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July 27, 1950
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Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9 ici:Lt.J.11.11X FOR THCEOCPYHINEOF,2C1.6A?LIBRARY 0??raterri--- GUATEMALA Document EO. IO CHL.:ICt DZ.CLA S ; TS SR-46 , Ln" 77 Pubished 27 July 1950,tatliz ' By; Pate CENTRAL INTELLIGENCE AGENCY ARCHIVAL RECORD PLEASE REI'LliiN TO ,AGLITCY ARCIIIVNS, a apreelefil* ,=raj,,_QTAT 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 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. 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 mairiosperr DISSEMINATION NOTICE 1. This copy of this publication is for the information and use of the recipient designated on the front cover and of individuals under the jurisdiction of the recipient's office who require the information for the performance of their official duties. Further dissemination elsewhere in the department to other offices which require the informa- tion for the performance of official duties may be authorized by the following: a. Special Assistant to the Secretary of State for Research and Intelligence, for the Department of State b. Director of Intelligence, GS, USA, for the Department of the Army c. Chief, Naval Intelligence, for the Department of the Navy d. Director of Intelligence, USAF, for the Department of the Air Force e. Director of Security and Intelligence, AEC, for the Atomic Energy Com- mission f. Deputy Director for Intelligence, Joint Staff, for the Joint Staff g. Assistant Director for Collection and Dissemination, CIA, for any other Department or Agency 2. This copy may be either retained or destroyed by burning in accordance with applicable security regulations, or returned to the Central Intelligence Agency by arrangement with the Office of Collection and Dissemination, CIA. DISTRIBUTION: Office of the President National Security Council National Security Resources Board Department of State Office of Secretary of Defense Department of the Army Department of the Navy Department of the Air Force Joint Chiefs of Staff Atomic Energy Commission Research and Development Board golierriT 0 o GIOVZnt 110 VO in Clas s. ZCLA.S5111ED 5S . TO i TS V Vi.srao, 4 Apr 71 77 17* c_t 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 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 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 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 eSZSJI,Xp-lh, 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 ? 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. p.piamiref 1 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 2 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. 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 ? ? ? SECRET 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 SECRET 3 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 4 SECRET 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 SECRET Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9 I Declassified in Part - Sanitized Copy Approved for Release 2013/02/05: CIA-RDP78-01617A001700030001-9 ? ? SECRET 5 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 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 6 SECRET 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- 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 ? ? 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- 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-RDP78-01617A00100030001-9 8 SECRET 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. 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 SECRET 9 ? 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 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 10 SECRET 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 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 SECRET 11 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- 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 12 SECRET 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 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 ? SECRET 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. 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 ? ? SECRET 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 SECRET . 15 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 16 SECRET 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 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 SECRET 17 ? ? ? 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. 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 ? ? SECRET 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 SECRET 19 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 20 SECRET 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 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 ? ? ? SECRET 21 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 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 22 SECRET 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 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 ? ? ? SECRET 23 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 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 24 SECRET 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 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 ? SECRET 25 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 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 26 SECRET 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- 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 ? SECRET 27 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: 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 28 Class SECRET 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 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 ? SECRET 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, 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 30 SECRET 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. 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 ? ? SECRET 31 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 30,060 404,439 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 32 SECRET (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. 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 ? SECRET 33 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. 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 SECRET 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. SECRET 35 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 36 SECRET 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 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 ? SECRET 37 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- 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 38 SECRET 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. 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 SECRET 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 SECRET 39 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 40 SECRET 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. 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 ? ? SECRET 41 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. 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 ? ? SECRET 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. SECRET 43 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 ? ? ? SECRET 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 SECRET 45 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 46 SECRET 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 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 ? ? ? SECRET 47 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. 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 SECRET ? ? ? 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. SECRET 49 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 ? ? SECRET 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 GUATEMALA-BRITISH HONDURAS TRANSPORTATION PAN-AMERICAN HIGHWAY OTHER ROAD 90 89 ,.. ., Santa El u.a Chetumal .1. 0 0 . .?..... ? ' Paved X C 0 Corozal ) An Weather -- -- Dry Weather Projected or Under Construction ' ' ? ? ? a? afre \ VVV I Standard Gauge Railroad (4,8will Departamento or District Boundary (3,0?) 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R? 4. 1 '4..41' 0 L SALVA\DOR 9 SAN SALVADOR I Quezaitenan0 , HO DURAS Retalhuleu ? . A Tiquisate . '?......_,. TEGUCIGPs\-Y /A, ? . E kALV ? 1..L-,_______K OCEAN ) (sel SALVADOR 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 92 PHYSIOGRAPHIC 91 90 I GUATEMALA I REGIONS Co? ? e i : AMBERGRIS GAY 17 i I NORTHERN II LAGO PEE& 1E2A BRI 1 ' LIZ( to 9,'o ., 1 ,--; r' i IURNEFFE ..., . 1 ISLANDS I ? I / . ? I LIGHTHOUSE' M 16 E X I C 0 :?C..?.U.?T..? ,.e..kjoces L OWL V I ANDS HONDURAS I I I Pocrelm . ? pLATEAu i I iPunta t AO Stann ' o ? I i ?. ? , r , ; ? \ t z. ..,' ?b / ' k x i Gorda . OI FHONDURA.. GPuUertLo I ? r / 1 IGEOVIRS r I REEF I 1 1'.:, S . / \LASMINAS MOUNTAIN COBAN ?Collin HILLS Pro 414116111V? 6 , BFa # 1 Sobs 12.260.000 9 10 20 30 40 r SIERRA De sOl. 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AN 9 EL SALVA 0 s?. 9 DOR HONDURAS re:;x:1 i 1 Plantation Aviailture: Coffee Plantation Agriculture: Bananas Cattle Ranching Sorest Products Subsistence Fanning ,m;rs, boons, and spuirAl r"."""1 Wheat Growing 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) .0 DepeDelaftartamentomerth' Capitol 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