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November 11, 2016
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January 1, 1969
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Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 25X1C10b Next 2 Page(s) In Document Exempt Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 =I- ---------- --- --?-- March 1969 PERUVIAN SEIZURE OF IPC ASSETS The government of former President Fernando Belaunde Terry of Peru was constitutionally elected in 1963 for a six-year term with solid voter sup- port. Yet his administration encountered serious national political and economic problems. The congress was dominated by the opposition party. A serious economic downturn in 1967 resulted in a 31 per cent devaluation of the sol and excessive capital outflow. Belaunde's problems were com- pounded by pressure from the military who forced through sizeable purchases of equipment, including French jet aircraft, at a time of severe budgetary difficulties. When there were disclosures of corruption in high govern- ment circles, including the military, and the possibility grew that the Apristas, a liberal party traditionally hated by the military, would win an election sweep in 1969, the military group, led by General Juan Velasco, made plans to act. When political tensions were even further increased because of dis- satisfaction at the top levels of the military and among some civilian elements with the government's settlement with the International Petroleum Company (IBC), a split developed within Belaunde's own party, followed by a change in the cabinet and, finally, the coup. The timing and motivation of the coup may have been largely personal on Velasco's part, since he and Belaunde had had their personal as well as professional difficulties, and he himself was scheduled to retire in early 1969. Whatever his timing and motivation, his junta represents a small clique of high-ranking military officers that had no popular power base at the outset, and which desperately needed support to sustain itself. Background of Expropriation One of the pretexts for the military overthrow of the constitutional government of Peru on 3 October 1968 had been the latter's settlement of Peru's long-standing dispute with the International Petroleum Company (IPC), a Canadian corporation owned almost entirely by Standard Oil Company of New Jersey. According to the Act of Talara, which the Belaunde government signed on 31 August 1968, the IPC was to surrender its claim to ownership of oil- fields at La Brea and Parinas in return for cancellation of the government's claim to. more than $144 million in alleged excess profits and back taxes. The company was to retain its refinery at Talara as well as its extensive distribution and marketing facilities. The oilfields were to be managed by the government-owned State Petroleum Enterprise (EFP) and the IPC was to buy the output of the fields at a "fair" price for processing at the Talara refinery. The military junta, led by Major-General Juan Velasco Alvarado, violently objected to the settlement, claiming that years ago IPC had illegally acquired its oil concession in Peru, and that the company's agree- ment with the Belaunde government meant the IPC would remain in full control Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 of the Talara complex while freed of the huge debt in taxes claimed by Peru. One of the junta's first acts, therefore, was to nullify the settlement on 4 October and, on 9 October, to expropriate much of the company's holdings in Peru, including La Brea and Parinas oil fields and the refinery at Talara. The expropriation instantly boosted the popularity of the junta and brought it widespread popular and political support. Celebrations were held throughout the country in an effort to rally political parties and civic and professional groups in support of President Velasco and the junta. At that time three large U.S. mining companies and other U.S. petroleum companies operating in Peru were assured by the Minister of Development that the government's action against the IPC was exceptional and that their operations would be "scrupulously respected." Meanwhile, rumors were growing that the president's advisory group, composed mainly of radical-nationalist colonels and a group of leftist attorneys, was urging the government to expropriate immediately the remaining assets of the IPC as a means of gaining additional and badly needed revenues, and also as a, means of emphasizing to other foreign investors that the demands of the new government must be met. In the final months of 1968, the government stepped up its propaganda campaign against the IPC, which included a series of articles critical of the company in the pro-government newspaper El Comercio. In mid-January the government's oil trust, the EPF, unilaterally broke off talks over the question of prices of the oil products sold through IPC's extensive marketing and distribution system, demanded that the IPC pay $14.4 million for these products at an average price of $3.34 per barrel and announced that failure of the company to make such payment would lead to the attachment and sale of its remaining assets. At the same time, the company's funds were frozen and no cash expenditures were permitted with- out the approval of the court-appointed military officers who had been monitoring IPC's operations to protect the EPF's claim. When the IPC appealed the EPF action in late January, the government took over administrative control of the distribution apparatus and the IPC share in the Lobitos oilfields, and threatened to auction off all of the company's holdings, valued at more than $200 million if payment of the $14.4 million debt was not made by 5 February. The legal procedure for these actions was enacted by decree-law of 31 December, which requires payment first before judicial hearing. Current Status of Dispute Most recently, the government has announced that the company owes the state more than $690 million which is, in effect, the valuation the regime puts on all oil taken by the company from La Brea and Parinas fields in the past forty-five years of its operations in Peru. (The fields were bought by IPC from a British concern in 1924 and, according to a grant which pre-dates the Peruvian Constitution, the title to them includes subsurface rights. When the Peruvian Constitution was later Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 adopted it reserved all subsurface riches for the state, but made no pro- vision for settling existing private holdings of subsurface rights. On'this basis, nationalists have continually attacked the company's subsurface title.) In a highly emotional and nationalistic television and radio address to the nation on 6 February, President Velasco declared his regime had :already started to take steps to collect this debt "to close definitely and forever this ignominious chapter in Peruvian history." Although the General did not specify what measures would ultimately be taken, it was obvious that all IPC holdings would at least have to be taken to satisfy the debt, since their value is something less than half of the amount the junta claims is owed to the "Peruvian people." Thus there would be no compensation for the assets expropriated on 9 October. U.S. Sanctions: Hickenlooper Amendment and U.,S, Sugar Act Although the claims of the Peruvian Government and the IPC had long been in conflict, the case had not directly involved the Government of the United States. However, it did immediately become involved by the Peruvian act of expropriation because of a provision of the United States law known as the Hickenlooper Amendment to the Foreign Assistance Act, which was passed in 1962. In essence, this law simply provides that the Government of the United States shall not grant economic aid to foreign countries which expropriate the holdings of American citizens or companies without due compensation or without commencing negotiations which, within six months after the seizure, promise to lead to fair and just com- pensation. The law does not reject the principle of expropriation, a sovereign right of every nation and one which has long been fully recognized by the United States. It does reflect the accepted norm of international law that compensation must be paid. Obviously the law was designed to prevent tax monies paid by American citizens from being given to other countries which seize American assets and do not pay for them. The law is fully accepted in the United States. Indeed, U.S. citizens are irritated that, after giving over $100 billion dollars in foreign aid since World War II (including a total of $550 million to Peru), foreign countries should now feel in the position to demand the continuance of aid, as if by right, at the same time that they confiscate U.S. holdings without recompense. In his radio and television address, President Velasco referred to the "celebrated and profoundly sad" Hickenlooper Amendment, .which he said he hoped would not be applied to Peru and would be "thrown out and never mentioned again." That provision of U.S. law as it applies to assistance will be invoked 4+ April unless Peru takes steps to settle the problem. April 4 is six months from 4+ October, the date of the nullification of the IPC-Peruvian contracts called the Act of Talara. The confiscation of. the IPC holdings also causes the automatic withdrawal of preferential treatment accorded Peru under another United States law, the U.S. Sugar Act of 1948. This law, which was designed to provide'a stable market for sugar producing nations and to protect them from the vagaries of wide fluctuations of prices on the world Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 3 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 sugar market, provides quotas within which sugar producing countries can sell sugar within the United States at a price which is currently well above the world market price (6.6? per pound versus 2?). Last year total Peruvian sales in the United States amounted to $45 million, of which $33 million amounted to a subsidy above world market prices. Because sugar is one of the country's major crops, Peruvian economists believe a cutoff of the U.S. quota may wreck the industry in that country, causing major unemploy- ment. This suspension would be effective on 9 April, six months after the 9 October expropriation. Division Within the Junta In view of the junta's announcement on 25 January that Velasco, who became eligible at the end of January for retirement from the army, will retain the post of President, a change to a more moderate official line appears unlikely in the foreseeable future. It has become known, however, that there is a division in the government between the ultra-nationalists, under Velasco, and the moderates, whose spokesman, Ernesto Montagne, is Prime Minister and also Minister of Defense and Commanding General of the Army. The latter group includes, among others, members of navy and air- force staffs who are discontented with the dominance of the army in the regime. If this group should eventually gain control, there would probably be hope of improvement in Peruvian-U.S. relations. Relations With Soviet Union To further complicate the present situation, Peru established diplomatic relations with the Soviet Union on 1 February, which was highly publicized and widely supported in the local press. This marked a sharp reversal of Soviet policy toward the coup, which Izvestiya referred to on 1.0 October 1968 as "another gorilla operation." The Soviet ambassador to Chile, who was in Lima for the exchange of diplomatic notes, said that the USSR could supply Peru with machinery and equipment for its oil industry and also heavy farm equipment and passenger airplanes. The Soviet Union is the fourth Communist country with which the Peruvian junta has established diplomatic or commercial relations in its five-month existence, having previously had diplomatic or commercial negotiations with Rumania, Yugoslavia and. Czechoslovakia. Opening of relations with Peru is the first time since the close of World War II that the Soviets have recognized a Latin American military government that came to power by means of a coup. Thu Soviets immediately sent a five-man commercial mission to Peru with promises of aid and technical assistance. Although there were indications that Peruvian officials were disappointed in Soviet offers of aid and trade, a trade agreement between the two was signed 17 February. First reports indicate it calls for the Soviets to provide credit to both the Peruvian government and private enterprise for the purchase of heavy machinery from the Soviet Union. Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Other Actions by Peru In the meantime, relations between Peru and the United States deteriorated still further when the Peruvian Navy opened fire on an American fishing boat and captured another while more than 50 miles off Peru's coast. The seized vessel was released after paying a fine of $7000. The U.S. protested the incident since it (like almost every country in the world) does not recognize a claim such as Peru's to the territorial limit of 200 miles offshore. The Peruvian junta has now embarked on a campaign to win hemisphere- wide support for its position on the IPC issue. This has begun with the calling of a conference in Lima of Peruvian representatives to all Latin American countries to coordinate diplomatic and propaganda action against the United States. Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 5 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 S61o Para Uso Como Marzo 1969 Material de Fondo APODERASE EL PERU DE LA IPC CPYRGHT ApI El gobierno del ex presidente Fernando Belailnde Terry del Peru fue elegido constitucionalmente en 1963 por un t6rmino de seis aflos. A pesar de que contaba con un amplio apoyo popular, su administraci6n pronto tuvo que hacerle frente a serios problemas dom6sticos de tipo politico y econ6mico. Por una parte, el Congre- so estaba dominado por la oposici6n; por otra, un des- censo econ6mico importante en 1967 habia ocasionado la devaluaci6n del sol en un 31 por ciento y la fuga excesiva de capital hacia el exterior. Los problemas del Presidente Belaunde se agrava- ron por la pres16n de los militares, quienes obligaron al r4gimen a adquirir grandes cantidades de equipos militares, entre ellos a.viones a reacc16n franceses, a pesar de las enormes dificultades presupuestarias de la Naci6n. Al hacerse publicas ciertas revelaciones sobre la corrupci6n en las altas esferas civiles y militares del gobierno y aumentar las posibilidades de triunfo de los apristas--corriente liberal tradicionalmente odiada por los militares--en las elecciones de 1969, el grupo de oficiales encabezado por el General Juan Velasco se prepar6 para actuar. Agudizada mas an la tens16n politica por el des- contento de los m&as altos niveles militares y de algu- nos elementos civiles por el acuerdo entre el goblerno y la International Petroleum Company (IPC), dentro del propio partido de Belainde se produjo una escisi6n, que fue seguida por cambios en el gabinete y, finalmente, por el golpe de estado. Los motivos y la selecci6n del momento oportuno para el golpe pueden haber sido escogidos personalmente por Velasco, pues Este y Belaunde hablan tenido disNguss- Approved-For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 CPYRGHT Sin que importen los motivos o la selecc16n del momento, su Junta representa a una pequefia camarilla de altos oficiales militares que carecia en un princi- pio de apoyo popular y que necesitaba desesperadamente algun respaldo para mantenerse en el poder. Antecedentes de la Expropiaci6n Uno de los pretextos para el derrocamiento mili- tar del gobierno constitutional del Peru el 3 de octu- bre de 1968 habia lido la decisi6n del r6gimen de so- lucionar la vieja disputa con la International Petroleum Company, firma canadiense controlada casi totalmente por la Esso Standard Oil de New Jersey. De acuerdo con el Acta de Talara, que el gobierno de Belaunde suscribi6 el 31 de agosto de 1968, la IPC dejaria de reclamar como propios los Campos petrolife- ros de La Brea y Par11as a cambio de la cancelaci6n de la demanda que hacla el gobierno par mas de $144+ millo- nes por supuestas utilidades excesivas e impuestos atra- sados. La compafiia retendria su refinerla de Talara asi como su vasto sistema de distribuci6n y comercio. Los campos petroliferos serian administrados por la empresa petrolera del estado, la EPF. Por su parte, la IPC com- praria la producci6n de los campos a un precio "justo" para su elaborac16n en la refineria de Talara. La junta militar encabezada por el Mayor General Juan Velasco Alvarado se opuso violentamente al acuerdo, manteniendo que hacla afios que la IPC habla adquirido ilegalmente su conces16n petrolera en el Peru y que el convenio con el gobierno de Belaunde significaba que la IPC retendria el control total del complejo de Talara en tanto que quedaba libre de la enorme deuda de impues- tos reclamada por Peru. For tanto, una de las rimeras medidas de la junta fue anular el convenio el 4 de octu- bre y expropiar el 9 de octubre la mayor parte de los bie- nes de la compafiia en el Peru, entre ellos los campos de La Brea y Parinas y la refineria de Talara. Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 -3- CPYRGHT La exproplac16n multiplic6 inmediatamente la po- pularidad de la Junta con el co nsiguiente respaldo popular y politico. Se efectuaron manifestaciones en todo el pals en un esfuerzo por obtener el apoyo de los partidos politicos y de las agrupaciones civicas y profesionales en favor del Presidente Velasco y la junta. En aquella oportunidad el ministro peruano de Fomento le asegur6 a tres grandes compa4Sias mineras y a~otras empresas petroleras norteamericanas en el Peru que la acci6n del gobierno contra la IPC era, exceptional y que las operaciones de aquellas serlan "respetadas escrupulosamente". Entretanto, aumentaban los rumores que el grupo asesor del Presidente, compuesto en su mayoria de co- roneles radicalnacionalistas y de ciertos abogados izquierdistas, estaba aconsejando al gobierno a que expropiara inmediatamente los bienes restantes de la IPC Como medio de recaudar mayores ingresos, muy nece- sitados, y para hacerle saber a otros inversionistas extranjeros que las demandas del nuevo r6gimen tenlan que ser aceptadas. Hacia fines de 1968 el gobierno acrecent6 su cam- pafia de propaganda contra la IPC, y it Comercio, diario de tendencia gubernamental, public6 una serie de a.rti- culos que criticaban a la compafiia. A mediados de enero el monopolio petrolero oficial --la EPF--unilateralmente rompi6 las negociaciones sobre el precio de los productos de petr6leo vendidos a trav?s del vasto sistema de distribuci6n y comercio de la IPC, exiai6 que la IPC pagara $14.4 mil.lones por esos produc- tos al precio promedio de $3.34 por barril y anunci6 que de no hater efectivo el pago se produciria la incau- taci6n y yenta de los bienes restantes de la compa?iia. Al propio tiempo se congelaron los fondos de la IPC y no se le permitieron gastos al contado sin el visto bueno de los oficiales militares designados por el tribu- nal que habian estado fiscalizando las operaciones de la IPC para proteger las reclamaciones de la EPF. Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 CPYRGHT Al apelar la IPC la acc16n de la EPF a fines de enero pasado, el gobierno asumi6 el control administra- tive del aparato de distribuci6n y de la parte de la. IPC en los campos de Lobitos, amenazando con vender en subasta pdblica todos los bienes de la compa?Sia, valorados en mas de $200 millones, si no se liquidaba la deuda de $14.4 millones antes del 5 de febrero. El procedimiento legal para estas acciones qued6 esta- blecido por decreto ley de 31 de diciembre, que exige el pago antes de la vista judicial. Estado Actual de la Querella El gobierno ha anunciado recientemente que la comparila le debe al estado ma's de $690 millones, que viene a ser, en realidad, el valor que el regimen le atribuye a todo el petr6leo extraldo por la IPC de los campos de La Brea y Parifias en los ultimos 45 afios de sus operaciones en el Peru. (Los campos fueron ad- quiridos por la IPC de una empresa britenica en 1924, y de acuerdo con la conces16n de fecha anterior a la Constituci6n del Peru, el titulo conlieva los derechos en el subsuelo. Al ser adoptada me.s tarde la Constitu- ci6n, esta reserv6 para el Estado todas las riquezas del subsuelo, pero no dict6 disposiciones para la so- luci6n de las tenencias privadas existentes de derechos del subsuelo. Sobre esa base los nacionalistas han ata- cado constantemente el titulo de la IPC al subsuelo.) En un discurso emotivo y nacionalista pronunciado ante el pals por radio y televisi6n el 6 de febrero, el Presidente Velasco manifest6 que su regimen ya habla iniciado los pasos para cobrar la deuda con el objeto de "cerrar definitivamente y para siempre este ignominioso capitulo en la historia del Peru". Aunque el general no precis6 las medidas que serian tomadas, era evidente que por lo menos todos los bienes de la IPC tendrIan que ser incautados para satis- facer la deuda, ya que su valor es algo menos que la mi- tad de la suma que la junta dice que se le debe al "pue- blo peruano". For tanto, no habria corapensac16n por los bienes expropiados el 9 de octubre. Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 -5- Sanciones de EE.UU.: La Enmienda y la Ley Azucarera Hickenlooper CPYRGHT A pesar de que las reclamaciones del gobierno peruano y la IPC hablan estado en conflicto desde hate mucho tiempo, el gobierno de los Estados Unidos no se habla visto envuelto directamente en el caso. Sin embargo, si se vio afectado inmediatamente por el decreto de expropiaci6n peruano a causa de la disposi- ci6n conocida como la Enmienda Hickenlooper y aprobada en 1962 de la ley norteamericana de ayuda al exterior. Esta ley dispone, fundamentalmente, que el gobier- no de los EE.UU. no podr6 conceder ayuda econdmica a passes extranjeros que expropien las tenencias de ciu- dadanos o empresas norteamericanas sin compensacibn justa o sin iniciar negociaciones que en el plazo de seas meses a partir de la incautaci6n prometan llegar a una compensacibn justa y honesta. La ley no rechaza el principio de expropiaci6n, derecho de soberania. de toda naci6n que por largo tiempo ha sido reconocido plenamente por los Estados Unidos, si refleJa la norma aceptada de derecho internacion al que hay que pagar la compensacibn. Es evidente que la ley fue aprobada con el objeto de impedir que el dinero pagado en calidad de impuestos por los ciudadanos norteamericanos sea entregado a otros passes que se posesionen de bienes norteamericanos sin pagar por ellos. La ley tiene plena aceptaci6n en los Estados Unidos. Es mas: los ciudadanos norteamericanos estun irritados porque despu6s de haber repartido mas de cien mil millones de d6lares en ayuda al extranjero desde la II Guerra Mundial--incluso un total de $550 millones al Peru--, algunos passes se creen ahora en condiciones de exigir que continue la ayuda, como cosa de derecho, mientras que proceden a la confiscaci6n de las propiedades norteamericanas sin compensacibn alguna. En su discurso por radio y televisi6n el Presidente Velasco se refiri6 a la "c6lebre y profundamente triste" Enmienda Hickenlooper, la cual dijo que esperaba no fuera aplicada al Peru y que fuera "descartada y ,jambs mencio- nada otra vez". Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 -6- CPYRGHT Esa disposici6n de la ley norteamericana, tal y como se aplica a la ayuda exterior, ser6 invocada el 4 de abril a no ser que el Peru tome medidas para solucionar el problema. El 4 de abril es exactamente seis meses despu6s del 4 de octubre, fecha en que qued6 anulado el contrato peruano-IPC conocido como el Acta de Talara. La confiscaci6n de los bienes de la IPC tambi6n produce en forma autom6tica el retiro del trato pre- ferencial extendido al Peru de acuerdo con otra ley de EE.UU., el Acta Azucarera de 1948. Dicha ley, cuya intenci6n era ofrecer un mercado estable para las na- ciones productoras de azucar y protegerlas de los capri- chos de las amplias fluctuaciones en los precios en el mercado azucarero mundial, instituye cuotas dentro de las cuales los palses productores de azucar pueden vender en Estados Unidos a un precio que actualmente sobrepasa con mucho al del mercado mundial ( 6.6 centa- vos contra 2 centavos de d6lar). El a?io pasado el volumen total de ventas peruanas en EE.UU. fue de 45 millones de d6lares, de cuyo total $33 millones equivalieron a un subsidio por encima de los precios del mercado mundial. Debido a que el azucar es uno de los principales productos del Peril, los eco- nomistas peruanos creep que la suspensi6n de la cuota por parte de los Estados Unidos puede arruinar la indus- tria azucarera y causar grave desempleo en esa naci6n. Esta suspensi6n ser6 efectiva el 9 de abril, seas meses despu6s de la expropiaci6n del 9 de octubre. Divisi6n en la Junta Con el aviso de la Junta hecho el 25 de anero que Velasco, quien tenia derecho a retirarse del Ej6rcito a fines de mes, permanecer6 en el cargo de Presidente, no se vislumbra en un futuro previsible un cambio a una linea official mas moderada. Sin embargo, existe una division entre los ultra- nacionalistas de Velasco y los moderados, cuyo portavoz, Ernesto Montagne, es primer ministro, ministro de Defensa y Comandante General del EjArcito. Este ultimo grupo cuenta con el apoyo, entre otros, de miembros de los es- tados mayores de Marina y Aviaci6n que est4n descontentos con el predominio del Ej6rcito en el regimen. Si dicho pprYiFa~~~aiq*3;j ~8~ete ueruano-norteamericanas. Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 CPYRGHT -7 Relaciones con la Un16n Sov16tica Para mayor complicaci6n de la situaci6n actual, el primero de febrero el Peru establec16 relaciones diplom&ticas con la Uni6n Sov16tica con jran publi- cidad y amplio apoyo de la prensa del pa s. El acon- tecimiento indic6 un reverso total de la actitud so- vi6tica hacia el golpe militar, al cual Izvestia se habia referido el 10 de octubre de 1968 como"otra operac16n gorila". El embajador sovi6tico en Chile, quien fue a Lima para el intercambio de notas diplomAticas, mani- festo que la URSS podria suministrarle al Peru maqui- naria y equipo para su industria petrolera, asi como equipo agricola pesado y aviones de pasaje. La Uni6n Sov16tica es el cuarto pals comunista con el cual la junta peruana ha establecido relaciones diplomAticas o comerciales en sus cinco meses de exis- tencia, ya que anteriormente tenla relaciones diplomA- ticas o comerciales con Rumania, Yugoeslavia y Checos- lovaquia. El inicio de relaciones con el Peru es la primera vez despu6s de la II Guerra Mundial que los sov16ticos han reconocido a un gobierno militar latinoamericano que lleg6 al poder por medio de un golpe. Los sov16ticos enviaron inmediatamente al Peru una misi6n comercial de cinco miembros con promesas de ayuda y asistencia t6cnica. No obstante los indicios que los funcionarios peruanos no estaban satisfechos con las ofertas sovieti- cas de ayuda y comercio, se suscribi6 el 17 de febrero un convenio comercial entre ambos palses. Los primeros informes indican que los sov16ticos le otorgar6n cr6ditos tanto al gobierno como a la empresa privada del Peru para la adquisici6n de maquinaria pesada en la Uni6n Sov16tica. Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 -8- CPYRGHT Otras Accirn es del Peru Entretanto, se produjo otro deterioro en las relaciones entre el Peru y los Estados Unidos a consecuancia que unidades navales peruanas abrieron fuego contra un pesquero norteamericano y capturaron a otro a mas de 50 millas de la costa peruana. El barco apresado fue puesto en libertad despu6s que pag6 una multa de $7000. Estados Unidos protest6 el incidente, ya que no reconoce--como casi todos los passes del mundo-- una reclamac16n, tal comp la del Peru, sobre los limites de aguas jurisdiccionales a 200 millas de la costa. La junta se ha dedicado actualmente a una campa?Sa por conquistar la solidaridad del Hemis- ferio en el caso de la IPC. Ha comenzado con la con- vocatoria de una conferencia en Lima de representantes diplomaticos peruanos ante todos los passes latinoame- ricanos para coordinar la acc16n diplom6tica y de pro- paganda contra los EE.UU. Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 CPYRGHT CPYRGHT ApprA6CrVdt1' 6Ies9e 199 0'8/24: CIA-R 8-03061A 0 009- 0 eizure r s r eru- . les By James Nelson Goodsell Latta America correspondent of seen as the most likely targets. The Christian Science Monitor Cerro has large holdings here. Its largest Lima, Peru activity is in the copper mining field and it is Peru's third largest taxpayer. One of its A major confrontation between Peru Mid subsidiary firms, erro a asco Company, the United States is developing in the wake has already lost 18 cattle ranches, expropri- of last week's total seizure, of a large United, -11 8-1 States oil firm here. Gen. Juan Velasco Alvarado came to power Although United States officials on the in last October's coup. scene and in Washington are seeking to. In this case, contrary to the situation with dampen the issue, there is a feeling here IPC, the lands are being paid for by govern- that relations between the two nations are ment bonds valued at $620,000 and redeem. worsening. able over 20 years. The government is also This feeling persists despite a statement paying $500,000 in case for installations and by Fernando Berckemeyer, the Peruvian $2.5 million for cattlei But some Cerro peo- Ambassador to Washington, that no addi- plc are not happy with the agreement. tional expropriations are expected. Here in Lima, the mood of the government seems Manager held less conciliatory and concern is widespread. Xerox has had financial and other prob- The American business community is lems for some mgnths. It recently was ac- clearly worried. So are businessmen from cured of violati g import laws and its other countries--West Germany,' England, local mahager, Len Ferric, was held in France, Australia. But the focus of Peruvian custody for some weeks until a court ab- nationalism is on the American firms, par- solved him and the company. But Gen. ticularly those which are large conglom- Armando Artola, Minister of Government, crates doing millions of dollars of business says he is dissatisfied with the court ruling yearly. and has ordered the case reopened. ITT, the parent company of the telephone l in u s listed firm, came under attack this past week In addition to the seized oil firm, the Inter- from El Comercio, one of Lima's leading national Petroleum Corporation, these firms. morning papers which led the strong ITT are the Cerro Corporation, the Peruvian morning papers which led the strong nation- Peruvian of the Xerox Corporation, and the' alist attack against IPC for nearly 10 years Peruvian Telephone Company, a subsidiary before its seizure last October. ITT officials of International Telephone and Telegraph have expressed concern over the develop- Company. Together, these firms represent ing situation in recent weeks. the largest single body of business taxpayers For its part, the Peruvian Government, in Peru. through a spokesman last week, said ITT One outcome of the current hassle is a operations "need to be looked into," adding Peruvian Government effort to step up trade that "a contract between ITT and the last and diplomatic relations with the Soviet government needs to be studied." Union and other East European nations. Re- This is part of the mounting nationalist lotions with Moscow were established last sentiment here. For years it was centered Saturday, following establishment of ties on the presence of IPC, the wholly owned with Yugoslavia, Romania, and Czechoslo- Peruvian subsidiary of Standard Oil Com- ~vakla earlier. pany (New Jersey) which for more than 40 President Nixon is bound by law to sus- pend all United States aid and other assist- years operated in Peru. In fact, its facilities ance to a nation which refuses to negotiate became the nation's principal source of on the expropriation of United States prop- petroleum products, serving both the local erty. This requirement, known as the Hick- and foreign. markets and winning praise for enlooper amendment, is part of the ,foreign its marketing setup. aid legislation passed by recent congresses. But the nationalist bent of many Peruvi- Under the arrangement, the United States ans worked against IPC. The case is an would also stop purchasing Peruvian sugar. Interesting one. United States economic aid to Peru last Last August, Peru's constitutional govern- year was $15 million, military . aid was $6 ment -worked out, an accord with IPC under million, and sugar purchases under quota which it turned over its important La Brea- were $45 million. Parifias oil fields to Peru, ceding also its This Inflow of some $70 million is impor- compressor plants, pipelines, tankage, and tant to an underdeveloped nation such as other producing facilities connected with Peru. But Peru's army generals ~ and the fields. The government for its part re- colonels, who took power last Oct. 3 depos- nounced any and all claims against IPC Ing the constitutional government of Fer- arising from the long-standing controversy nando Belaunde Terry, are not expected to The government also accorded IPC'% mar qW to by the threat of this cutoff. keting and refining activities the sanie status App Ir ;' tSiS` , page', 9B~i?/EI8/F atCIA-R4 iP O3064114(~ t @1~0~9~er could well spur them to move against other Peru's general petroleum aw., United States Investments. in Peru which But the solution lasted only briefly. When' CPYRGHT by the military on Oct. 3, the new govern- had e m r a had taken over ot7rratinn nf~ holh La Llt ca? h tt~nt tlt?clarec ' eQII'~ ' a ;recment Qpull and by n > tf yar JIta406020r009-8 ~~;Q~rArrct~~i~tarliaif+W~~~W/24 the Lti lima-Parings oil fields and IPC's Tatara refinery as well. The military leaders said any compensation for the seized property Would have to take into account the company's debt to the government. These alleged debts amount to more than the as- sessed value of the seized IPC property. IPC tried through the courts to get some redress. But its suits were thrown out on .the grounds that military law In this case holds precedence over constitutional provi- sions and all previous decrees. But IPC continued in business, purchas- Inc oil products from the state oil enter- CFI,I;I,1'; ",Cii (R P Fehrit?'ry 1o6.() son goo SC Latin America correspondent of The Christian Science Monitor Lima. Peru lo new trade R James Ncl r d II v CPYRGHTCPYRGHT Peru looks _ toward Soviet bloc Then, shortly after the first of the year, ,another claim against the comisany was made--the $15 million for the oil products purchased after fake-over. IPC said the sum was unrealistic and based on a price 'structure so high it would cause the com- pany to operate at a loss. EPF attached IPC's assets and bank ac= counts on Jan. 16 to collect the claim, pur suant to a decree law passed two weeks; before. The company was intervened the-, :same day and EPF agents moved into the offices. Then on Jan. 2$, company officials were removed and EPF took over'total op- erational management.: Y,; result of the military government's seizure of-the International Petroleum Corporation, the Peruvian subsidiary of Standard Oil Company (New argest foreign companies doing business here. but now is virtually complete, presenlst Washington with a serious policy dilemma. It gives President Nixon a problem even before he has worked out. his Latin-Amcri- can policy. New trade patterns sought Under the Hickenlooper amendment to the foreign-aid measure, the United States. is bound to cut off foreign aid and other assistance to a nation which takes over a United States-owned firm and fails to en- ter into negotiations to compensate the orig- inal owners. Peru has until early April to actually take such a step and while there is hope that some sort of accommodation can be worked out before then, the situa- tion is not too promising. Affected in addition to foreign aid would be Peru's sugar quota which earns $45 mil-, lion yearly in foreign currency, but which also is important because Peru, as a signa- tory to the world sugar agreement, can sell only about 60,000 tons of sugar on the; world market over and above what the' United States purchases. t I 11S et, sat tat a intsston will discuss With such a cutoff, the Peruvian military credit terms with "most favorable" interest leaders would be hard put to replace the rates and the possible export of Peruvian United States market. It may be that they products to the Soviet Union. are thinking ahead toward such an eventu. The visit, according to government spokes. ality and hoping that the Soviet Union Wmiid nten, is clearly in line with the govern- he willing to Purchase the sugar that tile meat's policy of diversifying Peru's mar. United Slates may reject. ets and reinforcing the country's foreign Certainly the mood within government ommerce. Tile rt~6ltlf?sdaFQiXl~i@t~~i~t$t41 ,99/08?24 : CIk~R[DP'll3-L01~1e?~t140A&20QQ9-8 tnitod States continne to snteriorate P. 4 pa erns, particularly with the Soviet 111"t.+.+ Peru's military leaders are looking to- ward the, Communist-bloc nations as poten- tial trading partners. Almost. from the moment they. seized power in early October of last year, the military indicated an interest in both diplo- matic and trade ties with the Soviet Union and other East European nations. But as relations with the United States have steadily worsened, .this trend has be- come more Insistent. Diplomatic ties were established with the Soviet Union Feb. 1, following the renewal of relations with Czechoslovakia, Romania, and Yugoslavia late last year. The trend reverses Peru's long-standing reluctance to do business with Soviet-bloc nations. And it apparently sterns from a growing readiness on the part of some Peru- vian business leaders, who support the mili- tary government, to look for new trade ties within the Communist world. To observers here, the situation reflects a change in Peruvian attitudes which could well affect other nations in the hemisphere. U.S. relations deteriorate A Soviet trade mission has arrived here and Gen. Edgardo Mercado, the Foreign t. NI t ? 'd I it iAplp,roved IPor;Rete'ase 1999/08/24: CIA-RDP78-03061 A000400020009-8 r i'"i''-).'nry 1966 CPYRGHT CPYRGHT scrambles tO patch dispute By James Nrlsnn Gondaeff Lnttn A?,erica correspondr,,t of f The ChrIstkn Science Rfonltor With United State elations worsening steadily# ashington is desperately try ng to find some solution to the risk caused by Peru's exproi riat.lon of vast oil properties be- onging to an American firm. It wants a solution which will mount to a fate-saving for both ides. But whether such a solution is ossible is a major question mark. There are some In Washington who feel the situa- inn has already rloteriorated eyoncl the point where face. giving corn he achieved. ebt nAat~rlyd One thing that hampers the e* Nixon administration is the ack of time to work out a co- rdinated Latin-American pot.' cy. Decisions on the Peru case re being made against a vac. tum in policy toward the West- rn Hemisphere. So for, Presi- ent Nixon has not tipped his and on what he hopes 'will be atin-American policy for his dntinistration, nor has he lamed his top advisers on Latin merica. The result is a major 'policy rists before Mr. Nixon nas a olicy. i The new administration, how. ver., is carrying on much as the' ohnson administration did dur- fig its final months in the case f Peru. The State Department,. f or example, said over the week ndthat it regretted a eruvian overnment statement i i tithe xpropriated International Pe.: oleum Company (IPC) ower Peru's military leader, which 'asserted the back debts against IPC, a subsidiary'of Standard Oil Company (New Jersey). The claim allegedly repre. Atnts the value of oil the corn- pony extracted during the 45 years it operated in Peru. if Fields seized Peru's military contends that the company's title to the oil fields was invalid-although in-' ternational arbitration, Peru's` Congress, and other Peruvian decisions had supported the validity of the claim. The title to the old La Brea Parings oil ftnlds was exchanged witli the former go) crnment, of Fernando t3 hu,nde Terry last August for, an operating concession. But the Peruvian military, shortly after ousting the consti- tutional Bela6nde government, seized the oil -fields and the Nearby Talara refinery, and subsequently took over the com- ,parry's remaining assets, includ. ing a vast distribution servici and the majority of Peru's gaso line stations. Amendment. rapped The State Department statg. 'ment read: "This development does not appear to be'leading to a resolution of the problem in accordance with . inter' national law." But the niceties of Interna- tional law do not appear to. bA eruvian worrying the Peruvian military leaders. General Velasco told "No person with a conscience, no people, no government, not even a court of law, can any longer support the despoliation of the natural resources of a generous people who have al. Wt,ys offered, and continue to offer generously, guarantees of law to foreign investors who came, are coming, and will come to live and work here honestly." General Velasco also threw a challenge at Washington on the so-called Hickenlooper amend. ment to the current Foreign As- sistance Act which provides for a cutoff in foreign aid and other 'assistance in case a country nationalizes American property without what is termed "prompt and adequate compensation." It is obvious that the Peruvian military has no intention of con. pensating for the IPC property since it says that IPC owes a whopping near-$700 million. Cutoff scheduled Under the Hickenlooper amendment, which General. Velasco called "celebrated and profoundly sad," foreign aid will be terminated April 9. This cutoff will include both actual foreign aid and such additional Items as Peru's lucrative sugar quota in the United States mar ket. Both the aid cutoff and the Sugar termination would be Seri- ous blows to the Peruvian econ- omy. 1 Approved For Release 1999/08/24 CIA-RDP78-03061A000400020009-8 25X1C10b Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8 Next 1 Page(s) In Document Exempt Approved For Release 1999/08/24: CIA-RDP78-03061A000400020009-8