COUNTRY REPORT ON SPAIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A003000010001-6
• Release Decision: RIFPUB
• Original Classification: T
• Document Page Count: 24
• Document Creation Date: December 27, 2016
• Document Release Date: July 31, 2013
• Sequence Number: 1
• Publication Date: July 15, 1947
• Content Type: REPORT

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COUNTRY REPORT ON SPAIN
July 15, 1947
(For Fuhmission to the SIVNCC
Special Ad floc Committee)
-20 27089
Document No. 001
NO CHANGE in Class.
/DECLASSIFIED
Class. CHANGED TO: TS S
DDA Memo, 4 Apr 77
Auth: DDh B,EG. 77/1763
Date: a ? By: Oil
?SECREi
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SPAIN
BACKGROUND
I. ANALYSIS OF THE SITUATION IN SPAIN
(a) Civil War Effects
The dominant factor in the Spanish political situation today is the
civil war of 1936-39. That was the culmination of a long process of social
disintegration and so vastly multiplied pre-existing animosities that Mutual
confidence as between different opposition groups is still almost wholly
lacking. Negotiations between representatives of opposing factions have
taken place over the past two or three years, and are continuing, but there
is as as yet TioLsign that they will come together with a common prograth in
opposition to general Franco.
All classes are obsessed and, for political purposes, virtually para-
lyzed, by the fear of renewed civil war and eventual Communist domination,
which Franco's propaganda has persuasively, although erroneously, presented
as the only alternative to the continuation of his regime.
(b) Economic Conditions
Spain's present economic plight stems from three main sources: ' Cl) the
relativelY slaw progress of industrialization that has characterized that
country during the last century and the presence of too large a proportion
of the population in marginal agricultural occupations; (2) the civil war,
which was extremely costly in losses of the skilled elements of the popula-
tion, in the depletion and destruction of capital equipment and transportation
facilities, and which also led to a considerable retrogression in agriculture;'
and (3) a high rate of population increase. World War II led to a relative
isolation of the counft and retarded economic recovery, although Axis and
Allied purchase's in SPain provided Substantial amounts of foreign exchange.
Shortages of fertilizers and food, coupled with the prevailing inflation,
have resulted in a reduced standard of living, especially among the urban
population., Unsound economic policies, three drought years in an essentially
agricultural country, and corruption in the government-controlled economic
system of the country have also delayed economic recovery.
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While a number of industries are gradually being restored to 1935
levels, the overall economic position remains considerably below the years
immediately preceding the civil war. However, even the attainment of 1935
levels would not spell adequate economic conditions in Spain. 'Spain has
too large a proportion of its population in agriculture and many in this
group subsist iii conditions of extreme poverty. In order to achieve a
higher standard of living, the country must undergo a rapid and substantial
process of modernization and industrialization. Old maChinery must be
replaced,. and new capital equipment obtained for better utilization of the
country's natural resources. Spain could expand such industries as iron
and steels metal refining and fabricating, textiles and feed processing.
Spain itself, however, has not the technical skills to plan or carry out such
a program herself. The present state of the SpaniOh economy does not permit
any sizeable expansion in exports. Spain has practically no reserves of
foreign exchange and only very limited gad holdings. Any significant increase
. in imports would, therefore, have to be achieved with the aid of outside
assistance. -
(c) Strength of Regime
Notwithstanding the inability of the regime to make any progress in
solving the long-range social and economic problems of Spain, and notwith-
standing widespread popular discontent with the regime, it possesses a number
of sources of strength.
Most important of these is the Army, numbering perhaps 500,000 officers
"
Supj4ementing the police and gendarmerie of
and men-in a population of 27,000,000. In-e441ee47-te-Avms-a-pe44ma-AeDoe-
about.40,000 mtn the Army assist in
/fel the maintenance of internal order and possesses such a vested interest in
the regime (the Republican opponents of the regime are committed to drastically
reducing the size of the Army and its _political power) that General Franco
has had little difficulty in keeping its loyalty. Most of the officers favor,
in principle, the restoration of the Monarchy, but are quite ready to follow
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Generali Franco's judgment as to the tithing Of such action.
The Church, which is intimately associated with political and social
life in Spain, supports the existing order in preference to change of any
kind which might lead to the decrease of its favored podition and perhaps to
open persecution.
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The Falange organization is the apparatus for operating the political
sub -divisions of the country and the system of state-directed syndicates,
which control allocations, production, wages, prices, etc., in the Various
branches of industry and agriculture. The greatmajority of members have no
attachment to the political and social theories of Falange., but the sub-
stantial number who benefit materially by their associations with the
organization have a strong vested interest in the continuation of the
status 22.
Those other Spaniards, like the great majority of Monarchists, who sup-
ported the Nationalist cause in the civil war, and yet are nov.opposed to
Franco for one reason or another, nevertheless prefer the continuation of
present conditions, unsatisfactory though they may be, to political. experi-
mentation which they fear will lead to civil strife and perhaps open the
doors to a return to power of the forces which lost the war.
The absence of any concrete alternative to Franco, the fear of renewed
civil strife and general political apathy, combined with the oppressive
techniques of the regime, have enabled Franco to obtain a seeningly impressive
majority in the national referendum held on July 6. .The reSult of this
referendum was to ratify legislation, previously passed by a Subservient
Cortes, which legalizes his position as Chief of State and authorizes him to
name his successor.
(d)_ianas,i..on groups
Opposition groups, including Monarchists, Republicans,
Socialists,
regional movements, and clandestine labor organizations, have been unable '
to organize successfully because of the Government's efficient and ruthless
oppression, and because of their own inability to agree on 'leaders and
policies. The Communist Party is probably the smallest but best organized ?
of the clandestine organizations. Advocating direct and violent action as '
the only way to overthrow France, the Communists are responsible for sporadic
acts of sabotage in Spain and have conducted para-military training among ,
the thousands of Spanish Republican refugees in France.
There are now three separate movements looking tcuard an alternative
regime. Two proposals provide for an interim government to be followed by
a plebiscite in which the people wpuld ,decide whether they wish a Monarchy or
a Republic. The first is a formula ii.Ee/cr d by Don Juan, the Monarchist
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Pretender, in attempting to reach an agreement with all other opposition
elements except the Communists, by which he would take over pager until the
plebiscite had been held. The second, advanced by certain Spanish Army
.officers, provides for government by a Military junta during the, interim
period.
The third movement is that of the Republican Government-in-exile, now
established in France, which claims to be the legal continuation of the
government which fell before Franco in 1939. It would prefer to hold ordinary
elections to the Cortes under the 1931 Constitution, but would probablyaccept
a compromise whereby no other regime than a Republic would be established with-
out first ascertaining the will-of the people.
Agreement among the various opposition groups is impeded by their Mutual
suspicions, but negotiations between them are still in progress. After
agreanent among themselves, they plan a secret- approach to selected army
leaders to obtain military backing.
(e) Stability of Franco Regime
There is little likelihood of Francois ouster in the near future. Tho
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44iiedfrepkezep-ettpfrer-try- For all their economic .troubles, most Spanish people
are convinced by past experience and by Franco's propaganda that a mere chahge
of regime will not better its lot. Above all, there is no sign that the
Army is ready to abandon Franco..
In the long run, particularly as relative stability returns to the
? rest of Western Europe, Franco's responsibility for the international
isolation of Spain and for continued economic stagnation within the country
will probably lead to hisremoval, in their awn interest, by the elements
now giving him active support.
(f) Policies of Other Countries
The importance to Great Britain of its trade, with Spain, and particularly
.British imports of Spanish iron ore, copper, and citrus fruits, as well as the
strategic importance of Spain to British security, have lea the British
Government to accept a continuation of the status auo.
? The French Government, inspired by pressure from the Communist-controlled
labor federation (CGT), closed its frontier with Spain in February 1946 and the
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result was the virtually complete suspension of. trade between the two
countries. Pressure on.the French Government for even more drastic action
against Spain on ideological grounds remains strong.
The USSR, believing that social conditions in Spain. resemble those
which prevailed in pre-revolutionary Russia, regards Spain as fertile ground
for the extension of Marxist doctrine. Soviet resentment against the Blue
Division ("volunteers" sent by Franco to fight alongside Germany on the
Eastern Front), and resentment against the defeat of the forces which the
USSR backed during the civil war has sharpened an anti-Franco policy founded
upon an awareness of Spain's strategic and political importance. From the
Soviet point of view, a Spain amenable to the USSR could promote Soviet
interests by flanking France, Italy, and Great Brit*nts Mediterranean life-
line; it would also offer an approach to the backward peoplesof Morocco and
could serve as a direct and important channel of influence in Latin America.
Despite reports of a rapprcActment between the USSR and Franco, the USSR
continues to conduct a large-sdale campaign against General Franco. In
addition to using its awn propaganda resources, it has mobilized Communist
Parties and "fellow traveler" groups in many parts of the world to bring
pressure on their respective Governments in favor of active measures to effect
the downfall of the Franco regime by the breaking of diplomatic and commercial
' relations between Spain and other countries. In the UN, Soviet-inspired
-pressure for action along these lines has been based on the allegation that
Spain presents a threat to international peace.
' In spite of the ferocity of the USSR campaign against the Franco regime,
there is good reason tobeRieve that the immediate Soviet objective is not
the elimination of Franco but his retention, coupled with the isolation of
I\ Spain from possible sources of foreign aid, until political and economic_con-
ditiona reach the point of revolution.
(g) United Nations
Resolutions of the UN General Assembly have barred Spain under the
Franco regime from membership in the UN and in its subsidiary organizations.
Although inspired by the USSR, this program of increasing isolation of Spain
.has in fact found nide support in most countries, including the United States,
on i/bd logical grounds. The effect in Spain has been, temporarily at least,
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to strengthen Franco, since his propaganda has been able to attribute the
entire affair to Soviet machinations and thus to capitalize on widespread
anti-communist sentiment in Spain. In the long run, the consequences or
this isolation, particularly in the ecenomic field (Spain is not a member
of the International Bank, the International Monetary Fund, the linternatiOnali
Emergency Food Council, the Economic Commission for Europe, etc.) will be
increasingly serious.
II. US OBJECTIVES AND PRESENT POLICY ,flankthglranoe, Italy, Great Britain's
'51-editemanean Wenne as well as U.S. routes to Eastern Mediterranean ,
13ecause of-Spain s strategic geographic positioAtt is important to
US security that the Spanish Government be friendly to our basic interests.
An additional, but incidental, reason for seeking a friendly government
lies in the ease with which Spain's close ties with Latin America can be
exploited by hostile influences to instigate opposition to US policies in
. the other Americpi Republics.
The present Spanish Government wishes to develop close relations with
the US and offers its long-standing anti-Communist record as a credential.
However, close relations have not been developed because of (1) the totali-
tarian and fascist charaCter of the government, (2) its record of close
association With our enemies during the?war, which was to some extent - .
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balanced but not erased by acticn6ore)friendly to our cause, and (3) wide--
spread public hostility to the regime in the US On ideological grounds. .
US policy since the end of the Bar has sought to encourage the develop-
ment in Spain of a government based on the freely expressed will of the
Spanish people. It has been andrlemains US policy to withhold US govern-
mental economic aid in any form; to support the exclusion of Spain from UN
activitiesland to impress upon. the Spaniards that this isolation will -
continue as long as the Franco regime remains in power. They have been
urged, in their own interest, to bring about a change which would form the
basis for closer political and economic relations.
At the same time, the US has been obliged to oppose proposals (largely
inspired by the USSR) for-drastic international action against Spain, in the
belief that such action would lead eventually to renewed civil strife and would
thus make more difficult, if not impossible, the achievement of our objective
in Spain.
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The unavoidable effect of the US opposing drastic international
action against Spain has been, temporarily at least, to strengthen the
Franco regime. However, it mhy be expected that, as the consequences of
the political and economic isolation of Spain becoming more evident,
Francais position will be weakened and change will eventually take place.
III. MEANS OF REACHING OBJECTIVES AFTER POLITICAL BAR IS REMOVED
Sections III, IV and V of. this?paper are based on the premise
of the political bar to the extension of aid by the U.S. 'Government to
Spain having first been removed.
In the case of an acceptable post-Franco Government, the immediate
political aid would be primarily' a morale-builder and'a stabilizing influence
until Spain assumes its rightful position in Western European affairs and
in international organizations, particularly the UN. In the economic
field immediate shipments of critically short raw materials, food, and other
consumption goods will be necessary to tide over the period of study
required before a long-range program can be undertaken. Economic assistance
of a. more fundamental character should be designed to modernize and expand
Spanish industries and to introduce modern agricultural methods. Detailed
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and up-to-date data on these needs are not available. The nature and
size of this aid would therefore Probably have to be determined by a
commission of experts. Such a long-range program appears to be the
only moans of ultimately raising the standard of living in Spain,.
normally one of the two poorest countries in Western Europe.
US assistance of both a political and economic character would be
required because (1) it would meet implied assurancesialready publicly
made by the US Government; and (2) such aid would contribute materially to
political and economic stability in Spain and in the whole of Western Europe.
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e unavoidable effect of the US opposing drastic internationa //aCtion
against Spain has been, temporarily at least, to strengthen the Franco
regime. However, it may be-expected that, as the consequences o the
political and economic isolation of Spain becoming more eviden Francois
position will b weakened and change will eventually take pl
The follauin discussion of aid to Spain is based on the premise of
the political bar t the extension of such aid having first .been removed.
CONSIDERATION 0 LEANS OF REACHING OBJECTIVES
In the case of Spai US assistance should include both political and
economic action. The seri s of United Nations ac,s that hate excluded Franco
Spain from full participation in the international community offer the US the
opportunitytogivespecialaidofapoliticalnature by taking the initiative
in rescinding these sanctions. In view of our general policy of support of
UN, and the UN's particular interest in tho Spanish case, care should be
taken that all US measures utilize UN achinery to the extent possible.
The achievement of US objectives in. pain would require both irradiate _
and long-range assistance. The Lznediate political aid would be primarily
a morale-builder and a stabilizing ilfluence til Spain assumes its rightful
position in Western European affairs and in intelnational organizations,
particularly the UN. In the economic field immedia e shipments of critically
short raw materials, food, and cither consUmp-Lon good will be necessary to
tide over the period of stud-, equired before a long-ran e.program'can be
undertaken. Economic assistance of a more fundamental character should be
designed to modernize and expand Spanish industries and to i troduce modern
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agricultural methods. Detailed and up-to-date data on these needs are not
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available. The nature 4nd size of this aid would therefore probably have to
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be determined by a commission,of experts. Such a long-range program appears
to be the .only means of ultimately raising the standard of living in\pain,
normally one of the/two poorest countries in Western Europe. ,
US ? assistanc of both a political and economic character to a friendly i
post-Franco Government will be required because (1) it would meet implied
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ascrurances already publicly made by the US Government; and (2) such aid would
contribute ma. erially to political and economic stability in Spain and in the
whole of Western Europe..
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First, the US has given public assurance of aid under certain cendi-
flops, to the government succeeding that of Franco. According' to the joint
declaration with France and Great Britain of March 4, 1946, this Government
under
hopes for the advent of "an interim or caretaker goverment/which the Spanish
.people may have an opportunity freely to determine the type of geVernment
they ilish to have and to choose their leaders" and which will provide for
"political amnesty; return of exiled Spaniards, freedom of assembly and
political association and provision for free public elections". The joint
'declaration continued,
. . . An interim goverment vytich would be and would
ranain dedicated to these ends should receive the recognition
and support of all freedom loving peoples.
"Such recognition would include full diplomatic relations
and the taking of such practical measures to assist in the
solution. of Spain Is economic problems as may be practicable in
the circumstances prevailing."
Secondly, a pest-Franco regime of a really different nature, if de-.
prived of encouragement and assistance from the US, will net be able to
achieve those conditions of internal strength and friendly orientation that
our objectives require. The initial situation of France's successor is likely
to be vulnerable. The, departure of the dictatorship will bring an inevitable
relaxation of political and economic controls. There will be an urge to pay
off private and local scores. The probable coalition character of an interim
government will make it difficult to reach basic policy decisions. The
imminence of elections will be a constant temptation to sacrifice the national
interest to partyadvantage at the polls. Spain's relatively isolated
position in the world for the last decade will be a handiCap in utilizing
effectively the new international mchinery once it is available to Spain.
Above all, the ousting of Franco and an inevitable Purge of administrative
officials in important posts will leave persons who have had little experience
in exercising huthority responsible for governing Spain under ebonomic con-
ditions that may well be worse than the present situation. Such difficult,
and initially somewhat' confused, circumstances will afford the small but
disciplined Spanish Communist. Party an exceptional opportunity to expand ite
influence. Its position will be materially strengthened if it can declare that
the US is neglecting the efforts of Spanish democrats, who must therefore
look to Mescail for the necessary aid.
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US political and economic aid can contribute substantially to attaining
US objectives in Spain. Given the world power
Government's recognition of a successor regime
acts will both strengthen that regime
which it is regarded by third powers;
into European economic arrangements.
position of the US, this
and other friendly political
directly and increase the favor with
it would be helpful in bringing Spain
IV. SPECIFIC 'MEASURES REQUIRED
A. Political
In the event of.the departure of Franco and his replacement by a satis-
factory government, the US Government shoLd
take the following steps to
give it political support:
(1) Give prompt diplomatic recognition;
(2) Encourage other friendly powers to recognize the
successor regime;
Encourage European states to accord Spain an equal
place in regional arrangements of a political or economic
character;
Take the initiative toward, or supPort a proposal for,
action by the UN General Assembly declaring that the
sanctions concerning chiefs of mission in Madrid and
Spanish participation in international organizations and
(3)
(4)
activities, which were recommended in its resolution*
of December 12, 1946 no longer apply, on the grounds that
the sinew and acceptable government" specified in the
Resolution had been formed.
In accordance with the freedom of action given by success-
ful completion of (4), appoint an Ambassador to Madrid;
In accordance with the freedom of action given by successful
completion of (4), propose, or support, the membership of
Spain in "international agencies established by or brought
into relations with the United Rations"; and propose, or
support, Spanish participation in "conference or other
activities which may be arranged by the United Nations or
by these agencies"; and
(7) Give support to a Spanish application for admission to the UN.
The text of this resolution is in Alopendix "A" of this paper.
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B. Economic
Any estimates concerning the magnitude of assistance required by
Spdin within several years following the change of the present regime are
bound to be sheer guesswork. The country has not published any balance-
of-paynonts statement for the last 15 years, data on production are unsat-
isfactory, and the Government has not worked out any over-all plan for
industrial expansion and economic development which would allow a judgment
on the size and character of the country's economic requirements. It is
known, however, that both the agricultural and industrial segments of Spain's
economy are still considerably below pre-Civil War levels. .Capital and
transportation equipment, where it has not been destroyed, is predominantly
obsolete; agricultural production suffers from the cumulative effects of
inadequate application of fertilizers since the outbreak of the Civil War
in 1936.
The recent agreement with Argentina allows for a three-year revolving
fund of some ;387 million and a !:,;100 million Than to be repaid in 25 years.
Since the loan will be mainly applied to repayment of the out-standing balances
due to the Argentine Government, estimated at 060 million, this will add only
040 million to be available as credits. .
Part of Spain's needs would be met by increased private US investment
in Spain. The present unsettled political conditions in Spain are to some
extent responsible for hesitation on the part of private American capital
which would otherwise be invested in Spain. A change in the regime, and
active support of the new government by the US Government, would certainly act
as a stimulus to private investment in Spain. It is possible that, in the
first two or three years, such investments would amount to 25 million a year.
Since Spain, after the elimination of the present regime, would doubtless
be admitted to membership in the World Bank and the International Monetary
Funds some financial aid would be available for those sources. It. is impcsaible
at this stage to estimate the amounts that may be provided by these organiza-
tions, but the US would appear to be the only other possible majOr source of
financial assistance.
It is clear that any program of large-scale aSsistance to Spain would
have to be preceded by a thorough study of the country's economic conditicn.
Such a survey should embrace production, export and import potentialities,
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credit and monetary policies, the need for agrarian reforms, the budget,
and other internal economic problems and policies. Such a program should
be worked out also in lino with the goneral European plan fcr recovery and
development, of which Spain, with its population of over 27 million, should,
under more favorable political conditions in Spain, form an important
component.
In the absence of information heeded for the elaboration of an economic
program, it is tentatively suggested that assistance to Spain be considered
under three broad headings.
'1. Emergency supplies of foodstuffs, durable consumer goods,
vehicleslland certain essential raw materials immediately
following the overthrow of the Franco regime.
2. Economic assistance calculated to restore production and
consumption to at least the levels of 1935 the year
immediately preceding the Civil War.
3. Long-run plans for the industrialization and modernization
of the ccuntry.
This paper will only deal with the first two points.
? a. Immediate Aid Program. Spain is predominantly an agricultural
country and was normally almost self-sufficient in foodstuffs except for
eggs, dried cod, coffee, and cocoa. Several factors have changed this
situation. While most of the land devastated during the Civil War has been
brought tack into cultivation, agriculture has suffered from a great shortage
of fertilizers, which were normally imported at the rate of over a million
tons a year, but since 1936 have been coming in at loss than one-fourth this
rate. Other obstacles to agricultural recovery have been the absence of
adequate quantities of manufactured products to satisfy the farmers, needs,
and the Government policy of low prices for farm products. The farmer as a
result has little incentive to increase production or to deliver his goods to
the cities. In addition there have been extraordinary droughts in 1944 and
especially in 1945, with severe impacts on the livestock population of the
country and on general food standards. Thus Spain, in spite cf a fairly good
crop in 1946 and deliveries of grain by the Argentine, is estimatadto have an
average daily caloric intake of less than 2,000. Urban areas have even a
lower average.
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The long deferred demand for a better standard of living would require
shipment during the first year of aid of large quantities of foodstuffs,
fertilizers, and various consumers' goods in addition to other normally
imported items.
The country is also in acute need of improved transportation. An
immediate significant improvement could be effected through the shipment
of several thousand trucks to replace the obsolete and dilapidated fleet
of trucks circulating in the country. Stain is also in great need of close
to to million tons of industrial coal .a year, the lack of which appears to
be holding back important steel and equipment output.
b. Restoration Program. While the economic levels of 1935 in Spain
placed that country among the poorest in Europe, there is still a consider-
able gap between the present and pre-Civil War standards of economic activity.
It is dcubtful whether under the circumstances any outside economic assistance
could achieve much more than a restcration to 1935 levels within 3 years;
more would be required to achieve these levels on a per capita basis, since
the population of Spain Will by 1950 have increased by some 3* million, or
about 15 percent, as compared with 1935.
No clear distinction can be drawn between aid designated for immediate
relief and assistance intended for rehabilitation purposes. Many of the
goods imported during the first year would be extremely useful in paving
the way toward reconstruction. On the other hand, a higher proportion of
capital equipment and raw materials as compared with consumers' goods might
be expected to flow into the country during, the last two years of the program.
Funds would have to be allocated to the purchase of certain capital
equipment, such as electric generators and textile machinery, to enable
Spain to carry out certain specific industrialization programs of immediate
importance to the country. It is also very possible that during the last ,
year of the program the cumulative effect of increased supplies of fertilizers
and of an improved standard of Jiving would lead to a substantial increase
in production and exports of foodstuffs (o anges, olive oil, nuts, wines,
.and canned fish), which normally accounted for two-thirds of Spanish exports.
This expectation is predicated on the assumption that the UK and France
as well as the US would increase their current demand for Spanish exports.
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c. Estimated Import Requirements. To achieve both the relief and
restoration programs, it is assumed that an import schedule somewhat in
excess of that of 1935 in volume should be Carried out during the three
?
aid years. Imports in 1.934-35 averaged around S300 million. Since the
world prices of most of the imports needed by Spain are a little over
100 percent above prewar pricesj and since extraordinary imports of wheat
and coal would be required, such a program would amount to about 0700 million
a year at current prices.*
The 1935 imports are suggested merely as a base for estimating the
approximate magnitude of annual requirements during the three years of
assistance in the absence of adequate indications of the most important
Spanish needs for the implementation of the above program. The actual
pattern of imports would have to be determined at the start by a commission
of experts and would probably differ from that of pre-Civil War years.
d. Balance of Payments. A rough estimate of the balance-of-payments
of Spain for the first three years of aid and for the year following it is
given below:
ESTIMATED BALANCE-OF-PAYMENTS IN TIE FIReT THREE YEARS
---1rn millions of dollars Tr-
: Payments : Receipts :Estimated
: ?
. : Use of : :Loans or
: Required : : Net : Existing : :Grants
: Imports : Exports :Services : Credits : Total :Required
1st Year 700 300 - 40*** 340 360
2nd Year 700 350 30** 380 320
31'd Year 700 430 50*41-** 480 220
900
14th Year ' 700
550 7.5.388m? ' 625 75
Merchandise exports in 1945 amounted to approximately 0300 millich. It
is assumed that about thie sane amount would be exported durin3 the first year
of aid. Only slight increases have been allowed for exports during the second
For a more detailed discussion of the cost of 1935 imports in 1946
see Section V below.
At current prices.
Estimated balance of a 0100 million credit extended by Argentina to
Spain.
Two-thirds of this is estimated to come from emigrant remittances,
the remaining third from shipping and tourists.
The items not listed in the above balance-of-payments are presumed to
cancel one another or to be of little importance in the first three years
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and third years because it is felt that most of the increased effort
following the re:loyal of political impediments would be devoted to capital
formation within the country .rather than to the production of export
goods. A good foundation should haVe been laid by the fourth year for
reducing the balance-of-paym4nts deficit to some $75 million dollars,
which could perhaps be met from foreign investments in Spain.
Available information indicates that Spain has practically no foreign
assets and a very small amount of gold ($100 million), used for the backing
of its currency.
The tentative estimate Of $900 million required for three years of
relief and reconstruction doeS not appear excessive in light of the size
of the country and in comparison with the assistance that has been and is
being granted to other European countries.,
o. Note on 1935 Imports. Below are detailed estimates of the cost
of sonic of the more essential annual imports in terms of 1935 quantities at
1946 prices (based on declared values at point of entrance in Spain). The
major items alone would account for around $300 million (1946 dollars) broken
down as follows:
ESTIMATE) COST OF TRE MAJOR IMPORT ITEMS IN
1933-AT 1976-ITICES
,
Thousands Millions
Commodity of Tons d?Tbellars
Cereals . ? 53 6
Coal 1,200 25
Petroleum 900 40
Phosphate Rock 600 10
Chemicals and
Fertilizers 650 58
Industrial Chemicals 19 7
Pharmaceuticals 4 1
Iron and Steel 150 10
Machinery 27 39
Trucks 7 18
Cars 14 25
Woodpulp 125 14
Rita Cotton 101 41
Rubber and Tires 25 6
300
The above goods accounted for about 55 percent of the 1935 imports.
A complete import program based on 1946 prices would therefore amount to
$550 million. To this should be added estimated emorgency requirements of
$100 million worth of wheat and coal, which woulc bring up the import costs
to $650 million at 1946 prices and to at least $700 million at 1947 prices.
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? . .
? It is worth reiterating that the 1935 imports are taken merely as a
guide post for arriving at some estimates for the three yearsTrogram,
which would necessarily have a different pattern because of the emphasis
shifting to reconstruction and capital replacement.
V. EFFECTS OF REFUSAL TO GRANT AID OR OF FAILURE OF PROGRAM UNDERTAK1N
The absence or failure of a.US aid program wouldhave the most serious
repercussions on Spain. In the short run, either might woll make it impossi-
ble to carry out the transition from Franco smoothly: and so night permit
the Outbreak of a decond civil, war. This would give the maximum opportunity
to the extremes of Left and Right and might subject Spain to direct Soviet
intervention. Absence of a US long-term political and economic program to
aid Spain would tend to make the Spanish Government and people look elsewhere.
for the required assistance: and so possibly shift the balance of domestic
political forces in favor of the extreme Left.
.2ailure to extend economic aid would mean a further continuation of the
prevailing low standard of living. The food situation in 1947 (despite
imports of foodstuffs under the Argentine trade agreement) is expected to
improve only to the extent of permitting a caloric intake of not more than
2,000 calories for the average Spaniard. This level not only Would jeopardize
the maintenance of normal health standards but also continue the weakening of
worker efficiency.
Left to its awn resources Spain would be unable to expand its capital
plant or increase manufacturing to any significant degree. The requisite
balance between agriculture and industry could not be established.
Economic autarchy, already'markedl would be given additional impetus,
and would take the form of uneconaaic production and of additional internal
economic controls, which would further retard the growth of an expanded
and more diversified economic life.
Finally, failure to grant economic assistance would contribute to the
creation of a state of economic chaos and disorganization, which would dig
deeper the normally profound economic abysses between various classes of
Spanish society and increase the Chances of internal accial upheaval.
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VI. POSSIBLE FRERGENCY SITUATIONS
During the continuance in-power of the Franco regime, the following
emergency situations might require reconsideration of present policy toward
Spain:
(1) Widespread civil strife in Spain or France;
(2) Communist domination of France or Italy;
(3) Establishment of a Soviet base of power in the
Eastern Mediterranean.
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?
APPENDIX "A"
?
TEXT OF RESOLUTION CONCERNING SPAIN, ADOPTED ON '
DECEMBER 12, 194615f THE GENERAL ASSEMBLY OF Tft-
UNITM NATIONS
The peoples of the United Nations, at San Francisco, Potsdam and
London condemned the Franco regime in Spain and decided that, as long
as that regime remains, Spain may not be admitted to the' United Nations.
The General Assembly in its resolution of February 1946 reconmended
that the members of the UN should act in accordance with the letter and
the spirit of the declarations of San Francisco and Potsdam.
The peoples of the UN assure the Spanish people of their enduring
sympathy and of the cordial welcome awaiting them when circumstances
enable them to be admitted to the United 'Nations.
The General Assembly recalls that in MAy and June, 1946, the
Security Council conducted an investigation of the possible further
action to be taken by the United Nations. The subcemmittee of the
Security Council charged with the investigation found unanimously:
(A) In origin, nature, structure and general conduct, the Franco
regime is a Fascist regime patterned on, and established largely as a
result of aid received from Hitler's Nazi Germany and Mussolini's
Fascist Italy.
(B) During the long struggle of the United Nations against Hitler
and Mussolini, Franco, despite continued Allied protests, gave very sub-
stantial aid to the enemy powers. First, for example, from 1941 to 1945
the Blue Infantry Division, the Spanish Legion Volunteers of the Salvador
Air Squadron fought against Soviet Russia on the eastern front: Second,
in the summer of 1940 Spain seized Tangier in breach of international
statute, and as a result of Spain maintaining a large army in Spanish
Morocco large numbers of Allied troops were immobilized in North Africa.
(C) Incontrovertible documentary evidence establishes that Franco
was a guilty party, with Hitler and Mussolini, in the conspiracy towage
war against those countries which eventually in the course of the World
War became banded together as the United Nations. It was part of the
conspiracy that France's full belligerency should be postponed until a
time to be mutually agreed upon.
The General Assembly, convinced that the Franco Fascist government
of Spain, which was imposed by force upon the Spanish people with aid of
the Axis powers and which gave material assistance to the Axis powers in
the warl.does not represent the Spanish people, and by its continued
control of Spain is making impossible the participation of the Spanish
people with the peoples of the United Nations in international affairs;
Recommends that the Franco government of Spain be debarred from
membership in international agencies established by or brought into
relationship with the United Nations, and from participation in conference
or other activities which may be arranged by the United Nations or by
these agencies, until a new and acceptable government is formed in Spain.
The General Assembly further desiring to secure the particiration
of all peace-loving peoples including the people of Spain in the community
of nations;
Recomends that if within a reasonable tiw thre is est ostablished
a government which derives its authority from t)c cenzunt of the governed
committed to respect freedom of speech) religion aid assembly and to the
prompt holding of an election in which the Spanish people, free from the
force and intimidation and regardless of party may express their will, the
Security Council consider the adequate measures to be taken in order to
remedy the situation and;
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,Recommends that all members of the United Nations immediately
recall from Madrid their Ambassadors and Ministers' Plenipotentiary
accredited there.
The Assembly further recommends that the State Members of the
Organization report to the Secretary General, and to, the next asseMbIy,
what action they have taken in abcordance with this recommendation.
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APP7NDIX "B"
SUMILRY
I. SITUATION,IN.SPAIN
The dominant factor in the Spanish political situation today is
still .the Civil Wax of 1936-39, which was the culmination of a long
process of social disintegration. The War and the policy of General
Franco since the end of the War have vastly multiplied preexistingana?
mosities.?
All classes are obsessed and, for political purposes, virtually
paralysed, by the fear of renewed civil war and eventual Camaunist domina-
tion; which Franco's propaganda has persuasively, although erroneously,
presented as the only alternative to the continuation of his regime.
As to economic conditions, the World War prevented any progress in
recovery from the devastating effects of the Civil War.. Extreme shortages
of fertilizers and several drought years have reduced food availabilities.
Lack of foreign exchange has made impossible essential capital replacements
in industry and transportation.
'Notwithstanding the inability of the Franco regime to make any -progress
in solving the long-range social and economic problems of Spain, and not-
withstanding widespread popular discontent with the regime, it possesses
which supplements the regular police forces in
a number of sources of strength. These are the large standing Army, A
Gecoptially p lice_f rco for the maintenance of internal order; .the
Church and its related lay organizations; and the Falange apparatus for
7Itg,
running _the political subdivisions andiAsyndical organizations ythlch
. virtually control industry and agriculture.- BY astute political maneuv-
ering, General Franco has .convinced these strong interests that the
maintenance of their own material position depends on continued support
of his regime.
Negotiations between the various factions opposing the regime for
one reason or another have been taking place aver the past two or three
years, and are continuing. Mutual confidence between different opposition
thr14. ?
groups,is still almost wholly lacking and thereds, as yet, hccsign that
they will come together with a common .program inoprosition to General
Franco. ?After eventual agreemmt among themselves, the opposition leaders
plan a secret approach to selected army leaders in order to obtain
military backing.
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There is little. likelihood
Frapools ouster in the near future.
For all their troubles, most Spdnish tieOkle are convinced by past experiehce
and by Francols propaganda that a mere change of regime will not better
their lot.
AboVe all, there is
Franco:
no sign that the Army is ready to abandon
In the long run, particularly as relative stability returns to the
rest of Western Eurepe; Francois responsibility for the international isola-1
tion of Spain and for continued economic stagnation within the country will
probably lead to his removal in their awn interest, by the elements now
giving him active support.
U.S. Objectives and Present Policy
Spain's importanre to the U.S. is underlined by her strategic position
flanking France, Italy and Great Britain's Mediterranean lifeline, as well
as U.S. routes to Eastern Mediterranean oil.
.U.S. policy since the end of the war has sought to encourage the
development in 5pain of a government based on the freely expressed will
of the Spanish people, with which close relations could be developed.
At the same time, the U.S. has been obliged to oppose proposals
(largely inspired by the USSR) for drastic international action against.
Spain, in the belief that auch action would lead eventually to renewed
civil strife and would thus make more difficult, if not impossible, the
achievement of, our objective in Spain.
III. -Means of Reaching Objectives after Political Bar is Removed
The discussion
of the political bar
U.S. assistance
friendly post-Franco
of aid to Spain in this paper is based on the premise
to the extension of such aid having first been removed.
of both a political and economic character to a
Government will be required becauthe (1) it would meet
implied assurances already publicly made by the U.S. Government; and (2)
such aid would contribute materially to political and economic stability
in Spain and in the whole of Western Europe.
In a period of crisis, the absence or failure of a U.S. aid program
would have the most serious repercussions on Spain. In the short run, either
might well make it impossible to carry out the transition from Franco
smoothly, and so might permit the outbreak of a second civil war. This would
give the maximum opportunity to the extremes of Left and Right and might
subject Spain to direct Soviet
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There is little likelihood of Francois ouster in the near future.
For all their troubles, most Spanish people are convinced by past
experie e and by FranWs prepaganda that a more change of regime
will not etter. its lot. Above all, there is no sign that the Amy
18
ready.to abandon Franco.
In the 1 ns rut-IIparticularly as relative stability returns to the
rest of western Europe, Francois responsibility for the international
isolation of Spa] and for continued economic stagnatiaawithin the
country will proba ly.lead to his romval, in their own interest, by the.
elements nett giving in active support.
. II. U. S. OBJECTiVES MJD PRESENT POLICY
US policy since the end of the war has sought to encourage the
development in Spain. of a overnMent based on the freely expressed will
of the Spanish people.
At the same tine, ? the US ts been obliged to oppose proposals
(largely inspired by the USSR) ?r drastic international action against
Spain, in the belief that such ac iontwould lead eventually to renewed
civil strife and would thus make no e difficult, if not impossible, the
achievement of our objective in Spai
It may be expected that, as the c sequences of the political and.
economic isolation of Spain becoming mor evident, Francols position will
be weakened and change will eventually te place.
The discussion of aid to Spain in this naper is based on the premise
of. the political bar to the extension of such
',id having first been removed,
III. MEANS OF REACHING OBJECTIVES aTER POLITIC tL BAR. IS REMOVED
US assistance of both a political and economi character to a friendly
post-Franco Government will be required because (1) t.would meet implied
assurances already publicly made by the US Government; and (2) such aid
would contribute materially to political and economic s sbility in Spain
and in the whole of Western Europe.
The absence or failure of a US aid program would have .he most serious
repercussions on Spain. In the short run, either might well e it impossible
to carry out the transition from Franco smoothly, and so might emit the
outbreak of a second civil war. This. would give the maxi= opp rtunity to
the extremes of Left and Right and might subject. Spain to direct\oviet
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intervention. Absence of a US long-term political and economic program
to aid Spain would tend to make, the Spanish Government and people lock
elsewhere for the required assistance, and so possibly shift the 'balance
Of domestic political forces in .favor of the extreme Left.
Without outside economic aid, principally from the United States)
economic stagnation in Spain would continue with grave tea4bct. consequences
Aft-
to future political stability fUjthe country.
A
IV. SPECIFIC MELSURES REQUIRED
Political support would be gives to a satisfactory successor regime
through strengthening of US diplomatic relations and through ,support of
Spain1s entrance into the UN and its affiliated organizations and activities.
Detailed estimates of outside economic aid which would be required by
Spain are difficult to make in the absence of an over-all plan dew:loped
after a careful survey of the country. Based on data now availablej Spain
would have to have $900 million of new capital in the first three year
period. emesLaem...SpaAA's.present.
during that period
to eAfr
con om increased private US investments in Spain.
?
. Perhaps $75 million could be expected
of $825 million
The balancerculd
1
ha* to 15e not by extraordinary aid from the United States since it is not
believed that there is any other outside source. ?
V. POSSIBLE EMERGENCY SITUATIONS
.During the continuance in power of the Franco regime, the' folloWing
emergency situations might require reconsideration of present policy toward
Spap:
Cl) Widespread civil strife in Spain or France;
(2) CommunistImination of France or ItalY;
(3) Establishment of a Soviet base of 'power in the .
* Eastern Mediterranean. ?
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--A