WEEKLY SUMMARY

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CIA-RDP79-00927A004300050001-1
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S
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24
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December 21, 2016
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June 3, 2008
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1
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Publication Date: 
December 27, 1963
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SUMMARY
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Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 O OCI No.. 0312/63 Copy No. 70 WEEKLY SUMMARY CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE State Dept. review completed 25X1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 25X1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 lempr SECRET '`'f (Information as of 1200 EST, 26 December 1963) SOVIET TRADE ACTIVITY IN THE INDUSTRIAL WEST Within a week after the central committee approved Khrushchev's plan for the chemical industry, Soviet traders apparently had their instructions and were renewing contacts in the industrial West. CHINESE COMMUNIST LEADERS' AFRICAN TOUR While Chou En-lai and Chen Yi have been able to project an aura of Afro-Asian amity during the first two weeks of their two-month tour, they have not scored comparable successes in the political or economic fields. ENTHUSIASM FOR SOUTH VIETNAM REGIME FLAGGING The military regime is beginning to take steps to make its counterinsurgency effort more effective, but the generals still seem to have little idea of how to rally significant popular support. LAOS Communist forces have moved to erase recent gains by rightist units in central Laos. Neutralist and Pathet Lao representatives are continuing thier efforts to ease tension between the two factions. FRENCH CABINET MINISTER TO VISIT CAMBODIA Armed Forces Minister Messmer's visit in early Jan- uary is designed primarily to strengthen French in- fluence in the wake of Sihanouk's call for an end to the US aid program. SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 lf~ SECRET ASIA-AFRICA (continued) CYPRUS DISPUTE FLARES AGAIN The new outbreak of fighting on Cyprus is a reaction to President Makarios' determination to change the constitution so as to limit the role of the Turkish minority. STAT THE COMMON MARKET CRISIS Agreements reached on agricultural policy on 23 De- cember are apparently sufficient to discourage De Gaulle from breaking up the community. The agree- AREA NOTES NATO and Iceland ment on a position for the Kennedy Round is not neces- sarily favorable to the US. WESTERN HEMISPHERE DOMINICAN REGIME FACES NEW POLITICAL CHALLENGES 14 The killing of 15 guerrillas by army troops apparently removes the insurgent threat but could provoke danger- sou political repercussions. The head of the pro- visional government has already resigned. SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY Page ii Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 SECRET WESTERN HEMISPHERE (continued) Page BRAZIL Appointment of Ney Galvao as finance minister reduces the already slight prospect that Brazil's critical financial problems would be handled ef- fectively. Other cabinet changes may follow. AREA NOTE 16 Bolivia SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY Page iii Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 Nwoe SECRET SOVIET TRADE ACTIVITY IN THE INDUSTRIAL WEST Within a week after the central committee approved Khrushchev's plan for the chem- ical industry, Soviet traders apparently had their instruc- tions and budget allocations and were renewing their activ- ity in trade circles of the in- dustrial West. Contracts for fertilizer installations, plastics and syn- thetic plants, petrochemical equipment, and mining machinery are already in various stages of neg tiation. The Soviet need for addi- tional credit to finance planned expanded purchases is crucial. The USSR presumably can generate sufficient funds to meet down payments on sizable orders. However, credit arrangements must be set now to spread out the heavy crush of payments which otherwise would fall due in 1965-66 when equipment con- tracted for next year will be delivered.. Soviet ability to increase hard-currency reserves is not likely to improve in the near future. Moscow's current grain imports will reduce its gold reserves by 25 percent. If these continue beyond mid- 1964, the Soviet hard-currency position will be under further strain. Despite the bleak foreign exchange prospects for the USSR, Soviet officials appear hopeful that Western competition for Soviet orders will be adequate to foster Western governmental and banking opinion favorable to more and longer term credit. Moscow may also hope that a continuation of its relatively restrained foreign policy will be helpful in this context. While viewing the USSR as an acceptable commercial risk, the banking community has hereto- fore been unwilling to extend credits beyond a five-year pe- riod because of uncertainty about future political develop- ments. SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Page 1 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 SECRET With two weeks of their pro- continent. jected two-month tour of Africa completed, Chou En-lai and For- eign Minister Chen Yi can claim high marks for their efforts to project an aura of Afro-Asian amity and to identify Peiping with African aspirations. There is no evidence, however, that they have scored any comparable success in the political or eco- nomic fields. The joint communiqud issued on 21 December at the conclusion of the Chinese leaders' visit to Cairo contains few surprises`- Thus far the Chinese have a - tempted to minimize differences, play up past contacts, and press such themes as militant struggle against colonialism and "US im- perialism." In both Algiers and Cairo, Chou's hosts sought to demon- strate their nonalignment by actions designed to play down the impact of the Chinese lead- ers'arrival. Chou was greeted in Cairo with a 21-gun salute, but Nasir was not on hand. In Algeria, Ben Bella was on hand to greet his guests, but the top- level delegation he sent to the Soviet Union just before Chou's arrival is receiving more pub- licity than the Chinese guests. It has become increasingly apparent that a major objective of the trip has been to undercut Soviet influence throughout the In Algeria, Chou sounded a similar note. He cited China's early support for Algerian rev- olutionaries--support which ac- tually pre-dated that of the USSR. He has also undoubtedly scored Soviet unreliability. The Chi- nese may be pressing the Algerians to use some of the $50-million credit offered in October. This offer was made to counter a $100- million Soviet credit offered earlier the same month. Sino-Soviet rivalry for African support also flared at the UN, where Peiping outmaneu- vered Moscow on the question of enlarging the representation in principal UN organs to accommo- date the African bloc. Soviet delegate Fedorenko had attempted to make it appear that the Chi- nese were opposed to the African- sponsored expansion plan because they insisted that any change in the UN be tied to Peiping's own admission to the Security Council. The USSR found itself holding a suddenly emptied bag, SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Page 2 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 ?: Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 SECRET however, when Peiping loudly repudiated Federenko's statement and accused the Soviets of using the issue as a pretext for op- posing Afro-Asian demands. Chou can be expected to capitalize on this during next week's'visit to Morocco and in subsequent stops in Guinea, Ghana, and Mali. No details of Chou's itinerary beyond Rabat have been made public by Peiping. Such secrecy may well be prompted by security considerations. Chi- nese officials were apparently seriously shaken by the abortive plot to kill Liu Shao-chi in Cambodia last spring. SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY Page 3 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 SECRET ENTHUSIASM FOR SOUTH VIETNAM REGIME FLAGGING Communist guerrilla activ- ity increased only slightly in connection with the third anni- versary, on 20 December, of the Viet Cong's Liberation Front, despite advance Communist propa- ganda exhortation for a major military effort. The Viet Cong continued to direct attacks and harassing activities primarily at strategic hamlets. South Vietnam's new govern- ment is showing extreme sensi- tivity to discussion of a "neu- tralist solution'.' to its in- surgency problem. The Communists' Liberation Front has repeatedly proposed such a settlement, and the idea is gaining new advocates as a result of Cambodia's call for an international conference. Saigon's military rulers last week closed down a newspaper which was expressing interest in neutralism. However, editorials in the vernacular press, even though attacking neutralism, have kept the debate in the public eye. On 20 December, Saigon students--possibly encouraged by the regime--demonstrated against neutralism. On the military front, the government is beginning to take some steps to overcome the leth- argy that has affected its coun- terinsurgency effort since the coup. A long-range pacification program has been launched in one of the most troublesome provinces in the northern part of the country, and broad command changes have been introduced in two provinces south of Saigon where security has been deterio- rating. In the political field, the government has named 60 members of the civilian advisory Council of Notables. Returned exiles apparently are not rep- resented, and there is a dearth of direct provincial represen- tation. Many appointees, how- ever, are prominent political, professional and lay religious leaders who could provide effec- tive guidance to the regime if they are given a chance. Apathy and disenchantment over the new government are wide- spread among such key elements as middle-grade officers, stu- dents and politicians. Criti- cism centers on the lack of firm direction by the ruling generals, on repeated reshuf- fling of local officials deemed incompetent, corrupt or close to the Diem regime, and on the rise in Viet Cong activity. SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY Page 4 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 LAOS Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 SECRET Communist forces have moved to erase recent gains made by rightist units in cen- tral Laos. Pathet Lao troops, reportedly supported by sub- stantial numbers of North Viet- namese, on 19 December captured Kam Keut and the nearby airfield, three days after occupying the key route junction at Lak Sao. In other areas, there have been reports of only limited activ- ity, involving scattered skir- mishes and artillery exchanges. Meanwhile, neutralist and Pathet Lao representatives are continuing their efforts to negotiate an easing of tensions between the two factions. At a meeting on 20 December in the Plaine des Jarres, both sides called for an "early" meeting between Premier Souvanna and Prince Souphannouvong. They also agreed, in principle, that elements of the coalition govern- ment should be transferred from Vietiane to the royal capital at Luang Prabang, which would be neutralized and placed under tri- partite control. Both factions reiterated their support for the formation of a mixed police force in a neutralized Vietiane. General Phoumi's right- wing faction, which was not represented at the meeting, remains skeptical of Pathet Lao intentions. Phoumi apparently believes that an agreement for the neutralization of Luang Prabang is unlikely, but he may join in talks on the subject. He has indicated, however, that the neutralization of Vientiane is contingent on the willingness of the Pathet Lao to allow free movement in areas of Laos now under their control. SECRET CURRENT INTELLIGENCE WEEKLY SUMMARY Page 5 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 SECRET Armed Forces Minister Pierre Messmer's visit to Cam- bodia from 4-7 January is de- signed primarily to strengthen French influence there in the wake of Prince Sihanouk's call for an end to the US aid pro- gram. Messmer's high-level entourage, which includes the chiefs of the Foreign Ministry's Indochina and Cultural and Tech- nical divisions, will probably recommend some increases in aid, but De Gaulle apparently has no intention of taking on any large new commitments. French-grant aid to Cam- bodia since 1956 has amounted to only $15 million. Current assistance is threefold: a military training mission of at least 250 men; cultural aid in the form of a university mission and 319 teachers in Cambodian schools; and the maintenance of about 40 experts in the fields of health and public works. In addition, a number of French nationals hired by the Cambodian Government hold positions of considerable influence in the Ministry of Finance, the Treas- ury, and the premier's office, and are among Prince Sihanouk's advisers. Paris has indicated it has no intention of equaling the US aid program. Any increase SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY in military aid probably would be limited to reconditioned and obsolete equipment, such as trucks and light armored vehicles. Increased cultural and technical assistance probably would include further help for the French uni- versity mission, more teachers, and 30 or 40 additional technical experts, especially agricultural- ists. The extension of French aid will be complicated by Cambodia's claims for compensation for losses incurred as a result of the 1958 devaluation of the French franc. Since 1958 France has asserted that a large-scale aid program would be impossi- ble until there is agreement on an exchange rate, but a compro- mise may now be in sight. Sihanouk has sought French help in maintaining Cambodia's policy of neutrality, and in recent talks with the US and the UK, France has supported his call for an international con- ference on Cambodian neutral- ity, despite US objections. Indeed, De Gaulle has consist- ently sought to meet Sihanouk more than half way, and Paris may now encourage Sihanouk to press this issue. Page 6 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Iq Next 1 Page(s) In Document Denied Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 SECRET CYPRUS DISPUTE FLARES AGAIN Fighting between the Greek and Turkish Cypriot communities, which began on 21 December and was continuing on 26 December despite efforts to obtain a cease- fire, is the culmination of a steady growth of tension on the island during the past few weeks. The new tension followed Presi- dent Makarios' presentation to Turkish Cypriot leaders of propos- als for changing the Cyprus con- stitution. The proposals, which essentially involved removing the guarantees to the Turkish minor- ity that had been written into the Cyprus settlement of 1959, were rejected by the Turkish Gov- ernment even before the Turkish Cypriots had made their views known. Most of the initial fight- ing appears to have been between Greek Cypriot police and the Turk- ish underground, and to have taken place in the Turkish areas of Nic- osia.. The situation there de- teriorated progressively during the week, as the police lost con- trol to extremist groups of ir- regulars from both communities. A cease-fire, to be supervised by the British, had not been ef- fective as of the morning of 26 December. Fighting had also con- tinued at the port city of Lar- naca; the rest of the island was quiet but tense. In the face of these de- velopments, the Turkish Govern- ment threatened to exercise its right under the 1959 agreement to intervene on Cyprus. Three Turkish jet fighters flew over Nicosia on 25 December, and Turkish naval units appeared-off the island. Part of the 650-man Turkish garrison on Cyprus left its barracks to move into one of the Turkish quarters of the capital. Part of the 950-man Greek contingent then moved to protect Greek areas. The situa- tion evidently prodded Athens and London into a more active role, and Greek, Turkish and British forces on Cyprus have been placed under a unified Brit- ish-led command. Britain has an- nounced it is sending 150 ad- ditional troops. The violence may make lead- ers of both sides more cautious in pressing political demands. Soon after the outbreak, Makarios told the US ambassador he would go more slowly in pushing his con- stitutional revisions. Both eth- nic groups, however, will be fur- ther embittered--particularly the Turkish community, which is believed to have suffered much the heavier casualties. SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY Page 8 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 V4001 The tariff disparities issue which has plagued preparations for the Kennedy Round for many months originates in the fact that there are substantial differences between the EEC and US tariffs on individual items, even though over-all tariff levels are roughly the same. Because the EEC common external tariff was arrived at by averaging the tariffs of the member states, theEEC tariff schedule is characterized by the absence of "peaks and lows"; in the US schedule, on the other hand, the rates vary much more, and some individual tariffs remain very high in comparison with those of the EEC. Accordingly, the EEC and the French in particular have long insisted that a 50-percent cut in tariffs by both the US and the EEC would leave the US with substantial protection on certain items and deprive the EEC of bargaining power to effect their future reduction. The disparities issue was believed to have been settled at the GATT ministerial meeting last May with a formula which provided that tariffs on industrial items would in general be reduced, equally and across the board, except that "special rules" would apply where sig- nificant adverse effects on trade would result from disparities in tariff levels." In fact, how- ever,this formula merely shifted the argument to the problem of determining what disparities are "significant" or "meaningful in trade terms." Because the "special rules" would mean in most cases a smaller tariff reduction by the EEC than by the US, the EEC has attempted to maximize the area to which these rules would apply while the US has sought to minimize their application. After lengthy negotiation, a GATT subcommittee reached a considerable measure of agreement last month on a formula which would identify a "significant" tariff disparity in the first instance as one in which the high rate is at least 30 percent of value and at least 10 percent above the lower rate. Because this formula would identify some 850 US items as eligible for "special treatment," --,the subcommittee proposed seven additional qualitative cri- teria which would reduce considerably the number of eligible items. The three to which the US attaches special importance would (1) require that there be substantial imports of the item concerned from the high tariff country into the low; (2) exclude items where there are sub- stantial imports into the high tariff country; and (3) exclude items on which the low tariff country maintains quotas. The formula approved by the EEC on 23 December would substitute for the 30/10 criterion a 2/1 formula. A disparity would be identified as one in which the high tariff is twice as high as the low one, apparently with the additional qualification that, in most cases, there would have to be a ten-point percentage spread between the two rates. This formula would provide for special treatment for far more than 850 items, including items of special US export interest. The arrangements for qualitative criteria also seem to have been modified to the US' disadvantage. Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 k Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 *mow Nftof SECRET The Common Market appears to have averted disaster for the sec- ond time in less than a year. The eleventh-hour agreements reached on agricultural policy on 23 De- cember are apparently sufficient to discourage De Gaulle from carry- ing out his threat to break up the community. Moreover, the Germans and Dutch succeeded in extracting limited commitments from Paris on EEC participation in the Kennedy Round of tariff negotiations. These agreements do not cover all the out- standing issues, however, and the manner in which they were reached will leave a residue of bitterness. Nor is it certain that major US interests have fared well. The main agricultural elements in the "package" deal are the reg- ulations concerning intracommunity trade in beef, rice, and dairy prod- ucts and the rules governing the community farm fund. Their effect is to open the large west German market to farm exports of France, Italy, and the Netherlands--gen- erally at a substantial advantage over the exports of nonmembers. Al- though approval of these and the financial regulations is an im- portant step forward, the key ques- tion of grain price unification is still unsettled. Further considera- tion of the formula proposed by Com- missioner Mansholt has been delayed until next year. The agreement on a Kennedy Round position is likewise an ad- vance for the community, but from the US view not necessarily favor- able. On the long-standing problem of tariff "disparities," the EEC adopted a formula which would exempt from the proposed 50-per- cent linear reduction in tariffs a far larger number of items than the US hoped for. The EEC position SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY on farm products in the trade ne- gotiations--although an improvement over the initial Mansholt propos- als--also leaves much to be desired from the US view. In general, the EEC proposes that, if its levy sys- tem operates in such a way as to cause difficulties for the exports of nonmembers, then the EEC Commis- sion will be called on to propose "appropriate," but unspecified, measures. These would not apply if it is technically impossible to determine how much protection is actually involved in the levy sys- tem. The general relief within the community which greeted these agreements reflects both the depth of the crisis and some op- timism that the Common Market's unity may have been restored. The prominent role played by the EEC's commission in achieving the compromise has in particu- lar encouraged those who hope to strengthen the community's in- stitutional structure. In France the conviction was evidently widespread, how- ever, that both Bonn and The Hague were quite prepared to see the French "leave" the Common Mar- ket, and in the event of its breakup, to seek alternative ties with the Outer Seven. More- over, while it may prove healthy that Bonn "stood up" to De Gaulle in this instance, its motive was strongly colored by a desire to pro- tect its inefficient farmers. Nor does it augur well for US-EEC re- 25X1 lations that the French blame the US for much of the opposition they encountered. Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 25X6 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Next Page(s) Next 1 Page,(s) In Doc u ment Denied Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 i*wf SECRET NATO: The NATO ministe- rial meeting in Paris, which ended on 17 December, avoided serious discussion of the more contentious issues facing the alliance. There was, for in- stance, only passing reference to the matter of nuclear shar- ing. While NATO's military posture was generally recognized as still inadequate, the Force Planning exercise--which is designed to help correct this situation--was not discussed at all. The dispute over basic strategy, the chief stumbling block to the exercise, was put off until after De Gaulle's press conference sometime in January. All but the French agreed that the alliance should explore possibilities of negotiating with the Soviets on outstanding East-West issues. The Germans, as usual, indicated some reser- vations because of their sensi- tivity regarding Berlin and Ger- man reunification. The question of restricting Western credits to the Soviet bloc was reserved for future consideration." Iceland's near general strike was settled on 21 Decem- ber when labor and management agreed to a 25-percent wage in- crease. The 11-day work stop- page was led by Communist-dom- inated unions seeking, as in the past, to force the resigna- tion of the Conservative - So- cial Democratic government by discrediting its economic poli- cies. The settlement is regarded as a political victory for Prime Minister Benediktsson's govern- ment, since the Communists were unable to maintain a solid grip on labor. The settlement, however, will intensify inflationary pressures and will probably force Benediktsson to take ex- traordinary measures to maintain economic stability. For polit- ical reasons he will try to avoid another currency devaluation, but it is doubtful that the government can maintain its economic stabilization program without resorting to this meas- ur e. SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 -Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 Iftwo, SECRET Western Hemisphere DOMINICAN REGIME FACES NEW POLITICAL CHALLENGES The killing of 15 guerrillas by Dominican Army troops on 21 December apparently removes the last pocket of insurgents op- posing the government. However, the incident could provoke dan- gerous political repercussions. Emilio De Los Santos, head of the governing military-in- stalled triumvirate, resigned in protest over what he regarded as the brutal and unnecessary kill- ing of the insurgents, includ- ing the president of the pro- Castro 14th of June Political Group. The army commander of the area in which the incident took place insists the deaths were the unavoidable result of a fire fight. If stories of armed forces "brutality" be- come widespread, however, they could provoke dangerous hostility toward the regime from rank-and- file Dominicans, who recall the repressive measures of former dictator Trujillo. The resignation of De Los Santos precipitated frantic ma- neuvering within the government among civilian and military elements. Only the prompt ap- pointment of Foreign Minister Donald Reid to the vacant post in the triumvirate appears to have helped avert a serious political crisis for the moment. The triumvirate has asked the cabinet--which was chosen from and is responsible to six minority political parties---to resign to permit the appoint- ment of a more independent group. This move has prompted strong protests from four of the splinter parties backing the regime, who stand to lose patronage; the outcome is unclear. However, the National Civic Union, the only sizable party in the government, backs the cabinet reorganization. More important, the key leaders of the armed forces are provid- ing the triumvirate with their support, which could prove cru- cial in a political showdown SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY Page 14 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 SECRET Further changes in the Bra- zilian cabinet are expected fol- lowing the resignation last week of Finance Minister Carvalho Pinto. A moderate leftist, Ney Galvao, was appointed Pinto's successor, but there remains a possibility that Leonel Brizola-- who had been actively pushed for the post by the extreme left-- may eventually receive some min- istry. There is widespread be- lief in the army that War Min- ister Jair Ribeiro will also be replaced in the near future. As one responsible Brazilian com- mentator has remarked, with Gou- lart "every minister is an in- terim one." Ney Galvao's appointment actually reduces the previously slight prospect that Brazil's critical financial problems would be handled effectively. Galvao's qualifications in the economic field are weak at best and his rec- ord as head of the Bank of Brazil Goes not command confidence with- in the business community. Be- fore taking his new post, he served as minister without port- folio in charge of coordinating foreign trade policies, a job he performed without any par- ticular distinction. Goulart's, Galvao can be expected to toe the adminstration line faithfully. Moreover, Galvao's appointment may be a temporary expedient designed to allay fears that Brizola would succeed Pinto. Galvao is a personal. friend of Brizola and there is speculation that Brizola will, in fact, eventually move into the Finance Ministry. The new finance minister inherits almost insurmountable economic and financial problems. Chief among these are a rampant inflation that may see the cost of living increase 80 percent this year, and a staggering foreign debt involving approxi- mately $1 billion in payments due over the next two years. The severity of the eco- nomic situation and Goulart's apparent intention to assume greater personal direction over financial policies increase the possibility of radical meas- ures that might be detrimental to foreign creditors and in- vestors. Goulart reportedly is considering nationalization of all public utilities and can- cellation of mining concessions. Measures such as these could lead to further deterioration of Brazil's economic position. Although his views are perhaps somewhat to the right of SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY Page 15 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 SECRET Western Hemisphere Bolivia: The political competition between Bolivian Vice President Juan Lechin and President Victor Paz Estenssoro is bound to intensify sharply as each maneuvers to line up support for the presidential nomination at next month's con- vention of the Nationalist Revolutionary Movement (MNR). Lechin probably still hopes to pull an upset by dislodging Paz or at least to demonstrate suf- ficient strength to assure him- self of retaining his vice- presidential post. Paz seems certain, however, to be able to control the party's convention, assure his renomination, and designate his own running mate. If the forthcoming conven- tion repudiates Lechin, he may well withdraw from the MNR and establish a "popular front" po- litical party. He probably could count on the support of political groups ranging from leftist extremists to disgruntled factions within right-wing parties. It would seem unlikely, though, that these disparate groups could coalesce into an organization powerful enough to defeat Paz' well-organized machine in the SECRET 27 Dec 63 CURRENT INTELLIGENCE WEEKLY SUMMARY Page 16 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 25X1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1 Approved For Release 2008/06/03: CIA-RDP79-00927A004300050001-1 ,%MW" Soso, SECRET Approved For Release 2008/06/03: CIA-RDP79-00927AO04300050001-1