000 (20,000 mi2) 9,184
Population 3,824,593 340,756
Language Spanish Spanish, English, Indian dialects, Chinese
Predominant Religions Catholic Catholic, Protestant
Predominant Race Mestizo Mestizo, Black, Indian, Chinese
Annual Rainfall 2,000 mm 4,000 mm
Average Temperature 24 °C (75 °F) 29 °C (84 °F)
GDP/capita (1996) $2,685 $1,440
Source: National Census of 2000 and data compiled by R. Stewart.

In terms of climate, natural resources, and cultural and ethnic characteristics, this province differs so markedly from the rest of Costa Rica that it is considered by many Costa Ricans to be like a separate country.

Cultural and Ethnic Peculiarities

The forging of the Province's unique ethnic identity began when the various native groups met the Spaniards whom Christopher Columbus brought with him on his third trip to America in 1502. Accompanying the Spanish were African slaves. A much later wave of Blacks emigrated from Jamaica and other Caribbean islands during the latter part of the 19th Century and early 20th to settle in Limón province. After centuries of persecution, the Bribris, Cabecares, Teribes and Guaymies Indians made Talamanca, in southern Limón, their refuge, living there on several reservations. There is also a large Chinese community dating from the days of railroad construction during the latter part of the 19th century. Over the years these groups mixed with whites, producing a large population of mestizos (Indian and white), mulattos (black and white) and zambos (black and Indian). Out of this singular interaction and mixture has emerged a distinctive Limonense character. However, such racial and cultural distinctiveness has inspired in the rest of Costa Rica suspicions and attitudes prejudicial to the province. This is also reflected in the attitudes of government officials, which helps account for the exacerbation in the province of bad government policies such as high taxes, low investment in infrastructure, excessive regulation, and poor public services.

Poverty and Misery

From the days of the Spanish conquest, Limón has been Costa Rica's most discriminated against and exploited province. Even today Limonenses suffer unemployment, under-employment, poor health, educational problems, poverty and malnutrition. In 1995 the per capita annual income of a family in Limón was about US $1,200. Three years later it rose to US $1,440. During 1995-1996 both the unemployment rate and the number of poor families increased by 60%. In the following year, the latter rose another 15 percent. In 1996-1997, 26% of Limonenses were unable to meet their basic nutritional needs. Infant mortality is the highest in the country (16 per 1,000 births, 24 in Talamanca), and infant malnutrition in Talamanca, at 6.5%, is three times greater than the national average.

Why are the Limonenses so poor? The reason, historically, has been the absence of freedom, especially economic freedom. To illustrate, we need only mention the nationalization and subsequent shutting down of the railroads, the prohibition until after the First World War against blacks owning land, and the national government's stifling control of the economy.

Except for the banana industry, the Costa Rican government controls the economic life of the region and owns its most important enterprises. Government interventions in the economy include ownership of the seaports, as well as monopolization of importing, refining and distribution of petroleum products, electric power generation, telephone communications, and the provision of insurance. It also controls the social security system, which includes medical services (hospitals) and pension funds, and the now closed railroads. All of these enterprises are managed by strict political criteria that have proven to be a sure guarantee of poor and costly services.

Besides monopolizing the most important economic activities, the government uses its control of the regional economy to extract wealth for the benefit of other parts of Costa Rica. Thus the taxes extracted from the banana industry and the profits of state-run enterprises are not reinvested in the province.

This situation should provide enough motivation for the region to welcome individual and economic freedom. But there are at least two other reasons why the national government and the Limonenses should embrace this project. One is the pervasive unrest in the form of collective violence against the State, long smoldering in Limón. The other is the enormous economic potential of the region.

Unrest

Because of worsening economic and living conditions, Limón has been a region of social unrest for the past 30 years. No less than six protests occurred between March 1999 and September 2000. In March, telecommunications workers, combined with several other unions, blocked the main roads in the province in protest against the telecommunications law then being proposed. In May, the Civic Committee of Sixaola, bordering on Panama, protested general conditions in that area by blocking the roads. In July, farmers demanding subsidies blocked the only highway to the port of Limón. In the same month there were protests again in Sixaola over lost benefits. In August 2000, laid off dockworkers joined with banana workers to demand supposedly deserved compensations; and in September 2000, unions at the ports, the petroleum refinery and other businesses blocked roads protesting the loss of perquisites. Undoubtedly Limón needs a solution before such violence escalates beyond closing roads.

Economic Potential

The economic potential of Limón is enormous. Its tropical rain forests, both black and white sand beaches, exuberant coral reefs, abundant navigable rivers into the jungle, unique flora and fauna, and highly contrasting scenic beauty are especially conducive to nature-oriented tourism. Its rich, fertile soils offer an enormous potential for agriculture, animal husbandry and forestry. Moreover, it is strategically located to become a bustling center for such services as ports, airports and transportation, plus complementary services such as finance, insurance, telecommunications and electric power. This potential has hardly been tapped.

The Limón REAL Project

The Limón REAL project is not a wild-eyed lunge for freedom. Rather, it is a carefully formulated plan with a specific purpose. It was conceived with three objectives in mind. First, to develop the province and make available standards of living the Limonenses can now only dream of. Second, to assist the Blacks, Indians, Chinese and Mestizos to fully recover their liberty, property, and self-esteem. Third, to prove to all Latin Americans that liberty is not only morally correct, but that it works. Applied free market principles will transform the worst of areas into something wonderful in a short period of time.

Limón REAL is a project for, and about, the people of Limón. Its purpose is to encourage the Limonenses, through a growing grassroots movement, to declare the whole province an autonomous and free region governed by free market principles and individual freedom. The province will continue to be a part of Costa Rica, but with totally different legal-institutional arrangements.

Traditionally such projects are negotiated directly with central governments from the top, but that approach has seldom proved effective. The Limón REAL project will follow a bottom-up approach. That is, instead of negotiating first with the Costa Rican government, it will "sell" the idea to the Limón people, through an elaborate marketing strategy that will include, but is not limited to, disseminating written materials (project descriptions, books and pamphlets); meeting with organized groups of all kinds such as churches, clubs and unions; appearing on television and radio talk shows; presentations at seminars, conferences and workshops, etc. These activities are described in the Project Sequence section. Negotiating with Costa Rica's central government will begin only after the project is sufficiently accepted and embraced by the Limonenses.

The project is described in Dr. Stewart´s book2 Limón REAL, which covers many important details, including answers to these fundamental questions:

Salient Features of the Autonomous Region

Autonomy is a necessary but not sufficient condition for achieving prosperity in Limón. Economic freedom is the key. Autonomy will enable the cultivation of an institutional structure and system based on the free market and protective of personal freedom. Some salient features of a society so structured are listed below. Research data, supportive arguments and operating details are provided in the book Limón REAL.

Project Sequence

In order to achieve autonomy for Limón, we anticipate a long series of activities. These will change as the project moves forward and new opportunities arise. The initial stages emphasize market and financial research and fund raising. The intermediate ones concentrate on marketing the project to the Limonenses and negotiating with the central government. The final stages will be devoted to preparing the citizens and businesses for autonomy and the actual implementation of it. The changes in project activities will be determined by achieving the following critical milestones: obtain the initial funding, complete the business plan, secure the project funding, obtain the necessary support of the Limonenses, negotiate a date for autonomy, and Autonomy Day itself. The project will proceed in eight stages. The following is a summary of each stage in terms of its objectives, expenditures, and time frame.

Stage 1: Project Development

This stage is now completed. Besides formalizing the idea and publishing it in book form, it included presentations of the project before various groups of Limonenses and international conferences, publication of articles in a major national newspaper, preparation of a video and brochure, and initial distribution of the book in Spanish in Limón Province. It began in 1995 and ended in December 2000.

Stage 2: Secure Initial Funding

The primary objective of this stage will be to obtain from foundations, businesses and individuals the US$200,000 needed to complete the business plan, establish headquarters in the Province of Limón, and continue marketing the project from an office in Limón city. This stage began in January 2001 and should end not later than June 2001.

Stage 3: Complete the Project Business Plan

Work needs to be done in three primary areas before the project can be fully specified and accelerated. Legal planning will be needed to facilitate a smooth transition and to draw up the various agreements and corporate entities that will be part of the project. Financial planning will be needed to quantify the assets of the Limonenses currently held by the national government and to ensure soundness and fairness in the agreements and corporate entities. Marketing research will be needed to provide details of implementation. The culmination of these three efforts will provide a complete and viable business plan with the legal, financial and marketing details worked out. This stage will also include establishing headquarters in Limón, publishing a second English edition of the book edited for that audience, and engaging in preliminary marketing, primarily by means of flyers, pamphlets, videos, and sales of the book in both Spanish and English. This and the following stage will exhaust the preliminary funding.

Stage 4: Obtain Funding to Complete the Marketing Stage

Once the business plan is complete, funds will be needed to market the project to the Limón people. To obtain these funds, the finance committee will use the business plan, audio/visual aids, and the two editions of the book to market the project in the United States, Hong Kong, Singapore and Europe. This stage will end when the funds are in hand and should take no more than nine months.

Stage 5: Achieve Critical Support Level in Limón

This stage will begin when total financing has been secured and will end when a critical level of support from the Limonenses has been achieved. Determining when this level of support has been achieved is not an exact science. Using all relevant sources such as independent surveys, petitions and membership recruitment, the Limón REAL team will identify when the Limonenses have embraced the project to the extent that the national government's cooperation can be reasonably assured. We expect this stage to take 12 months. This is where the bulk of the effort to secure the Limonenses' support will occur. These efforts will take the form of a wide array of marketing activities, each designed to reach specific segments of the population, to address particular aspects of the project or to address specific needs of the Limón people as a whole. The intellectual leaders in Limón will be provided with the philosophical and economic reasoning needed to persuade them of the merits of autonomy. But because the Limón people are in deep need of a sense of pride and hope for the future, the mass marketing effort will stress the emotional aspects of the project. It will also emphasize the practical aspects as opposed to the philosophical.

Stage 6: Negotiate a Date for Autonomy

This stage will begin once a critical level of support among the Limonenses has been achieved. Independent research projects, signatures on petitions and membership in the Limon REAL Association will be some of the indicators used to determine when level of support has been reached. The object will be to use this support as leverage to negotiate autonomy for Limón with the Costa Rican central government. This stage should take no more than three months and will end when the date for autonomy is set.

Marketing Activities. In this stage the marketing emphasis will shift away from the Limonenses toward the rest of Costa Rica and the national government. While the groundwork for acceptance of liberty and free market principles will already be set through the activities of other organizations and individuals in Costa Rica, the specific emphasis on autonomy as a solution will be provided by the project. The purpose will be to strengthen the position of the negotiators by securing the support of the rest of the country. Some marketing will continue in Limón, and contacts will be initiated abroad to interest foreign investors in the soon-to-be autonomous region.

Negotiations with the Government of Costa Rica. Many issues must be negotiated with Costa Rica's central government. These will include definition of a Limonense, definition of autonomy and its characteristics, identification of needed constitutional and legal changes, identification and valuation of the assets to be returned to the Limonenses, and procedures to be followed during the transition.

These negotiations will call for hiring specialists in different areas to help negotiate details surrounding the national debt, asset transfers, changes in operations of certain government firms, valuation and transfer of natural resources, etc.

Stage 7: Prepare for Autonomy

This stage will extend from the moment an agreement is reached to grant Limón autonomy under the conditions stipulated in the Limón REAL document to the actual date autonomy begins (Autonomy Day). Here the primary goal will be to make all necessary preparations for autonomy. This should take eight months.

"Selling" the Region Abroad. Selling the project abroad will entail making contacts with the international business community. It will include preparing materials, giving presentations to visiting businessmen, sending out business prospectuses, traveling to give presentations, and responding to inquiries from abroad.

Helping Prepare Citizens for the Change. Some citizens will need to make a decision whether to join the autonomous region or stay with the current system. They will inquire about the project and will need responses. We anticipate that inquiries will cover a wide range of subjects and we must be prepared to deal with them.

Helping Prepare Institutions for the Change. Autonomy will entail changes affecting the courts and judicial services; social security; the school system; petroleum refining, importing, and distribution; operation of the ports; institutions such as the Atlantic Coast Development Board (JAPDEVA), state banks, the National Insurance Institute, and the institute that provides electrical power and telecommunication services. The project will assist these institutions in making the transition as smoothly as possible.

Guiding the Regional Electoral Process. In conjunction with the national government, the project's board will set election dates and expedite the election of a governor and other regional officials. This activity will include a strong information campaign. Candidates must be well aware of what Limón REAL stands for.

Stage 8: Implement Autonomy (Transition Period)

This period will cover the transition to a free and autonomous region, the first 24 months of actual autonomy. It is described in the book Limón REAL as the transition period from Limón under Costa Rican laws and institutions to a free and autonomous region operating under the Founding Principles set out in the book. This process will not, and can not, be rushed. Each individual issue must be considered independently and timed according to its unique problems. Some aspects of daily life in the region will change immediately, while others will take time. Some of the more important activities of this period follow.

The Regional Government Takes Office and Begins the Transition. The regional government, comprised of the Governor, his cabinet and representatives of the municipal governments, will assume its duties from the first day of autonomy and will have such attributes, characteristics and functions as are established in the Founding Principles. Nevertheless, during the first two years of autonomy it will assume greater functions and powers than at any time thereafter. The temporary and extraordinary powers will allow the regional government to:

  1. Negotiate with the national government everything having to do with management of the public assets, consisting of such things as buildings, roads, parks, ports, lands, and functions such as the postal service, the police and the court system. Negotiations will include the public debt.
  2. Effect the transfer of public assets and programs to the private sector, deciding how this shall be carried out and how to use the revenues.
  3. Develop alternative plans for carrying out certain changes and conduct hearings so that all citizens who are interested can participate in the decisions.
  4. During the interim, manage all assets and programs that will no longer continue under control of the national government, such as police of various kinds, water and sewerage, streets and highways, railroads, and public employees.
  5. During the transition period the government of each canton will continue operating as at present but with the following exceptions: They will charge fees for licenses or business permits at the rate that existed before autonomy but may not restrict any activity. They will not charge taxes for garbage collection and other services but may compete to earn revenues from services sold. They will not bar private competition from providing any of these services nor will they charge property taxes.

These eight stages may be considered in terms of the milestones and time periods shown in the graph below.

Limón REAL time line

Organization

Just as the activities change as each milestone is achieved, so does the organization that supports those activities. The organizational structure began with the project's creator and one assistant. It is now progressing to a larger organization with headquarters and offices in Limón, and Task Force leaders and members in various parts of Costa Rica and around the world. Final organizational structure will consist of a board of trustees, a director general, a project manager, multiple Task Forces, a financial officer, office directors, market research specialists, and a well trained cadre of promoters, many of whom will be volunteers. With variation in size and activities, this structure will remain until the completion of the project.

Formalized and rigorously applied project management practices, such as Critical Chain Project Management, will be adopted. This is an important strategy, but left for the final business plan to specify. It is expected that under this approach, task forces to address the various obstacles and required actions will be organized and provided with explicit, easily gauged milestones and deliverables.

Budget

In addition to preparing a budget for each stage, we have identified three critical budgetary milestones: 1) initial funding to cover stages two through four; 2) project funding to cover stages five through seven; and 3) transition funding to cover stage eight. For stage one the budgeted figures represent total investment in the project through December 2000.

Personnel Office Marketing Total
Stage 1 297,000 0 19,000 316,000 **
Stage 2 12,000 0 12,000 24,000
Stage 3 29,200 31,700 35,000 95,900
Stage 4 21,600 4,950 56,500 83,050
Stage 5 1,171,200 281,600 1,430,857 2,883,657
Stage 6 564,450 15,450 100,000 679,900
Stage 7 771,880 70,800 340,000 1,182,680
Stage 8 2,280,000 0 0 2,280,000
Total 5,134,430 404,500 1,993,357 7,545,187

** The preliminary work was financed mostly by the Project leader, Dr. Rigoberto Stewart, with some financial help on specific projects within the preliminary preparation stage.

Financing and Investment Opportunities

Three financing steps will be required to complete the project:

  1. Raise $200,000 through donations to fund Project Stages 2, 3 and 4.
  2. Generate $5.6 million in project investments to fund Project Stages 5 through 7.
  3. Generate $2.3 million to finance the 2-year transitional government in Limón (Stage 8).

First step financing consists of raising $200,000 in donations and is the primary goal of this Preliminary Business Plan. These donations will pay for the legal and financial research and planning required to construct the Final Business Plan and associated legal documents. Since it is highly unlikely that the entire project can be financed through donations, we recognize the need to create attractive investment opportunities to provide the $5.6 million needed for the second step. The nature of these investments will be the primary subject of this section. Third step financing pays for the governor, his cabinet or staff, and the operational expenses associated with the two-year transitional period that begins after Autonomy Day.

First Step Financing

Initial Financing

We have allotted six months for securing these initial donations. To mitigate risk to principal, donors are free to make stipulations such as holding the donation in escrow until we acquire the full $200,000. Otherwise, formal investment mechanisms cannot be offered at this stage. As we mentioned above, the main purpose of the initial financing is to research and design those investment mechanisms. It should be obvious to the donor, however, that he or she would be helping to create a future investment opportunity with unique and extraordinary potential.

Donors contributing more than $1,000 will enjoy monthly progress updates through secured website access, affording them privileged information and reports concerning the project. In addition to showing how their contributions are being applied, this information should prove beneficial to assessing and timing future investments in Limón REAL. Donors contributing $10,000 or more will be invited to a special financers day in Limón REAL where they will be updated personally.

Second Step Financing

Primary Financing - $5.6 million

The more important and initial application of this money will be for marketing Limón REAL to the Limonenses. This is an essential first step to pave the way for subsequent negotiations with the national government. Given the size of this financing, formal investment mechanisms are needed to attract it. Two possibilities in this regard are presently under consideration and are summarized below. It may well be that the financing research performed in Stage 2 will reveal additional options.

We should mention that anyone (including foreigners) should enjoy protection under Costa Rican law to invest and own property or businesses in Limón even today. Clearly, if Limón REAL succeeds, the tax-free, unregulated environment will increase considerably the value of such investments. However, these types of investments in themselves provide only peripheral support to the immediate needs of the project. Donors and potential investors are encouraged to invest in Limón through any means they prefer, but we remind them to consider the importance and potential benefits of directly supporting the autonomy project.

Regardless of the enthusiasm and optimism of the Limón REAL team, it is reasonable that outside investors will consider their investments high-risk and will expect commensurate returns. Hence, financing mechanisms similar to venture capital scenarios must be provided. Two possibilities are: