GUATEMALA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A001700030001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 55
• Document Creation Date: December 23, 2016
• Document Release Date: February 4, 2013
• Sequence Number: 1
• Publication Date: July 27, 1950
• Content Type: REPORT

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GUATEMALA
Document EO.
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SR-46 , Ln" 77
Pubished 27 July 1950,tatliz '
By;
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CENTRAL INTELLIGENCE AGENCY
ARCHIVAL RECORD
PLEASE REI'LliiN TO
,AGLITCY ARCIIIVNS,
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WARNING
This document contains information affecting the na-
tional defense of the United States within the meaning
of the Espionage Act, 50 U.S.C., 31 and 32, as amended.
Its transmission or the revelation of its contents in any
manner to an unauthorized person is prohibited by law.
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DISTRIBUTION:
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SorisagRArT-
. SR-46
GUATEMALA
TABLE OF CONTENTS
SUMMARY
CHAPTER I?POLITICAL SITUATION
Page
1. GENESIS OF THE POLITICAL SITUATION 3
2. PRESENT GOVERNMENT STRUCTURE . . . 6
a. The Executive Branch . 6
b. The Legislative Branch . 7
c. The Judicial Branch . . . . 8
d. The State and Local Government . . 8
3. POLITICAL PARTIES . . 9
a. Administration Parties . ? ? . 9
b. Anti-administration Parties . . . . . 10
4. OTHER INFLUENTIAL GROUPS . 10
5. CURRENT ISSUES . . . . 11
6. STABILITY OF THE PRESENT REGIME . . 13
CHAPTER II?THE PRESENCE OF SABOTEURS AND SUBVERSIVE ELEMENTS
1. SABOTAGE .
2. SUBVERSIVE ACTIVITY
?
CHAPTER III?ECONOMIC SITUATION
?
15
15
1. GENESIS OF THE PRESENT ECONOMIC SITUATION 19
a. Introduction . . 19
b. Capital . . . . 19
c. Land . . . 20
d. Labor . . . ? ? 21
e. Economic Ideology . . 23
f. Conclusion . . . 23
2. DESCRIPTION OF THE PRESENT ECONOMIC SITUATION 24
a. Summary . 24
b. Agriculture . . . . 24
c. Forest Products . . 26
d. Animal Husbandry . . ? ? . 26
e. Mining ? ? . . . . 26
f. Manufacturing . . . 27
g. International Trade . . 28
h. Transportation . ? ? 29
i. Public Utilities . . 30
j. Money and Finance . 31
k. Foreign Investments . . . 32
3. ECONOMIC STABILITY . . . ? ? . 33
s.riamerf
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stworter
CHAPTER IV?FOREIGN AFFAIRS
1. GENESIS OF GUATEMALAN FOREIGN POLICY . . ? ?
?
35
2. PRESENT FOREIGN POLICY AND INTERNATIONAL ISSUES .
35
a. Belize . . ? ? ? ? ? ? ? . .
35
b. Encouragement of Sympathetic Governments . . .
37
c. US Relations . ..
38
CHAPTER V?MILITARY SITUATION
1. GENESIS OF THE PRESENT MILITARY POLICIES
39
2. THE CURRENT MILITARY SITUATION .
39
CHAPTER VI?STRATEGIC CONSIDERATIONS AFFECTING US SECURITY.
43
CHAPTER VII?PROBABLE FUTURE DEVELOPMENTS
1. POLITICAL .
45
2. SUBVERSIVE
46
3. ECONOMIC .
47
4. FOREIGN AFFAIRS
47
5. MILITARY . .
47
6. STRATEGIC CONSIDERATIONS AFFECTING US SECURITY
47
APPENDIX A?Important Personalities
49
APPENDIX B?Terrain and Climate ? ?
51
MAPS:
#11556 Guatemala: British Honduras?Transportation
#11557 Guatemala: Physiographic Regions
#11558 Guatemala: Dominant Land Use and Natural Resources
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SUMMARY
Guatemala has some strategic importance
to the United States because of the following
factors?none, it is true, peculiar to Guate-
mala alone: (1) its privilege, as an independ-
ent nation, of taking action incompatible with
US security interests; (2) its production of
tropical hardwoods and aback and its poten-
tialities as an oil producing area; (3) its po-
tential influence over neighboring Central
American countries; and (4) its location
within the US defense sphere.
The Guatemalan Government, independent
and republican in form, has in the past been
dominated by strong dictator-presidents
whose personal policies favored the interests
of a small, wealthy, upper class. President
Arevalo, elected for the term 1945-51, repre-
sents a break with tradition. The policies of
his administration, strongly nationalistic and
influenced by modern socialistic ideas, favor
the interests of the heretofore politically im-
potent laboring class. Opposition to his so-
cial and economic reforms has undermined
the stability of his regime, despite its popular
support among the working class and por-
tions of the middle class.
The policy of the Arevalo government in
employing, subsidizing, and encouraging Com-
munists and their sympathizers is a potential
threat to US security interests. Material
sabotage by Communists or unfriendly ele-
ments in Guatemala would not greatly handi-
cap US military preparedness or military op-
erations, but a possibility exists that the fa-
cilities of the Guatemalan Government are be-
ing used by Communists to further the plans
of the Soviet Union. Guatemalan labor
groups and pro-government political parties
are, to some extent, Communist influenced,
and various Communist front groups are per-
mitted to operate. However, it is believed that
Guatemala's basic alignment with the US
would result, in event of a US-USSR war, in
the suppression of Communist activities.
Guatemala's economy rests upon the coffee
and banana industries, which provide 81 per-
cent (by value) of all exports. These indus-
tries have been built up largely by foreign
capital and have been organized, in part, in
terms of land and labor relationships typical
of colonial times. Arevalo's socialistic ideas,
which attack foreign capital, land monopoly,
and the traditional employment pattern, have
therefore discouraged foreign investors and
have aroused internal class antagonisms.
Guatemala's welfare is almost entirely de-
pendent upon the US as a market and a source
of imports. US interests control virtually all
shipping to and from Guatemala, all internal
railroad transportation, much of the inter-
national air transport operating through
Guatemala, and much of the electric power
production within the country. Trucks,
busses, and other manufactured products
basic to the modern economy are imported
predominantly from the US, which supplies
65-75 percent of all imports. The US takes
about 90 percent of Guatemala's exports, but
about 95 percent of all exports are of no
essential strategic importance. However,
Guatemala does produce mahogany, some
aback and small amounts of chrome and
lead. It is a potential producer of oil, but the
nationalistic policies of the present adminis-
tration have prevented the exploitation of sus-
pected deposits of petroleum.
Guatemala recognizes that its political in-
dependence and economic security are de-
pendent upon the US. In foreign affairs,
therefore, a fundamental alignment exists
with the US, but to the degree that Guate-
mala's general welfare is not jeopardized by
independent action, the Arevalo government
has allowed its pursuit of certain foreign ob-
Note: The intelligence organizations of the Departments of State, Army, Navy, and the
Air Force have concurred in this report. It is based on information available to CIA
as of 30 March 1950.
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jectives to conflict with US interests. In ad-
vancing its claims to British Honduras it has
worked to create pressure blocs within the
inter-American system and to embarrass the
US as a "colonial" power; it has questioned
the sincerity of US foreign policy, and on co-
lonial issues it has sometimes sided with the
USSR in UN disputes. Guatemala has also
sought to bring about the establishment of
sympathetic governments in neighboring
countries by giving aid to international revo-
lutionary movements.
Although the positive contribution which
Guatemala could make toward US security is
slight, its geographic position makes it of con-
ceivable value to an enemy of the US. It
could be used for propaganda dissemination
and espionage, or as a base for attacks against
the Panama Canal, the Venezuelan oil fields,
Caribbean shipping, or other potential West-
ern Hemisphere targets. In general, however,
its importance to an enemy is limited by the
absence of military facilities of consequence
and the existence of other, more suitable (or
more easily obtainable) sites for bases in the
Caribbean area.
Nevertheless, a friendly and stable govern-
ment in Guatemala favors US security, and
because Guatemala is incapable of defending
itself against a strong enemy, denial of its
facilities and resources to an enemy power is
S
primarily a US responsibility. Because
Guatemala's national welfare is dependent
upon imports of non-strategic materials by
the US, extreme dislocation of the economy
might occur in event of an East-West war,
with resultant political instability. Effective
guarantees of US economic aid in event of
war would therefore contribute materially to
the maintenance of a friendly and stable gov-
ernment.
Before the end of Arevalo's administration
in 1951, internal violence may break out be-
tween extreme leftist factions (backed by
militant labor groups) and moderate-conserv-
ative factions (backed by the army). In gen-
eral, it is believed that Arevalo is desirous of
completing his legal term of office without
incident and of abstaining from a display of
partisanship in the 1950 presidential cam-
paign. This course will cause him to con-
tinue the more moderate policy noticeable
since late 1949, and to avoid controversial de-
cisions. The national economy should re-
main sound, and no basic change in foreign
policy is anticipated, although a more con-
ciliatory attitude toward the US may develop
and effective aid to foreign revolutionaries
may diminish. No change is foreseen in the
functions or capabilities of the armed forces
or in the strategic significance of Guatemala
to the US.
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CHAPTER I
POLITICAL SITUATION
1. Genesis of the Present Political Situation.
Spanish conquistadores first invaded and
conquered the territory that now comprises
Guatemala in the year 1524. Ever since that
time, the political life of the country has been
dominated by those of Spanish descent (under
1 percent) or mixed Spanish-Indian descent
(34-44 percent) . The majority of inhabitants,
of unmixed Indian ancestry (55-65 percent)
has had little voice in political affairs.
In 1544, Guatemala became part of the
Captaincy-General of Guatemala, a political
entity that extended from Chiapas in Mexico
to Costa Rica, and at first also included Yuca-
tan and Tabasco. With few changes, the Cap-
taincy-General existed (with the exception
of one brief period) until the end of the Span-
ish colonial regime. It included five prov-
inces, corresponding to the modern republics
of Guatemala, El Salvador, Honduras, Nicara-
gua, and Costa Rica.
Following the lead of Mexico, representa-
tives of the five provinces declared their in-
dependence of Spain on 15 September 1821,
retaining, for the moment, a centralized ad-
ministration in Guatemala City. The follow-
ing year, the ruling junta, backed by the
wealthy class, voted to join the new Mexican
Empire under Iturbide, and a Mexican army
was sent to quiet dissident elements. How-
ever, with the fall of Iturbide and the army's
withdrawal, the five provinces reasserted their
independence as a single federal republic. At
this time Guatemala lost the territory com-
prising Chiapas, which was still occupied by
the Mexican army, and (perhaps in conse-
quence) voted to join Mexico.
From the time of its inception, the Central
American Federation was weakened by sec-
tional jealousies and conflict between Liberal
and Conservative political factions. The Con-
servatives, including the large landowners,
wealthy merchants, and the clergy, at first
favored union with Mexico and later, after the
establishment of the Federation, favored a
strong central government under their con-
trol, rather than a loose federation of semi-
autonomous states such as favored by the
Liberals. The Liberals, including the middle-
class merchants, artisans, and salaried em-
ployees, generally held the upper hand during
the early struggle for power and, in conse-
quence, Guatemala remained a member of the
federation. The federal capital, however, had
been moved from Guatemala City to San Sal-
vador in 1831.
With the decisive victory of the Conserva-
tives under Jos?afael Carrera in 1838,
Guatemala officially withdrew from the Fed-
eration. Carrera, a mestizo who had seized
control with the aid of an Indian army, be-
came the first Guatemalan Dictator-President
to hold power for an extended period, con-
tinuing to rule until his death in 1865. Dur-
ing his regime, the dominance of the landed
aristocracy and the clergy was firmly estab-
lished.
A few years after Carrera's death, a Liberal
leader, Justo Rufino Barrios, gained domi-
nance and later became officially President
from 1873 to 1885. He re-enacted some of the
liberal laws which had been repealed by Car-
rera. Church properties were expropriated,
and the influence of the church in public af-
fairs was brought to an end.
At the same time, Barrios increased the
power and authority of the provincial gover-
nors, advocated the improvement and expan-
sion of agriculture and industry, and built
roads which connected the capital with all the
provinces. He sought to set up free public
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primary schools, did establish a central nor-
mal school and six secondary schools, sup-
ported a school of arts and trades and a mili-
tary school, and brought the university under
state control. In accordance with Liberal
ideals, Barrios advocated restoration of a Cen-
tral American union. However, while at-
tempting to effect the union through military
force, he was killed in action in 1885.
The Liberal Party policy under Barrios was
crystallized in the Constitution of 1879. The
main outline of this document has never been
radically altered, though changes and addi-
tions have been made several times. More
than a statement of basic principles, the
Guatemalan constitution includes many de-
tailed articles which have the effect of specific
laws. Although it has always been liberal
and democratic in theory, it has, in practice,
been subject to the will of a powerful execu-
tive who can ignore or alter its provisions.
The political history of Guatemala since
Barrios has been one of periods of partisan
dissension alternating with years of peace
maintained by strong-handed presidents.
The conservatives?wealthy landowners?
have avoided direct participation in politics,
fearing a revolt which would cause their work-
men to be recruited into the army and would
perhaps lead to the destruction or confisca-
tion of their properties. The upper class has
therefore countenanced venality in the gov-
ernment and perpetuation of personal regimes
in exchange for freedom from political repris-
als. Manuel Estrada Cabrera, whose presi-
dency lasted from 1898 to 1920, held the long-
est tenure of all recent presidents. He was
succeeded, after an interval, by General Jorge
Ubico, who maintained himself in office from
1931 to 1944, when he was forced to resign.
Ubico's administration, beneficial to the
country in some ways, became a personal dic-
tatorship. He built roads, enforced honesty
in public office, created a modern police sys-
tem, renovated the army, and extended public
health and sanitation services. Yet in pro-
moting his program, he eventually stifled all
opposition and became increasingly arbitrary,
suspicious, and unreasonable. Simultane-
ously with the United States, Guatemala de-
clared war on Japan and Germany, and
Ubico's anti-Nazi precautions, extended to all
opposition groups, further suppressed indi-
vidual liberties. After 1942, rapidly rising liv-
ing costs and governmental economic controls
intensified dissatisfaction with Ubico's presi-
dency, which had been extended for a second
time through personal control of a constitu-
tional assembly.
The resignation of Ubico, after thirteen
years in office, was forced by a desire, among
all classes, to escape dictatorial controls. The
initiative was first taken by students, who,
influenced by twentieth century ideas of lib-
eralism, conscious of the intellectual freedom
that existed in Mexico, and encouraged by the
Salvadoran student revolt that overthrew the
Dictator Martinez, demanded reforms in the
university. The forceful suppression of the
student revolt by Ubico's National Police, and
particularly the indiscriminate shooting of a
number of women by these police, created a
general public demand for the President's res-
ignation, which he met by depositing his man-
date with three obscure generals. One of
these, General Frederico Ponce, was desig-
nated by Congress (still dominated by Ubico's
Liberal Independent Party) as provisional
President.
Fear that General Ponce, with the aid of
Ubico's party organization and Indian "ma-
chete men" from the large plantations, would
perpetuate himself in office led to a military
revolt backed by the same popular forces that
opposed Ubico. This was led by three men:
Jorge Toriello (member of a conservative mer-
chant family and brother of a student leader) ;
Major Francisco J. Arana (a career soldier,
commander of a tank battalion and later Chief
of the Armed Forces) ; and ex-Captain Jacob?
Arbenz (a well-educated man with leftist af-
filiations, subsequently Minister of Defense) .
The triumvirate held power until a new Presi-
dent, popularly elected by constitutional
means, could take office. This President was
Juan Jos?revalo, a reform-minded intellect-
ual of humble parentage who had spent seven
years teaching in Argentine universities as a
voluntary exile from the Ubico regime.
The revolutionary movement that forced
Ubico to resign, and which overthrew his suc-
cessor, Ponce, represents more than a simple
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change in political administration. With the
election of Arevalo to replace the revolution-
ary junta of Toriello, Arana, and Arbenz, the
fundamental character of the revolution as a
broad social reform movement was assured.
Arevalo's writings show him to have been
acutely aware, long before his election, of basic
social and economic problems handicapping
the small, backward, antagonistic Central
American countries?problems which he felt
arose from the racial and cultural heteroge-
neity of the inhabitants, from the social and
intellectual barriers between the classes, from
the tendency to accept caudillos rather than
practice democratic self-expression, from the
disinterest of ruling class in the collective
welfare of the nation, and from the extreme
disparity in opportunity between the urban
rich and the rural poor. During his years of
study and teaching, Arevalo had developed a
clear and comprehensive ideology of his own
which stressed the need for a "spiritual unity"
of all the inhabitants of a country, based on
equality of opportunity and education, on
freedom of self-expression, and on the uni-
versal recognition of the dignity of the indi-
vidual, whatever his social status. The prob-
lem of "spiritual unification" he saw as a po-
litical, economic, and 'cultural problem which
could be solved only gradually?not during
the course of a single administration or gen-
eration. Although he was primarily inter-
ested in education as a means of bringing
about this popular unity, he was well aware
that political and economic obstacles had to
be overcome. He wrote, in 1939:
Closely associated with the racial heterogeneity
of the contemporary American societies is the prob-
lem of social heterogeneity, or the problem of
"classes", wherein some of the people attempt to
retain fictitious or usurped privileges. Whatever
the educational undertaking, it will not be effective
for the goals of nationalism in a republican country
if the laws and governments do not join in doing
away with the disparities which are preserved,
through economic exploitation and spiritual empti-
ness, as caricatures and survivals of a bygone social
structure.
Arevalo's opposition to military dictator-
ships, his refusal (or unwillingness) to concen-
trate political power in his own hands, the
relative freedom he has permitted his cabinet
ministers, and the bureaucratic expansion of
the Guatemalan Government are not neces-
sarily indications of a weak executive, nor of a
democratic administration, since they coincide
with Arevalo's personal ideas concerning the
well-organized state, as expressed in an essay
of 1935 entitled Istmania; tierras del Istmo:
In all modern, well-organized states, each of these
structures (i.e., the economic organization, the so-
cial organization, the cultural organization, the
government, and the army) live an independent ex-
istence with ends and means which are their own,
yet which do not, because of this, endanger the
general unity of the nation. . . . The potentialities
of a nation depend upon the completeness with
which each structure maintains its independence of
the others and on the greater degree of efficiency
and productiveness achieved by each.
The foregoing passage describes, briefly, the
desirable "polystructural" state of Arevalo,
which he contrasts with the "monostructural"
states then existing in the isthmus (i.e., the
Guatemala of Ubico, the Honduras of Carias,
the El Salvador of Martinez, and the Nicara-
gua of Somoza) .
Arevalo's own philosophy of "spiritual so-
cialism" appears to owe little to Marxist
thought. Its immediate goals, however, are
somewhat parallel to those of the Commu-
nists, and persons more or less influenced by
the Communist ideology supported his candi-
dacy and became members of his administra-
tion. Some of these were Guatemalan re-
formers who had been exiled by President
Ubico and who had congregated in Mexico,
where the principles of the Mexican Consti-
tution of 1917?the first Latin American con-
stitution to stress economic nationalism, the
social obligation of private property owners,
and the rights of organized labor?were being
implemented under Presidents Cardenas and
Avila Camacho. Among the most influential
of these Guatemalans was Jorge Garcia Gran-
ados, a brilliant lawyer who was exiled in 1934
for his pro-Communist sympathies, who
worked with the Spanish Republican Commit-
tee in Mexico and with the Mexican Depart-
ment of Labor, and who taught at the Na-
tional University for three years, after which
he returned to Guatemala and became Presi-
dent of the Constituent Assembly, which re-
wrote the Guatemalan Constitution. The
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sympathies of the Mexican Government were
closely allied with the student revolutionists
of 1944, and were clearly demonstrated when
these students were given sanctuary in the
Mexican Embassy during the revolution. In
other Latin American countries, such as Cuba
and Argentina (where Arevalo was an exile)
and in Europe and the United States, Guate-
malan liberals saw, and were influenced by,
political movements that involved national-
ism, the extension of governmental social
services, the regulation of private enterprise,
and the recognition of organized labor?ideas
which were denied expression under Ubico,
who still represented the economic individual-
ism of the nineteenth century. In a general
sense, therefore, the revolution of 1944 repre-
sents, for Guatemala, the end of an era which
had already ended in Mexico and many of the
larger countries throughout the western
world. It is clear that many Guatemalans
themselves regard this "October Revolution"
as the beginning of a new era, and hope to
place Guatemala on record as a champion of
a new "democracy"?both in behalf of the
small nations of the Western Hemisphere and
the new nations which have emerged from
subservient or colonial status since the end of
the Second World War. This new democracy,
which may be called "Arevalism," has been
given concrete expression in: (1) the writings
of Arevalo; (2) the Constitution of 1945; (3)
the political platforms of the revolutionary
parties; (4) the official acts of the govern-
ment; and (5) the unofficial activities of per-
sons and groups (including pro-Communists)
that have been permitted freedom of expres-
sion under the Arevalo administration.
Apart from foreign influences, the Guate-
malan revolution represents a response to an
internal situation which presaged a funda-
mental change. The most important factor
in this situation was the gradual adoption of
western culture by a large portion of the In-
dian population which gave it a potential
voice in domestic political policy. Even at the
beginning of the Ubico regime, possibly two
thirds of Guatemala's inhabitants did not
speak Spanish?the language necessary for
minimal political understanding?and the po-
litical dominance of the educated and wealthy
upper class of European or part-European
extraction continued. As the disparity in cul-
tural background has decreased, however, the
working class has gained political acumen and
numerical strength. Because even more of
the Indians (almost half of the population)
had become, culturally, a part of the national
community by 1944, it was almost inevitable
that the concept of "popular" government
should be revised to the detriment of the old
established families and many of those who
traditionally represented "popular" opinion.
Because the Arevalo government recognized
the political and economic aspirations of the
emergent Indian class, it gained?and will
probably continue to hold?the support of this
class. Moreover, the Arevalo government has
gained support from other quarters by attack-
ing foreign economic domination and provid-
ing employment and a means of expression
for many of the educated middle class.
2. Present Government Structure.
The present government, in structure and
principle, is based on the revised constitution
of 1945. The revisions were largely a reaction
to the dictatorship of Ubico. They were de-
signed to prevent the arbitrary extension of
presidential tenure, to make the army a check
on presidential power rather than an agency
for its execution, to assure the individual (and
particularly the working classes) of economic
freedom and social security, and to prevent
monopoly, by either domestic or foreign inter-
ests, of the natural resources of the country.
In theory, sovereignty is vested in the
people, who delegate its exercise to executive,
legislative, and judicial branches designed to
operate as a system of checks and balances.
The electorate includes all men over the age
of 18 (who are legally obliged to vote) and all
literate women over 18 (for whom voting is
voluntary). For literate men and women, a
secret ballot is prescribed; for illiterates (who
probably number about two thirds of the elec-
torate) , voting is public.
a. The Executive Branch.
The Chief Executive, who holds the title of
President of the Republic, must be a Guate-
malan citizen over the age of 35, and is elected
by direct popular vote. There are various safe-
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SECRET 7
guards designed to prevent the arbitrary as-
sumption, perpetuation, or delegation of presi-
dential power. Thus the elected President
cannot have been a leader of a revolution
against the state, or one who held high office
in a government which altered the constitu-
tional regime, or one in a position to control
the elections. He cannot be a member of the
armed forces in active service or who has been
on active service within six months of election
tion day. He cannot be a relative of the
President, and, in most cases, cannot be a
relative of those barred from the presidency.
He cannot be a member of the clergy.
The term of office of the President is six
years, and the Constitution specifically for-
bids extension of the term or re-election of an
individual without an interval of twelve years
between terms. No provision is made for the
office of Vice-President. The President is suc-
ceeded, in order, by the president of the Con-
gress, the vice-president of the Congress, and
the president of the Judicial Branch. In the
event of death or prolonged absence of the
President, his successor is required to call a
presidential election within eight days after
the office is vacated, such an election to be
held in not less than two nor more than four
months from the date of call.
The President exercises wide appointive
powers, in addition to the usual presidential
powers of promulgating decrees, approving or
vetoing legislation, and calling sessions of
Congress. He appoints the governors of the
twenty-two Departments into which the coun-
try is divided, the Ministers of his Cabinet,
the diplomatic representatives to foreign
countries, and numerous miscellaneous offi-
cials. He is also Commander-in-Chief of the
Armed Forces and is required to issue his or-
ders through the Minister of National De-
fense and the Chief of the Armed Forces. His
control over the army is minimized, however,
by the fact that the Chief of the Armed Forces
is designated by Congress from a panel of
three names recommended by the Superior
Council of National Defense, which consists
of not less than fifteen army officers.
Executive power is exercised through the
Cabinet, which includes the following minis-
tries: Government; Foreign Affairs; National
Defense; Agriculture; Economy and Labor;
Public Education; Finance; Public Health;
and Communications and Public Works. The
ministers are all appointed by the President
and may be removed by him as well as by a
vote of Congress.
Unless strongly opposed by his own political
party, the President is able to dominate the
conduct of the government and its policies.
He is able to suppress opposition through a
state of siege (suspension of constitutional
provisions concerning individual liberties) .
Barring interference from the army, which is
in theory bound to a non-political role, his
control over the National Police is sufficient
to assure control over public demonstrations
and minor plots against the government.
Through his appointment of provincial gov-
ernors and other officials he can greatly influ-
ence, if not dictate, the results of congres-
sional as well as local elections. Control of
the electorate insures that the President
usually has at his command the two-thirds
vote of the Congress necessary to suspend or
amend the Constitution, and by suspending
the civil guarantees or by pushing amend-
ments through Congress, the President may
legitimately further his personal policies.
b. The Legislative Branch.
The Guatemalan Congress is unicameral
and consists of one member, a Deputy, elected
for each 50,000 inhabitants or fraction of 25,-
000 or more, provided that each of the twenty-
two Departments, regardless of population,
elects at least one Deputy. To be elected
Deputy, it is necessary to have the status of a
native-born Guatemalan, to be in exercise of
the rights of citizenship, to be of secular sta-
tus, and more than 21 years of age. Those
who may not be elected include relatives of
the President and of the Chief of the Armed
Forces, persons who represent companies or
who operate public services, members of the
armed forces, and employees of the other
branches of the government. The term of a
Deputy is four years, congressional elections
being held every two years, at which time half
the membership of Congress is replaced.
Deputies can no longer be reelected for the
following term?a provision of the 1945 con-
stitution designed to minimize the consolida-
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tion and perpetuation of political power which
has, in fact, slightly weakened partisan con-
trol of Congress and increased the significance
of congressional elections. This provision
could, however, serve to decrease the influence
of Congress and increase the personal domi-
nance of the President in political affairs,
since neither his supporters nor his opponents
in Congress have prolonged opportunity to
gain recognition, skill, and leadership as par-
liamentarians. Now, as heretofore, the party
or parties that elect the President easily domi-
nate and control Congress, and though differ-
ences of opinion may lead to heated and acri-
monious debate on the floor, the final vote
generally supports the President.
Congressional powers include the power to
appoint and remove the Magistrates of the
Supreme Court and the members of various
other tribunals; to depose, obligatorily, a
President who attempts to perpetuate himself
in office; to grant or refuse the President per-
mission to leave the country or temporarily
vacate his office; to declare the physical or
mental incapacity of the President to exercise
his office; to enact, interpret, amend, and re-
peal laws; to modify or approve the budget bill
presented by the Executive; to contract, con-
vert, and consolidate the public debt; to ap-
prove or disapprove treaties and conventions;
to approve or disapprove concessions or con-
tracts granted by the Executive to those who
would establish new industries within the
country, and to declare war and approve or
disapprove of treaties of peace.
c. The Judicial Branch.
In the organization of its judiciary, Guate-
mala follows the practice, derived from the
French, of establishing courts of ordinary
jurisdiction and a court of administrative
jurisdiction. The ordinary courts, which have
jurisdiction over cases between private per-
sons, include the Supreme Court, the Courts
of Appeals, the Courts of First Instance, and
minor courts. The administrative court,
which decides cases involving the acts of gov-
ernment officials and agencies, is known as
the Court of Administrative Litigation. Other
courts include the Court of Amparo (dealing
with violations of constitutional guarantees) ,
the Court of Conflicts of Jurisdiction, and spe-
cial courts created by law (such as the au-
tonomous system of Labor Courts established
under the new Labor Code) . All the judicial
functionaries in the higher and intermediate
courts, with few exceptions, are appointed by
Congress or by the Supreme Court, serve for
four years, and may be reappointed. All
judges must be native-born Guatemalan citi-
zens of secular status. Those of the interme-
diate and higher courts must be attorneys,
and those of the Supreme Court and the
Court of Appeals must have had previous ex-
perience as judges of lower courts.
Although their appointments are directly
controlled by Congress or by congressional
appointees, magistrates are generally in sym-
pathy with the policies of the government in
power. This has been particularly noticeable
in the Labor Courts, which are organized un-
der a judge appointed by the Supreme Court.
Even if this were not so, the courts do not
have the effective power to oppose the pro-
gram of the administration. They may de-
clare laws unconstitutional, but the laws may
easily be changed or rephrased by the Presi-
dent or Congress in order to obtain the desired
effect.
d. State and Local Government.
The twenty-two departmental governors are
appointed by the President for a term of three
years, and have responsibility as the local
representatives of the President and each of
his cabinet ministers. They are instrumental
in carrying out the policies of the Ministries
of Agriculture, Communications and Public
Works, Economy and Labor, Education, Gov-
ernment, Finance and Public Credit, Foreign
Relations (with respect to passports and regis-
trations) , and Public Health and Social Wel-
fare.
Each department is divided into municipali-
ties (equivalent to counties) which are gov-
erned by autonomous municipal corporations,
elected by popular vote and presided over by
one or more magistrates, also popularly
elected. These municipalities have the power
to establish taxes and collect revenues, and
to organize local police forces which are ex-
clusively responsible to the magistrate who is,
in theory, responsible to the departmental
governor.
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Although the municipal governments are
autonomous within the department, they are
not necessarily democratic in nature. Except
in the purely Indian areas, the municipal gov-
ernments represent, and are controlled by, the
ladino element (i.e., the small upper and
middle class) of the larger towns, rather than
the Indian population which, in some cases,
looks to a separate and unofficial hierarchy
of Indian leaders in matters affecting the
community.
The most important local governmental of-
fice in Guatemala is that of the mayor of
Guatemala City, where the wealth and influ-
ence in the country are centralized. The
mayor has often been a representative of the
wealthy conservative class rather than a mem-
ber of the dominant liberal party. His power
rests only upon his position as spokesman for
this class and his control of privilege, however,
for he has no armed force under his com-
mand.
3. Political Parties.
Guatemalan political parties? in general,
are short-lived organizations designed to fur-
ther the interests of a particular group or
leader. There is traditionally one party, or
bloc of parties, which supports the President
during his term in office, and a number of
small, ephemeral, opposition parties which
rise and fall with the personal fortunes of
their leaders. Since opposition activities can
be, and usually are, suppressed when they be-
come a threat to the party in power, and since
opposition leaders can easily be exiled or re-
moved to positions of minor importance where
they can exert little influence, there is little
opportunity for dissident elements to achieve
a strong organization or influence the course
of government. There is a tendency, there-
fore, among men who exert considerable per-
sonal influence, to avoid throwing their sup-
port to any specific party until they are sure
that they will be able to control political
power. This makes for last-minute political
compromises and expedient realignments as
elections approach, and in case of a change
in administration.
After the resignation of President Ubico in
1944, a renascence of political activity resulted
in the formation of a large number of political
parties, all rejecting restrictions on individual
liberties, but ranging from conservative to
radical in political and economic outlook. A
number of these parties accepted Juan Jos?
Arevalo as their candidate, and he was elected
President by an overwhelming majority.
a. Administration Parties.
After the election of President Arevalo in
December 1944, the two most powerful of his
supporting parties, the Frente Popular Liber-
tador and the Partido Renovacion Nacional
formed a coalition known as the Partido Ac-
cion Revolucionaria (PAR) which from Octo-
ber 1945 until May 1947 remained as a single,
united government party. When the major-
ity of FPL and the PRN membership withdrew
from the coalition and re-established the ori-
ginal parties, the name of the PAR was re-
tained by the remaining group. Arevalo's
support is now divided among these three par-
ties, and although they still tend to vote to-
gether in the face of conservative opposition,
they differ greatly in their interpretation of
the principles of the 1944 revolution.
The Frente Popular Libertador has always
been the largest and most moderate of the
administration parties, has held the greatest
number of Congressional seats, and has op-
posed the radical and ultranationalistic doc-
trines of the other Arevalista parties. It is
strongest among the professional class and
students, and has some support among the
workers, though this backing seems to come
from the white-collar workers rather than
from the industrial and manual workers. Its
followers are the least loyal of those support-
ing President Arevalo, and it is not unlikely
that, as the election of December 1950 ap-
proaches, the party will undergo division or
even combine, as a group, with moderate con-
servative elements. It has chosen Dr. Victor
M. Giordani as its candidate in the 1950 presi-
dential elections, having declined to follow
the lead of the more leftist administration
parties who support Lt. Col. Arbenz. Dr.
Giordani has resigned his post as Minister of
Public Health to participate in the campaign.
The Partido Accion Revolucionaria is com-
posed of the extreme leftist elements backing
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President Arevalo, and includes many persons
of Communist sympathies. Its policies in-
volve implementation of revolutionary prin-
ciples with a minimum of delay: land reform
beneficial to the Indians; support and develop-
ment of labor movements; extension and de-
velopment of social security; nationalization
of land that is standing idle; and the "libera-
tion" of Guatemala from foreign economic
domination. Among its leaders are radicals
such as Jos?anuel Fortuny, Carlos Manuel
Pellecer, Manuel Pinto Usaga, Agusto Char-
naud MacDonald, and Ernesto Marroquin
Wyss. It has nominated Lt. Col. Jacob? Ar-
benz as its candidate for President in the 1950
elections.
The Partido Renovacion Nacional, weakest
of the three administration parties, includes
intellectuals and students who were among
the first to support Arevalo as a presidential
candidate. Its history and composition indi-
cate that it is ideologically to the left of the
FPL, but adverse to the militant implementa-
tion of policy advocated by the PAR. In re-
cent elections, it has cooperated with the PAR,
and has also chosen Lt. Col. Arbenz as its
presidential candidate.
The Partido del Pueblo is a party of leftist
character formed in December 1949 to support
the presidential candidacy of Jorge Garcia
Granados, who was rejected as a possible co-
alition candidate by the three major revolu-
tionary parties. Garcia Granados was influ-
ential in drafting the Constitution of 1945,
and in the past has identified himself as an
advocate of the leftist policy favored by the
PAR.
The Partido de Integridad Nacional is a
small party formed early in 1950 to support
the presidential candidacy of Lt. Col. Jacobo
Arbenz, who was subsequently nominated by
the established PAR and PRN. The PIN
strength is largely concentrated in Quetzalte-
nango, the home of Arbenz.
b. Anti-administration Parties.
Conservatives, relatively inactive under the
Ubico regime, established a Partido Social
Democrdtico after the dictator's resignation.
Its leaders were predominantly professional
men, such as Ernesto Vitteri, Julio Bianchi,
Eugenio Silva Pefia, Jos?nd Frederico Rolz
Bennett, Francisco Villagran, Colonel Guill-
ermo Flores, Carlos Zachrisson, Nicolas Reyes,
and the Toriello brothers. This group did not
support Arevalo in the 1944 election, though
both Jorge and Guillermo Toriello obtained
appointments in the government, and for one
year exerted a conservative influence on the
administration. With the removal of Jorge
Toriello in January 1946, however, the liberal
elements in the government established their
undisputed supremacy. Conservatives boy-
cotted the 1946 elections and generally re-
mained politically inactive until 1948.
The Union Nacional Electoral was formed
in June 1948 by a number of civic and political
groups in an effort to consolidate the con-
servative opposition. Its support comes from
the conservative, pro-clerical elements, and its
membership includes men prominent in busi-
ness and agriculture, some of whom were in
politics during the Ubico regime. Among the
important opposition groups to which it looks
for support are the Partido de Trabajadores
Republicano-Democrcitico, the Partido Uni-
ficacion Anti-Communista, the Guatemalan
Agricultural Association and its affiliated
Frente de Trabajadores Agricolas, and the
Union Patriotica. The Union Nacional Elec-
toral was successful in winning a few seats in
Congress in the 1948 elections, and also
elected its candidate as mayor of Guatemala
City. As the presidential election of 1950 ap-
proaches, this party (or a new coalition of
essentially the same elements plus splinter
groups from the Frente Popular Libertador)
should become increasingly active and power-
ful.
The Partido Reconciliacion Democrcitica
Nacional is a party formed early in 1950 to
support the presidential candidacy of General
Miguel Ydigoras Fuentes. General Ydigoras
Fuentes played a rather ambiguous, middle-
of-the-road role in the 1944 revolution and was
later appointed Minister to Great Britain, a
post which he retained until 1950. His sym-
pathies appear to lie largely with the present
anti-administration elements.
4. Other Influential Groups.
The continuation in power of any dictator,
political party or coalition of political parties
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in Guatemala is dependent, in the last analy-
sis, upon the support of the leaders of the
armed forces?or, at least, upon their non-
intervention on behalf of the opposition.
Though relegated to a non-political role un-
der the Constitution, the traditional role of
the army as the most powerful potential po-
litical force in the couritry is still generally
recognized. During the Arevalo regime, its
leaders have, in general, shown sympathy for
the moderate and conservative political fac-
tors.
Other organizations representing physical
force and the threat of violence are influential
in proportion to their strength and composi-
tion. The national police force (the Guardia
Civil) has confined itself to a "non-political"
role since the overthrow of Ubico in 1944. Al-
though it could not effectively oppose the
army, it is more responsive to the President,
comprises a rather select group oriented in
favor of the PAR, and could be used as a
threat in political maneuvering or to enforce
minor partisan policies. It is currently under
the direction of Colonel Victor M. Sandoval, -
brother-in-law of President Arevalo.
In addition to the army and the police, the
Indian laborers also represent an element of
force in Guatemalan politics traditionally used
to support partisan policies. Since 1944, they
have been consolidated and organized into
labor unions which, in general, support the
radical policies of the PAR. The most impor-
tant of these unions are the CTG (Confedera-
cion de Trabajadores de Guatemala) which
includes the agricultural unions, and the FSG
(Federacion Sindical de Guatemala) which
includes industrial and railway unions. These
two federations support a political action
committee, the CPNT (Comite Politico Na-
cional de los Trabajadores). There is evi-
dence that the PAR, with the knowledge and
possible support of Minister of Defense Ar-
benz, distributed arms to the unions, and the
15,000 laborers who take part in the annual
May Day demonstration represent the poten-
tial force which the PAR has at its disposal.
If the army remains united, it might be able
to dictate the result of the coming presiden-
tial election. And even if the army were di-
vided, if any candidate (such as Lieutenant
Colonel Arbenz) could obtain the support of
an effective group within the army in combi-
nation with the support of labor and the po-
lice, his chances of success would be greatly
enhanced.
Although the Catholic Church in Guate-
mala, as in all Latin American countries, ex-
erts a strong moral force in the community,
its influence in politics has been weak and in-
direct since the anti-clerical reforms of Bar-
rios, who came to power in 1873. The sym-
pathies of the church tend to coincide with
those of the conservative, propertied classes
and are opposed to those of liberals who ad-
vocate social reforms. In consequence, under
the present regime, the church has been
rather effectively prevented from expressing
its political sympathies through public media.
The pro-Catholic radio station, PAX, was ar-
bitrarily closed in 1948 for broadcasting "Fa-
langist" propaganda. From the pulpit, the
clergy has been able to denounce Communism
and to encourage voting for anti-Communist
political candidates belonging to the conserva-
tive opposition parties. Church approval
possibly aided in the election of a conserva-
tive as mayor of Guatemala City in 1948, but
Church influence in political affairs has, in
general, been slight. Should the Arevalo re-
gime be followed by a more conservative one,
the political influence of the church may be
expected to increase, though it is probable
that the church would continue to avoid di-
rect involvement in politics or a close alliance
with any single political party.
5. Current Issues.
The current issues of Guatemalan politics
have arisen largely as the result of an at-
tempt, by the Arevalo government, to put into
practice certain revolutionary ideals that in-
evitably conflict with the interests and tradi-
tions of the wealthy, conservative elements in
the society, particularly those engaged in
business and large-scale agriculture. The ad-
ministration program has been favored, and
conflict somewhat minimized, however, by a
period of postwar prosperity and additional
revenue obtained from government operation
of the expropriated German coffee fincas?
factors which have helped to support the ex-
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tension of educational and public service ac-
tivities as well as a large bureaucratic govern-
mental organization which concerns itself
with almost all phases of Guatemalan eco-
nomic life.
Economic difficulties became apparent for
the first time in the 1948 budget deficit and
the apparently adverse trade balance. Al-
though unlikely to become serious, these con-
ditions will undoubtedly increase opposition
to the Arevalo policies, which have involved
the following controversial issues:
Encouragement and protection of an organ-
ized labor movement and the development of
a social security program. These measures,
beneficial to the hitherto unorganized and
powerless laborers of Indian descent, are dis-
tasteful to employers in agriculture and in-
dustry. Employers, while often voicing ac-
ceptance of social legislation as inevitable and
just, object to the manner in which it is ad-
ministered and to the tolerance shown by the
government for violent labor agitation among
the working class.
Nationalization of private property for the
collective interest. Propertied classes fear
the possibility that their land and other prop-
erty may be expropriated or placed under
government management in the name of the
"collective interest." This would be possible
under the Constitution, and the Expropriation
Bill No. 529, which became law on 9 Septem-
ber 1948. Radical PAR leaders have agitated
for redistribution of lands among the Indian
laborers, but as yet the government has no
thorough agrarian reform program. A policy
of redistributing national lands to collectives
or families has been initiated, and though not
likely to be extended to private lands or even
the intervened coffee plantations held by the
government, such developments are feared by
some.
Management and eventual disposition of
the intervened plantations. Income from
these properties defrays some 15 percent of
the national budget, and their management
offers numerous opportunities for personal
profit. Under government management, pro-
duction has fallen off and expenses have in-
creased?partly as a consequence of observ-
ance of laws benefiting the workers. Large
landholders object to the inefficient manage-
ment and fear the policy of permitting labor-
ers to organize and agitate, which has been
encouraged on the government-held planta-
tions.
Nationalist policies objectionable to foreign
investors. The Arev.alo administration has
consistently defended its labor code and
backed labor in the latter's disputes with for-
eign-owned companies. It has limited the
employment of non-Guatemalans and limited
the pay of those who are employed. It has
reasserted national ownership of natural re-
sources, and has demanded favorable conces-
sions from foreign firms which operate in
Guatemala. Conservatives, who sympathize
with foreign employers and who desire in-
creased investment in Guatemala, are opposed
to these policies.
Pattern of government spending. The gov-
ernment is criticised for its support of certain
projects, such as the construction of a Na-
tional Stadium, and for its neglect of other
causes, such as road construction and repair.
-It has greatly increased its expenditure for
education, but has not increased funds spent
on the armed services. Opposition elements
find certain expenditures unnecessary, others
inefficiently managed, and ask for a more
cautious and conservative spending policy.
Government tax policy. The administra-
tion hopes to replace the present business
profits tax with a personal income tax supple-
mented by an excess profits tax. The com-
bined rates of the new taxes would be consid-
erably higher than the 43 percent rate pos-
sible on business profits only. Propertied in-
terests are therefore strongly opposed to the
tax program.
Communism in government. The Commu-
nist Party is outlawed in Guatemala. How-
ever, the Arevalo government has tolerated
extreme leftist (including pro-Communist) in-
fluence in the PAR and the labor unions, and
has befriended and employed persons of Com-
munist sympathies who have exercised some
influence in the government. The opposition,
to which the whole Arevalo program is an
anathema, sees the Communist infiltration,
real or imagined, as a serious threat, and is
certain to use it as an election issue and as a
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device to gain international sympathy for its
cause.
6. Stability of the Present Regime.
The administration of President Arevalo is
to be considered weak and unstable, particu-
larly if measured in terms of the Guatemalan
dictatorships established by Ubico, Estrada
Cabrera, Barrios, and Carrera. Arevalo,
elected in an unusually democratic election,
has shown himself to be neither a strong nor
universally popular President. Conservatives,
although largely withdrawn from active poli-
tics, have opposed his administration almost
since its formation. The liberals who support
it are divided into three political parties which
have, at times, engaged in violent disputes
and open conflict. Within the politically ac-
tive middle class (the chief source of support
for the FPL, the strongest party in Congress)
there has been a general trend away from the
liberal social reform program and open criti-
cism of the administration's tolerance for
Communists, its antagonistic attitude toward
US business interests, and its sympathy for
13
the labor movement. Arevalo, either from in-
ability or lack of desire to establish himself as
a dictator, has allowed his cabinet ministers
unusual freedom in formulating and execut-
ing government policies, has countenanced
congressional opposition to some of his per-
sonal policies, and has, at times, reorganized
his cabinet in response to immediate political
pressures. His failure to define clearly, and
to force adherence to, purely personal policies
has indirectly encouraged the growth of rival
cliques within the administration.
It is possible that a desire to complete his
legal term without incident, and to remain
aloof from the political campaign will cause
Arevalo to follow a more moderate and cau-
tious policy during his last year in office. In
view of a popular desire to maintain the ap-
pearance of democratic, rather than coercive,
political procedure, and in view of Arevalo's
demonstrated willingness to respond to popu-
lar pressure, it is improbable that he will be
overthrown or forced to resign prior to the ex-
piration of his term in March 1951.
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CHAPTER II
THE PRESENCE OF SABOTEURS AND SUBVERSIVE ELEMENTS
1. Sabotage.
Potential saboteurs can be assumed to exist
in Guatemala among sincere native Commu-
nists, among foreign Communists who have
been allowed entry by the present govern-
ment, and among maliciously inclined per-
sons who, for pay or personal satisfaction,
might desire to destroy property useful to the
United States. However, the importance of
possible sabotage activities in case of a war
between the US and the USSR is restricted by
the limited strategic significance of the coun-
try. At the present time, Guatemala pro-
duces no strategic materials of sufficient
rarity, or in sufficient quantity, to make their
loss a severe handicap to military prepared-
ness or military operations. Sabotage to air-
fields and military installations would be of
importance only in relation to the degree to
which these are built up and used by US forces
in event of war.
The most effective sabotage activities might
be directed against the IRCA railway line and
the port facilities at Puerto Barrios, as such
action would virtually stifle Guatemala's im-
port and export trade. Damage to United
Fruit Company property, which might be of
some use to military operations, might be ex-
pected. However, such sabotage activities
would injure the Guatemalan economy far out
of proportion to their adverse effect on the
US war potential. Because of its dependence
upon the US as a market and a source of im-
ports, and a widespread aversion to Commu-
nism among the propertied class, Guatemala
can be expected to adopt a policy of sympathy
and cooperation with the US after the out-
break of war?assuming that the United
States were willing and able to compensate
Guatemala for economic and other losses in-
curred as a result of such cooperation. If the
United States were unable to guarantee Gua-
temala its economic security, however, Guate-
mala might hesitate to enter the war on the
side of the United States, or might even re-
main neutral throughout a war. The Guate-
malan Army should be able and willing to con-
trol sabotage to military installations within
the country, except for initial and minor
damage.
2. Subversive Activity.
The facilities of Guatemalan governmental
agencies, notably the foreign service, have pos-
sibly been used by Communists whose activi-
ties benefit the Soviet Union. This, rather
than sabotage, constitutes the most immedi-
ate threat to US security. President Arevalo,
with apparent personal satisfaction, regards
his country as a citadel of democracy where
exiled liberals and intellectuals from. dictator-
controlled countries are free to gather. It
has been the policy of his government to aid,
covertly or overtly, leftist expatriates from
Spain, Nicaragua, the Dominican Republic,
Venezuela, and other countries. Some of
these (such as Jos?eon Depetre and Dr. Ra-
fael de Buen, both Spanish republicans, and
Manuel Edwardo Hubner, a Chilean) have
been awarded minor positions in the govern-
ment, where, in conjunction with extreme
leftist Guatemalans, they could serve effec-
tively as Communist agents devoted to the ex-
tension of Soviet propaganda and influence.
No official Communist Party exists in Gua-
temala, because the 1945 Constitution under
which the present government operates for-
bids international political parties. Unsuc-
cessful efforts were made to establish a dis-
guised Communist Party within the Escuela
Clariclad in 1945, and under the name of the
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Partido Socialista in 1945, and the Partido
Vanguardia Popular in 1947. The most ef-
fective Communist activity has taken place
through the established Arevalista parties,
through labor unions and through front
groups. Although the existence of a clandes-
tine Communist Party, with a small member-
ship of 200-300 persons, has been reported,
convincing evidence of a closely knit organiza-
tion with effective centralized direction is not
available. The clandestine party is said to be
organized into cells, but members of one cell
are said to be unaware of either the existence
of the other cells or their affiliation with them.
The party organization, therefore, appears to
be weak, and there is no reason to believe that
it is not also subjected to the same forces that
weaken all Guatemalan political parties?con-
flicts of personal or family loyalties, over-rid-
ing economic considerations, and individual
political opportunism.
Within the reported clandestine Commu-
nist Party, and within the various Commu-
nist-front groups, there are very probably in-
dividuals whose primary loyalty is to certain
international Communist organizations that
act as agents for, and supporters of, the USSR
in opposition to the US and US-supported or-
ganizations. No accurate estimate has been
made of the number of such party-line Com-
munists in Guatemala. However, in the event
of a war between the US and the USSR it is
improbable that many of those popularly
styled as "Communists" would actively sup-
port the Soviet Union or would be permitted,
by the government, to engage in anti-US
activities.
At the present time, Communist influence
and ideology are significant factors in Guate-
malan national affairs. Of the established
Arevalista parties, the PAR (Partido Accion
Revolucionaria) has been most strongly influ-
enced by Communist thinking, and Marxian
objectives are apparent in its social, economic,
and labor platforms. It has adopted and used
classic Communist techniques and slogans,
and its followers denounce US "economic im-
perialism." Several of its leaders or sympa-
thizers, such as Agusto Charnaud MacDonald,
Jos?anuel Fortuny, and Carlos Manuel
Pellecer, are possibly pro-Communist.
The Guatemalan labor movement, which
has been encouraged by the government, de-
veloped with the aid and advice of foreign la-
bor leaders of Communist affiliation, notably
Lombardo Toledano of Mexico and Blas Roca
of Cuba. Leaders of the Guatemalan labor
movement, such as Victor Manuel Gutierrez,
Manuel Pinto Usaga, Professor Humberto Or-
tiz, and others, are imbued with the same
ideals and display the same revolutionary fer-
vor as do Communist labor leaders in other
countries. The progress of organized labor
in Guatemala has therefore been associated
with anti-imperialist, anti-capitalist propa-
ganda, class violence, malicious destruction of
property, demands for worker benefits, and
land reform. There is no convincing evidence
that Guatemalan labor has been directly or
significantly subsidized by the Soviet Union,
although it has received leadership and intel-
lectual stimulation through contacts with for-
eign Communists. Both the major labor
federations, the CTG and the FSG (the Con-
federacion de Trabajadores de Guatemala and
the Federacion Sindical de Guatemala) are
affiliates of the Communist-dominated inter-
national labor organization, the CTAL (Con-
federacion de Trabajadores de America
Latina) and the WFTU (World Federation of
Trade Unions) . The CTG and the FSG sup-
port a political action committee, the CPNT
(Comite Politico Nacional de los Trabaja-
dores), whose members tend to be pro-Com-
munist.
Of Communist front groups, the most sig-
nificant are the Committee for Peace and De-
mocracy, formed in 1948 through the efforts
of the CTAL, the Alliance of Guatemalan
Democratic Youth, the Syndicate of Educa-
tional Workers (teachers) , the SAKER-TI (As-
sociation of Writers and Intellectuals), and
the STIAR (Syndicate of Artists and Intellec-
tuals).
In event of war between the US and the
USSR, it is estimated that Guatemala's west-
ern cultural orientation and recognition of its
fundamental political and economic ties with
the US would bring about the suppression of
these Communist front groups. In event of
continued peace, and the election of a leftist
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to the presidency, they might be allowed to
continue to flourish and even to expand their
activities, though it is improbable that they
would become of international importance.
In event of the election of a candidate backed
by the army, these organizations might be
suppressed and certainly would not be allowed
to expand their activities.
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CHAPTER III
ECONOMIC SITUATION
1. Genesis of the Present Economic Situation.
a. Introduction.
Throughout the colonial period and the
early years of independence, the economy of
Guatemala was self-sufficient. The only sig-
nificant exports were forest products from the
east coast and small amounts of cochineal, in-
digo, and cacao from the Pacific coast. Com-
merce was small; intercourse with the out-
side world was limited; the country offered
little to attract colonists, and, despite efforts
by the government to encourage immigration,
the European population increased very
slowly.
The economic isolation that characterized
Guatemala during colonial times has per-
sisted insofar as a large number (possibly 50
percent) of Guatemala's inhabitants?the
rural Indians?is concerned. Indian agricul-
ture is still carried on by primitive methods
at a near-subsistence level; Indian trade is
limited almost entirely to the exchange of
local produce and the purchase of simple
goods locally manufactured; and the Indians
themselves remain a distinctive racial and
cultural group. However, those who have be-
come workers on the coffee and banana plan-
tations, in industry, and in various urban oc-
cupations demanding unskilled labor have
been drawn into the modern economic system.
Many of these have abandoned their Indian
language and customs and, as an expanding,
Spanish-speaking, lower class are now taking
an active part in Guatemalan national life.
At the present time, Guatemala's monetary
economy, its international trade, and its de-
velopment as a modern nation all rest largely
upon the large scale production of two plan-
tation crops?bananas and coffee. Chicle,
other forest products, and minor plantation
crops are next in importance as exports, but
contribute little to the country's international
trade. There are no other effective sources of
wealth: mineral production is insignificant;
industrialization is negligible; and trade is
limited by the low buying power of the ma-
jority of inhabitants.
The coffee and banana industries are com-
paratively modern, large-scale, developments
representing heavy foreign capital invest-
ment. The organization of production, how-
ever, particularly in the coffee industry, is
superimposed upon a pattern of land and la-
bor relationships typical of the hacienda econ-
omy of colonial times. This is a pattern de-
fended by the conservatives but attacked,
along with foreign capitalism, by the support-
ers of the socialistically inclined Arevalo gov-
ernment that came into power in 1945. The
most important factors entering into the gen-
esis of the current economic situation will
therefore be discussed in terms of capital, la-
bor, land, and economic ideology.
b. Capital.
Because no effective sources of great wealth
existed in nineteenth century Guatemala, the
capital with which Guatemala's plantation
agriculture was originally established came
largely from abroad. Coffee had been intro-
duced in Guatemala in the late eighteenth
century, but production remained very lim-
ited until after 1873, when President Barrios
took steps to encourage its cultivation. The
opportunities of the new industry attracted
emigrants from Europe. Many of the largest
coffee plantations were established by Ger-
mans, who came to control (in 1940, before
German-owned properties were expropriated)
a large proportion of the total coffee acreage.
Other large coffee plantations were founded
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by English and US interests, and by native
Guatemalans. Guatemalans, however, pro-
duced less than half the total coffee crop, and
their plantations were, in general, smaller
than those of the foreigners. Moreover, trade
in coffee fell almost entirely into the hands of
foreign firms. Before the war, Germans han-
dled 64 percent of the coffee exported, Ameri-
cans 18 percent, and native Guatemalans
only 5 percent. Guatemalans?even those of
the relatively small upper class?did not,
in general, profit directly from the ex-
panding coffee industry. In contrast to the
wealthy foreign entrepreneurs (and a few
Guatemalans) many of the capable and edu-
cated Guatemalans sought opportunity and
prestige in the learned professions, politics,
and the army. Guatemala's entry into World
War II, the confiscation of German coffee
plantations, and the subsequent trend toward
economic nationalism can all, to a degree, be
regarded as reactions to the earlier non-par-
ticipation of Guatemalans in their country's
economic wealth.
To a degree even greater than that of the
coffee industry, the banana industry was de-
veloped by foreign capital?in this case US.
The United Fruit Company, largely after the
turn of the century, established plantations
around Bananera, on the Atlantic Coast in the
Department of Izabal. Until 1936, banana
production was concentrated in this vicinity,
but the sigatoka and Panama diseases led to
the establishment of new plantations near the.
Pacific Coast, at Tiquisate, Suchitepeque De-
partment, which are operated by a United
Fruit subsidiary.
Although there are some small independent
Guatemalan producers of bananas, ownership
and control of the industry is concentrated in
the United Fruit Company. It owns the
steamships, the docks, and the railroads nec-
essary for the transport of bananas; it also
possesses the capital necessary to relocate
plantations, and the technical knowledge nec-
essary for combatting diseases affecting pro-
duction. Native producers can expect only to
supplement UF production, have no control
over prices, shipment, or marketing, and can-
not compete with UF in terms of the wages
and social services offered to the workers.
The United Fruit monopoly of shipping,
railroad, and communications services also
affects the whole of Guatemalan economic
life. Few goods can be imported or exported
(except by air), or moved from one part of the
country to another, without the use of UF-
controlled International Railways of Central
America (IRCA). The owners of the United
? Fruit Company, unlike the owners of the cof-
fee plantations (who have close social ties in
Guatemala) are sometimes viewed as unsym-
pathetic foreign profiteers. Therefore, the
nationalistic policies of the Arevalo adminis-
tration receive considerable approval among
Guatemalans.
c. Land.
The control of land in Guatemala's agricul-
tural economy has always involved two basic
problems: control of suitably productive land
on which to raise the cash crop, and control
of subsistence land as a device for assuring
control of the laborers resident upon it. Be-
fore the advent of commercial coffee culture,
there was no shortage of productive land; the
cash crops of the haciendas were food crops
for a limited domestic market. With the great
initial expansion of coffee culture during the
regime of President Barrios (1873-1885), how-
ever, a need for a particular type of land de-
veloped, and was met, in part, when the
Church properties were confiscated by the
state and offered to those who would develop
them as coffee plantations. New land laws
were also passed under Barrios which per-
mitted the extension of large properties and
the development of new estates. These de-
creed the abolition of the traditional com-
munal land tenure system, under which the
Indians held their land, and its replacement
by a system of individual holdings. Many In-
dians, not cognizant of the law, failed to regis-
ter their land as private property, and such
land was considered unclaimed, to be sold by
the government to large plantation owners.
The inhabitants of such newly established es-
tates therefore became resident laborers, obli-
gated to the landowner by virtue of a law that
could have acted to their benefit.
Not until the Second World War was the
private ownership of the large landholdings in
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any way threatened. In 1941, however, the
funds of the German owners of coffee planta-
tions were frozen, and following Guatemala's
entry into the war, the plantations themselves
were placed under government management.
After the 1944 revolution, the government also
seized the fincas of the high officials in Ubico's
government, thereby raising the total num-
ber of intervened plantations to around 110.
These plantations comprise 30 percent of the
commercially productive agricultural land of
the country, and supply some 20 percent of
the total coffee crop.
Although the final legal expropriation of the
intervened plantations has not yet been ef-
fected, there is little doubt that they will be
placed under full government ownership, in
the name of the "national interest" or "social
necessity." These concepts symbolize the
Arevalo period, and are used as justification
for political action even as the concept of the
good of the individual soul was used in the
days of the Conquest, or the concept of free
enterprise and private property was used by
Barrios. It is true that Arevalo's original defi-
nition of "spiritual socialism" is hardly mate-
rialistic, for in his own words, it is opposed to
materialistic socialism and concerns "psycho-
logical liberation and spiritual integrity?the
satisfaction of the mind and will rather than
the stomach." Nevertheless, it is clear that
Arevalo's supporters, and his opposition are
concerned with material matters. Article 91
of the Constitution, for example, provides that
steps be taken to eliminate from private own-
ership large areas of land that are standing
idle, and the Expropriation Law of 9 Septem-
ber 1948 provides that any type of property, in
order to satisfy a collective necessity, may be
expropriated.
Large landowners, therefore, now feel that
their holdings are in jeopardy?not particu-
larly because of the letter of the law, but be-
cause the framers of the laws hold to the phi-
losophy that the Indian (whether tribal or
not) deserves to be a member of the collectiv-
ity, to be considered when matters of the "col-
lective necessity" are involved. Moreover, the
government has actively furthered organiza-
tion of Indian workers into articulate groups,
and has countenanced agitation among In-
dian farm laborers by irresponsible leaders
who have promised seizure and redistribution
of land. These promises may effectively
arouse the Indians to class violence such as
occurred in 1948 at the town of El Tumbador,
in the rich San Marcos coffee region, where
rural Indian agricultural workers killed, with
their machetes, the mayor of the town?a
well-to-do landowner. This incident is of se-
rious significance in Guatemala, for one of the
greatest influences on the political and eco-
nomic attitudes of the property-owning upper
and middle classes is the persistent nightmare
of Indian violence.
d. Labor.
The Indian population has always provided,
and will continue to provide, the population
pool from which workers are drawn according
to the needs of agriculture and industry. The
control of Indian labor has always been of pri-
mary interest to the Guatemalan entrepre-
neur, particularly since the development of
the coffee industry. Throughout Guatemalan
history, various legal systems have been de-
veloped whereby the landowning aristocrat
was assured control over an adequate supply
of cheap (or unpaid) Indian labor. Although
the Indian has usually been granted, in
theory, certain compensatory rights or privi-
leges in keeping with the ideas of quid pro quo
held by the ruling class, he has, in practice,
always been subject to forced labor, despite
periodic revision or liberalization of labor laws.
Under the encomienda system of Colonial
times, the labor force was composed of resi-
dent Indians, many of whom had been settled
in more compact communities to simplify the
administrative problem for the conquerors.
Their labor was an obligation owed the land-
lord in return for his protection, the privilege
of living upon his land, and the benefit of spir-
itual guidance by the Church. Additional
labor required for harvesting and other work
was later obtained through a system of com-
pulsory labor by mandamientos or reparta-
nzientos (theoretically involving remunera-
tion) which continued until the end of the
nineteenth century. However, the manda-
miento system, by which laborers were forcibly
recruited by the governmental authorities and
sent wherever their services were needed (in
response to a payment by the landowner) was
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inadequate for the greatly increased needs of
the expanding coffee industry. Thus, new la-
bor laws were promulgated in 1894 which, in
effect, permitted employers to hold resident
workers through control of the fields on which
the latter were accustomed to raise their sub-
sistence crops, and also to hold contract la-
borers through a system of debt slavery.
Under Ubico, debt slavery was outlawed, but
an equally effective system of obtaining forced
labor was established in terms of anti-va-
grancy laws. Even after the overthrow of
Ubico and his successor, Ponce, by the revo-
lutionists of 1944, an attempt was made to
continue the system: the Guatemalan Va-
grancy Decree of 10 March 1945 (passed by
the revolutionary junta of Arana, Arbenz, and
Toriello) was an example of the means by
which labor was traditionally obtained. Un-
der this law, any man between 18 and 60 who
cultivated less than nine acres of his own land
(which would include all subsistence farmers)
was obliged to work for an employer at least
150 days annually, or be punishable for va-
grancy, and even a man who could prove he
worked at least nine acres was still obliged to
work for an employer at least 100 days a year.
In practice, the employer was obliged to pay a
wage to the worker, yet the latter was free to
work for himself only a portion of the year?
in effect, when his labor. was not needed.
Under the Arevalo administration the Va-
grancy Decree was rewritten and greatly liber-
alized, effectively limiting the concept of va-
grancy to landless Indians. Although it has
been possible for some employers to ignore or
circumvent the new law, it nevertheless has
been effective in creating a labor shortage in
certain important coffee areas. Moreover, re-
cent amendments to the Guatemalan Labor
Code (itself a product of the Arevalo adminis-
tration) permit the organization of rural agri-
cultural laborers into unions on the same
liberal basis as granted the workers in indus-
try, though, as yet, organization has been ef-
fective only on government-managed ha-
ciendas.
Strong domestic opposition to Arevalo's lib-
eralism has therefore come from the coffee-
plantation owners, who constitute the wealth-
iest group of Guatemalan employers and those
with the largest labor requirements. Some
500,000 full or part-time workers are employed
on the 1,500 coffee plantations throughout the
country at wages averaging possibly 30 to 35
cents a day and supplemented, in some cases,
by rations of corn and various privileges.
Planters consider these low wages vital to cof-
fee production, and although they have diffi-
culty in holding transient labor throughout
the harvest season, they oppose wage increases
on the basis that workers prefer to work less
rather than earn more?that they return to
their homes as soon as they have accumulated
a small amount of capital, regardless of the
stage of the harvest. Since the liberalization
of the Vagrancy Law and the passage of the
Labor Code, therefore, serious conflicts have
arisen between the landowners (who seek to
continue the forced recruitment of labor
through subterfuge and control of local au-
thorities) and labor organizers and agitators
(who seek to unionize the employees or turn
them against their employers). By way of
putting its liberal theories into practice, the
government has encouraged the activities of
unionists, particularly on the expropriated
plantations which it operates. In some cases,
more satisfactory working conditions have re-
sulted. This has not always been the case,
however, and because employers, and many of
the workers themselves, are satisfied with the
paternalistic pattern of labor relations still in
existence on the majority of Guatemalan
farms, the organization of rural workers has
become one of the most disruptive and divisive
problems of current Guatemalan social and
economic life.
The revolutionary Guatemalan labor legis-
lation has been even more disruptive to labor
relations on the banana plantations and in
industry. Workers on the United Fruit plan-
tations were enabled to organize earlier and
more effectively than others because of a
clause in the Labor Code which classifies agri-
cultural enterprises employing over 500 per-
sons as "industries." The monopolistic posi-
tion and the foreign ownership of the United
Fruit Company?factors which weaken its
support among native Guatemalans?have
encouraged the government to support the la-
bor unions in their demands, which have often
been upheld by the special labor courts set up
in accordance with the Labor Code. Workers
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on the IRCA railway (also controlled by the
United Fruit Company) have also been en-
abled to form strong, aggressive unions whose
demands have been sympathetically viewed
by the government. Other foreign-owned en-
terprises have similarly felt the effect of the
Labor Code, and to a lesser degree Guatemalan
employers have been faced with the need of
granting their employees numerous conces-
sions in the form of higher wages, paid vaca-
tions, job security provisions, and various priv-
ileges.
? e. Economic Ideology.
The widespread appeal of President Are-
valo's philosophy of "spiritual socialism" is in
itself an important factor in the current eco-
nomic situation. This philosophy is the Gua-
temalan version of the twentieth century eco-
nomic liberalism with which exiled Guate-
malan intellectuals became acquainted in
Mexico, Cuba, Argentina, and other countries
during the 1930's. Its development coincides
with the gradual assimilation of the large In-
dian working class, which in the past has been
isolated, inarticulate, culturally diversified,
and without voice in national affairs. It is
an ideology which not only affirms the status
of the Indian as a free citizen-worker in a dem-
ocratic society, but which seeks to provide
him with the education and organizational
strength necessary to oppose private employ-
ers and employers' associations, and seeks to
assure him that the wealth of the country will
not be monopolized by private interests but
will be controlled by the state for his benefit.
It is an ideology, therefore, directly antago-
nistic to the interests of the propertied class,
whose economic position has been largely de-
pendent upon cheap labor, the undisputed
ownership of large landholdings, and the abil-
ity to dominate the political scene.
The economic policies of Arevalo appeal not
only to the Indian working class, but also to a
large segment of the educated middle class.
Because the wealth of the country has been
concentrated in the hands of aliens, and be-
cause former President Ubico's political or-
ganization was small, efficient, personalized,
and non-intellectual, members of the growing,
educated, Guatemalan middle class were
faced with but limited opportunities in agri-
culture, trade, politics, and the army. The
new ideology, however, requires, a vast exten-
sion of governmental activities which provide
employment for teachers, engineers, econo-
mists, and others of the professional and in-
tellectual group. The large, nationalistic,
bureaucratic government that characterizes
the Arevalo administration?supported in
part by the profits derived from the expropri-
ated German coffee plantations?is therefore
an instrument through which native Guate-
malans have been enabled, indirectly, to par-
ticipate in the wealth of the country.
Although the revolutionary ideology has a
wide appeal, there is also widespread opposi-
tion to the implementation of its social re-
forms, particularly in connection with the
rights and privileges accorded the Indians and
working class. This opposition is not limited
to large landowners and employers, but is
found throughout the society. A popular
basis for the opposition movement is found
in the so-called "ladino" class, which, in con-
trast to the rural Indians, forms the dominant
population group in the towns throughout the
country. The "ladinos" are the merchants,
storekeepers, artisans, and small businessmen.
They hold all the municipal offices, control
local credit, and own the best small properties
and those nearest the towns, in contrast to the
poorer and more distant plots owned by the
Indians. As a group, the "ladinos" are fearful
of losing their dominant position (tradition-
ally associated with Spanish or part-Spanish
ancestry, Spanish language and culture) as
a result of the education and advancement of
the lower-class Indians. The "ladinos"?of
whom the murdered mayor of El Tumbador
is a symbol?are in most direct contact with
the Indian working class and have the least
opportunity to avoid the personal dangers of
class violence. Their opposition to Are-
valismo is therefore correspondingly great.
f. Conclusion.
The ideology of the Arevalo administration
has proved popular and disruptive. The "Oc-
tober Revolution" of 1944 represents not
merely a political revolution, but a challenge
to the traditional social and economic privi-
leges of a very small upper class and a good
portion of the "ladino" middle class. It has
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not materially affected the total production
of coffee and bananas?the mainstay of Gua-
temala's modern economy?but by attacking
existing foreign enterprises and reducing their
profits it has discouraged potential foreign in-
vestors and has thereby hampered the more
rapid development of Guatemalan resources
and industries.
2. Description of the Present Economic System.
a. Summary.
The economy of Guatemala is based almost
entirely upon agriculture, yet the country is
barely self-sufficient in basic food crops.
About 70 percent of the people live by working
the soil, and domestic industries are based
largely upon the utilization of farm and for-
est products. Approximately 98 percent of
Guatemalan exports (of which over 90 per-
cent are consigned to the United States) are
agricultural or sylvan in origin.
Only a small portion of the land is economi-
cally productive. Out of a total of approxi-
mately 27,431,000 acres, an estimated 2,000,-
000 acres (7 percent) are under cultivation in
field and tree crops; 500,000 acres (2 percent)
are dedicated to improved pasture; and some
18,000,000 acres (67 percent) are covered by
forest. The approximate areas (in acres) de-
voted to various crops in 1948 include: corn,
1,200,000; coffee, 350,000; beans, 200,000; ba-
nanas, 100,000; wheat, 50,000; sugar cane,
40,000; grain sorghums, 25,000; rice, 16,500;
essential oils, 8,000; cotton, 7,500; tobacco,
7,200; other fibers for cordage, 6,000. Farm
animals in the Republic in the year 1948 num-
bered approximately as follows: cattle, 900,-
974 head; horses and mules, 216,422 head;
sheep, 617,611 head; goats, 63,545 head; pigs,
374,367 head. Of forest products, chicle and
lumber are the most important to the econ-
omy.
Production of textiles, although small, is
the major industry, followed by the manufac-
ture of leather goods (principally boots and
shoes) . Other small factories produce, for
local consumption, furniture, soap, candles,
wooden toys, matches, vegetable fats, ciga-
rettes, and miscellaneous rubber goods.
There are also breweries, flour mills, sugar
mills, a sugar refinery, a cement plant, and
plants for generating electricity.
Production of minerals is practically con-
fined to minor exploitation of chrome, silver,
lead, and zinc, and a few other minerals. Po-
tentially rich deposits of petroleum are be-
lieved to exist in the Peten region, and Guate-
mala can expect to become an important pro-
ducing region when, and if, these deposits are
exploited.
b. Agriculture.
(Note: The percentage of total exports con-
tributed by each specific product (as given in
this section) is based upon a total export
evaluation which (in its use of customhouse
figures) greatly underestimates the value of
banana exports (see g. International Trade).
If the true value of banana exports be con-
sidered, bananas will be seen to contribute at
least 39 percent of the total exports (by value)
and coffee 47 percent or less.)
Coffee. Guatemala ranks fourth among
Latin American countries in coffee production,
and fifth among countries of the world.
This one crop supplied over 61 percent, by
value, of Guatemala's total exports in the year
1948 (1,054,959 quintals valued at $31,718,-
788). Guatemalan coffee is of a mild variety
and is used in the United States chiefly for
blending. It commands a high market price
and does not compete directly with Brazilian
coffee.
The principal coffee districts are found on
the highland slopes near the Pacific coast
(particularly the Departments of San Marcos
and Quetzaltenango) and in the area around
Coban, in central Guatemala on the Carib-
bean side of the highlands. Approximately
75 percent of the crop is grown at eleva-
tions between 2,000 and 4,500 feet. About
13 percent is grown below this belt, and
about 12 percent above it. Altogether there
are some 1,500 coffee plantations in Gua-
temala, ranging up to 35,000 acres in extent,
employing (during the crop year 1942/3) an
estimated 425,544 workers (men, women, and
children) . About two-thirds of these work-
ers were resident on the plantations, the oth-
ers being mainly migrant laborers from high-
land Indian villages. About 20 percent of the
total coffee crop is produced on about 110 gov-
ernment-operated farms. Because such coffee
is sold at auction rather than on contract, the
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government has been an immediate benefi-
ciary of the rapid rise in coffee prices of Octo-
ber?November 1949. Most private producers,
however, had already sold their 1949-50 crop
at relatively low contract prices at the time
the rise occurred.
Bananas. Guatemala ranks first or second
in Latin America and the world as an exporter
of bananas. Bananas supplied approxi-
mately 20 percent, by value, of Guatemala's
total exports in the year 1948 (12,267,244
stems valued at $10,318,934).
In the year 1948, the United Fruit Com-
pany and its Guatemalan subsidiary, the
Cornpania Agricola de Guatemala, produced
about 61 percent, and exported about 80 per-
cent of the country's total production. Pro-
duction is centered inland from the Caribbean
coast, near Bananera (where the United Fruit
Company has some 15,250 acres under culti-
vation) and near the Pacific coast, at Tiqui-
sate (where the Compania Agricola has about
18,250 acres in cultivation) . These companies
are the largest private employers in Guate-
mala, with a combined labor force of approxi-
mately 15,450 (6,250 at Bananera, and 9,200
at Tiquisate) .
Abacd. All abaca plantations in Guate-
mala are operated by the United Fruit Com-
pany under a contract with the Reconstruc-
tion Finance Corporation. Plantations were
developed during the recent war, and abaca
production has increased rapidly as plantings
have matured until, in 1948, abaca was fourth
(after chicle) in value of Guatemala's exports,
representing 4 percent of the total (107,354
quintals valued at $2,184,500) . Production
may be expected to increase in future years,
assuming continued US financial aid and
technological assistance in combatting the
root-borer disease which threatens all Central
American abaca production.
Essential Oils. Essential oils (predomi-
nantly citronella and lemongrass oils) ranked
fifth in value among Guatemala's exports in
1948, and provided, by value, about 1.5 per-
cent of Guatemala's total exports (8,643 quin-
tals valued at $850,465) .
Honey. Honey ranked sixth in value among
Guatemala's exports in 1948, representing 1.2
percent of the total value of all exports (31,033
quintals valued at $295,219) .
Cinchona. A revival of interest in cinchona
production during the 1930's led to the de-
velopment of new plantations. However, vir-
tually all cinchona exports still come from the
established plantation at El Porvenir in the
Pacific highlands, which from 1943 to 1948
operated under contract with the Reconstruc-
tion Finance Corporation. This plantation,
17,000 acres in extent, is the largest single
concentrated source of cinchona bark known
in the Western Hemisphere. In terms of
value, cinchona provides less than 0.2 percent
of Guatemala's total exports.
Minor Export Crops. Minor crops which
contribute to the export trade include Zaca-
ton root, cacao, vegetables and fruits, hene-
quen and maguey, and oil-producing plants
such as castor beans, peanuts, sesame, flax,
tung nuts, and soybeans. Other plants,
and plant products, being produced for do-
mestic industrial use and export include euca-
lyptol, citral, mint, balsam, liquidambar, in-
cense, pitch, turpentine, myrtle, anatto, gin-
ger and cardamon seeds.
Subsistence Crops. Although Guatemala is
an agricultural country and one in which the
majority of inhabitants subsist on a very low
dietary standard, production of the major food
crops (corn, beans, and rice) is barely suffi-
cient for domestic needs. Food shortages, ac-
companied by extreme price increases, led the
Ministry of Economy to authorize the impor-
tation of 1,000 short tons of these food crops
during the crop year 1948-49.
Corn and beans are grown throughout the
country and form the basis of the Guatemalan
diet. These crops are raised principally by
small farmers who grow only enough for their
own use and sale in the local village market.
Yields are low and the crops are generally
hand cultivated in small plots where the use
of modern methods would be difficult.
Rice, another important subsistence crop, is
less widely grown. Production is greatest in
the Departments of Santa Rosa and Jutiapa.
A portion of the crop is exported to neighbor-
ing countries.
Wheat is grown to a limited extent in Guate-
mala, but production is not sufficient to ful-
fill the domestic demand, and wheat flour
ranks first among the country's agricultural
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imports. Sugar production is barely suffi-
cient to satisfy domestic demand.
c. Forest Products.
Chicle. Chicle ranks first in importance
among the country's forest products and in
1947 provided about 8 percent, by value, of the
total exports (36,695 quintals valued at
$2,740,197). The producing area comprises
the great forested regions of the Peten,
throughout which the chicle-yielding trees are
scattered. All chicle shipments from Guate-
mala were made to the United States by the
Chicle Development Corporation and the
Wrigley Export Company, until June 1949,
when these companies ceased operations in
Guatemala. A Guatemalan company, organ-
ized with government aid, has now taken over
chicle buying and selling.
Lumber. Combined, cabinet and other
woods represented about 1 percent, by value,
of Guatemala's total exports in 1948 (3,666,000
board ft. valued at $516,972) . Most impor-
tant are mahogany, Spanish cedar, lignum
vitae, primavera, balsa, and pine. Most of
Guatemala's mahogany, from the Department
of El Peten, is normally exported through
Belize.
Rubber. Rubber is of no consequence as an
export, and production is negligible. Castilloa
plantations, which once supplied 100 to 200
metric tons annually, were virtually aban-
doned after the development of Far Eastern
hevea plantations. During the recent war,
Guatemala's estimated 250,000 castilloa trees
supplied about 360,000 pounds of rubber an-
nually. Under United States direction, about
1,500 acres (on 39 properties) were planted
with some 300,000 hevea trees. It is estimated
that these will produce about 1,800,000 pounds
of rubber annually, thereby raising the total
to about 2,160,000 pounds.
Minor Forest Products. Guatemala's for-
ests also produce dyewoods, tannin woods, va-
nilla, sarsaparilla, camphor, cinnamon, spices,
palm oil, and other minor products.
d. Animal Husbandry.
Livestock are raised throughout Guate-
mala, and most domestic requirements for
animal products are met by domestic produc-
tion. Animal products, mainly cattle hides
and fresh beef, constitute about 1 percent, by
value, of Guatemala's total exports, but their
value is greatly exceeded by the value of im-
ports of the same category.
There are few large cattle herds, and pure-
bred stock raising is limited to a few dairy
herds in the vicinity of the capital. Farmers
in many sections raise cattle and other stock
for meat, and meat cattle are also occasionally
imported from Honduras and El Salvador.
Sheep raising is a fairly important industry
in the western highland section of Guatemala,
particularly in the Departments of Hueheu-
tenango, San Marcos, Quetzaltenango, Toto-
nicapan, and Quiche. The better grades of
wool are used mainly by two factories making
woolen suitings; most of the remainder is
used by local weavers, on whose hand looms
are produced most of the country's woolen
goods. These products (mainly blankets,
shawls, and rugs) are manufactured chiefly
for the immediate local market.
Fishing is of local importance only, and
contributes little to the national economy.
e. Mining.
Although a large variety of minerals are
known to exist in Guatemala, the only miner-
als mined commercially are chromite and
small amounts of gold, lead, iron, silver, zinc,
limestone, salt, and sulphur. Other known
minerals include mica, marble, gypsum,
graphite, coal; copper, titanium, mercury, an-
timony, and molybdenum. Most Guatemalan
mineral resources have not been developed be-
cause of inaccessibility, inadequate transpor-
tation facilities or excessive transportation
costs, and also, in the case of petroleum (the
existence of which is not yet proved defini-
tively) , the inability of foreign companies and
the Guatemalan Government to reach satis-
factory agreements concerning exploitation of
the deposits.
The lead and zinc shortages resulting from
the war have served to stimulate the produc-
tion of these minerals, which have been ex-
ploited on a small scale in Guatemala for
many years. The most important mining
operation at present is that being undertaken
by the US-backed Campania Minera de Gua-
temala, in the Coban region of Alta Verapaz.
Two other US-owned companies are planning
lead or lead-zinc mining operations: the Com-
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pania Centro-Americana de Minas and the
Compania Minera de Hueheutenango. A Gua-
temalan company, Mineras Nacionales, is cur-
rently exploiting ores containing lead, copper,
zinc, barium, and silver; in 1948, 6,453 metric
tons of ore were processed and exported to the
US.
Guatemala is believed to be rich in chrome
ores, but only the richest deposits have been
worked, and these only on a small scale.
Chromite deposits in the Departments of Ja-
lapa and Zacapa are exploited by two Guate-
malan companies. In 1948, about 1,200 gross
tons of chromite ore (CR203 content 55 per-
cent) were exported.
The production of gold is very small, and
gold exports are negligible. Sulfur and salt
deposits are exploited commercially on a small
scale. Mica deposits, worked during and after
the First World War, have not been utilized
for many years, because the mica will not
meet present industry specifications. Iron
deposits exist in the vicinity of Chiquimula,
near the border of El Salvador, but lack ex-
tensive volume and continuity. A very small
amount (150 tons a month) of iron ore is
mined near Zacapa for use by the Guatemala
City cement plant. Limestone deposits are
utilized locally for the production of lime for
domestic consumption and for the cement
plant in Guatemala City. Radioactive min-
erals exist in certain areas of Guatemala, but
to our present knowledge not in sufficient
quantity to be recovered commercially.
The existence of petroleum deposits in the
Peten and Alva Verapaz regions is very
strongly indicated by surveys made by major
oil companies since 1925, but no drilling oper-
ations have yet been undertaken. Following
surveys made in 1936-7, Shell Oil Company
negotiated for concessions with the Guate-
malan Government, but withdrew in 1938
when unable to reach a satisfactory agree-
ment. Since the recent war, several large
companies (Standard Oil of Ohio, the Ohio
Oil Company, and the Atlantic Refining-Tide-
water group) have carried out active explora-
tion and have negotiated for exploitation con-
tracts. Negotiations have been prolonged,
and the granting of contracts delayed, by dis-
agreement over certain provisions of the Pe-
troleum Law. The law reflects the extreme
nationalism of the present administration,
which repudiates exploitation of the country's
resources by foreign enterprises except on
terms extremely favorable to Guatemala. Al-
though agreement seemed to be near in early
1949, the drafting of a revised law with pro-
visions still less favorable to the contracting
companies has again delayed matters. Oil
company officials have become openly pessi-
mistic about the possibility of reaching an
agreement and speak of withdrawing entirely.
It seems possible, however, that if the objec-
tionable provisions of the Petroleum Law are
not modified during the next year, they will
be so modified under Arevalo's successor.
f. Manufacturing.
There is no heavy industry in Guatemala,
and almost all machinery, equipment, and fuel
must be imported. The limited and poorly
developed hydroelectric resources, the lack of
many raw materials, the high transportation
costs, and the limited markets have operated
to discourage large-scale development of in-
dustry. As a consequence, most of the manu-
facturing establishments in Guatemala remain
household industries or small shops, employ-
ing from two to ten persons and producing
solely for a local market. Indian handicrafts
constitute an unusual, and characteristically
Guatemalan, item of export, and attract some
tourist trade. In terms of value, however,
they are of little importance.
Most industrial enterprise is centralized in
Guatemala City, where are located 463 of the
776 "industrial establishments" (non-agricul-
tural and non-commercial enterprises employ-
ing five or more persons) listed in the 1946
Industrial Census. These 776 establishments
employed 23,014 persons, manufactured prod-
ucts worth $43,802,784, and utilized raw ma-
terials worth $19,455,103 during 1946. Of
the raw materials, 59 percent were domestic
in origin, and 41 percent were imported. In
85 percent of the establishments, electric
motors were the source of power; other power
sources include steam, internal combustion
engines, and direct hydraulic power.
The various classes of industries are listed
below in order of the dollar value of their
product:
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No.
Percentage
Product Value of Total Value
1.
Beverages
33
$10,254,491.00 23.3
2.
Foodstuffs
174
9,647,834.00 22.0
3.
Textiles
74
5,427,409.00 12.3
4.
Clothing
177
3,732,847.00 8.4
5.
Tobacco
28
3,620,091.00 8.2
6.
Non-metallic minerals
44
1,910,625.00
7.
Wood and cork
72
1,759,900.00
8.
Chemicals
20
1,716,777.00
9.
Light and water
6
1,642,409.00
10.
Printing and binding
23
1,111,147.00
11.
Hides and skins
35
752,496.00
12.
Metal working and foundry.
20
513,912.00
13.
Machinery manufacturing
and repair
26
454,869.00
25.8
14.
Rubber
2
376,594.00
15.
Salt
10
201,758.00
16.
Fats and oils
4
193,670.00
17.
Jewelry
4
99,203.00
18.
Paper
4
14,212.00
19.
Metallic and non-metallic
mineral extraction
3
13,660.00
20.
Others
17
358,880.00
TOTALS
776
$43,802,784.00 100.0%
The Guatemalan Government has long at-
tempted to encourage industrial production
within the country. The current Law of In-
dustrial Development of 21 November 1947
provides for free importation of construction
materials, machinery, and of some raw mate-
rials for periods up to ten years. It also estab-
lishes the proportion of domestic and foreign
capital to be required in the formation of new
industries or the future expansion of existing
industries. Thus, industries producing prin-
cipally for the domestic market must be con-
stituted of predominantly Guatemalan capi-
tal; those producing principally for the domes-
tic market, but which demand high technical
competence, must have a minimum participa-
tion of 33 percent Guatemalan capital (or 30
percent as the extreme minimum) ; those pro-
ducing principally for foreign markets may be
constituted 100 percent of foreign capital; and
those producing alcoholic and fermented bev-
erages must have a minimum of 70 percent
Guatemalan capital. Mining and petroleum
industries are subject to special laws.
g. International Trade.
Guatemala's foreign trade is dominated by
the United States, which normally takes about
90 percent of its exports and supplies from 65
to 75 percent of its imports. Canada ranks
second as a customer, and various European
countries follow. Mexico is generally second
in importance as a supplier of imports. Ex-
ports are almost entirely agricultural products
and raw materials (coffee, bananas, chicle,
abaca) ; imports are almost entirely manufac-
tured articles but include some raw materials
and foodstuffs (petroleum, ginned cotton,
processed foods). Guatemalan foreign trade,
both in imports and exports, has increased
tremendously in volume and value during re-
cent years. During and immediately after the
war, favorable trade balances were consistent-
ly recorded and foreign exchange holdings
reached a peak of $55,522,000 in April 1947.
Between 31 December 1947 and 1 December
1948, foreign exchange holdings fell from $53,-
005,000 to $49,156,000 and by 30 November
1949 had decreased to about $39,912,000. In
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1948, for the first time since the war, imports
exceeded exports: imports were valued at $68,-
349,860 and exports at $50,165,489.56, produc-
ing an apparent deficit in the balance of trade
of $18,184,370.44. However, the Bank of
Guatemala makes a moderate upward adjust-
ment in the export figures of at least $14,110,-
000 in view of the extremely low customhouse
evaluation of bananas, which is figured on
purely nominal and invariable prices, and
shows no correlation with the actual sales price
on foreign markets. This figure represents,
in effect, that portion of the sales price of
bananas that is returned to Guatemala in the
course of United Fruit Company operations.
An adjustment of this sort, and of this amount,
is entirely reasonable, and serves to cancel out
a relatively large proportion of the apparent
deficit in the international trade for 1948. The
deficit has, however, stimulated interest in im-
port control measures which may eventually
be applied to conserve dollar exchange.
The dollar value (customs statistics) of
Guatemala's foreign trade, by countries, was
as follows in the year 1948:
Country of Origin
or Destination
Imports
Exports
United States
$52,106,808
$44,616,917
Mexico
2,864,683
42,638
Curacao
1,635,560
0
El Salvador
1,562,250
139,995
England
1,512,005
702,688
Canada
1,470,161
1,970,130
Aruba
1,289,747
3,952
Switzerland
662,224
251,823
Belgium
580,831
653,662
Peru
576,354
2,301
Holland
124,665
261,403
Sweden
379,463
289,480
Venezuela
3,808
408.706
Italy
554,300
362,607
All Other
3,027,301
459,188
Total
$68,349,860
$50,165,490
As in other Central American countries, the
Guatemalan tariff is largely for revenue, but
protection is afforded certain industries, nota-
bly, textiles, cattle, sugar, and matches. Im-
port duties averaged about 14 percent of the
total value of imports during 1948.
29
h. Transportation.
Air Transport. Guatemala is linked to
other countries by two scheduled airlines and
two non-scheduled carriers. Pan American
World Airways, a United States company, and
TACA (Transportes Aereos Centro Amen-
canos), a Salvadoran company, were the only
international carriers operating on a sched-
uled basis during the year 1948, and during
this year their combined traffic amounted to
54,749 passengers entering and 54,996 leaving
Guatemala. AVIATECA (Compania Guate-
malteco de Aviacion) is a government-owned
airline (formerly Aerovias de Guatemala, a
Pan American subsidiary expropriated in
1945) . Aviateca has a monopoly on all inter-
nal passenger and freight traffic, and has ex-
panded its operations until it now serves more
than 27 communities in Guatemala on regular
schedules. During 1948, the gross income of
this company amounted to more than $1,000,-
000, a large portion of which was derived from
the transport of chicle from the Peten area to
Puerto Barrios. It carried 74,706 passengers
and over 13,000,000 pounds of freight.
Maritime Transport. Almost all water
freight and passenger service to and from
Guatemala is provided by ships belonging to
the United Fruit Company, which also owns
the port facilities at Puerto Barrios and con-
trols the railroad that links the port with the
interior. Puerto Barrios, the country's most
important seaport, is located on the Caribbean,
and is the only port where ships can come
alongside and unload cargo directly onto the
pier or into railroad cars. Regular service to
New York, New Orleans, and other US ports
is maintained by the United Fruit Company
ships.
Livingston, at the mouth of the Rio Dulce
near Puerto Barrios, is the terminus of a ship
and lighterage service used mainly for the
transport of coffee from the Verapaz region.
On the Pacific coast, the principal ports are
Champerico and San Jos?both termini of the
International Railways of Central America
and both open roadsteads demanding offshore
anchorage. San Jos?erives its importance
from its proximity (72 miles by rail) to Guate-
mala City, and the possibility of constructing
port facilities here (a breakwater, channels,
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and piers) has attracted the attention of at
least one group of US investors. The Pacific
ports function chiefly for the export of coffee.
Rail Transport. There are four railroads in
Guatemala, having a total track mileage of
850. All are single track, narrow gauge (36")
lines. The IRCA (International Railways of
Central America) operates 590 miles, provid-
ing the only Atlantic and Pacific outlets for
Guatemala City. Virtually all imports and
exports pass over its tracks. It meets the
standard gauge National Railways of Mexico
at Ayutla, and extends into El Salvador.
Forty percent of the railroad stock is owned
by the United Fruit Company, whose banana
shipments provide a sustaining cargo. Two
industrial railroads are operated directly by
the United Fruit Company and its subsidiary,
the Compania Agricola,. but may be regarded
as extensions of the IRCA line. The Verapaz
Railway, approximately 30 miles in length and
serving the Coban coffee area, is government
owned and does not connect with the IRCA.
The government is presently making plans to
extend the Verapaz railroad northward into
Peter' and eastward to El Estor, on Lake Izabal.
Road Transport. A limited and inade-
quately maintained road system is a major
handicap to Guatemala's economy. The vast
area of the Peten, as well as large portions of
other departments, are without roads and are
virtually inaccessible. Altogether, there are
about 2,400 miles of unpaved, though largely
all-weather, roads, linking Guatemala City
with the towns of central and western Guate-
mala and extending to the Mexican, Salva-
doran, and Honduran frontiers. There are
also about 2,400 miles of local roads, for the
most part usable only in the dry season. Two
international highways cross the country: the
Pan American (or Franklin D. Roosevelt)
Highway, extending from Mexico to El Salva-
dor, and the Pacific Highway, which parallels
the Pan American nearer the coast. Some
portions of the Pan American Highway and
the road connecting Guatemala City with the
Pacific port of San Jos?ave now been paved.
In general, however, the abolition of forced
labor, increased traffic, and incompetence or
negligence on the part of local officials have
all contributed to the deterioration of Guate-
malan roads in recent years. Road mainte-
nance, as well as road construction, is one of
the more important problems facing the gov-
ernment.
Truck and bus lines connect Guatemala City
with Quetzaltenango and other important in-
terior towns, with San Salvador in El Salvador
and Tapachula in Mexico. Coban is linked by
truck service to the Verapaz Railway which in
turn connects with river boat service terminat-
ing at the Caribbean port of Livingston.
There is no road connection to the Caribbean
coast, but construction of such a highway has
long been a Guatemalan dream, and is being
considered by the present administration.
i. Public Utilities.
Communications. All forms of communi-
cation?postal radio, telegraph, and tele-
phone?are under the control of the Ministry
of Communications and Public Works. The
Guatemalan Government owns and operates
domestic telephone and telegraph lines, which
reach all important points in the republic and
have connections with other lines in Central
America and Mexico. The Tropical Radio
Telegraph Company, a US firm controlled by
the United Fruit Company, operates an inter-
national radiogram and radiotelegram service
to Mexico, the United States, and to thirty
principal centers in Guatemala, and the All
America Cable Company operates a cable serv-
ice with world-wide connections.
The government operates eight radio broad-
casting stations in Guatemala City and two
in Quetzaltenango. Private stations are op-
erated in Guatemala City, Quetzaltenango,
Zacapa, Mazaltenango, and Retalhuleu.
There are over 40,000 radio receivers in the
country.
Electrical Power. About 90 percent of the
population of Guatemala is without electrical
current. Within the country there are only
three important electrical power develop-
ments: Empresa Electrica de Guatemala,
S. A., a US concern which produced 38,539,100
kwh in 1944; the state-owned Empresa Hidro-
electrica del Estado, which produced 5,898,000
kwh in 1944; and the privately owned Empresa
Electrica de Chimaltenango. There are a
number of small municipal and private elec-
tric plants.
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j. Money and Finance.
For many years, Guatemala has enjoyed a
sound financial position. Its balance of trade
has generally been favorable, and government
income has generally exceeded expenditures.
However, in recent years there has been a sig-
nificant increase in the internal debt, which
rose from $3,045,983 at the close of 1947 to
$8,246,700 at the end of 1948, and which was
probably increased to over $13,000,000 during
1949. There has been no increase in the ex-
ternal debt, which amounted to $739,100 at the
end of 1948.
The banking of 1946 provides for three types
of banks: (1) commercial banks, receiving
short-term deposits and transacting in active
and short-term investments; (2) mortgage
banks, authorized to issue mortgages on
chattel bonds and transactions in medium
and long-term operations; (3) capitalization
banks, authorized to issue bonds, receive sav-
ings, premiums, etc. All banks are required
to maintain reserves of 5 percent of their in-
vestments in state or state guaranteed securi-
ties; 10 percent in other securities or in cred-
its, and 50 percent movables, real estate, and
other fixed assets.
Banking functions are carried out by the na-
tional Banco de Guatemala (which is the sole
bank of issue and the fiscal agent of the gov-
ernment) the government-controlled Banco
Hipotecario Nacional, and various private
banks, including the Banco Agricola y Mer-
cantil (formerly the Banco Central, which was,
until 1947, the central government bank) , the
Bank of London and South America, Ltd., and
the Banco de Occidente. In addition, the Pro-
duction Development Institute (INFOP) in-
cludes several departments authorized to per-
form banking or semi-banking functions.
Government expenditures have increased
greatly in recent years: prewar budgets were
about 10 million dollars, but the 1948-1949
budget, the largest in history, totalled over 51
million dollars. Actual governmental revenue
during the year amounted to only 39.5 million
dollars and the budgetary deficit was liqui-
dated through use of surpluses accumulated in
former years. The 1949-50 budget expendi-
tures total about 41 million, but can be ex-
pected to be amplified during the course of the
year until they exceed those of the year past.
However, higher coffee prices may increase
government revenues during 1950.
Sources of government revenue and expend-
itures, as published in the official 1949-50
budget, are given below. It should be men-
tioned that the income and expenditures of the
expropriated coffee plantations?about $8,-
000,000?are not included in the budget, since
the National Fincas are now set up as an
autonomous agency, comparable to the Social
Security Institute, the Bank of Guatemala, the
San Carlos University, the Accounting Office,
and the National Production Development
Institute.
INCOME, 1949-50
Patrimonial
Public services
Sale of Products from State
Properties and Monopolies
Taxes and Contributions,
"Group A" (customs, invoice
fees, road tax, beer tax, cigarette
tax, real estate tax, stamps, le-
galized paper and tax)
Taxes and Contributions,
"Group B" (amusement taxes,
business profits tax, bank profits
tax, airplane landing tax,
Guardia Civil licenses)
Taxes and Contributions,
"Group C"
Miscellaneous (incl. National
Lottery)
Total income
EXPENDITURES,
Group I, Legislative
Group
Group
Group
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
SECRET
$1,192,800
1,648,000
386,600
30,807,600
6,353,700
102,200
1,005,305
$41,496,265
1949-50
II, Executive
III, Judiciary
IV, Ministries
Agriculture
Communications and Public
Works
National Defense
Economy and Labor
Education
Government
Finance
Public Affairs
Accounting Office
344,280
582,276
856,464
1,178,749
4,505,802
4,631,645
536,180
6,256,445
3,794,269
2,945,289
30,060
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(10) Foreign Affairs
(11) Public Health
Group V, Public Debt
Group VI, Pensions
Group VII, Extraordinary (in-
cludes special appropriations for
school construction, hospital con-
struction, the PoptUn agricul-
tural colony, the 1950 census,
etc.)
1,162,891
3,892,396
1,654,380
1,130,000
7,590,700
$41,496,265
k. Foreign Investments.
Recent estimates indicate that all foreign
investments in Guatemala aggregate approxi-
mately $152,000,000, of which about 70 percent
can be assumed to be US capital. The value
of US-owned assets in Guatemala in the year
1943 were estimated (US Treasury Census) at
$93,000,000. These interests were distributed
as follows:
Value of American-Owned Assets
in Guatemala
Interest in Controlled
Manufacturing
Mining and Smelt-
ing
Petroleum
Public Utility and
Transportation
Agriculture
Trade
Finance
Miscellaneous
Non-profit
Organizations
Enterprises
400,000
400,000
1,100,000
62,800,000
19,300,000
1,400,000
100,000
1,400,000
400,000
Securities (not included above)
Bullion, currency, and deposits
Real Property
Miscellaneous
Total
87,300,000
1,400,000
300,000
1,600,000
2,400,000
$93,000,000
The United Fruit Company. The total capi-
tal investment in agriculture of the United
Fruit Company had increased, by 1947, to
$37,000,000. Including its interest in the In-
ternational Railways, its total capital invest-
ment may now exceed $95,000,000. Its impor-
tance in the economic and political life of the
country is paramount because: (1) it is the
largest single enterprise in the Republic; (2) it
provides almost all water and freight service to
and from the country and controls railroad
transportation within the country: (3) its
operations are responsible, in part, for the
favorable trade balance generally maintained
by Guatemala, and its tax payments contribute
directly and importantly to the governmental
income; (4) it has profitably exploited sections
of the vast, unused, tropical lowlands, which
have defied Guatemalan colonization schemes
for over a century, and has thereby proved the
basic need for huge capital outlays and large-
scale operations; moreover, its operations have
proved that high wages, housing, medical and
hospital services, and other benefits to the
workers are not incompatible with profits.
In 1947, the United Fruit Company owned
some 578,000 acres of land (of which 32,448
acres were in cultivation) and employed about
15,000 Guatemalans and 700 foreigners (main-
ly Americans) . Operating expenses of the
company amounted to $19,337,743, including
$7,747,242.26 paid in salaries to Guatemalan
employees, $932,025 paid to foreign employees,
and $1,015,388 paid to the government in the
form of taxes of various kinds, customs duties,
and rentals. It sold $2,829,043 worth of goods
through its commissaries, maintained 2 hos-
pitals and 18 dispensaries totalling 538 beds,
maintained 55 schools for 2,581 students, and
contributed $412,690 to charity and to other
public causes.
The foreign ownership of the United Fruit
Company, the fact that there are no similar
Guatemalan owned enterprises of importance,
the vast scale of its operations and the propor-
tionate profits, its monopoly of certain public
services, and its isolation?both physical and
social?from Guatemalan life are all contribut-
ing factors in the attacks levelled against it
within Guatemala.
Other US Companies. In addition to the
United Fruit Company (including IRCA) ,
other important US companies operating in
Guatemala include Empresa Electrica de
Guatemala, S. A. (a subsidiary of the American
and Foreign Power Corporation) , the Esso
Standard Oil Company of Central America,
S. A., and the Compania Minera de Guate-
mala.
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3. Economic Stability.
The national economy of Guatemala is, and
should remain stable, despite an apparent def-
icit in the balance of trade and a slow decline
in gold and foreign exchange levels. Import
controls, if imposed, should check the trend
of deficits in the international trade situation,
governmental economies should ameliorate the
budgetary difficulties, and the world coffee
deficit should assure the sale, at advantageous
prices, of Guatemala's primary export.
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CHAPTER IV
FOREIGN AFFAIRS
1. Genesis of Guatemalan Foreign Policy.
Guatemala's foreign policy, though adapted
to the exigencies of political and economic de-
velopments, has consistently reflected the
former status of the country when, as the dom-
inant member of the Central American Feder-
ation, it was the seat of the colonial Captaincy-
General of Guatemala and the center of the
Central American independence movement.
The generally recognized limits of the colo-
nial Captaincy-General have provided a basis
for Guatemalan boundary claims. A major
international issue?insofar as Guatemala is
concerned?is the question of Guatemalan
rights over Belize (British Honduras) , a por-
tion of which was included in the Captaincy-
General. Guatemala's political heritage has
also been a factor in the persistent belief,
among Guatemalan liberals, that the coun-
try should promote a reconstituted Central
American Federation. For the immediate
purpose of insuring their continuation in of-
fice, however, partisan governments have
usually endeavored to aid sympathetic politi-
cal elements in neighboring countries, regard-
less of the attitude of those elements toward
federation. Political independence, threat-
ened neither by powerful neighbors nor ag-
gressive powers, is no longer a popular issue,
but emphasis has shifted to economic inde-
pendence. This change, partly a reaction
against the development of Guatemala's mod-
ern export economy by foreign capital operat-
ing under domestic dictators, has become man-
ifest since the overthrow of Ubico in 1944. It
has been marked by violent nationalistic at-
tacks on foreign enterprise (particularly US) ,
notwithstanding the fact that Guatemala's
basic security and political independence rest
upon maintenance of international guarantees
underwritten by the United States. Support
of the United States in event of a war between
major powers is, however, implicit in Guate-
malan foreign policy, although it has not al-
ways been openly stated and although oppo-
sition to the United States on minor issues
has occurred.
2. Present Foreign Policy and International
Issues.
The foreign policy of the Arevalo adminis-
tration is concerned with: (1) obtaining recog-
nition of the Guatemalan claim to Belize; (2)
encouraging the development of sympathetic
liberal, democratic governments in neighbor-
ing countries and opposition to the military
dictatorships; and (3) maintaining suffi-
ciently friendly relations with the United
States to insure the benefits of US protection
and aid in matters of national and hemispheric
security.
a. Belize
In claiming Belize (British Honduras) ,
Guatemala is not only defending what it con-
siders a just and legal claim, but is endeavor-
ing to secure a territory of some geographic
and economic importance. Belize is the nat-
ural Caribbean outlet for the southeastern
Yucatan hinterland, important as a lumber-
ing region and suitable, in part, for agricul-
ture and cattle raising. Most of the mahog-
any cut in the Guatemalan department of El
Peten must be exported through Belize, and
Guatemalans feel that their ownership would
aid in the further development of this isolated
department. Moreover, although no surveys
have been made, it is possible that petroleum
deposits exist in Belize which would be more
accessible and easier to develop than those be-
lieved to exist in Guatemala. In contrast to
the prestige and economic value involved in
ownership of Belize, however, would be the dis-
advantage of high administrative costs and
the necessity of administering a largely Eng-
lish-speaking, partly Negro population which
desires to remain under British control.
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Guatemala's claim has an historic basis.
During the Colonial Period, the territory now
known as British Honduras, or Belize, was
recognized by Britain as the property of Spain.
Under the Spanish, the area north of the
Sibun River was regarded as part of the Cap-
taincy-General of Yucatan, and the area south
of the Sibun was generally recognized as part
of the Captaincy-General of Guatemala, al-
though actual administration by the Spanish
never existed. The British, whose first settle-
ment was established in 1638, were granted
usufructory rights only. By various treaties
between Spain and Britain?the terms of
which were revalidated in the Treaty of Madrid
in 1814?the British settlers were denied the
right to establish any form of government, to
maintain troops, or to engage in economic ac-
tivities other than logging.
Upon gaining its independence of Spain in
1821, Guatemala claimed title to the terri-
tory formerly recognized as part of the Cap-
taincy-General of Guatemala. The contro-
versy that subsequently developed between
Britain and Guatemala over the ownership of
Belize was temporarily settled by a treaty in
1859, Article I and II of which defined, and
provided for the demarcation of, a boundary
(the present boundary) that was generally
recognized to be already in existence. In
Article VII of this treaty, both countries
agreed to cooperate in the construction of a
road from Guatemala City to a point on the
Atlantic Coast "near Belize." Shortly there-
after, a supplementary convention was signed
by representatives of both countries by which
Britain agreed to pay ?50,000 in lieu of assist-
ance in constructing the road, but when
Guatemala failed to ratify this agreement
within the specified time, Britain refused to
recognize any obligation under the supple-
mentary convention, and made no payment.
A few years later, in 1871, British Honduras
was constituted as a Crown Colony.
In subsequent years, Guatemala continued
to seek fulfillment (with certain modifica-
tions) of the 1859 treaty and the supple-
mentary convention, claiming that recogni-
tion of the boundary and provision for its
demarcation constituted "cession" of Belize
by Guatemala, and that such "cession" was
contingent upon fulfillment of Article VII.
Britain continued to view the supplementary
convention as having lapsed and eventually
came to regard the terms of Article VII of
the 1859 treaty as no longer applicable to
changed conditions. However, in 1934, Brit-
ain offered to construct a road from Belize to
the Guatemalan frontier, and, in 1936, of-
fered to pay Guatemala ?50,000 to settle the
dispute, although not admitting any liability.
Guatemala, in turn, suggested that Britain
"return" Belize in exchange for ?400,000, or
that Britain pay Guatemala the same amount
for the title and cede the southern tip of the
colony (south of the Rio Grande), or that
Britain cede this strip and also pay ?50,000
plus 4 percent interest as from 1859. The re-
fusal of Britain to agree to the Guatemalan
proposals, or to submit the dispute to arbitra-
tion by the President of the United States,
has caused Guatemala, since 1938, to regard
the 1859 treaty as void, with Belize returning
to the status quo ante.
Since 1945, the Arevalo administration has
continued to press the Guatemalan claim. A
statement of Guatemalan sovereignty was in-
cluded as a basic provision of the 1945 con-
stitution. All natives of Belize have been de-
clared Guatemalan citizens; objections have
been raised to all British plans involving
Belize (such as the proposed inclusion of the
colony in a Caribbean federation and plans
for colonization by West Indians) ; anti-British
demonstrations have been held, and Guate-
malan propaganda has been disseminated in
Belize. In the UN meetings, at the Rio Con-
ference, the Bogota Conference, and wherever
possible, Guatemala has reasserted its claim.
Yet although Britain offered, in 1946, to sub-
mit the dispute to the International Court of
Justice, Guatemala has refused to do so un-
less Britain agrees to allow the court to de-
cide the case ex aequo et bono,* rather than
by the strict application of legal principles.
* Ex aequo et bono may be defined as a basis of
judicial procedure by which a dispute is settled ac-
cording to "principles of objective justice." A de-
cision reached in this manner would not necessarily
coincide with one based on rules of positive law.
Cf. Max Habicht, The Power of the International
Judge to Give a Decision "Ex Aequo Et Bona" Lon-
don, Constable and Co. Ltd. 1935, especially Chapter
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Guatemala's demand that the case be de-
cided ex aequo et bono betrays an anxiety that
the court might find little legal basis for a
claim based upon the principle of territorial
succession, or that it might find (in the treaty
of 1859 and elsewhere) clear recognition by
the signatories of a pre-existing British sov-
ereignty, or that it might even declare the
1859 treaty still valid and render a judgment
whereby Britain might be able to retain pos-
session of Belize. Guatemala sees a possi-
bility of arguing that Guatemala, as a small
and weak country, was forced into alienating
a portion of its territory against its will, and
that Britain, as a strong and powerful coun-
try, was able to ignore Guatemalan protests
while continuing its occupation of Belize. In
brief, Guatemala hopes to show that the legal
language, and the terms of the early treaties
were concessions necessary for the existence
and recognition of a small nation in the nine-
teenth century, but are incompatible .with the
rights of small nations as recognized in the
world today. Britain, on the contrary, con-
tends that the case is not an appropriate one
for ex aequo et bono determination, since
Guatemala's claim is one of legal title which
should, therefore, be resolved in accordance
with legal principles.
Incidental to the Anglo-Guatemalan dispute
over Belize is the problem of Mexican claims
which might be advanced if and when Britain
makes any concessions in this matter. On the
same basis as Guatemala, Mexico could also
claim a portion of British Honduras?that
portion north of the Sibun River which was
theoretically administered by the Captaincy-
General of Yucatan. Such a claim would con-
flict with the boundary between Mexico and
Guatemala established in 1882, which was de-
fined as extending "indefinitely toward the
east" along parallel 17?49'. However, by the
Treaty of 1893, Mexico clearly recognized
British sovereignty over Belize as well as the
present boundary of the colony, and has
evinced no desire to side with Guatemala in
the latter's disputes. On the contrary, Guate-
malan pretensions of title to the northern por-
tion of Belize have aroused much resentment
in Mexico and have constituted a continual
source of friction between the two countries.
The single objective of regaining Belize ac-
counts, in large part, for Guatemala's sym-
pathy with anti-British, "anti-imperialist"
countries. To gain international support,
Guatemala has attempted to consolidate an
anti-imperialist bloc composed of nations with
anti-British territorial claims (Argentina,
Chile, and Venezuela) and to gain hemispheric
support for a policy of eliminating "colonial-
ism" from America. A Guatemalan resolu-
tion to this effect was adopted at the Bogota
Conference over the opposition of only the
United States, Brazil, and the Dominican Re-
public, and led to the formation of an Ameri-
can Committee on Dependent Territories. The
unwillingness of the United States to partici-
pate in the meetings of this committee, which
Guatemala regards as a blow to Hemisphere
cooperation, emphasizes the conflict of inter-
ests between the two countries. This con-
flict has led Guatemala to attempt embar-
rassment of the United States, with the pos-
sible object of bargaining for US support. For
example, Guatemala has insisted that the
concept of "colonialism," as defined at Bogota,
be extended beyond its stated meaning to
cover US rule in Puerto Rico, thereby hoping
to make the status of this territory subject to
international review in accordance with the
Bogota resolution. Such a major test of the
inter-American system would challenge US
leadership and sincerity in the system which
it has consistently advocated.
b. Encouragement of Sympathetic Govern-
ments.
Current Guatemalan foreign policy involves
the support of liberal "democratic" elements
in neighboring countries and opposition to
"dictatorships" such as those of Somoza in
Nicaragua and Trujillo in the Dominican Re-
public. Apart from political expediency, this
policy is founded upon the belief of President
Arevalo and other liberal Guatemalans that
Guatemala, since the revolution of 1944, is a
symbol of democracy in Central America, and
has a moral obligation to assume the leader-
ship in an international struggle for social,
economic, and intellectual freedom. It is a
policy which complements the general provi-
sion of the 1945 constitution that Guatemala
"will endeavor to reestablish Central Amen-
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can union, partially or completely, in a popu-
lar and democratic form."
In implementing its policy, Guatemala has
broken off diplomatic relations with the mili-
tary dictator governments of Spain, the Do-
minican Republic, Nicaragua, Peru, and Vene-
zuela, and has given refuge and employment
to political exiles from these countries. It
materially aided the movement, led by Figue-
res, which prevented Rafael Calderon Guardia
(defeated candidate in the 1948 presidential
elections and political ally of Somoza) from
seizing the presidency of Costa Rica by force.
It has given encouragement, refuge, and some
material assistance to the members of the
Caribbean Legion, who aided the Figueres
movement and who are dedicated to the over-
throw of Somoza and Trujillo. It has also
encouraged other Nicaraguan revolutionary
factions led by General Chamorro and Edel-
berto Torres, and during the presidency of
Castafleda Castro in El Salvador, gave sanc-
tuary to various liberals who became involved
in the revolt of December 1948. Since 1948,
it has given sanctuary to others (including
Communists) who have been exiled by the
present Salvadoran regime. Indirectly, the
Guatemalan Government appears to have
aided the leftist labor movement in El Salva-
dor and, to a lesser extent, in Honduras.
In contrast to the severance of relations
with the "dictator" countries, Guatemala has
maintained close relations with "democratic"
Cuba, and has persisted in its recognition of
the Spanish Republican government-in-exile.
c. US Relations.
It has long been a fundamental, but unwrit-
ten, tenet of Guatemala's foreign policy that
cordial relations be maintained with the
United States Government. Anti-US senti-
ments, which may exist within the administra-
tion, are generally expressed unofficially, for
most Guatemalans recognize that their coun-
try is almost totally dependent upon trade
with the United States and is the beneficiary,
actual or potential, of the United States' de-
sire to defend the peoples and institutions of
the Western Hemisphere. In this connection,
President Arevalo has specifically stated that
Guatemala is bound to the US in event of a
war between this country and Soviet Russia,
and has also indicated that Guatemala's re-
sources will be made available to the US in
such event.
In general, the Guatemalan Government
and the Guatemalan people have looked to the
US for technical and financial assistance, and
will probably continue to do so. At the end
of 1949, there were active in Guatemala twelve
official and semi-official groups representing
US agencies or international organizations to
which the US contributes. These included:
the US Air Force Mission; the US Army Mis-
sion; the Foreign Agricultural Relations group
active in the cooperative agricultural station;
the Department of Agriculture group active
in rubber investigations; the US Public Roads
Administration group involved in the Pan
American Highway project; the health and
sanitation group from the Institute of Inter-
American Affairs; the education group from
the Institute of Inter-American Affairs; the
cultural relations group active in the Instituto
Guatemalteco-Americano; the group repre-
senting the Pan American Sanitary Bureau;
the group representing the Inter-American
Geodetic Survey; "The American School"
group of the Inter-American School Service;
and the consultant to the Guatemalan Na-
tional Office of Vital Statistics provided by the
US Public Health Service through the Inter-
national Vital Statistics Cooperative Program.
In general, US-Guatemalan relations (both of-
ficial and unofficial) in connection with these
projects have been satisfactory, although an
anti-US, Communist-influenced, minority has
in some cases (e.g., the IIAA educational
program) sought to obstruct the cooperative
effort.
Despite the evidence of fundamental good
will between Guatemala and the US, the Are-
valo government's tolerance of strongly na-
tionalistic and anti-imperialistic propaganda
(often derived from Communist sources) and
its discriminatory legislation and arbitrary
judgments against US firms operating in
Guatemala have been injurious to good rela-
tions between the two countries. In interna-
tional affairs?particularly where the Belize
issue or the principles thereof are involved?
Guatemala has also opposed the US at times.
However, this does not imply that Guatemala
is generally opposed to US foreign policy.
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CHAPTER V
MILITARY SITUATION
1. Genesis of the Present Military Policies.
The military organization of Guatemala is
maintained in accordance with the needs of a
small underdeveloped country with weak
neighbors. Its military capabilities are suf-
ficient for the maintenance of internal order
(generally as the agent for a certain political
faction) , for defense against attack by the
armed forces of a neighboring Central Ameri-
can country, and for limited offensive opera-
tions against these same nations. Apart from
its strictly military function, it is important
as a respected agency through which an in-
dividual may achieve social, economic, and
political advancement. The army does, in
fact, offer opportunity to all classes. The
Escuela Politecnica offers a classical educa-
tion in military science to members of the cul-
tured upper class of largely European descent;
advancement within the ranks is a traditional
opportunity for capable soldiers of middle-
class mestizo background; and men from the
illiterate Indian lower classes, drafted under
the universal military service law, may achieve
some limited advantages as a result of the ex-
perience in the army.
Guatemalan history substantiates the im-
portance of the army as an agency for per-
sonal advancement: military Dictator-Presi-
dents have ranged from Carrera, an illiterate
provincial leader of predominantly Indian
descent, to Ubico, a cultured upper class
Guatemalan of Castillian ancestry. Under
Arevalo, the two most influential leaders were
the late Colonel Arana, a competent and per-
severing mestizo officer who had risen from
the ranks, and Lieutenant Colonel Arbenz, a
brilliant, cultured, graduate of the Military
Academy of upper-class European ancestry.
Guatemalans have never seen combat serv-
ice except against domestic revolutionaries or
the forces of neighboring Central American
countries. During the early years of inde-
pendence, hastily recruited armies represent-
ing either conservatives or liberals took part
in the factional strife existing within the Cen-
tral American Federation. During the nine-
teenth century, under the dictators Carrera
and Barrios, Guatemalan armies actively in-
tervened in the affairs of other Central Amer-
ican states. In the twentieth century, Guate-
mala has not been actively involved in an in-
ternational war, but has, at times, aided revo-
lutionists plotting the overthrow of govern-
ments in neighboring countries. Although it
must be prepared, in theory, to defend Guate-
mala from invasion and to take possible ag-
gressive or retaliatory action, its actual role
remains limited largely to the maintenance
of internal order and the support of individu-
als or factions seeking political advancement.
2. The Current Military Situation.
The Armed Forces of Guatemala consist of
the army, which includes the air force. There
are no naval forces. The National Police, or
Guardia Civil, is a separate quasi-military or-
ganization whose officers have often had army
training, but whose duties are normally lim-
ited to police functions, whose funds are pro-
vided by the Ministry of Government and
whose Director is in no way responsible to the
Ministry of Defense or the Chief of the Armed
Forces.
Although poor by most standards, the
Guatemalan Army is superior to that of any
other Central American republic. As organ-
ized and equipped at the present time, it is
adequate to defend the republic against Hon-
duras or El Salvador and to maintain internal
stability. However, it would be unable to
withstand an attack from Mexico or contribute
to Hemisphere defense at home or abroad.
The army would be incapable of sustained
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operations because all arms, ammunition, and
mechanized equipment have to be imported
and because Guatemala does not possess the
industrial potentialities that would permit de-
velopment of an arms industry. Weapons
are generally old, of various manufacture, and
in only fair condition.
The Guatemalan Army is in the process of
reorganization. To date the 1st Infantry Reg-
iment (Guard of Honor) and the 2d Infantry
Regiment (Military Base) , in the immediate
vicinity of the capital, have been reorganized.
These units represent the greatest concentra-
tion of men and equipment in the Guatemalan
Army and their continued loyalty is neces-
sary for a stable government. Each of these
regiments has approximately 800 officers and
men and includes a Headquarters, Headquar-
ters and Service Battery, a Rifle Battalion, a
Tank Company, a Howitzer Battery, an Anti-
tank Platoon, and an Antiaircraft Automatic
Weapons Battery. It is planned to organize
similar regiments in each of the six military
zones outside the capital with the exception
of the fourth zone which will have a rein-
forced cavalry squadron. At the present time
the troops outside the capital are widely dis-
persed in small detachments in accordance
with the army's function of internal policing.
This dispersal, however, coupled with poor
transportation, prevents the unification of
troops under any one individual for revolu-
tionary purposes. For these reasons it is
doubted that reorganization of units in zones
outside the capital will conform in great de-
tail to the 1st and 2d regiments.
The present strength of the Guatemalan
Army is estimated at 5,980 men, of which ap-
proximately 4,200 are conscripts. There is no
organized reserve system, though in theory
records are kept of those eligible for military
service and those who have served, who could
be called in time of war. No mobilization
plans exist, with the exception of the theoreti-
cal system of records just mentioned, but the
mobilization capacity of the army is estimated
at 14,000 on M plus 90, and 25,000 on M plus
180, and 35,000 on M plus 365. At present,
only part of these men could be equipped with
serviceable small arms.
Officers are either graduates of the Military
Academy or have worked their way up from
the ranks. The Military Academy (the
Escuela Politecnica), which is under the su-
pervision of the Army General Staff, subjects
the officer candidates to rigid physical, mental,
and moral requirements. The student body
consists of about 110 cadets and the curricu-
lum approximates that of the last two years
of high school and the first year of college.
The School of Application, for advanced train-
ing, conducts two yearly classes for about 50
officers and is under the supervision of the
Chief of the United States Army Mission.
The Guatemalan Air Force is part of the
army, its main purpose being the support of
ground operations through transport of
troops and supplies. The present government
has not attempted to build up a particularly
strong or modern air force, and has concen-
trated on pilot training (particularly for
transport work) , routine duty and mainte-
nance operations, and (in the last year) on
paratroop training. In number of personnel,
the Guatemalan Air Force exceeds those of
other Central American countries, but in mod-
ern equipment it is inferior to neighboring
Honduras. Its offensive power is currently
very limited because the potential of the strik-
ing force (as of 30 March 1950) is limited to
the capabilities of the following aircraft:
Fighters
4P-26 4
Transports
3 C-47 }
1 UC-78 5
1 C-45
Trainers
2 BT-15
IT-6
4 T-11
8 T-19
5 T-14
2 T-17
6 T-23
34
Total 43
Moreover, with the exception of the train-
ing received by seven of the pilots in the United
States, there has been no effective training in
bombing or gunnery of any kind.
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In an attempt to remove the army from the
personal control of the President, as was the
case under Ubico, and make it non-political in
character, the Constitution of 1945 established
a system of checks and balances for the selec-
tion of military leaders. The President of the
Republic remains Commander in Chief of the
Armed Forces. However, the Chief of the
Armed Forces, who exercises the actual tacti-
cal and administrative control, is appointed by
the National Congress from three names sub-
mitted by the Supreme War Council for a
period of six years and can be removed only
by Congress. His direct control of the army
ground units through the seven zone com-
manders and the air force through the Chief of
the Air Force, all his appointees, makes him
the most powerful figure in the military estab-
lishment. The Minister of National Defense
is appointed by the President, and, except for
his control of army finances, is relegated to a
position secondary to that of the Chief of the
Armed Forces, although his is not specifically
designated as subordinate. The Chief of the
General Staff performs administrative func-
tions for the Chief of the Armed Forces and
the Minister of National Defense, but does not
have control over troops.
Compared to certain other Central American
countries, notably Nicaragua and the Domini-
can Republic, Guatemala has devoted a rela-
tively small portion of the national budget to
military expenditures. The 1948-49 appro-
priation for the Ministry of National Defense
approximated $5,000,000, or 10 percent of the
total budget.
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CHAPTER VI
STRATEGIC CONSIDERATIONS AFFECTING US SECURITY
In terms of its own resources and manpower,
the positive contribution that Guatemala can
make toward US security is slight. Hardwood
timber (largely mahogany) is the only strate-
gic material produced in quantity. Abacd,
also of strategic importance, is now produced
in small but commercially important quanti-
ties as the result of the development program
instituted during the last war, but without
continued US financial and technological as-
sistance, production is unlikely to be increased.
Mineral resources (including oil, lead, and
chromite) are possibly extensive, but have yet
to be developed. In the event of war, Guate-
mala, as in the last conflict, could provide the
United States with the site for a major air
base at Guatemala City. It could not provide
a site for a naval base, however, owing to the
absence of good harbor facilities (although
Puerto Barrios with its dock, its United Fruit
Company installations, and its railway shops
would have some strategic significance as a
port where minor repairs might be effected
and supplies obtained) . The International
Railway, though of possible value as a trans-
isthmian route in event of the destruction of
the Panama Canal, is a narrow gauge (36")
line of limited capacity, easily sabotaged, and
has only open roadsteads as Pacific termini.
Guatemala could contribute some of the food
required by major army installations in Pan-
ama or elsewhere as it did during the last war,
but could not, on its own resources, support a
strong occupation force. Guatemala's army,
numbering about 6,000 officers and men, is
poorly trained and badly equipped. Even with
the aid of US equipment and instruction it
could be converted into a modern fighting
force only with great difficulty and after a con-
siderable period of training. Guatemala's re-
serve military manpower, though numerically
great by Central American standards, is of ex-
tremely low quality. It could not be used to
supplement US manpower requirements, and
is of questionable value even to Guatemala for
defense against the forces of a neighboring
country.
Guatemala could endanger US security,
however, were it to give refuge or aid to enemy
saboteurs and propagandists, or were it to al-
low use of its airfields, ports, and other facili-
ties and resources by an enemy power. At the
present time, under the liberal Arevalo ad-
ministration, enemy propagandists and poten-
tial saboteurs may exist in Guatemala, though
in event of war it is believed that these would
be effectively controlled (see Chapter II) .
However, since Guatemala would be incapable
of defending itself or denying use of its mili-
tary facilities in event of a strong attack by a
strong enemy, it is conceivable that, in the
absence of effective US protection, it could be-
come a base for enemy attacks on the Panama
Canal or other strategic objectives in the area.
This is unlikely since there are no existing
military facilities of consequence and because
there are other more suitable (or more easily
obtainable) sites for bases. Nevertheless, de-
nial of Guatemalan facilities and resources
to an enemy power is primarily a responsibility
of the US. Moreover, the existence of
a friendly and stable government in Guate-
mala?one willing and capable of limiting
anti-US propaganda, sabotage, and espio-
nage?is largely dependent upon a sound na-
tional economy, and US economic aid to
Guatemala in event of a general war would
contribute materially to the existence of a
stable and friendly government.
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CHAPTER VII
PROBABLE FUTURE DEVELOPMENTS
1. Political.
Although it is more probable than not that
President Arevalo will complete his term in
office, which expires in March 1951, the presi-
dential elections scheduled for late 1950 may
be accompanied by bitter factional disputes
which may involve violence of unprecedented
severity. The possibility of violence has been
greatly increased as the result of the assas-
sination of Colonel Francisco J. Arana on 18
July 1949, since this deprived the more moder-
ate supporters of the present administration
of a potential candidate who might also have
been acceptable to a certain portion of the con-
servative opposition. Because Arana had con-
sistently refused to lead a conservative revolt
against Arevalo and staunchly defended the
principal of legal election to office, his murder
will be used by the conservative opposition as
an argument that truly democratic processes
are impossible in Guatemala as long as the
present administration is in power. Con-
vinced that they will be denied fair elections,
the conservative opposition, aided by adminis-
tration moderates, will possibly concentrate
their efforts upon perfecting an organization
capable of seizing the government through a
coup d'etat, or controlling the elections
through force. Moreover, President Arevalo,
Lieutenant Colonel Arbenz, and other political
leaders will be in danger of assassination by
persons desirous of avenging the murder of
Colonel Arana.
The possibility that violence, if it occurs,
will be of unprecedented severity is a result
of the development, during the Arevalo ad-
ministration, of a strong, organized, and po-
tentially militant labor movement. This
movement has been fostered and armed by ad-
ministration leftists and opportunists, and
has been infiltrated by Communists or Com-
munist sympathizers. It provides, for the first
time, a force which can be used in opposition
to the traditionally conservative army, whose
leaders are largely drawn from the upper
strata of Guatemalan society. Although it is
unlikely that the armed proletariat, even with
the aid of the National Police, could effectively
prevent a coup d'etat backed by the army (un-
less the army were divided within itself) , it is
capable of strong opposition to the army and
(particularly in rural areas) a good deal of
violent, indiscriminate aggression and ter-
rorism.
President Arevalo is probably desirous of
completing his legal term of office without inci-
dent, and he undoubtedly would prefer to re-
main aloof from the current presidential cam-
paign. This should lead him to pursue a rela-
tively moderate course, to delay or circumvent
decisions on controversial matters, and to
avoid giving offense or support to competing
factions. Such a trend has been noticeable
since the Arana assassination, and may be
expected to continue during the coming year.
The character of the next administration
will depend upon the personal policies and
objectives of the next President, even as the
character of the present administration has
reflected Arevalo's personal philosophy of the
"polystructural state" in which a balance is
sought between various semi-autonomous so-
cial institutions (see p. 5) .
At the present time, Lt. Col. Jacobo Arbenz
Guzman, candidate of the PAR (Partido Ac-
cion Revolucionaria), the PRN (Partido Reno-
vacion Nacional), and the newly formed PIN
(Partido de Integridad Nacional), is in a far
stronger position than any of the other candi-
dates (Dr. Victor M. Giordani, Lic. Jorge Gar-
cia Granados, Gen. Miguel Ydigoras Fuentes) .
Arbenz is a ruthless opportunistic, ambitious
army officer. While Minister of Defense, he
helped to arm and strengthen the militant
leftist labor organizations, possibly as a means
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of strengthening his own hand vis-?is the
popular Colonel Arana, who enjoyed wide army
support. Moreover, since Arana's assassina-
tion, he has gained effective army support by
arranging the removal of some officers and the
financial rewarding of others. If elected, it is
likely that Arbenz will establish an adminis-
tration (more conventional by Central Ameri-
can standards) in which graft, privilege, and
arbitrary repressive measures are used to a
greater degree than at present. In view of
his background and his private remarks (both
official and otherwise) , Arbenz appears to be
willing to grant favorable terms to business at
the expense of labor. He has indicated that
he is favorably disposed toward US interests in
Guatemala, and, despite the anti-imperialism
of his present campaign supporters, it is be-
lieved that personal characteristics and possi-
ble governmental financial difficulties would
lead him, as President, to welcome foreign in-
vestments and possibly foreign loans. If
elected, he will probably distribute favors for
personal profit, will seek to subvert army and
labor leaders who oppose him, and will take
rigorous action against those whom he cannot
control. In contrast to Arevalo, Arbenz ap-
pears to place a higher value on material than
on social progress, and there is evidence that
he plans, if elected, to initiate various con-
struction projects. It is likely that he will
permit the labor organizations, established un-
der the Arevalo administration, to continue
their activities, and that he will seek to use
labor as a personal political weapon, thereby
establishing himself as an indispensable arbi-
ter between labor, business, the army, and
other factions.
In general, an Arbenz administration would
probably be more conventional and more con-
servative in actual practice than the present
administration. Should he be assassinated, it
is likely that the leftist labor forces now sup-
porting him would be opposed by the army as
well as the popular majority and could neither
seize nor maintain control of the government.
Of Arbenz' opponents, Dr. Victor M. Giordani,
candidate of the moderate leftist FPL (Frente
Popular Libertador) is the strongest competi-
tor for the presidency. The strength of the
FPL in Congress slightly surpasses the com-
bined strength of the pro-Arbenz PAR and
PRN, and should conservative anti-administra-
tion elements add their support to Giordani,
he might be able to win over Arbenz in a fair
election. However, pro-Arbenz groups should
be in a position to control the electoral ma-
chinery. and this control, coupled with the
aggressiveness of the leftists, will go far to
assure an Arbenz victory.
2. Subversive.
It is believed that the tolerant policies of the
Arevalo administration, which have permitted
Communists and Communist sympathizers to
operate within and without the government,
will be continued as long as Arevalo remains
President. The activities of such persons rep-
resent a continuing threat to US security. It
is probable, however, that Communist influ-
ence on Guatemalan government policies, par-
ticularly domestic policies, will diminish in the
future. This estimate is based on the follow-
ing considerations: (1) Since about 1948, there
has been a slight trend away from the left.
Oppositionists have emerged and have won
seats in Congress; the FPL (largest of the
Arevalista parties) has moved away from the
leftist parties; the agrarian reform program
has not advanced, agitation by union organ-
izers among coffee plantation workers has
diminished, the nationalized plantations have
been put under a more business-minded ad-
ministration which has opposed the labor
unions and the Ministry of Labor; the Produc-
tion Development Institute (INFOP) has done
much to promote and finance private agricul-
tural projects; labor problems have been more
easily solved since mid-1949. (2) It is felt
that the moderate and anti-Communist ele-
ment in Guatemala, including the army, is
more adequately led and has greater repre-
sentation and influence in government than
the extreme leftist element associated with the
PAR and the labor unions. (3) The Guate-
malan labor movement is young and poten-
tially weakened by an absence of capable labor
leaders. The effectiveness of the present
leadership, which is strongly influenced by
Communism, is not so much a measure of
labor's coercive power as it is a measure of the
administration's desire to establish a labor
movement. Should a relatively few labor
leaders be removed, their replacement would
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be difficult and the influence of labor (and
Communism) would be considerably dimin-
ished. There would, of course, continue to be
a large number of the working class who would
be receptive to Communist propaganda, but if
not adequately led and not favored by a tol-
erant government, they could exert little in-
fluence. (4) The increasing indebtedness of
the government will favor adoption of a pro-
US policy. The United States has offered
financial and technical assistance to Guate-
mala, and leading Guatemalan officials and
presidential candidates are aware of the ad-
vantages of a pro-US policy. No evidence is
available to indicate that the USSR has offered
comparable benefits to Guatemala, or that the
country, the government, or high officials of
the government would benefit materially from
a pro-Communist, pro-USSR policy. (5)
Whereas Arevalo's political idealism has led
him to establish an administration that per-
mits the freedom of expression enjoyed by the
Communists, there is no evidence to suggest
that his successor is imbued with a similar
idealism. It is likely that all the presidential
candidates are less idealistic and more mate-
rialistic (or "practical") than Arevalo.
3. Economic.
In view of prospects for a continued world
coffee shortage, which would assure the sale,
at advantageous prices, of Guatemala's pri-
mary export, and in view of a continued de-
mand for Guatemalan bananas, Guatemala's
economic situation should remain favorable.
The development of Guatemalan oil resources
in the near future is not indicated.
4. Foreign Affairs.
In event of a third world war, Guatemala
may be expected to support the US, provided
its economic security would not be endangered.
In the immediate future, a slightly more con-
ciliatory attitude toward the US may be ex-
pected to result from the replacement of the
leftist Munoz Meany by moderate Gonzalez
Arevalo as Foreign Minister. There is no in-
dication, however, that the government's an-
tagonistic attitude toward US business inter-
ests will be abandoned, although it may be
modified somewhat. Concentration on the
presidential campaign may cause Guatemalan
aid to foregn "democratic" revolutionary
groups to diminish, but expressions of sym-
pathy with "democratic" governments and
political factions will continue. Guatemala's
claim to Belize, supported by conservatives and
liberals alike, will continue to be advanced.
5. Military.
The growth of a militant labor movement in
Guatemala will, it is estimated, force the army
to assume a more active role in political af-
fairs?to the advantage of the conservative
factions. Although some efforts may be made
under Major Paz Tejada to improve army
equipment and training, no great change is to
be expected in the capabilities or functions of
the armed forces.
6. Strategic Considerations Affecting US Se-
curity.
Pending the development of possible oil re-
serves at some time in the unforseeable future,
the positive contribution which Guatemala can
make toward US security will continue to be
slight. Its location within the US defense
sphere, however, will continue to make it a
possible location for US or enemy military and
propaganda operations. Because Guatemala
is incapable of defending itself against a strong
enemy, the denial of its facilities and resources
(admittedly limited) to such an enemy is pri-
marily a US responsibility.
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APPENDIX A
IMPORTANT PERSONALITIES
Dr. Juan Jos?revalo Bermejo, President of
the Republic 1945?Born 1904. Educator
and writer, liberal and nationalistic; non-
party.
Lt. Col. Jacobo Arbenz Guzman, Minister of
Defense. 1945-50?Born 1913. Career mili-
tary officer; member of the revolutionary
triumvirate of 1944; ambitious, opportunis-
tic; has tended to favor PAR.
Lic. Mario Monteforte Toledo, President of
Congress 1949?Born 1911. Writer and pol-
itician; liberal, nationalistic, anti-military;
member of FPL.
Maj. Carlos A. Paz Tejada, Chief of the Armed
Forces 1949?Born 1917. Career military
officer; engineer; somewhat conservative;
non-party.
Col. Victor M. Sandoval, Chief of the Civil
Guard. Brother-in-law of President Arev-
alo; non-party, but favors leftists.
Col. Carlos Aldana Sandoval, Minister of Com-
munications and Public Works 1948?Born
1912. Former Chief of Staff of Guatemalan
Army 1944-48; personal friend of Col. Ar-
benz; a presidential possibility.
Victor Manuel Gutierrez, Secretary General,
Con federacion de Trabajadores de Guate-
mala. Labor leader; delegate to interna-
tional leftist labor conferences; radical and
pro-Communist; favors the PAR.
Manuel Pinto Usaga, Deputy, National Con-
gress 1947?Born 1906. Labor leader; mem-
ber Executive Council of the Sindicato de
Accion Y Mejoramiento Ferrocarrilero (rail-
way workers) and of the Comite Politico
Nacional de los Trabajadores. Radical left-
ist; member of PAR.
Jorge Toriello, political exile?Born 1908.
Member revolutionary triumvirate of 1944;
Minister of Finance 1945; conservative busi-
nessman (import-export) ; oppositionist.
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APPENDIX B
TERRAIN AND CLIMATE
Guatemala, with an area of 42,364 square
miles, is the third largest of the Central Ameri-
can republics although its population of
3,500,000 is greater than that of any other
Central American state. The topography of
Guatemala is determined largely by east-west
geologic formations which continue in south-
ern Mexico, British Honduras, El Salvador,
Honduras, and northern Nicaragua, and which
emerge from the Caribbean in Cuba, Jamaica,
Hispaniola, and Puerto Rico. Within Guate-
mala, these formations serve to divide the
country into four distinct topographic regions:
the Northern Lowlands; the Caribbean Low-
lands; the Highlands; and the Pacific Low-
lands. Altitude is the most important factor
determining climate. The lowlands are hot,
with very heavy rainfall (80-100 in. or more)
and are characterized by tropical forest or
savanna-type vegetation. The highlands are
temperate or cool with somewhat lesser rain-
fall (40-80 in.) and temperate forest or grass-
land vegetation. Throughout the country,
rainfall is concentrated in the summer
months. Between the lowlands and high-
lands are regions of transitional climate and
vegetation, and in many parts of the country
local differences in topography cause extreme
local climatic variations.
1. The Northern Lowlands.
The Northern Lowlands lie in the Depart-
ment of Peten, and largely belong to the low
limestone plateau of Yucatan. The greater
part of Peten is less than 800 feet above sea
level. However, in the southeast, the Poctun
Plateau rises to an altitude of over 1500 feet.
Although there are low east-west ranges of hills
in the north of Peten, surface drainage in this
area is poor and is provided chiefly by inter-
mittent streams that flow only during the
rainy season. In many places, lakes and
swamps occupy the shallow troughs between
the hills. Except for a few stretches of savan-
na, and areas of pines around Poctun, almost
the entire area is covered by a dense
tropical forest, which provides the basis for
the chief economic activities?chicle gather-
ing and mahogany lumbering?although scat-
tered patches of shifting agriculture are to be
found within the forest area. The Northern
Lowlands are virtually inaccessible due to ab-
sence of roads and navigable rivers. Mahog-
any logs must be floated down rivers at flood
time and exported through British Honduras,
and chicle is taken out mainly by air, from
Flores on Lake Peten.
2. The Caribbean Lowlands.
The Northern Lowlands of Peten merge, to
the southeast, with the Caribbean Lowlands of
the Departments of Alta Verapaz and Izabal.
These are coastal lowlands, easily accessible
from the sea, and extend inland along the
structural valleys between low mountain
ranges that form eastward extensions of the
Highlands. The most important navigable
waterway of Guatemala, and the only one
which gives access to the interior of the coun-
try, is formed by the Rio Dulce, Lake Izabal,
and the Rio Polochic, all of which lie within
one of these valleys. The lowlands also ex-
tend up the valley of the Sarstun River (which
forms the southern boundary of British Hon-
duras) and that of the Montagua River
(which, at its mouth, marks the Guatemalan-
Honduran boundary). Climatically, the
Caribbean Lowland is similar to the Northern
Lowland, but is far more accessible for eco-
nomic exploitation. Mahogany lumbering and
chicle gathering are the chief forest industries,
and the extensive Atlantic coast banana plan-
tations of the United Fruit Company are found
in the lower Montagua valley. Both the
Northern and Caribbean Lowlands are sparsely
populated, and although they represent some
46 percent of the total area of Guatemala, they
support only 3 percent of the total population.
SECRET 51
Declassified in Part -Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05 : CIA-RDP78-01617A001700030001-9
52 SECRET
3. The Highlands.
The Highlands comprise about 48 percent
of the total area of Guatemala, support about
90 percent of the total population, and include
most of the southern and western portions of
the country. Elevations of over 10,000 feet are
found in the southern highlands near the Pa-
cific, where a series of volcanic peaks dominate
the landscape, and in the high Cuchumatanes
Mountains of the northwest. In the southern
highlands, the underlying east-west structural
characteristics of the mountains tend to be
buried beneath deep layers of volcanic ash and
lava, which form irregular intermontane
basins between the volcanic cones, some of
which are still active. It is in these basins,
which are from 5,000 to 8,000 feet in altitude,
that the greatest concentrations of population
exist. North and east of the volcanic region,
the covering layer of lava and ash thins out,
revealing more rugged and less habitable high-
land areas. Further east, toward the Carib-
bean, the highlands extend as a series of ranges
diminishing from 5,000 to 1,500 feet in alti-
tude. These include the Coban Hills, the Si-
erra de Santa Cruz, the Sierra de las Minas,
and the Montana del Mico. Across the isth-
mus, on the Pacific side, the highlands drop
off sharply to the Pacific coastal lowlands.
In general, areas of productive land within
the highlands are small and scattered, but
where they exist they support a large popula-
tion. The most extensive areas of good land
are located near the departmental capitals of
San Marcos, Huehuetenango, Solola, and
Quiche, in the Samala and tributary valleys
near Quetzaltenango, and in the Chimalte-
nango-Tecpan-Patzan triangle between Gua-
temala City and Lake Atitlan. Agriculture in
the highlands between 5,000 and 10,000 feet is
carried on, for the most part, by small farmers
who raise maize, beans, wheat, and other food
crops for the domestic market. Much of the
poorer and fallow land is given over to grazing,
and in the high cold regions above 10,000 feet
(the param6) the land is used for little else,
though some subsistence agriculture is possi-
ble. Below 5,000 feet and down to about 1,500
feet there are temperate areas with a monsoon
climate particularly suited for the cultivation
of coffee, cacao, sugar cane, rice, citrus fruits,
and other crops. Most of Guatemala's coffee
crop is produced in the piedmont that parallels
the Pacific coast, where the volcanic soils are
highly productive, but a portion is grown on
the eastern side of the highlands, in the Coban
Hill region.
In general, the highlands of Guatemala re-
ceive plenty of rain and are covered with for-
ests, except in the densely populated areas
where the land has been cleared. Broadleaf
forests in which oaks are predominant occur
generally throughout the highlands, except in
the highest altitudes where pines are the chief
species. In some areas, low rainfall and rapid
drainage make forest growth impossible.
Such areas are commonly occupied by savan-
nas, but the middle part of the Montagua Val-
ley, northeast of Guatemala City, is so dry
that only xerophytic plants can survive.
4. The Pacific Lowlands.
The Pacific Lowlands occupy a narrow
coastal plain, 320 feet or less above sea level
and 10 to 25 miles wide, between the southern
border of the highlands and the Pacific Ocean.
This plain constitutes about 7 percent of the
total area of the country, and supports about
7 percent of the total population. Except for
the extensive banana plantations near Tequi-
sate, it is relatively underdeveloped agricul-
turally, and tropical forests occupy large areas
of fertile soil suitable for agriculture. The in-
land part of the region adjoining the piedmont
is potentially one of the most productive areas
of the entire country, but land near the coast
is swampy and poor in forest and bush cover.
Grassland areas within the plain provide pas-
turage for range cattle.
The Pacific Lowlands have a tropical climate
with an average rainfall averaging over 80
inches except at the northwestern and south-
eastern extremities of the plain and imme-
diately adjacent to the coast. Here the 40
inches of rain that fall annually are inade-
quate for the production of bananas and sugar
cane, but will support quick-maturing sub-
sistence crops.
SECRET
, Declassified in Part- Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05 : CIA-RDP78-01617A001700030001-9
1556
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11556 Map Division, CIA, 7-50
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
CIA Reproduction
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
115
18
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11557 Mao [Aviv.. CIA. 7.50
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
11558
BERGR1S
CAY
I.
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Plantation Aviailture: Coffee
Plantation Agriculture: Bananas
Cattle Ranching
Sorest Products
Subsistence Fanning
,m;rs, boons, and spuirAl
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A Chief Clwondte MiNnt Are.
? Chief Lead Mining Area
173 National Petroleum Reserve
(A rip Olan wide adjacent rain land
and sr hcrrs s also inclurd)
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SAN SALVADOR* 4_19
Scale 12.230900
10 10 39 40 *)
MILES
9 10 20 30 40 ;0
KILOMETERS
11558 Rep ONision. OA, 7'0
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
; Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
DOOUnent NO.
NO CHANGE in Class.
X- DECLASSIFIED
, J
, ass. CHANGED TO: TS S C
DDA nemo, 4 Apr 77
Auth: DDA REG. 77/1763
Date By
BY: OjE?,;k
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9
Atoirlitetikert.,?
GPO-State Serv.-50---5319
Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9