CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A000600020001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 36
• Document Creation Date: December 16, 2016
• Document Release Date: March 17, 2005
• Sequence Number: 1
• Publication Date: July 28, 1955
• Content Type: SUMMARY

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CONFIDENTIAL
SCR
CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO. /?
OCI NO. 6456/55
28 July 1955
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CENTRAL INTELLIGENCE AGENCY
OFFICE OF CURRENT INTELLIGENCE
State Department review
completed
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
The Current Intelligence Weekly Summary has been prepared
primarily for the internal use of the Central Intelligence
Agency. It does not represent a complete coverage of all
current situations. Comments and conclusions represent
the immediate appraisal of the Office of Current Intelligence.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955
T H E W E E K I N B R I E F
OF IMMEDIATE INTEREST
PROSPECTS AFTER GENEVA . . . . . . . . . . . . . . . . . . Page 1
The general impression left by the Geneva talks is
that the Soviet leaders are relatively content with the
status quo and believe that time is on their side in the
long-term struggle with the West. The negative Soviet
attitude on German unity is unlikely to change in sub-
stance when Chancellor Adenauer visits Moscow, although
there may be some tactical offers on unification based
on German neutrality within a. security system. While
Moscow obviously decided that the time was not ripe for
demanding a multilateral Far Eastern conference it is
probably holding such a proposal in reserve.
TALKS BETWEEN AMERICAN
AND CHINESE AMBASSADORS . . . . . . . . . . . . . . . . . Page 2
In the talks between the American and Chinese Com-
munist ambassadors in Geneva, it would seem to Peiping's
interest to take a. conciliatory line on the question of
detained nationals in the hope of smoothing the way for
a discussion of larger issues such as Formosa.
Soviet Mid-1955 Economic Plan Report: The Soviet 1955
midyear pan report, issueir on 2]. July, indicates
that recent measures to improve the efficiency of
the Soviet economy have been generally effective.
The 1955 industrial goals, which were generally re-
vised upward last winter, will be more than met.
Agriculture continues to be the weakest sector and
to receive increasing support. The rate of improve-
ment in output of consumer goods will probably be
somewhat lower than last year. The announcement
confirmed the emphasis on heavy industry and agri-
culture evident in Soviet statements and releases,
since early this year.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955
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THE WEEK IN BRIEF
necessary to reassure the East German leaders and
their supporters, who fear they will be abandoned
Soviet Delegation to Geneva Visits East Berlin: Soviet
efforts to increase domestic -support or the East
German regime and to raise its prestige in the eyes
of the world are apparent in the stopover of Bul-
ga.nin and Khrushchev in Berlin after the summit con-
ference. Soviet leaders also probably-considered it
for the sake of unifying Germany.
Page 3
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Moscow May Be Studying Plans for "Free"' Elections in
Satellites: There are rumors o prepara ons or ree"
elections in the Eastern European Satellites. The
USSR may be planning some form of dramatic propa-
ganda. gesture in Eastern Europe intended to concili-
ate opinion not only in the West but to some extent
among the Satellite populations as well.
Philippines--Ma.gsaysa.y-Recto Feud: President Magsaysay's
public break. with Sena. tor to On 26 July shows he
now is ready to make a. more determined effort to lead
the Nacionalista Party and push for the adoption of
his own policies. Magsaysa.y announced that he would
not support Recto for re-election in November a.nd
would personally ca.mpa.ign against him if he is renomi-
nated. Recto will nevertheless be a, hard man to beat.
Situation Remains Tense in Vietnam: Partially as a, result
of the hostile rea.c ion to e 20 July riots against
the International Control Commission, Diem ha.s indi-
cated, in effect, that he is not unalterably opposed
to some sort of consultation with the Viet Minh re-
garding elections. The situation remains tense,
particularly in Saigon's residential section where
there has been a. series of terrorist attacks.
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28 July 1955
Negotiations
in Laos Make Little Progress: Prospects for
a settlement Between the Laotian government and the
Pathet Lao continue poor, despite the optimism of the
International Control Commission. Little progress
has been made in the current military and political
negotiations. Chinese Communist and Viet Minh propa-
ganda on Laos has become more belligerent in the past
two weeks.
Page 9
Cambodians Dissatisfied With Commission's Ruling on US Aid:
Cambodian officials have indicated dissatisfaction w th
the reservations in the resolution adopted by the Inter-
national Control Commission, although the commission
generally agrees that the US military aid program does
not conflict with the Geneva. accords. The Cambodian
premier has stated that unless the phraseology is
changed, his government will have no alternative but
to lodge a protest with the Geneva cochairmen.
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Indonesian Cabinet Crisis: Progress toward forming a new
Indonesian cabinet as thus far been characteristi-
cally slow. Aside from the usual difficulties arising
from Indonesia's multiple party system, the procedure
is complicated by the absence of President Sukarno and
the fact that the cabinet must have army approval.
Should cabinet negotiations require a month or more,
Indonesia's first national elections, now scheduled
for 29 September, may be delayed. Page
Pakistan Delays Adhering to Turkish-Iraqi Pact: Palestine's
formal adherence to the r is - raq cat may be con-
siderably delayed as a. result of the Karachi govern-
ment's failure to take immediate action after Prime
Minister Mohammad Ali's public announcement on 1 Jul
that Pakistan intended to join. Page 11
French North Africa: The French government has yet to de-
vise a formula. which would justify continued French
presence in the eyes of the North Africans, satisfy
the more reasonable of native aspirations, and make
it possible for the nations friendly to France to sup-
port its policy in the area.. New proposals for Tunisia
are expected when the French Council of the Republic
considers the French-Tunisian agreement early in August.
Action on the reform program for Algeria is not expected
before fall, and no immediate soli R"on is in sight for
the tense situation in Morocco. Page 12
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Tension Renewed Between Costa Rica and Nicaragua: Tension
has mounted between Costa ca and Nicaragua following
Nicaraguan charges against Costa Rica. President Somoza
accused Costa Rica in June of complicity in a new plot to
assassinate him and took measures against Costa Rican
citizens transiting Nicaragua. This led to bitter exchanges
between the two governments.
PATTERNS AND PERSPECTIVES
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STATUS OF KREMLIN CONTROL OF THE SATELLITES . . . . . . . Page 1
Moscow is faced with a dilemma in the Eastern European
Satellites arising from its efforts to end intimidation as a
means of control and obtain instead the voluntary co-operation
of the Satellite populations. These moves--which in effect
are an attempt to substitute more subtle for direct controls--
have been interpreted by the Satellite peoples as indicating
a weakening of Soviet controls and have whetted their desire
for concessions greater than the Kremlin has been willing to
make. Moscow must now choose between encouraging "voluntary"
co-operation while reducing the more obvious aspects of direct
controls, or abandoning present tentative efforts to govern
by consent. The Soviet leadership appears to believe that,
given sufficient time, a more satisfactor relationship with
the Satellites can be established. 25X1
;COMMUNIST CHINA'S FIRST FIVE-YEAR PLAN . . . . . . . . . . Page 3
Peiping appears confident, judging from the recently
released report on its first Five-Year Plan, of achieving
its. military and industrial aims for 1957. Barring further
agricultural disasters similar to those of 1954, these aims
can probably be reached. Soviet support and more intensive
austerity are said.to be essential for the success of the
plan. Peiping says that China's level of industrialization
will still be low by 1957, and that it will take 20 to 50
years for China to become a highly in ed state.
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28 July 1955
LATIN AMERICAN COMMUNISTS REWRITE PARTY PROGRAMS . .
. Page 9
Latin American Communists are rewriting their party
programs, using the Brazilian program as a model. The
programs concentrate their fire on US imperialism as the
chief enemy of the people, and seek to develop allies. among
"anti-Yankee" nationalist business elements. While the
Communists do not have good prospects of attaining their
political objectives in most countries, they may be able
to make significant gains in Brazil.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955
OF IMMEDIATE INTEREST
PROSPECTS AFTER GENEVA
Events at Geneva indicate
that the Soviet leaders are rel-
atively content with the status
quo and believe that time is on
their side in the long-term
struggle with the West. They
appear to be developing a for-
eign policy of conciliation
based on strength. The West
can now expect a prolonged peri-
od of relaxation, a series of
international meetings, the
lifting of some portions of the
iron curtain, less virulent
propaganda, and endless rounds
of visits and cocktail parties
with Soviet leaders.
Meanwhile, Moscow appears
confident that its economic
strength will grow and its mili-
tary position vis-a-visthe.West
will improve, particularly in
terms of air power and nuclear
weapons. It probably does not
believe it will have to make
any major substantive conces-
sions in order to maintain its
advantageous position.
The Soviet insistence that
German unity is impossible at
present and must await estab
lishment of a European security
system, admittedly. likely to be
slow in coming, quite accurate=
ly reflects Moscow's real views.
When Chancellor Adenauer gets
to Moscow, however, the USSR is
likely to make some new offers
on unification, still based on
German neutrality. within a se-
curity system, but accenting
more heavily the alleged Soviet
willingness to meet Western de-
mands for free elections. This
tactic will be designed to por-
tray Adenauer as an opponent of
unification and if possible
to undercut his strength with-
in West Germany.
While the USSR continued
to urge eventual establishment
of a comprehensive European se-
curity system, which would in-
volve the dissolution of NATO and
WEU, and gave no formal answer
to Eden's proposals for more
limited security arrangements,
Bulganin did express interest in
them, and press reports say that
privately Soviet officials have
shown. even greater interest.
This may indicate one of
the opportunities for progress
in the October talks. However,
while the West has insisted that
unification of Germany must
accompany any security arrange-
ments, Moscow probably views the
:.den proposals primarily as use-
ful preliminaries to a broad
security system which would pre-
cede unification.
While Soviet acceptance of
the President's proposal for
aerial inspection and exchange
of military blueprints was un-
likely, the caution of the So-
viet leaders in not immediately
rejecting the plan shows that
they wanted to avoid destroying
the atmosphere of the meeting
with any blunt rejection or
sharp criticism. Swedish Foreign
Ministry officials report that
Marshal Zhukov, presumably
after his return to Moscow, com-
mented that the Soviet disarma-
ment plan may not be bold enough.
The Soviet failure at
Geneva to insist on discussing
Far Eastern issues or to propose
a subsequent Far Eastern confer-
ence appears to have been moti-
vated simply by a desire to avoid
undermining the conciliatory
atmosphere by pressing an issue
on which disagreement with the
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955
United States seemed inevitable.
Another factor may have been the
Chinese Communist acceptance of
the American offer. to begin
direct talks at the ambassado-
rial level at Geneva-. Although
Peiping had previously called
for both direct talks and an in-.--
ternational conference, Moscow,
if not Peiping, may well have
judged that direct talks
TALKS BETWEEN AMERICAN
AND CHINESE AMBASSADORS
Peiping's representative
in the Geneva talks, scheduled
to begin on 1 August, will be
Wang Ping.=an, Chinese
Communist ambassador
to Poland. Wang, who
took part in talks
with Ambassador John-
son a year ago on the
question of detained
nationals, was a Chi-
nese Communist spokes-
man in Chungking and
Nanking after World
War II. He had an
important job in the
Ministry of Foreign
Affairs from 1949 to
1954..
There is no clear
indication of Chinese
Communist intentions
regarding the only
explicitly defined
topic for the Geneva
talks--"the repatria-
tion of civilians who
desire to return to
their respective coun-
tries..." There are
at least 40 American
civilians, in addition
to the 11 airmen of
the "spy" case, de-
tained in Communist
China, but very few
Chinese detained in
would be enough- for the time
being.
Soviet and Chinese comment
at the close of and following
the conference on the con-
tinuing urgency of Far Eastern
problems suggests that a propo-
sal for a new multilateral
conference is being held in
reserve,
the United States against their
will. Peiping may try to bar-
gain for the forcible return of
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955
the thousands of Chinese stu-
dents in the United States who
do not want to go to Communist
China.
It would seem to Peiping's
interest, however, to take a
conciliatory line on the ques-
tion of detained nationals in
the hope of smoothing the way
for discussion of larger ques-
tions. The Chinese Communists
have frequently stated their
wish to negotiate with the
United States about the Ameri-
can "occupation" of Formosa--
that is, the American commit-
ment to Formosa's defense and
the presence of American forces
in the area.
If approached on the con-
cept of a cease-fire in the
Formosa Straits., the Chinese
Communists at Geneva are ex-
pected to begin from their
frequently stated position
that this question is irrele-
vant, as Communist China is not
at war with the United States.
Peiping is also expected, how-
ever, to suggest that a de facto
cease-fire can continue so long
as satisfactory progress is
being made toward the solution
of problems the Chinese Commu- 25X1
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,: ~c :~' # s rk
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955,
Soviet Mid-1955
Economic an Report
The Soviet 1955 midyear
plan report, issued on 21 July,
indicates that recent measures
to improve the efficiency of
the Soviet economy have been
generally effective.
The 1955 industrial, goals,
which were generally revised
upward last winter, will be ex-
ceeded across the board. Agri-
culture, as expected, continues
to be the weakest link and to
receive increasing industrial
support. It appears that the
improvement in output of con-
sumer goods will be somewhat
less than last year. The an-
nouncement confirmed the em-
phasis on heavy industry and
agriculture evident in Soviet
propaganda since early this
year.
Apparently the nonagri-
cultural labor'force grew but
slightly in.the first six months
of 1955. In the postwar period,
failure to increase labor pro-
ductivity has been compensated
for by sizable above-plan ad-
ditions to the labor force.
These additions have been the
source of about half the in-
dustrial growth in this period.
This development was un-
doubtedly the basis for Bul-
gan:tn's clear implication on 4
July, before the central com-
mititee that in the future short-
falls in labor productivity
could not be compensated for
simply by adding more people
than planned to the industrial
labor force. The era of milking
agriculture of its surplus labor
to mieet Industrial production
goals has apparently come to an
end. Of the'315,000 young tech-
nicians graduated in the first
six months of 1955, 235,000--
INCREASE IN SOVIET LABOR PRODUCTIVITY
1955
Planned
Goals
1955
Estimated
Projection
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70 percent--were transferred to
agriculture.
The midyear report con-
firms previous announcements
that the goal for total in-
dustrial output of the original
Fifth Five-Year Plan (1951-1955)
was fulfilled eight months ahead
of schedule, on 1 May 1955.
This indicates that even the
new, higher 1955 goal announced
last February will be slightly
exceeded, and suggests that the
recent changes in organization
and planning and the emphasis
on introduction of new tech-
nology have resulted in in-
creased efficiency.
As for basic heavy in-
dustries, output of steel and
electric power continues to rise
at a rate sufficient to meet
the Five-Year Plan goals, in-
dicating that certain problems
facing these two industries at
the end of 1954 have been solved.
The rise in the rate of growth
of petroleum output from 12 per-
cent in 1954 to 19 percent in
the first half of 1955 suggests
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that the original plan may be
slightly overfulfilled. The
growth of coal output rose
from 8 percent last year to 12
percent in the first half of
this year.
The data on agriculture
repeat earlier announcements
that the sowing plan for both
corn, and wheat acreage has been
fulfilled. Areas sown in flax,
sugar beets, sunflowers, and
potatoes also increased by
amounts greater than last year's
gains. Livestock numbers, how-
ever, increased more slowly than
in 1954, and the number of hogs
actually remained the same as
on 1 July 1954. The delivery
of machinery and equipment to
agriculture continues to in-
crease rapidly and except for
row-crop tractors, grain-clean-
ing equipment, and tractor
drills, production was generally
above plan.
The data on consumer goods
production and retail trade in-
dicate that private consumption
will not grow as rapidly this
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955
year as last. Though remaining
substantial, growths in the pro-
.duction of manufactured con-
sumer goods and clothing are
off considerably from last
year's high gains. A slight
increase in the growth of food
production is insufficient to
offset this, with the result
that the gain in total produc-
tion of consumer goods has
lagged somewhat behind last
year's growth.
The announced 8-percent
increase in retail trade, a
sharp drop from the 1953 and
1954 figures, probably is less
than the normal growth of wage
payments. The inflationary
danger inherent in this sit-
uation may be offset, however,
by the increase in the state
loan and the failure to reduce
retail prices this year.
The volume of investment
increased 11 percent in com-
parison with the first half of
1954, but was reported as 7 per-
cent below plan. This surpris-
ingly large increase occurred
in the face of a 2-percent de-
crease below the 1954 level in
new allocations for investment
from the 1955 state budget.
Failure to utilize a fairly
large proportion of the invest-
ment funds last year and signifi-
cant economies achieved through
organizational and technical
measures probably explain this
apparent contradiction.
Soviet Delegation to Geneva
Visits as er n
Soviet efforts to increase
domestic support for the East
German regime and raise its
prestige in the eyes of the
world are apparent in the stop-
over of Bulganin and Khrushchev
in Berlin after the summit con-
ference. Soviet leaders also
probably considered it necessary
to reassure the East German
leaders and their supporters,
who fear since the recent con-
PART II
Investment in heavy in-
dustry apparently accounted for
the bulk of the increase, with
investment in light industry re-
maining at approximately last
year's level. Investment in
agriculture and transportation
is reported to have increased,
but precise data are not avail-
able.
Labor productivity in in-
dustry met the revised plan by
increasing 7 percent in the first
six months of 1955. The 10-per-
cent increase in labor produc-
tivity in construction is a
marked improvement compared to
the increases of 4 and 8 percent
in ].953 and 1954 respectively.
This, together with sizable in-
creases in actual construction,
shows that the extensive shake-
up of the building industry, be-
gun in August 1954, has been ef-
fective.
The rates of increase in
labor productivity are not, how-
ever, sufficient to meet the
cumulative 1955 goals. If the
growth rates of the first six
months are maintained for the
rest of the year, industrial
labor productivity will have
increased 42 percent and con,-
struction labor productivity
45 percent for the 1951-55
period, compared with originally
planned increases of 50 and 55
percent respectively.
dilatory Soviet gestures toward
the West that they will be aban-
doned for the sake of unifying
Germany.
On his arrival in East
Berlin on 24. July, Bulganin drew
particular attention to the
"sovereign" status of the German
Democratic Republic and its
"equality" with West Germany.
ire repeated the view that the
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German unity question can be
solved only through the partici-
pation of the German-people
themselves.
Bulganin said that the East
and West German regimes should
share in negotiations on unity,
but that this goal could be
achieved only if West Germany
withdrew from NATO and canceled
its adherence to the Paris agree=
ments. He also repeated the So-
viet position that German re-
unification must await the
formation of a European security
pact as proposed by the Kremlin.
Cognizant of the consuming
desire of the East German people
for reunification, the Soviet
leaders may have wished to stress
that this could be achieved
only if the people supported
the present East German regime,
which will be the one to negoti-
ate with the West German republic:.
The Soviet visitors used
the occasion to tour 'the coun-
try, making frequent public
appearances in the company of
East German officials. While
publicly demonstrating con-
fidence in the government, the
Moscow May Be Studying Plans For
'rFree" E ections in Satellites
Some of the Eastern European
Satellite governments are al-
legedly preparing to hol-d "free
elections" in the not-too-distant
future. Although reports of
such activities are to date lit-
tle more than rumor, changes al-
ready evident in Soviet-Satellite
relationships apparently are
scheduled to continue (see Part
III, p. 1), and Moscow may be
planning some form of dramatic
propaganda gesture in Eastern
Europe in order to impress the
PART II
Russians had an opportunity
.to observe conditions within
the country. Soviet leaders
have no doubt been disturbed
by the unrest and dissatisfac-
tion prevalent in East .Germany
and must regard this problem
as one of first importance in
the Satellites.
The unexplained absence of
party first, secretary Ulbricht
and Deputy Premier Rau was a
conspicuous feature of all the
public appearances of the So-
viet leaders. These two top
Communists would ordinarily
have been on hand for such
important occasions.
It is strange that
Ulbrricht, who has been con-
sidered to be the "strong man"
of 'East Germany, would be
relegated to the background
while the Russian and East
German leaders firmed their
plans for dealing with the
question of unity. He may be
ill or on vacation. Ulbricht
went on an unpublicized vaca-
tion in the Soviet Union at
about this time last year.
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West and to a lesser extent the
Satellite populations themselves.
The Soviet Union has made
it perfectly clear that it does
not wish to be "pushed" in its
relations with the Satellites.
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28 July 195
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301
301
The USSR probably has never-
contemplated holding free elec-
tions in the Western-sense-of
the term. It could, however, use
the parties participating in the
various national fronts to give
a democratic facade to elections.
On 10 July a London daily
carried
rnat oscow, in or er to pave
the way for ostensibly-free-
elections in the Satellites,
has ordered various prewar and
postwar leaders and-secondary
figures released from prison.
They would presumably;
The release and rehabilita-
tion of political prisoners has
been a recurring Satellite-wide
phenomenon for some time, and
appeared to.be one facet of the
general "liberalization" program
initiated in 1953. Some of these
rehabilitated figures were used
to bolster the national fronts
during the 1954 elections in
Czechoslovakia and Hungary.
More recent developments
include a wave of releases of
former opposition leaders in
Bulgaria, and the apparent
freeaipig this year 'of a number of
secondary leaders in Rumania.
X f such men are convinced--
as many of, thgm 'Apparently have
been--that they must work for
the regimes,"they might serve
a useful purpose for the regimes
during "free" elections.
Any "free" elections planned
by the Communist parties would
pre#;ent no danger of election
upsets. The positive' propaganda
effect domestically, moreover,
would probably be limited large-
ly to non-Communists already pre-
disposed to co-operate with the
regimes. The general popula-
tioEL, which might interpret any
broadening of-elections as a
possible sign of weakness or
of a, genuine loosening of So-
viet controls, might be en-
couraged to demand real con-
cessions.
As a Soviet "conciliatory"
gesture aimed at the West,
the holding of "free" elections
might prove effective in con-
vincing many in the West that
this represented a significant
departure from previous policy-
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28 July 1955
Philippines--
Magsaysay-Recto Feud
Philippine president
Magsaysay's public break with
Senator Recto on 26 July shows
that he now is ready to make a
more determined effort to lead
the Nacionalista Party and push
for the adoption of his own
policies.
Recto leads the ultrana-
tionalist faction of the
Nacionalista Party which
accepted Magsaysay as its
presidential candidate in 1953
because of his immense popular-
ity. Party wheel horses, how-
ever, believed that he would
be a mere figurehead and that
they would determine policy.
Magsaysay readily accepted
Recto's support during the
election campaign and repeatedly
deferred to him during the
early weeks of his administra-
tion. Although the president
soon became aware that his
policies were jeopardized by
Recto's ambition for party
leadership, he had hitherto
failed to take a determined
stand against the senator.
Magsaysay's pro-American
foreign policy has been the
Situation Remains Tense
In Vietnam
The South Vietnam govern-
ment has not been conspicuously
successful in its efforts to
offset the adverse reaction to
the Saigon riots of 20 July
directed against the Inter-
national Control Commission.
The situation remains tense,
particularly in Saigon's resi-
dential. section, where there
has been a series of terrorist
attacks.
basic issue in the struggle
between the two men. This
week's break was precipitated
by Recto's charge that the
Philippine recognition of South
Vietnam on 15 July was dictated
by the United States.
The feud between the two
men is not over. Recto claims
Magsaysay cannot prevent his
running for re-election, imply-
ing that he will fight to stay
in the Nacionalista Party and
run on the party ticket. How-
ever, a report is already cir-
culating that Recto is consider-
ing joining forces with several
Liberal Party leaders to form
a new party.
Recto has always attracted
a great deal of publicity and
his name is one of the best
known in the Philippines. He
is an astute politician and
probably has kept his political
fences well mended. He is
almost certain to seek re-
election in November, and
whether he runs as a Nacion-
alista or as the leader of a
new party, he will be difficult
to defeat.
On 21 July, Premier Diem,
aware that his government had
suffered a setback as a re-
sult of the rioting, publicly
expressed regret, promised
compensation for losses, and
gave assurances that action
was being taken to prevent
any recurrence,
The next day, a government
communique denied that the
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28 July 1955
demonstrations had been directed
against the commission. Diem
has indicated that he is willing
for the commission to maintain
its headquarters in Saigon,
although Vietnamese officials
had previously indicated it
should move to Dalat.
These measures have thus
far failed to achieve positive
results. It is the unanimous
opinion of the commission dele-
gates and their military ad-
visers that the Diem government
is fully responsible for what
happened, apologies and denials
notwithstanding. They also
note that the press, heavily
censored by the government,
remains highly critical of the
commission. The commission
has decided to remain in
Saigon, not because of Diem's
new attitude, but to avoid giving
the appearance of succumbing
to mob pressure.
The commission's position
is viewed with sympathy in
London, Paris, and New Delhi.
The upshot has been that addi-
tional pressure has been placed
.on Diem to enter into some sort
of consultations with the Viet
Minh regarding elections.
Apparently in response to
this pressure, Diem has, in
effect, indicated that he is
not unalterably opposed to con-
sultation. He has requested
advice from the United States
as to how to handle the letter
sent him--via French channels--
by Vice Premier Pham Van Dong
of North Vietnam requesting
the appointment of representa-
tives to conduct pre-election
negotiations. A press report,
quoting high-level sources,
states that Diem will insist
that the Viet Minh release all
Vietnamese military prisoners
and allow free movement of
refugees to the south before
considering the appointment
of representatives for con-
sultations.
The Saigon press, which
heretofore has made no effort
to conceal the government's
hostility toward talks with
the Viet Minh, appears to be
taking a new line. It is
repeating the theme that the
south is not opposed to elec-
tions, but insists that they
be genuinely free. One paper
points out that where Vietnamese
have been free to express their
feelings without fear, they have
rejected Communism, and cites
the anti-Communist sentiment
prevalent in areas recently'
freed from Viet Minh control.
There have been reports
that Viet Minh representatives
have been discussing the elec-
tion question with Bao Dai, and
Dont''s letter to Diem was also
addressed to the "chief of
state"--Bao Dai. In 1945, Bao
Tsai served as "supreme counselor"
to the Viet Minh.
Communist propaganda from
Hanoi and Peiping continues its
tough tone. A recent Hanoi
broadcast commenting on the riots
repeats the accusation that they
were a device to sabotage the
Geneva agreements and warns that
"this dictatorial regime, sub-
servient to the warmongers,
.will be the cause of worse re-
sults...."
The situation in Saigon
remains tense because of a series
of well-executed terrorist inci-
dents in the residential section.
The main targets of these attacks
have been electrical and tele-
phonic facilities.
by police or army countermeasures,
a continuation of this activity
will make it extremely difficult
for most of the European popula-
tion to remain in Saigon.
While the dissident Binh
Xuyen is generally regarded as
responsible, involvement of Commu-
nists is a strong possibility in
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28 July 1955
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view of recent reports of their
efforts to infiltrate the Binh
Xuyen, In addition, suspicion
has been voiced in Saigon
that unofficial French elements
may have been behind these dis-
25X1
Negotiations'in Laos
Make Little egress
The prospects for a set-
tlement between the Laotian
government and the Pathet Lao
continue poor, despite the
optimism of the International
Control Commission in Laos.
Little progress has been
made thus far in the current
military and political nego-
tiations. Moreover, Chinese
Communist and Viet Minh prop-
aganda on Laos has become more
belligerent in the past two
weeks.
The present optimism of
the Indian and Canadian mem-
bers of the control commission
is based on the fact that an
agenda for political talks has
been agreed on, and apparently
also on the assumption that the
Pathet Lao genuinely desires
peaceful integration into the
national community. Actually,
agreement on the agenda was
possible only because the gov-
ernment accepted Indian and
Canadian advice to give in to
the Pathet demand that elections
be the first order of business.
The government had pre-
viously insisted that control
over the disputed provinces of
Saw Neua and Phong Saly be the'
first item. The Pathet Lao is
now presenting its case on elec-
tions and there is every indi-
cation that discussions on this
problem will be protracted.
Military negotiations on
the disposition of opposing
forces in the Muong Peun area
,of Sam Neua Province are also
stalled. The Pathet Lao is
insisting on keeping its pres-
ent positions, while the gov-
erninent is pressing for an ar-
rangement which would secure
communications between its
Muonng Peun garrison and neigh-
boring Xieng Khouang Province.
There is little reason to
believe that the Pathet Lao and
its Viet Minh advisers are ne-
gotLating in good faith. The
Communists are unlikely to re-
linquish their control of the
disputed provinces unless they
can obtain in exchange a strong
position in the rest of the
country.
In the past two weeks,
Chinese and Viet Minh propaganda
regarding Laos has hardened.
The United States is accused
of having instigated the recent
government "attack"--which was
in fact a counterattack--on the
Pathet Lao at Muong Peun. Com-
munist propaganda charges that
"sinister American maneuvers"
in Laos threaten to "rekindle
the flames of war in Indochina."
4
While this propaganda cam-
paign'may be laying the ground-
work to justify the use of vio-
lence, its immediate objective
appears to be to back up Commu-
nist political demands.
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28 July 1955
Cambodians Dissatisf:ie4 With
Cambodian officials have
indicated dissatisfaction with
the reservations-in the resolu-
tion adopted by the Intc;rna-
tional Control Commission which
generally agrees that the
American military aid program
does not 'conflict with the
Geneva accords.
The Cambodians object to
the resolution, which has not
yet been published, because it
implies that there are lingering
doubts as to the validity of the
aid agreement under the Geneva
accords The Cambodian'premier
has stated that unless the
phraseology, is changed.,, his
government'-will, have, no.alter-
native but to lodge a,protest
with the cochairmen of the 1954
Geneva conference.
The premier has promised,
however, first to seek a com-.
promise.with the Indian chair-
man of the commission.
The outcome of these nego-
tiations is very much in doubt.
The Indian official is in a
particularly difficult position
as his government is anxious to
maintain and extend its influence
in Cambodia while at the same
time to avoid antagonizing
either Communist Chula or the
Viet Minh. The final decision,
therefore, again rests with
New Delhi, where opinion seems
to be in favor of going ahead
with publication of the reso-
lution.
Indonesian Cabinet Crisis
Progress toward forming
a new Indonesian cabinet has
thus far been characteristically
slow. Aside from the usual
di_ff1.c'Oties arising from Indo-
Even if the resolution
problem is settled by mutual
agreement, implementation of
plans to publish the back-
ground material is bound to
draw a strong Cambodian pro-
test. Included among these
documents is the commission's
letter of 5 July to the Cam-
bodian government specifying
the doubts concerning the aid
agreement.
Prince Sihanouk
was named chief of army opera-
tions on 25 July. Sihanouk
would be, in effect, commander
in chief of the Cambodian
security system and in a posi-
tiord to control the country
through the police as well as
the army. His appointment, if
confirmed, would be an effort
on his part to ensure an over-
whelming victory for his
followers in the 11 September
elections.
nesia's multiple party system,
the procedure is complicated by
the absence of President Sukarno
and the fact that'the cabinet
must have army approval.
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28 July 1955
Vice President Hatta ac-
cepted Prime Minister.Ali's
resignation on 24 July. He
will complete conferences with
the 20 parliamentary-parties
and factions about 29 July and
hopes to be able to name a cabi-
net formateur by that time.
Action may be delayed, however,
until Sukarno returns from his
pilgrimage to Mecca on 4 August.
Meanwhile, the Ali cabinet re-
mains in office on a caretaker
basis.
The army leaders primarily
responsible for the cabinet
collapse are reported-to have
informed all parties that the
formation of a. new cabinet will
not in itself solve the army
crisis. The army is expected
to press for guarantees from
the 'new government on future
army policy, particularly with
regard to organization and
training. It will also seek
a clear understanding on the
extent to which politics will
influence the military estab-
lishment.
Hatta and Sukarno are
expected to work for the forma-
tion of the usual parliamentary
cabinet, despite pressure from
the Masjumi and other opposition
parties for a "presidential
cabinet" appointed by the
president and responsible to
parliament. There is'no con-
stitutional basis for such a
"presidential cabinet" and
the formation of one would
Pakistan Delays Adhering
To Turkish-Iraqi act
Pakistan's formal adherence
to the Turkish-Iraqi pact may
be considerably delayed as a
result of the Karachi govern-
ment's failure to take immedi-
ate action after Prime Minister
require either parliamentary
authorization or an executive
decree, neither of which is
likely. until other efforts have
been exhausted.
The formation of a cabinet
has always been a lengthy pro-
cedure in Indonesia. Negotia-
tions for the country's four
previous cabinets took from
five to ten weeks. With elec-
tions close at hand, however,
agreement may be reached this
time with less difficulty than
usual. It is also likely that,
in an effort to expedite matters
and avoid party jealousies, as
many parties as possible will
be invited to join the govern-
ment; .
If the cabinet negotiations
do require a month or more,
Indonesia's first national elec-
tions, now scheduled for 29
September, may be delayed. The
government is highly centralized
and the formation of a new
cabinet is usually accompanied
by the cessation of all but
routine activity. In addition,
the Ali government, faced with
the prospect that another cabinet
will be in charge of supervising
the elections, will have little
incentive to press election prep-
arations. The incoming re-
gime will also probably wish
to inspect the electoral macbin-
ery before proceedin with
election plans.
Mohammad Ali Is public announcement
on ]L July that Pakistan intended
to ;join. By not acting before the
newly elected Pakistani Con-
'stituent Assembly met on 7 July,
the government lost its best
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28 July 1955
opportunity to adhere to the
pact without opposition from
dissident politicians.
Opposition deputies in
the assembly are now likely to
demand either that Pakistan not
join at all or that the assembly
be asked for its approval. Since
the government's control of the
assembly is still shaky, it
may be unable to obtain quick
ratification of the pact.
The principal factor com-
plicating the situation is the
possibility that Governor Gener-
The French government has
yet to devise a formula which
would justify continued French
presence in the eyes of the North
Africans, satisfy the more rea-
sonable of native aspirations,
and make it possible for the
nations friendly to France to
support its policy in the area.
The two immediate problems
in Tunisia deal with the econ-
omy an a new constitution.
Proposals to solve these is-
sues probably will not be an-
nounced until the French Coun-
cil of the Republic considers
the French-Tunisian Agreement
early in August. Meanwhile,
repercussions from the Moroccan
disorders took the form of a
series of relatively minor in-
cidents. Immediate and firm
police measures should reduce
the possibility of serious dis-
orders in Tunisia.
The French governor general
in Algeria recently expressed
confidence that the rebel ef-
fort has been so weakened that
the French would shortly have
al Ghulam Mohammad may die at
any moment. This is encouraging
politicians such as Awami League
leader H. Suhrawardy to bargain
for high posts in the government
as the price of their parties'
continued support of the Moslem
League. If the governor general
should die and these leaders not
be satisfied, there might be a
shift in the relationships of
the major parties in the assem-
bly, and the Moslem League might
have to.seek to form a majority
by alliance with a number of 25X1
independents and minor party
groups.
the situation in hand. The
American diplomatic agent be-
lievies, however, that this
would mean only the establish-
ment of comparative calm, not a
solution of the Algerian problem.
On the other hand, the letup in
rebel activity may be a maneuver
rather than the results of
French military repression.
The French National Assem-
bly now plans to discuss the
Algerian situation on 28 and
29 July, when it will consider
giving the government decree
powers to extend the state of
emergency beyond October, cre-
ating a fourth Algerian depart-
ment with headquarters at Bone,
and approving some administra-
tive reforms.
The most controversial
measures of Governor General
Soustelle's Algerian reform
program have been strongly
opposed by the French settlers.
These! measures, considered
essential to alleviate the
unrest among Algerian Moslems,
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would remove the Moslem reli-
gion from state control, teach
Arabic in state schools, and
progressively extend local self-
government.
The proposals will first
be considered by the Algerian
Assembly, which convenes at the
end of September, where they
are expected to be defeated.
Subsequent passage by the
National Assembly in Paris is,
however, hoped for. This de-
lay in a program which was
first announced last December
will prolong the high tension.
In Morocco, Resident Gen-
eral Grann vaITs tour of the
principal cities was broken
off at Meknes when Moroccan
nationalist-inspired demonstra-
tions in favor of the deposed
sultan, Mohamed ben Youssef,
and welcoming Grandval resulted
in bloodshed in both Marrakech
and Meknes.
Grandval's.third stop was
to have been Fez, the Moroccan
Tension Renewed Between
Costa Rica and Nicaragua
Tension has mounted be-
tween Costa Rica and Nicaragua
following Nicaraguan charges
against Costa Rica. President
Somoza accused Costa Rica in
June of complicity in a new
plot to assassinate him and,
took measures against Costa.
Rican citizens transiting
Nicaragua. This led to bitter
exchanges between the two gov-
ernments.
The work of the Commission
on Investigation and Concilia-
tion, set up by the Council of
the Organization of American
States after the abortive
religious center, where tensions
are particularly high with the
approaching religious festival
of Aid-el-Kebir, which will be
celebrated this week end. French
residents in Morocco, most of
whom are apprehensive over what
policy Grandval may propose,
may even have provoked the
incidents at Meknes and Marrakech
in order to impress Grandval with
the undesirability of granting
concessions to the Moroccans.
Despite Gr-.andval's reported
assertion that Paris is not con-
sidering restoration of Ben
You.ssef to the throne, rumors
are circulating that he will be
brought back before the week-
end's festivities. Without the
return of Ben Youssef, which is
the basic demand of Moroccan
nationalists, this important
religious holiday will again be
a period of mourning and possi-
bly of widespread serious dis-
orders.
25X1
Nicaraguan-backed rebel invasion
of Costa Rica last January,
mitigates but does not eliminate
the danger of a serious crisis.
Thee-commission secured conces-
sions from both governments on
21 July, including a promise to
continue negotiation of a treaty
designed to guarantee each coun-
try against revolutionary or
terroristic acts originating in
the other.
The internal situation in
Nicaragua could lead to further
incidents. Somoza, strong man
of Nicaragua since 1934, is
preparing to succeed himself
in elections set for November
1956.
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28 July 1955
STATUS OF KREMLIN CONTROL OF THE SATELLITES
Moscow is faced with a
dilemma in the Eastern European
Satellites caused by its efforts
to end intimidation as a means
of control and obtain instead
the voluntary co-operation of
the Satellite populations.
These moves--which in effect are
an attempt to substitute more
subtle for direct controls--
have been interpreted by the
Satellite peoples as indicating
a weakening of Soviet controls
and have only whetted their de-
sires for concessions greater
than the Kremlin has been will-
ing to make.
After World War II, the
Kremlin sought to develop
through force and intimidation
all the means necessary to pre-
vent any Satellite regime from
slipping the Soviet yoke and to
preserve the Communist People's
Democracies against possible
overthrow by their dissident
populations. Control was gained,
however, only at the expense of
the good will and co-operation
of the Satellite populations
and the stifling of initiative
among local Communist leaders.
Furthermore, the USSR failed
to obtain the economic and po-
litical benefits which it ex-
pected from its domination of
the Satellites.
After Stalin died, Moscow
began to move away from intimi-
dation and sought to develop
active support for the Communist
regimes among the Satellite
populations by appealing to
their self-interests and--par-
ticularly in Hungary and Poland
--to their strong nationalist
sentiments.
During 1953 and 1954, the
drive toward the traditional
goals of rapid industrialization
socialization of agriculture,
and elimination of "class
enemies" was temporarily shelved.
Through this "new course", the
Soviet leaders attempted to
rectify the growing economic
imbalances which had lowered
living standards and led to
greater popular resistance.
To grant the Satellites an
appearance of a greater degree
of control over their own in-
ternal affairs, the Kremlin
ostentatiously withdrew its
outstanding reparations claims
and sold back to various Satel-
lite regimes its interest in
most of the Soviet-Satellite
joint companies. It condoned
the tailoring of Soviet direc-
tives to fit the particular
conditions within each Satel-
lite. The Satellite regimes
were also directed to attempt
to improve trade and diplomatic
relations with the non-Commu-
nist world.
The Kremlin has, however,
strengthened its hold over
Eastern Europe in less obvious
ways, Since July 1953, the
USSR has replaced its ambas-
sadors to most of the Satellites
with men who have had extensive
experience in party or govern-
ment administration, and who
are presumably better qualified
than Foreign Ministry special-
ists to serve as channels of
Soviet control.
The joint Soviet-Satellite
military command established
at the Warsaw conference on 14
May 1955 was apparently set up
primarily as a bargaining in-
strument to obtain the dis-
solution of NATO. It can be
used, however, to legalize the
extension of Soviet occupation
of ::astern Europe while creating
the appearance of increased
Satellite sovereignty.
The increasing integration
of the long-range economic plans
of the Soviet Union and the
Satellites will ultimately place
the Satellite economies more
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28 July 1955
effectively under. Moscow's ,
control than heretofore by re-
ducing their self-sufficiency
and tying their production plans
more. directly to the over-all
Soviet bloc program.
There are a number of steps
the USSR can take to further
the semblance of Satellite in-
dependence without actually
weakening its control. For ex-
ample, the Cominform, long a
symbol of Soviet domination-but
never in fact an instrument of
control, could be abolished
without cost to the USSR. The
USSR could also withdraw some
of its troops from Hungary and
Rumania without either compro-
mising its control over these
Satellites or prejudicing its
military position vis-a-vis
.Western Europe.
Gestures made since Stalin"s
death toward "liberalization"
of economic and political pro-
grams, however, have not had
the desired effect. Elements
within some of the Satellite
Communist parties--and particu-
larly in the Hungarian party--
seized on the Kremlin's recogni-
tion of the right of individual
states to a-dapt Soviet experi-
ence+ to local conditions. This
resulted'in policies at odds
with the traditional Soviet
policy and in a serious loss
of party discipline in Hungary.
The realization in Moscow
that a continuation of this
trend could not be tolerated
was at least partially respon-
sible for Malenkov's demotion in
February 1955 and Hungarian
premier Nagy's ouster in March.
Kremlin leaders have since modi-
fied their manner of implement-
ing this policy in order to re-
emphasize the traditional goals,
to tighten discipline within
the parties, and to prevent
further local deviations from
the Moscow line. The Kremlin
probably considered this es-
pecially necessary prior to
any dramatic gestures toward
Tito's Yugoslavia, There has
been no return, however, to the
coercive tactics typical of the
Stalinist period.
The rapidly unfolding Soviet
diplomatic offensive of the past
few months has aggravated Mos-
cow's problems in Eastern Europe.
The reaction of the Satellite
people and party members to
Soviet diplomatic moves has
faced the Kremlin with the possi-
bility that it might have to use
force to maintain control. This,,
of course, would vitiate its of -
forts to ease international ten-
sions and gain sympathy for So-
viet policies.
Moscow's signature of the.
Austrian state treaty raised ex-
travagant hopes among the Ru-
manians and Hungarians for the
early withdrawal of Soviet troops.
The widespread expectation among
the Satellite populations that
the West would demand a con-
sideration of the status of the
Satellites at the summit meet-
ing gave rise to wild rumors
and speculation that unpopular
local officials would be purged,
that free elections would be
held, and that the Satellites
wou:td be granted a neutral status.
Local Communist leaders in
the Satellites, particularly.at
the lower levels, have also been
confused by the rapid shifts in
policy. The Soviet recognition
of the validity of the Titoist
variant of Socialism has ag-
gravated the problem of dis-
cipline within the ranks of the
various Communist parties. Some
top-level leaders are probably
not only confused but fearful,
especially since they have been
closely identified with strong
anti-Tito policies, which now
appear to be proscribed.
Soviet leaders are extremely.
sensitive to this reaction and
are taking strong measures to
counter it. They took a firm
stand against considering the
status of the Satellites at the
four-power conference. Most of
the Satellite regimes are, under
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28 July 1955
Kremlin direction, undertaking
campaigns to strengthen labor
discipline and heighten vigi-
lance against both internal and
external enemies. They are
increasing their efforts to
convince the populations that
the United States is interfering
in internal Eastern European af-
fairs through subversive tactics.
The cautious publicity
given in the Satellites to
Khrushchev's acceptance of the
Titoistalternative to the So-
viet road to Socialism indicates
that the Soviet leaders realize
that this recognition must be
carefully circumscribed in the
Satellites lest it encourage
nationalist deviation within
the Satellite parties. At the
same time, however, they must
gain consistent Satellite sup-
port for their new Yugoslav
policy in order to solidify
whatever success they have gained
in their appeal to Tito for a
genuine rapprochement. This
has again raised the problem for
the Kremlin of how to ensure
Satellite compliance without ex-
posing the naked machinery of
Soviet domination.
The Soviet leaders probably
believe that given sufficient
time they can establish a more
satisfactory relationship with
the Satellites. During their
talks with Tito in early June,
Soviet leaders reportedly claimed
that there would be a change in
their policy toward the Satel-
lites, but that time would be
needed for this.
25X1
COMMUNIST CHINA'S FIRST FIVE-YEAR PLAN
Peiping has announced for
the first time the main details
of its first Five-Year Plan. It
was begun two and a half years
ago but the final draft was
completed only last February.
The announcement discloses that
Peiping is generally adhering to
its previously announced ambi-
tious industrialization goals
while reducing agricultural
targets.
The,regime appears confident
of achieving its goals for mili-
tary and industrial development.
Barring further agricultural dis-
asters similar to those of 1954,
these aims can probably be
reached.
Peiping is placing greater
emphasis on austerity and is
temporarily showing the trend to-
ward socialization in agriculture
and retail trade in order to
stimulate production incentive.
The Five-Year Plan report
acknowledges the importance of
material and technical aid from
the USSR, which has assumed
responsibility for the construc-
tion of 156 large industrial
projects described as the core
of the industrial construction
program. The report reasserts
China's determination to-achieve
a socialist society on the Soviet
pattern in three Five-Year Plans
and to become a highly indus-
trialized country in 40 to 50
years, but says that by 1957 the
level of industrialization will
still lag far behind that of
Japan.
Capital investments--addi-
tions to fixed assets--from 1953
through 1957 are to total $18.3
billion. This is more than 10
percent of the gross national
product during the period, a high
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figure for a country with China's
low standard of living. The
rate of investments is to rise
as the plan progresses; 68 per-
cent of construction work is
scheduled for the last three
years of the plan.
COMMUNIST CHINA
Major Heavy-Industrial Construction
Under-, First Five-Year Plan
A
(>'.tHR t~AC:HiNEk'i ( ~-' i n: t'i?;M
MOTOE fEEiiCLE 0! 4 TRACTOR
The $18.3 billion .(con-
verted at the current exchange
rate) is allocated principally
to the following: 58.2 percent
to industry; 19.2 percent to
transport, posts and telecommuni-
cations; and only 7.6 percent
Tsitsihar
Haokang
Kirin
`Tafengmen
SAW * r
fAAuukden Changchun
Anshar1* Kungyuan
it Yumen
Taiyuan Shihchi3chuang
.~r
Lanchou.
Fengfeng
it Chengchou
Huainan'
Chengtu
i'ar,tou
X Sian
X Chungking
Tatung Peiping Kailan Dairen
angshan
Wuhan
4Tayeh
Hsiangtan*
0
`Kunming
OKochiu
Cantonal
Nanping W
U nfocated
25X1
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CURRENT INTELLIGENCE WEE1MY SUMMARY
28 July 1955
25X1
COMMUNIST CHINA
Five-Year Plan
CAPITAL INVESTMENT - $18,300,000,000
to agriculture, forestry and
water conservancy.
Of the $10.7 billion for
industry, heavy industry is
allocated 88.8 percent, a larger
proportion than in the Soviet
first Five-Year Plan, but one
which is justified, according
to Peiping, by the existence
of much idle capacity in -
light industry and lack of raw
cotton and other agricultural
raw materials to support a large
expansion of light industries.
The geographical center of
industry is to be shifted inland
for both security and economic
reasons, but this redistribution
will not become significant
until the second Five-Year Plan,
during which new industrial
bases in North, Northwest and
Central China are to be com-
pleted. Meanwhile, China's
industry will remain concentrated
in Manchuria and coastal areas.
Of the 694 large industrial
projects being started during
the first plan, 472 are located
in inland provinces.
Some investment prices
supplied by Peiping when compared
with construction costs in
other countries suggest that the
exchange rate at Which the
$18.3 billion figure for invest-
ments is calculated somewhat,
but not greatly, overstates
the real value of the investment
program.
Peiping has reported the
costs of the following enter-
prises: $840,000,000 for an
iron and steel enterprise with
an annual capacity of.1,500,000
metric tons; $28,000,000 for a
50,000-kilowatt power plant;
$170,000,000 for a tractor
plant producing 15,000 54
horsepower tractors per year;
and $14,000,000 for a 50,000-
spindle textile mill. While
comparisons are difficult.and
tentative, it is believed that
China is budgeting the costs
of its new plants at a higher
level than the costs of com-
parable facilities in non-
Communist undeveloped countries.
Little new capacity had
been added to China's industries
by 1.954, however, and a substan-
tial portion of the new plants
will not be in operation until
the second Five-Year Plan.
Industry and Rail Transport
The Five-Year Plan report
retains the previously announced
industrial target of doubling
gross output between 1952 and
1957. The annual increases in
the gross value of industrial
production and railroad trans-
port operations are to fall
off sharply after the first
two years of the plan from an
annual average increase of about
24 percent in 1953 and 1954 to
9 percent per year in the last
three years of the plan. This
decline is anticipated despite
rising investments and indus-
trial capacity, and results
from a considerably intensified
use of existing industrial and
transport capacity during 1953
and :1954 to a nearly maximum
level.
The projected decline in
the annual rate of increase is
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955
less pronounced in heavy in-
dustries than in textile and
light industries. The propor-
tion of gross output of heavy
industries to total industrial
output is to rise from 39.7 to
45.5 percent during the period
of the plan,
Agricultural Production
The new 1957 target for
food crops is 192,800,000 metric
tons, 17.6 percent over 1952
but 10 percent below a 1957
goal announced in 1953. Although
Peiping is appraising its agri-
cultural prospects more real-
istically than in 1953, even the
reduced target is believed to be
unattainable with the small in-
vestment resources allocated
to agriculture.
Since Peiping has admitted
that agriculture is to have low
priority for investment in the
second Five-Year Plan, except
for the large projects to
control the Yangtu and'Yellow
Rivers, it is estimated that
the actual-rise in food out-
put during both plans will not
be much more than 10 percent.
Population growth during this
period will almost certainly
be as great.
The goals for industrial
crops are higher than those
for food: raw cotton produc-
tion is to rise 25.4 percent
in the five-year period; oil
bearing crops, 37,8 percent;.
sugar cane, 85 percent; and
tobacco, 76.6 percent.
Efforts toward socializa-
tion during the last three
years of the plan are to.be
concentrated on eliminating
remaining private indus- .
trialists,. Meanwhile, the
drives to socialize two other
groups--farmers and retail
merchants--are to be moderated,
evidently a belated attempt
to retain agricultural production
and marketing incentives.
COMMUNIST CHINA
Industrial Production and
Railroad Freight Volume
?- STEEL
.TT ELECTRIC POWER
_ _ _ COAL
-----_ CEMENT
.??????.????. CLOTH
RAILROAD,
TON-KM S.
28 JULY 1955
Whereas in 1954 Peiping
predicted that by 1957 more
than half the peasants would
be in agricultural producers'
co-operatives, an elementary
form of collective, this
target has now been cut to one
third. As most peasants in the
"old liberated areas" of northern
China are to join co-operatives,
apparently little effort is
planned in the Yangtze Valley
and South China, where peasant
opposition to the regime is
probably more intense. At pres-
ent, . 14 percent of the 110,000,-
000 peasant families in China
are in co-operatives.
Private retail merchants
apparently have been given a
reprieve. The proportion of
retail trade to be handled by
state organizations is to de-
cline from 58 percent in 1954
to 55 percent in 1957, but there
will. be a concurrent tightening
of indirect controls on private
retailers.
25X1
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955
The state plans to absorb
by 1957 most remaining private
industry. The proportion of
total industrial output pro-duced in state-owned factories
and others under direct state
control was 37 percent in 1949,
61 percent in 1952, 75. percent
in 1954 and is to be 88 percent
in 1957.
The placing of nearly all
wholesale trade under state man-
agement--a primary goal of the
first Five-Year Plan--has already
been accomplished. This move
and the related program of forced
purchase of farm products under
a quota system have increased
considerably. the regime's con-
trol over farm produce and pri-
vate industrial output.
Ties with the USSR
Soviet aid is said to be
essential to the plan, with
the 156 projects being built
by the USSR constituting the
nucleus of industrial construc-
tion in the plan. Peiping claims
that it has a high priority for
delivery of equipment from the
USSR. The European Satellites,
probably at Soviet direction,
are'supplying increasing quanti-
ties of equipment and technical
aid for industrial development
in China.
According to the plan
report, China expects with So-
viet aid to begin the develop-
ment of atomic energy for eco-
nomic purposes by 1957. The
USSR has publicly offered during
1955 to help China and several
Satellites to develop atomic
energy for peaceful purposes.
The report emphatically re-
affirms China's close ties with
the USSR. It devotes a long sec-
tion to praise for Soviet aid,
and other sections contain fre-
quent references to Soviet aid,
citations of Soviet sources for
justification of policies, analo-
gies from the first Soviet Five-
Year Plan, and assertions that
Soviet patterns are being
followed.
25X1
25X6
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CURRENT INTELLIGENCE WEEKLY SUMMARY
28 July 1955
25X6
LATIN AMERICAN COMMUNISTS REWRITE PARTY PROGRAMS
Since the draft of the new
Brazilian Communist Party pro-
gram was issued in January 1954,
other Communist parties in
Latin America have been re-
writing their own programs,
using the Brazilian one as a
model. The Communists' pros-
pects for achieving their
political objectives are un-
favorable in most countries.
In Brazil there is a possibil-
ity, however, that the party
may be able to strengthen its
position through an electoral
alliance.
The new Communist programs
seek to isolate United States
"imperialism" as the chief
target for attack. They seek
to bring the "national bour-
geoisie"--business elements
independent of American con-
trol--into a Communist-led
"united democratic front for
national liberation."
The new party programs
recognize the significance of
Latin America as the locus of
40 percent of all American
foreign investment, the source
of 32 percent of US imports,
and the market for 26 percent
of the United States' non-
military exports. The Commu-
nists hope to capitalize on
the widespread dissatisfaction
with dependence on United
States capital and trade policies.
The Communist programs are
designed to isolate the United.
States by promoting trade with
non-American countries, and to
gain the sympathy of a dissatis-
fied, nationalistic, bourgeois
group.
In this effort, the parties
are aided by the Soviet Union's
trade offensive. This offensive,
of which the recent Soviet trade
fair in Buenos Aires was an
example, caters to Latin Ameri-
can interest in independent
national development programs,
barter agreements, and develop-
ment of non-US markets and
sources of supply.
The Latin Americans' dis-
satisfaction with their econom-
ic relations--often linked with
emotional "anti-Yankee national-
ism"-is one of the greatest
assets the Communists have to
exploit. The growth of trade
between the USSR and Latin
America responsible for. Uruguay's
recent decision to reopen its
legation in Moscow--may in-
directly contribute to the
prestige and security of local
Communists.
The Brazilian Program
The Brazilian party's pro-
gram was developed in 1952 and
1953 under Soviet guidance and
has received the official
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LATIN AMERICAN
REPUBLICS
COMMUNIST PARTY STRENGTHS
Estimated Party Membership
over 100,000
25,000 to 50,000
5,000 to 25,000
500 to 5,000
under 500
endorsement of the Soviet Com-
munist party. It was approved
by the Brazilian Communist
Party congress in November 1954,
The major objectives of
the Brazilian party's program
were presented in the Cominform
journal earlier this year in
an article by Diogenes Arruda
Camara, secretary of the cen-
tral committee of the Communist
Party of Brazil. Arruda listed
the main conclusions of the
50726
program, such as the necessity
of overthrowing the present
Brazilian government--identified
as the tool of American "im-
perialists"--the need to form a
united front of all antiimperial-
ist and antifeudal forces, from
the proletariat to the national
bourgeoisie, and the need to
make the Communist program that
of "the whole people."
Arruda noted that the pro-
gram recognizes "Marxist-Leninist
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CURRENT INTELLIGENCE WEEKLY SUMMARY
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teaching" with respect to the
nature of the revolution in
colonial and dependent countries
i.e., that in such countries
the native capitalists them-
selves are victims of imperial-
ism, and are thus useful as
allies in the anti-imperialist
struggle. Arruda then defined
the "four new basic elements"
of the program as follows:
First, it "concentrates
its fire on US imperialism,"
and "makes it possible to use
the contradictions among the
imperialists in the interests
of the revolution," and seeks
as provisional allies those
Brazilian capitalists who are
linked with "non-US" imperial-
ist groups.
Second, it demands confis-
cation of the properties of
large landowners only, and thus
corrects the former "sectarian"
error of viewing the "rich and
even the middle-class peasants"
as a counterrevolutionary force.
By guaranteeing the property
of the well-to-do peasants, the
program accepts "objective
economic reality," and makes it
possible to win over the well-
to-do peasants as allies, and
increases the possibility of
winning over the richer peas-
ants.
Third, the program does
not ask for the confiscation
of all banks, enterprises, and
capital, but only of those which
have "betrayed national in-
terests" through collaboration
with American interests.
Fourth, the program seeks
the establishment of a 'people's
democratic state" which would
be "a coalition of the working
class, peasantry, intelligentsia,
petty bourgeoisie, and national
bourgeoisie," led by the pro-
letariat and the Communist Party.
Brazilian Program as a Model
The Brazilian program has
been given continuing laudatory
attention in the Soviet and
Cominform press, and is now
being extensively copied. Steps
have been taken toward the
formulation of new programs by
Communist parties in Colombia,
Costa Rica, Ecuador, Paraguay,
Uruguay, Venezuela, and possibly
other countries. In a number of
cases, parties have explicitly
recognized the Brazilian program
as their guide, and in others,
acceptance of its major points
is apparent in party activities.
In Mexico, for example,
the committee assigned to draft
a new party program has come to
the following "conclusions":
(1) the Ruiz government represents
only the wealthy class and gives
special protection to United
States capital; (2) the "national
bourgeoisie" should be persuaded
of the need to fight "Yankee
imperialism"; and (3) even those
bourgeoisie who are linked with
British or French "imperialism"
should be defended if they are
opposed to the United States.
Mexican party leaders stress
that the "national bourgeoisie"
--which they have defined as
those whose capital comes from
within the country and who man-
ufacture for domestic or other
Latin American consumers--must
be sought as allies and assured
that their properties will not
be confiscated. Stating that
the ""democratic-bourgeois
revolution" has already develop-
ed in Mexico--reaching a peak
in the 1930's under President
Cardenas--the Communists define
their task as that of exposing
the betrayal of the present
bourgeois administration and
building a democratic, anti-
impesrialist liberation front
under their own leadership.
In Costa Rica, the "new
theoretical contributions" of
the Brazilian party program
were recently praised by
Rodolfo Guzman, a member of the
political commission of the
Costa Rican Communist Party, who
is preparing a draft program for
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28 July 1955
consideration at a party con-
gress to be held later this
year.
The Venezuelan Communists
have recently published the
Brazilian party program in
pamphlet form, calling it
evidence of "a new stage in
the application of Marxism to
the conditions obtaining in
Latin America, where the people
have the same enemy--US imperial-
ism--and generally similar
economic, social, ant. political
problems."
The Uruguayan Communists,
who will also hold a congress
this year, are likewise study-
ing the Brazilian program. The
Paraguayan and Colombian Commu-
nists have acknowledged it, and
within the Chilean party it has
been described as a "model for
all of Latin America with re-
spect to party organization,
press, and propaganda."
Implementing the Programs
.In most countries, the
Communists' prospects are un-
favorable. Both administra-
tion and major opposition
parties are anti-Communist, and
the Communists, often numeri
tally insignificant, must be
circumspect in their actions.
Moreover, their programs,
calling for a broad coalition
of popular forces, preclude
alliances with extremist non-
Communist elements which have
no popular support.
In Mexico, for example,
the anti-Communist administra-
tion party has a virtual monop-
oly.over popular support., The
Communist Party, with only about
4,500 card-carrying members,
has found it impossible to dis-
credit the administration
leadership.
In Colombia, the party is
in danger of drastic suppres-
sion, has gained no supporters
for its "democratic front for
national liberation," and has
denounced as "sectarian" those
who.favored open support of the
extremist Liberal elements now
engaged in guerrilla activity.
In Chile, the party posi-
tion is somewhat better. There
it possesses some 35,000 mem-
bers, appears well organized,
has good propaganda outlets
and a significant influence in
labor. It remains illegal,
however, and the "people's front"
which it has been able to es-
tablish with minor legal parties
is politically ineffective. The
Chilean Communists' fear of
government repression was
recently apparent in their
reluctance to support the one-
day general strike of 7 July.
Only in Brazil does there
seen to be a Toss ility at
present of significant Commu-
nist political achievement in
line with the party program.
There the 120,000-member Com-
munist Party, although illegal,
is very well organized, has a
popular following in its own
right, and has instructed its
members that they must be pre-
pared to "take up arms immedi-
ately" in event of illegal
seizure of government power.
However, the Communists, recog-
nizing the infeasibility of
challenging the Brazilian armed
forces by taking unilateral
action of a violent nature,
are concentrating on efforts to
align themselves with other
political forces. In this
effort, the party achieved one
striking success when it formed
a winning alliance with two
important legal parties in the
Sao Paulo mayoralty elections
of May 1955.
The Brazilian Communists
hope to establish a similar
alliance prior to the presi-
dential elections on 3 October.
The existence of several
candidates and the divided
electorate place the party in a
position to bargain its sizable
disciplined vote for an oppor-
tunistic alliance which, if
successful, would greatly en-
hance the part Is political
position.
CONFIDENTIAL
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