NSSD ON U.S. POLICY TOWARD ECONOMIC DEVELOPMENT FOR CENTRAL AMERICA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP10M00666R000301160001-0
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 22, 2016
• Document Release Date: September 2, 2011
• Sequence Number: 1
• Publication Date: January 9, 1985
• Content Type: MEMO

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AW 'AMW
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No. ER 85-0159
COPY 5
NATIONAL SECURITY
COUNCIL
INFORMATION
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SECRET I i.. I SYSTEM II
January 9, 1985
MEMORANDUM FOR THE VICE PRESIDENT
91299
CIA ER 85-0159
THE
SECRETARY OF STATE
THE
SECRETARY OF THE TREASURY
THE
SECRETARY. OF DEFENSE
THE
SECRETARY OF AGRICULTURE
THE
SECRETARY
OF COMMERCE
THE
SECRETARY
OF ENERGY
THE
DIRECTOR,
OFFICE OF.MANAGEMENT AND BUDGET
THE
DIRECTOR
OF CENTRAL INTELLIGENCE
THE ADMINISTRATOR, AGENCY FOR INTERNATIONAL
DEVELOPMENT
SUBJECT: NSSD on U.S. Policy Toward Economic Development
for Central America (S)
The President has approved the attached National. Security Study
Directive on U.S. Policy toward Economic Development for Central
America. (S)
' Robert. C . ' McFarlane
Attachment.
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VLW1 %L. I SYSTEM II
SECRET
NATIONAL SECURITY STUDY
DIRECTIVE NUMBER 2-85
January 9, 1985
91299
ECONOMIC DEVELOPMENT FOR CENTRAL AMERICA (U)
Introduction
The purpose of this NSSD is to provide an analytical framework
for building a successful U.S. policy toward economic develop-
mext?in Central America in support of U.S. national security
policies. (S)
U.S. Central American policy as defined by NSDD-124 has four
objectives: (1) Support for the-advancement of democracy and
implementation of a free and open electoral process in all .
countries of Central America; (2) Support for economic devel-
opment, including significantly increased economic and human-
itarian assistance to raise standards of living; (3) Resolu-
tion of regional disputes and conflicts through dialogue and
the achievement of political settlements with verifiable
agreements through negotiation; (4) Sufficient security
assistance to ensure that democratic institutions, social
reforms and economic improvements are not threatened by
communist subversion and guerrilla warfare. (S)
The troubled situation in Central America has no single cause,
but poor income distribution despite rapid growth in the
1960's has been a major factor. The subsequent sharp economic
contraction in the 1970's, which has continued into the
1980's, has exacerbated the problem. (C) .
The key to economic performance in the future will be imple-
mentationof a domestic policy-framework which relies on free
market principles as the basis for economic development. In
addition successful strategies for handling outstanding debt
problems, development of an indigenous energy and-mineral base
and establishment of a stable and democratic political en-
vironment_will be important. (C) -
Objectives of the Study
The study,-directed by this NSSD will 1) review economic
prospects for Central America; 2) determine priority areas for
U.S. assistance'in order to achieve the reinforcing goals of
-economic development and the preservation and enhancement of'
U.S. national security and economic interests; and 3) estab-
lish a monitoring system to evaluate the progress of assis-
tance programs in meeting overall U.S. objectives as defined
by the Kissinger Commission and Jackson Plan legislation which
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contemplates for $8 billion of U.S. funding over the next five
years. (S)
Scope of Study
I. U.S. Objectives for Regional Economic Development in
Support of U.S. National Security Concerns (C) -
The specific U.S. economic developmental objectives for
Central America include:
A. Inducing broad-based economic development throughout
Central America based on private enterprise and - free
market principles-operating within a stable demo-
cratic political.framework; (C)
B. Fostering and strengthening U.S. trade and invest-
ment ties with Central America; (C)
C. Working with Central American nations to implement
essential structural economic reforms and improve
the economic, political and legal environment in
their nations in order to enhance their growth
potential and to attract greater investment from
abroad and maximize retention of local capital; (C)
D. Laying the foundation for the development of a
middle class in the region; (C)
E. Encouraging rational, efficient development of
indigenous energy, mineral and other natural re-
source wealth consistent with country endowments;
(C)
F. Stabilizing and.improving the international finan-
cial circumstances of the region; (C)
G. Maximizing the multiplier effect of U.S. assistance
to reduce regional economic dependence and provide a
climate of self-reliance. (C)
Ii. Economic Analysis and Projections
This section should synthesize existing findings on
regional economic trends and development needs (drawing -
on work done for the Kissinger Commission supplemented as
necessary with further research). (C)
A. Regional considerations: (U)
--- Relevant world economic developments as they
affect Central American economies; (U)
Central America economic growth prospects, and
demographic/populations factors 1985-2000; (U)
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Present obstacles to economic growth and their
principal interconnections, including the
adequacy of economic policy responses to both
positive and negative external economic devel-.
opments
o Insurgents'
o Infrastructure
o Industrial base
o Hard currency pressures
-- Loan problems'
-- Energy requirements
Food import bills
Tourism' difficulties
-- Foreign investment shortfall. (U)
B.
Country-by-Country Profiles (current conditions,
obstacles and expectations for the 1985-2000
period) : (S)
--
Overall economic growth
--
Demographic factors
--
Industrial sector base and infrastructure
--
Investment climate -
--
Energy and minerals
--
Labor force
--
Agriculture/forestry/fishing
--
Public/private
ships
sector U.S./foreign relation-
--
Tourism
--
International
and potential
exchange
trade mechanisms and practices
for new sources of foreign
--
International
finance and debt
--
Econbmic assistance/food aid
--
Opportunities for export expansion and diversi-
fication
--
Absorptive capacity -for external assistance
--
Other macroeconomic variables including ex-
change rate and fiscal and monetary policies.
(U)
III. U.S. Resource Allocation Decision-Making Process: Current
Approach and Priorities (U)
A. What are the present external resources and
-indigenous funding potential, their priorities and
expected behavior over the short and medium term?
(U)
Domestic savings
U.S. private/official resource flows
European private/official resource flows
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Japanese private/official resource flows
Other Latin American private/official resource
flows
Multilateral efforts (World Bank, DAC, IMF,
IDB, etc.) (U)
B. How can present aid programs be better structured
to achieve U.S. objectives, given the-present
economic and political realities in the recipient
countries and our finite resources? (C)
Are there areas where U.S. policy initiatives
are easier to promote at a regional level? For
example, should the. remains of the Common
Market be revived and appropriately structured
to support and enhance new initiatives? (C)
What degree of importance should we assign to
each country and by what measure -- level of
development? degree of potential? receptivity
to U.S. initiatives? political/economic ability
to support U.S. interests? (S)
What conditions should be applied for. the
allocation of resources? How should we develop
and enforce those conditions? (C)
Given the regional backdrop and level of
funding, what are the individual country assets
and opportunities that can be targeted? What
techniques can be used to determine priorities
vis-a-vis available resources?
Labor force
Resource base
o Energy
Traditional
Non-traditional
o Mineral
o Agricultural/forestry
o Husbandry/fishing
Manufacturing base
o Existing industries
o New manufacturing areas
o Possibilities based on GSP or CBI
o Infrastructure
Tourism potential
Legal/legislative environment (S)
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C. What are the tradeoffs between present and projected
U.S. assistance and failure to eliminate economic
policy and other obstacles to economic development?
(C)
IV. Implementation, Timing and Monitoring of Assistance
Programs (C)
A. Given the above financial,' natural and, human re-
sources of Central America, what is the optimal path
to economic stability and democracy by the year
1990? By the year 2000?
What are the priority assistance programs? (S)
What are the expected results over time of
these assistance programs? (S)
How do we ensure that our assistance encourages
appropriate economic policy and structural
reforms? (C)
How do we ensure that our assistance acts as a
multiplier for greater private investment? (C)
How can present efforts of AID to monitor the
implementation of the Kissinger Commission
objectives be enhanced? What is the best
information system which could monitor in a
comprehensible way progress in achieving U.S.
objectives? (S)
Implementation
A study group to carry out this NSSD will be established under
the auspices Of the SIG-IEP and be chaired by the NSC staff.
It will include representation from the following agencies and
departments: Treasury, State, AID, Commerce, CIA, DOE, Ag-
riculture, Defense, OMB, Eximbank, OPIC. (C)
The report should be ready for transmittal to the NSC for
review by the President by mid-February 1985. (U)
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