Dozens of wooden shacks have joined the businesses and luxury hotels that line the highway linking the capital of San Jos'e to the national airport. The poor shanties pale next to the colorful flags decorating the road to herald today's presidential inauguration. The obvious housing shortage is one of the chief domestic problems facing President-elect Oscar Arias S'anchez, the National Liberation Party standard-bearer who will be sworn into office today. His campaign slogan of ``roofs, jobs, and peace'' neatly summarizes the new administration's priorities. Its challenge is to meet campaign promises of improved housing, employment, and social services while also financing the nation's enormous $4.5 billion foreign debt.
The goal is particularly important here, since it is precisely the nation's strong social-service system that has given it the highest standard of living in the region and the most stable democracy.
Major service cutbacks could provoke the powerful middle class and ignite the social unrest that is endemic to the region. Although President-elect Arias is inheriting a recently stabilized economy, he will have to strengthen it considerably if he is to balance these economic interests, political observers say.
Mr. Arias will be more active, aggressive. He is described as an intelligent, capable administrator who has a strong sense of pride in himself and his country.
A graduate of the London School of Economics, he was twice minister of planning, and he is a former National Liberation Party secretary, and author of several books on Costa Rican politics. Arias has already stirred up controversy, particularly when he publicly questioned the wisdom of President Reagan's request in February for $100 million in military and humanitarian aid to Nicaraguan rebels.
In a recent speech, Arias hinted at his vision of United States-Costa Rican relations. ``I value nothing more than friendship, friendship between people, friendship between nations,'' he said. ``Friendship implies loyalty, but loyalty is not synonymous with servitude or unconditionality.'' Costa Rica's friendship with the US brought it $201.8 million in economic aid in 1985.
But since December, about $80 million in US and international credits has been suspended until Costa Rica meets World Bank demands to reduce the number of state employees, certain import taxes, and the budget of the National Production Council, which provides subsidies for basic food commodities.
Arias has pledged to fulfill the nation's international financial obligations. But like outgoing President Luis Alberto Monge, he is unwilling to dismantle Costa Rica's welfare state to meet the demands of the international lending institutions, which will begin negotiating with the new government this month. On Tuesday, Costa Rica announced that because of a serious foreign-exchange shortage, it had suspended payment on the interest of its foreign debt. It expects to resume interest payments next month.
``We don't necessarily believe in the magic of free market,'' Arias told a US journalist. For example, the government's program to revitalize the economy calls for ``economic growth with social justice.'' The plan includes restructuring the tax system; providing credit to small farmers and industries; promoting tourism, cooperatives, and nontraditional exports; and generating employment. The plan calls for raising the salaries of the middle class, which still suffers from the economic cutbacks of the previous administration.
The government must also contend with the estimated 250,000 Central American refugees here. The refugees, mainly Nicaraguan, have created health, social, and employment problems.
On foreign policy, Arias plans to play an active role as peacekeeper in Central America. But he has not made significant conciliatory gestures toward his northern neighbor, Nicaragua. A firm supporter of neutrality and nonintervention, he has indicated he will take a tough stance against the ``contras'' rebels operating out of Costa Rica.
Arias would like to carve a more independent path on international issues than did Monge, say some National Liberation Party officials, thereby restoring the credibility that Costa Rica lost with Western Europe and Latin America because of its tough stance on Nicaragua. Whether he can hold that position seems doubtful. US press reports already claim that Washington is holding back financial credits to pressure Costa Rica to adopt a harder line against the Sandinistas.
Arias has denied the claim. In the past two weeks, Arias has sharpened his statements against Nicaragua in the local press. The press, which is opposed to Arias, is an obstacle that Arias will have to deal, observers say. So is an overwhelming pro-US public opinion.