WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A008300060001-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 41
• Document Creation Date: December 21, 2016
• Document Release Date: May 15, 2008
• Sequence Number: 1
• Publication Date: November 20, 1970
• Content Type: SUMMARY

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Mexico: Political Prisoner Issue Is Heating Up
The political prisoner issue may be the first
polit cal headache for President-elect Luis
Echeverria after his inauguration on 1 December.
Strong reaction has developed against the
stiff sentences dealt out last week to a group of
prisoners arrested after the 1968 student dis-
turbances. National university rector Gonzalez
Casanova and Cuernavaca's Bishop Mendez Arceo
are among cultural leaders calling for amnesty. A
prominent student leader claims that the general
feeling of hostility against the government has
unitec all student groups and that protest activi-
ties are planned. The Communist-dominated
Mexican Organization for the Liberation of Politi-
cal Prisoners (OMELEPPO) has decided to go all
out in an effort to embarrass the government
durinc the inauguration period, when the govern-
ment's sensitivity to charges of repression will be
heightened by the presence of hundreds of for-
eign dignitaries. Although tight security will most
likely prevent large or lengthy protest demonstra-
tions, hard-line agitators will try to create an
incident by provoking the security forces into
overreacting.
The government had hoped to minimize at-
tentiol on the sentencing by scheduling the pro-
ceedings for the day Echeverria was expected to
meet 'resident Nixon. The postponement of the
US visit, however, torpedoed the plan. In August,
prisoners and spectators had repeatedly inter-
rupted the trial in Chicago-seven style and forced
a delay in sentencing. The courtroom chaos that
develcped caused .he trial to be put off until
November, and p*obably contributed to the
severity of the final judgment.
The growing bitterness over the govern-
ment's handling of the prisoners and other dis-
senters could serve to revitalize the damaged and
divided extreme left. The government has
managed to keep -potential troublemakers off
balance by floating false rumors of leniency to-
ward the prisoners, of impending amnesty, and of
penal reform. The ostensible acquiescence to
broad demands for revision of the penal code by
Diaz Ordaz, for example, resulted in tighter rather
than liberalized internal security laws.
Earlier signs suggested that the Diaz Ordaz
government would show clemency in its last days,
and although amnesty could be granted following
sentencing, Diaz Ordaz apparently will leave the
choice of toughness or generosity to the incoming
administration. Although there is no united op-
position to concern the new president, the ques-
tion of political prisoners has proven the most
durable issue left over from the 1968 student
movement. The issue, moreover, has attracted
support from diverse sectors. OMELEPPO
originally was organized with significant support
of church groups and other non-Communist ad-
herents.
Communist efforts to harass the incoming
government will be helped by the leadership
ability of Valentin Campa and Demetrio Vallejo,
who were released from jail in July after 11 years
imprisonment. These two union leaders organized
the disruptive strikes that were the first political
challenge to the new president. There has been a
spate of "new" leftist parties and organizations in
formation over the past year. None showed any
obvious promise, partly because of the lack of a
commanding "personality." Campa or Vallejo
have the prestige of long-time "political pris-
oners" and are "heroes" who might be able to
revitalize revolutionary groups.
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URUGUAY: Serious personnel losses have not
crippled the Tupamaro guerrilla organization,
which last week successfully engineered the
largest bank robbery in the country's history. In a
well coordinated operation, the Tupamaros struck
the country's most important bank, kidnaped
three bank officials to gain entrance to the vaults
and escaped with more than $1.5 million in
jewelry and cash.
In keeping with the Robin Hood image that
the organization had carefully tried to cultivate
prior to this summer's murder of a US public
safety adviser, the Tupamaros have offered to
return all individual pieces of jewelry valued at
less than $200. The group's audacity has been
further underscored by its recent warning to
Supreme Court members not to approve the gov-
ernment's pending request to try terrorists under
military justice. The legal basis for the govern-
ment's case is shaky, and the guerrillas apparently
hope that a decision against the government could
be used most effectively in their propaganda. The
Tupamaros continue to demand that the news
media publish their political manifesto in ex-
change for one of the two kidnap victims they
have held for more than three months.F-
Chile
Salvador Allende, since becoming President
slightly over two weeks ago, has placed Marxists
and Castroites in most of the controlling positions
at all levels of his government. At the same time
he has skillfully assuaged many of the fears of the
majority of Chileans who voted against him.
Allende has also extended the Marxists' con-
trol to most of the crucial official economic
posts. For example, the directors of such offices
as the agricultural trade and price control agen-
cies, the national railways, and the state bank all
served as advisers to Fidel Castro for periods
ranging up to seven years. Where a non-Marxist
Popular Unity (UP) coalition member was given
the top job-the vital national development
corporation, for example-decision-making posts
at the second level have gone to men committed
to the idea of a Cuban or Soviet state. The al-
ready pervasive role played by the government in
Chile's economic life gives these officials power
far beyond that indicated by their job titles.
Allende has granted a year's asylum to exiled
pro-Castro Bolivian guerrillas and has amnestied
members of the extreme leftist Movement of the
Revolutionary Left (MIR) who had been indicted
or imprisoned on grounds of violating the Law of
Internal Security. He has also disbanded the riot
control squads of the national police and he plans
to set up an internal security organization with
counterespionage responsibilities, similar to
Castro's Committees for the Defense of the Revo-
lution. According to his press secretary, a former
head of the Cuban news service in Santiago, the
military intelligence services will provide the re-
sources for the new organization and its primary
source of information will be the local UP com-
mittees. These were organized, chiefly by the
Communist Party, during the electoral campaign
and now total some 14,000 groups in communi-
ties and factories.
Although few Latin American governments
have criticized Chile's re-establishment of diplo-
matic relations with Cuba last week, there may be
more reaction to plans of the state-owned airline
to add a stop in Havana to its Santiago-US route.
Other plans reportedly call for a European flight,
with stops in Havana and Prague. Efforts to
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expand ties with Cuba include the trip to Havana
next week by the head of the conservative farm-
owners' association to explore ways to bring next
year's trade up to some $30 million-three times
the level planned by the Frei government.
In another move to broaden economic ties
with Communist cauntries, Allende opened com-
mercial relations with North Korea on 16 Novem-
ber. Part of the de egation from Pyongyang to his
inauguration will remain to set up a trade mission
that can serve as the forerunner of diplomatic
relations. On 17 November the Chilean Govern-
ment announced its withdrawal from the UN
Committee on the Unification and Rehabilitation
of Kcrea (UNCURK).
The president has been provided with favora-
ble publicity by the Chilean media, which are 90
percent controlled by the UP. In addition to this
created aura of piblic approbation, Allende has
managed to convince most Chilean interest groups
that lie values the r role even as he expands and
consolidates Marxist control. An important mani-
festation of this sales job was the initial
quiescence of the labor unions. The restraint ap-
parently reflects the Socialist and Communist
domination of most unions, although copper
workers at one of the largest mines are now
demanding a 70-percent increase in pay and bene-
fits.
Labor is a possible source of continuing
problems to the government. Anti-Allende Chris-
tian Democrats and the MIR are supporting slum-
dwellers' seizures of property and housing units in
Santiago. This is a major problem for the govern-
ment and a source of embarrassment to the Com-
munist Party.
Such efforts will be blunted quickly by the
government, either by its crash housing program
or other action to fulfill campaign promises of
immediate impact on the poor and unemployed,
but Allende may have to take police action to
enforce the law. One popular measure has been a
ten-percent reduction in the price of men's
ARGENTINA: Tha third successful general strike
in 33 days has failed to win additional conces-
sions for labor fro-n the Levingston government.
This strike, like those in October, effectively
brought Argentine industry and commerce to a
standstill. Well-organized police action contained
disorders in two interior cities as well as unrelated
stude it violence in Tucuman.
The General Confederation of Labor is con-
sidering additional strikes, but the government
has given evidence that it will not change its
policies under pressure. The government has
already announced some increase in the minimum
wage and has promised collective bargaining by
April. Labor's political goal-specifically to
achieve a voice in government policy formula-
tion-is not likely to be granted. Should activist
labor leaders push the government too far, a
tough response, such as a government take-over of
hard-line unions, could be expected.// 25X1
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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Ceylon: Trouble Looms
Secret
N! 43
20 November 1970
No. 0397/70A
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OL %% A1\U. J. Now
Ceylon: Trouble Looms
Prime Minister Sirimavo Bandaranaike's co-
alition government has reached an important
stage, vital not only for its own success and unity
but possibly also for the continuation of democ-
racy in Ceylon. In its first six months the regime
acted primarily to solidify its socialist image,
largely through leftist-oriented foreign policy ini-
tiatives; the government now must face up to
several difficult domestic problems. The initial
euphoria in the public's acceptance of the coali-
tion, following its sweeping victory last May over
the moderate government of Dudley Senanayake,
has started to wane. Mrs. Bandaranaike has not
been able to roll back the high cost of living nor
to alter the high unemployment rate. Many
Ceylonese, whose unrealistic expectations of
rapid economic progress were fed by the coali-
tion's rhetoric before and immediately after the
election, could succumb to the propaganda of a potentially dangerous "new left" revolutionary
element. Pressure from this or other potential sources could prod Mrs. Bandaranaike into risking
ill-advised repressive measures in order to retain control.
A Leftist Turn in Foreign Policy
A strong tide of victory carried Mrs. Banda-
ranaike's United Left Front-composed of her
own nationalist, left-of-center Sri Lanka Freedom
Party (SLFP), the Trotskyite Lanka Sama Samaja
Party (LSSP), and the Ceylon Communist Party/
Moscow (CCP/M)-to power last May. As the de-
feated United National Party (UNP) and its allies
retreated into temporary obscurity, numerous
glowing press reports proclaimed that the nation's
difficulties would finally be solved.
The new government sustained popular in-
terest during its early days by a series of foreign
policy moves designed to heighten its socialist
image. Full diplomatic recognition was granted to
East Germany in June, and later to North Korea,
North Vietnam, and finally to the Provisional
Revolutionary Government of South Vietnam.
Ceylon also suspended relations with Israel, gave
notice that the US Peace Corps agreement would
be terminated in October, and asked the Asia
Foundation to leave.
From Mrs. Bandaranaike's point of view,
such measures were ideally suited to launch her
new government. In addition to creating an im-
pression of rapid, decisive action, they apparently
enabled her to fulfill promises made earlier to her
coalition allies in return for their electoral sup-
port. During the pre-election planning stage as
well as throughout most of the campaign, it had
seemed that the contest would be close, with
Special Report
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3_4.A1_ l _
Senanayake's IJNP holding a slight lead. Mrs.
Bardaranaike presumably calculated that she
would need the assistance of the Trotskyites and
the Communists and was willing to pay the price.
At first analysis, it would appear that the new
prirne minister, whose own party won 91 of the
151 elective seats in the House of Representa-
tives-the largest -najority ever enjoyed by a single
party in Ceylon--could have dispensed with her
campaign partners, whose combined 25 seats
might be considered of marginal value.
Mrs. Bandaranaike, however, evidently con-
cluded that her Fosition was not solid enough to
enable her to dismiss her allies. Her own party is
not homogeneous, but a miniature coalition em-
bracing a large body of moderates and a strong
leftist wing. Mrs. Bandaranaike's previous govern-
mer;t had fallen in late 1964 because of party
defections, when a number of conservative SLFP
representatives bolted the party because of Mrs.
Bandaranaike's effort to take over the country's
larg,:st independent newspaper chain and because
of -:he growing leftist influence in her govern-
Seats Won in Hoi.se of Representatives
in 1986 and 1970 Elections
151 Elective Seats
lAftar elections 6 additional
members are appointed to
represent groups not
otherwise repreiented.)
Federal Party claim to be
functioning as "independent"
opposition parties
' Fed oral Party was an ally
oft lie UNP until late 19f8.
Special Report
"Sri Lanka Freedom Socialist Party ? 5
18y the 1970 elections, this party had
merged into the UNP.i
Tamil Congress -3
Others ? 2
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meet. After the 1970 elections she probably rea-
soned that retention of the SLFP left wing neces-
sitated continued cooperation with the LSSP and
the CCP/M. Three members of the LSSP and the
UNP = United National Party
FP = Federal Party
SLFP - Sri Lanka Freedom Party
LSSP - Lanka Same Samaia Party
CCP/M = Ceylon Communist Party/Moscow
iND - Independent
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secretary general of the CCP/M received cabinet
portfolios in the new government, and the foreign
policy pledges were quickly redeemed.
The prime minister apparently hoped that
Ceylon's chances of obtaining increased aid from
Communist sources would be improved by these
initiatives and gambled that any adverse reaction
T. B. Ilangaratne
from Western nations would be limited. Her strat-
egy has had some success. Relations with Commu-
nist China warmed, and after a hiatus of over four
years, a new Chinese ambassador to Ceylon was
named in early June. In August, a Chinese techni-
cal team arrived in Colombo to resume assistance
in the construction of the Bandaranaike Memorial
International Conference Hall. This project, a
memorial to Mrs. Bandaranaike's husband, who
was assassinated in 1959, had been agreed on
initially in 1964, but was shelved after the UNP
won in 1965.
More substantial Communist aid followed
the visits of several Ceylonese delegations to
China and North Korea in August and September.
Trade Minister T. B. Ilangaratne, probably the
most prominent leftist among the SLFP cabinet
ministers, obtained an interest-free loan of about
Special Report 3-
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US $8.9 million, repayable over a 10-year period,
to cover the cost of importing 100,000 tons of
rice, in addition to the 200,000 tons of rice
initially ordered from China for 1970. This con-
stituted the first Chinese credit to Ceylon since
1964. Through that year, Ceylon had received
from China a total of about US $48 million,
chiefly for project assistance. In addition to this
new loan, China reportedly offered further assist-
ance for the purchase of subsidiary foodstuffs as
well as project aid for a survey of Ceylon's re-
sources and the development of its fishing in-
dustry. Ilangaratne's delegation then negotiated
various trade agreements and protocols on eco-
nomic cooperation and commodity exchange
with North Korea. Ilangaratne, moreover, in late
October, led a delegation to Moscow and East
Germany and signed various trade and economic
agreements.
Meanwhile, Ceylon's traditional Western aid
donors appear to have accepted, some of them
reluctantly, the nation's leftward turn. West Ger-
many resented the recognition of Pankow and
emphasized it by refusing to fulfill 1970 aid
pledges and by advising the Ceylonese to work
out with German banks credit arrangements for
commodities already ordered on commercial
terms as a private rather than a government mat-
ter. Canada, England, and Japan, however, have
signed or are negotiating agreements to fulfill
their aid pledges. Australia is implementing its
pledge
The US in late September signed a
new rL-4tSV agreement with Ceylon, providing US
$14 million in long-term credit for wheat flour
purchase.
In order to assure US good will, Mrs. Banda-
ranaike took some steps to make her foreign
policy moves less unpalatable. She eschewed the
harshly anti-US phrasings that typically appeared
in Ceylon's foreign policy pronouncements during
her previous term in office. Announcements of
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the recognition of Communist regimes appeared a
week or so after the effective dates and were
published matter-of-factly in the press. Termina-
tion of the PeacE Corps and Asia Foundation
programs was handled by the Ceylonese Govern-
ment diplomatically and without rancor.
An unexpected irritant developed in August,
however, when LS';P leader and Finance Minister
N. M, Perera charged publicly that the CIA was
backiig a so-called "Che Guevarist" revolutionary
movement on the island, and the trade minister
ates. In early August he reportedly headed a small
delegation that expressed concern to the prime
minister over what they viewed as an excessively
leftist bias in Ceylon's foreign policy. This criti-
cism and possibly subsequent advice from Felix
Bandaranaike-probably the only friend at court
the US has in Ceylon-may have had some im-
pact. At the recent nonaligned conference in
Lusaka, Mrs. Bandaranaike held herself to a rela-
tively moderate role, refraining, for example,
from a move for seating a Sihanouk delegation.
Furthermore, the new Ceylonese ambassador to
the US has made considerable effort to explain
his government's actions as being prompted by
pragmatic political and economic motives and has
hinted that the worst-from Washington's point
of view-is over. If Ceylon's foreign policy does
indeed assume a more even keel, pragmatic con-
siderations of a different order will have been
involved-the Ceylonese Government's recogni-
tion of its pressing need for continued US eco-
nomic aid.
N. M. Peres
followed up with -.wo strong attacks on US for-
eign policies. After several protests by US offi-
cials, members of the Ceylonese Government is-
sued new statements apparently intended to re-
tract or at least blunt the allegations. Perera him-
self, possibly at the urging of Mrs. Bandaranaike,
privately expressed regret to the US ambassador,
claiming his charges were caused by his misunder-
standing of the CIA's role within the US Govern-
ment.
In her effort! to avoid alienating the US,
Mrs. landaranaike has been backed if not pushed
by Home Minister Felix Bandaranaike, a relative
and an influential leader among cabinet moder-
Special Report
This continued need for foreign aid reflects
the troubles brewing domestically. For over a
decade the economy has been faltering, with un-
employment high, the cost of living rising, and
foreign exchange reserves dwindling. Mrs. Banda-
ranaike, whose policies during her prior adminis-
tration aggravated the slump, aroused expecta-
tions during the campaign that her coalition
would be able to put the economy on an upward
curve and provide jobs for all.
Some warnings, however, were voiced early
after the election in order to counter the initial
enthusiasm. In early June, the finance minister
announced that the nation was near bankruptcy,
predictably laying the blame on the previous UNP
government. A "save the nation" drive material-
ized, and for several weeks the press carried a
steady diet of pictures of individuals handing gov-
ernment officials checks representing part of their
earnings or collections taken up to meet the emer-
gency. This campaign, however, served more as a
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Despite only a slight decline in its popular vote between 1965 and
1970, the United National Party's strength in the House of Repre-
sentatives dropped considerably (see other chart) because of an
electoral system weighed heavily in favor of the rural areas, which
the Sri Lanka Freedom Party and its allies captured.
Special Report
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temporary morale booster than an effective
means of staving off economic disaster.
Other actions helped to divert popular atten-
tion from the harsh financial outlook. Plans are
under way to change the local government sys-
tem. In late July, the House of Representatives
passed a resolution empowering itself to act as a
constituent assembly to draft a new constitution.
Although this implemented another campaign
promise, the widely publicized opening of the
constituent assembly served also as a temporary
diversion while the government searched for a
way out of the deepening economic problems.
Occasional press stories have divulged alleged
details of the new constitution, possibly for the
purpose of buoying up sagging public interest or
serving as trial balloons for controversial issues,
but complete details are not yet available. The
new document will evidently make Ceylon a re-
public and establish a unicameral legislature. Mrs.
Bandaranaike has indicated that there has been no
final decision regarding Ceylon's continued mem-
bership in the Commonwealth. There is strong
sentiment among some left-wing government lead-
ers for leaving, but other strong economic reasons
for remaining.
Ceylon's senate is still dominated by the
opposition UNP because of a staggered senate
election process. It is normally a rubber stamp for
the house, but in August it sounded its own death
knell when it vetoed a poorly written house con-
stitutional amendment designed to save a cousin
of the prime minister from being disqualified
from his seat. Inasmuch as work on the new
constitution has apparently bogged down, the
house passed a bill in late October to abolish the
senate, but this will evidently be defeated by the
senate, thereby preventing the bill from becoming
law for six months. The new constitution report-
edly will specify a six-year term for the national
assembly, in effect giving the present house as
well as the Bandaranaike government the possibil-
ity of almost seven years in office.
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Workers loosening soil in rice paddies
The one government measure that initially
was most appealing to the people was the imple-
mentation on 26 September of the coalition's
promise to double the weekly rice ration. Under
the new system eah ration card holder (most of
the is.land's 12.5 million people) will receive one
two-pound "measure" of rice per week free, as
during the Senanayake administration and an ad-
ditional measure for which he must pay about US
$0.12. To operate the new ration program, the
gover-ment has hEd to increase rice imports. In
addition to the extra 100,000 tons from China,
Special Report
Ceylon has obtained about 140,000 tons over its
earlier purchases for 1970 from Burma, plus
10,000 tons from Pakistan.
To provide for the expanded rice ration, the
government will also have to buy up a consider-
ably larger portion of the domestic crop than it
has been. The government will become the sole
buyer of unmilled rice in March 1971 and, in
preparation, has launched a crash program to in-
crease its milling and storage facilities. Legislation
will reportedly be introduced, whereby private
truck and tractor owners would be compelled to
lend their equipment 30 days each year-for
which they supposedly will be paid a reasonable
compensation-in an effort to lower production
costs for small farmers. A large number of rice
mills will also be taken over by the government to
enable it to enlarge the capacity of its processing
facilities.
So far it is uncertain how well the govern-
rnent will succeed in filling the double rice ration
over a sustained period of time without adding
seriously to the strains of an already over-
burdened economy. The situation may be al-
leviated somewhat by the world rice surplus,
which could allow Ceylon to arrange favorable
credit terms to ease its balance of payments. A
hint of governmental awareness that even the
present system could be too heavy a financial
drain on the government's budget came in mid-
October when Trade Minister Ilangaratne ap-
pealed to the Ceylonese to surrender their rice
coupons or to refrain from buying their full ra-
tion of four pounds a week as an act of benev-
olence to future generations." Many Ceylonese
are indeed not buying the second measure, but
not from altruistic motivation. They had ex-
pected a return to the system in effect during
Mrs. Bandaranaike's former administration,
whereby two measures of rice were sold for about
US $0.04 each. The quality of rice supplied under
the present double ration is apparently poor, and
the Ceylonese prefer to buy a better quality at a
higher price on the market. The initial public
enthusiasm for the new ration has lessened.
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The government will probably be reluctant,
however, to do away with the new rice ration
although it may alter it somehow, because it has
little else to show for nearly half a year in office.
It is unlikely that the average Ceylonese is excited
over the prospects of a new constitution, and
even when it is promulgated and a republic pro-
claimed, Mrs. Bandaranaike can expect only
limited political benefit.
Ceylon has had chronic trade deficits. For
over a decade the prices of Ceylon's principal
exports-tea, rubber, and coconut-have been fall-
ing, while the prices of its imports have been
rising. In 1969, for example, prices on the
London market for tea, the nation's largest ex-
change earner, dropped 10 percent and Ceylon's
trade deficit increased sharply from US $61 mil-
lion in 1968 to about US $113 million in 1969.
In an effort to reduce the trade deficit, the
Bandaranaike government has enacted a new
restrictive licensing procedure that has sharply
reduced imports of both consumer goods and
goods needed for industrial production. As a re-
sult, prices of consumer goods on the domestic
market have risen markedly. The government's
Consumers' Price Index has shown a dramatic rise
from 114.8 in 1967 to 130.5 at the end of 1969
and to 138.7 in September (1952=100). The
Bandaranaike government has already put several
items under price controls, and Trade Minister
Ilangaratne recently announced that at the begin-
ning of 1971 all consumer goods would fall under
such controls.
A lack of supplies has caused factories to
reduce production, intensifying Ceylon's high un-
employment problem. Over 12 percent of the
labor force is unemployed. Among them are at
least 10,000 university graduates, unable to find
suitable jobs and prevented from doing physical
labor because of the stratification of Ceylonese
society. Presumably most of the unemployed
Special Report
voted for Mrs. Bandaranaike's coalition last May
and looked to her government to provide jobs.
The government is aware of the magnitude
of its problems, and it appears equally aware of
the growing discontent. Mrs. Bandaranaike has
appealed for patience and time, and other offi-
cials have protested against charges that nothing is
being done, pointing usually to the convening of
the constituent assembly and to the increased rice
ration as proof that the government is moving
forward. That there is little else to point to is not
entirely the fault of the present administration.
Ceylon's economy is fundamentally agricultural.
\There is more room for
government management in the export trade, but
the import of most essential commodities is al-
ready a state monopoly. Although the coalition 25X1
had promised during the campaign to nationalize
the banking system (only a handful of foreign-
owned banks would be affected because most
banks were nationalized in Mrs. Bandaranaike's
,
777::::
In late October Finance Minister Perera in-
troduced a bill in parliament that would enable
the government to take over any business employ-
ing more than 100 workers. Defending the bill
against sharp reaction from Ceylonese business-
men, government officials have stated that the
bill's powers would be used only in extreme cases
to eliminate uneconomical industrial enterprises
and to help the government deal with businesses
that refuse to comply with government policy.
Whatever the bill's outcome, the private sector's
apprehension over government intentions is likely
to have an adverse effect on industrial produc-
tion. If passed, the bill could be used by Marxist
elements in the government as a means for rapid
nationalization of some industries.
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crDILL,1
The new budget, announced at the end of
October and billed as a step toward completing
the socialist transformation of the economy, con-
tairs some austere measures. A "one-shot" capital
levy on individual wealth above US $33,000 is
callad for. Persons with an annual income over US
$1,000 must deposit a portion of their income,
ranging from 2 o 20 percent, with the govern-
merit at 5 perce;it interest, and companies must
deposit a flat percentage of their income. Al-
though such measures may appeal to the less
Ceylonese trying to exchange old 50 and 100 rupee
notes after anna uncement of demonitization.
affl lent Ceylonese and provide some additional
sou-ce of government revenue, they will probably
discourage investment and further slow the econ-
om'i. Even people with lower incomes may be hit
by increased excise taxes and by a demonetiza-
tior, plan for 50- and 100-rupee notes. By this
plan, individuals who have hoarded such notes-
and most probably avoided paying taxes on
them-may exchange 100 rupees of the old notes
for new ones. The excess is to be deposited for at
least a brief period in banks, enabling the govern-
merit to tax previously hoarded sums which had
escaped scrutiny.
Special Report
Political Problems Within and Without
the Coalition
Mrs. Bandaranaike faces more than eco-
nomic problems. The three-party coalition is po-
tentially explosive. The partners are united more
by expediency than by ideology, and strains are
already apparent. One area of friction is the trade
union field where LSSP organizations have at-
tempted to increase their strength, provoking her
own SLFP to take countermeasures. One SLFP
union has campaigned openly against an LSSP
union leader who was appointed chairman of the
Ceylon Transport Board. The CCP/M is also at
odds with its coalition partners.
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In late August Mrs. Banda-
ranaike tound it necessary to issue a public appeal
for unity. As long as both the LSSP and the
CCP/M continue to need the SLFP more than
Mrs. Bandaranaike's party needs them, however,
the two junior partners will probably take care
not to break up the coalition.
In addition to preserving unity, Mrs. Banda-
ranaike faces the problem of maintaining her own
leadership. In the early days of her administration
she took steps further to strengthen her control.
Supervision of the public service was transferred
from the Ministry of Finance, under the care of
LSSP leader Perera, to the Home Affairs Ministry,
headed by Felix Bandaranaike. Presumably this
would make it more difficult for the LSSP to
infiltrate effectively into the government ap-
paratus. Two other LSSP leaders were given
posts-those dealing with transportation and the
plantation industries-that could bring them into
direct conflict with some of the powerful trade
unions controlled by their party. With the LSSP
leaders hopefully given enough to keep them
either in hot water or out of mischief and with
the smaller CCP/M probably viewed as less of a
threat, Mrs. Bandaranaike may have believed that
she had effectively forestalled immediate chal-
lenges to her leadership. Although there has been
the usual postelection changeover among police,
military, and public service personnel, there is no
firm evidence that enough members of the far left
have attained positions of sufficient importance
to enable them to exert a disproportionate influ-
ence over policy.
Although there may be no direct challenges
in the near future, Mrs. Bandaranaike eventually
may feel compelled to adopt more radical policies
in order to protect her position. Her continued
failure to alleviate Ceylon's problems could lead
or stimulate the left wing of the SLFP to join
with the LSSP and the Communists in demanding
more radical moves. Mrs. Bapdaranaike is also
aware of a developing "new left" revolutionary
element, composed of a number of apparently
disunited organizations whose members are edu-
Special Report
cated unemployed youths and whose leaders are
generally former members of either the pro-Mos-
cow or pro-Peking Communist parties. The gov-
ernment is clearly concerned, and a special police
unit has been assigned to monitor the new left
groups. Several arrests have been made, but
usually the police have been able to prove little.
Another potential source of agitation is the
island's large (about 22 percent) Tamil minority,
divided almost equally between the "Ceylon
Tamils," whose ancestors have lived on the island
for generations and who have full voting rights,
Indian Tamils Sorting Tea
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1963 Population'
Sinhalese
7.517.750
70.8
Tama
2.293,160
21.9
JIUnaP
Ceylon
1,170,310
11.0
Indian
1.122,850
10.9
Moors
688.880
6.5
DEL#1
ISLAND
Burghers &
Eurasians
46,050
.4
Malays
24,130
.2
Others
20,090
.2
BUDDHISM
Anutadhapwso
CEYLON
Sinhalese
Ceylon Tamil
Q Indian Tamil
Moor/Cevion Tamil
ISLAM Religion name
Coabnut * Tea
Rice 0 Rubber
Special Report
HINDUISM
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1
1970 Estimate: 12,500,000
Based on 10% tabulation
by the Dept. of Census
and Statistics
0Trubcomalee E' 1 Y
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and the mostly disenfranchised "Indian Tamils,"
whose forebears were brought over from southern
India in the second half of the 19th century to
work on plantations. The Tamils remember that
the earlier Bandaranaike administrations fanned
existing anti-Tamil sentiment among the majority
Sinhalese, causing occasional violence. The Cey-
lonese Tamils might begin agitating should the
new constitution appear to discriminate against
them, and the Indian Tamils, the work force for
the important plantation industries, could cripple
the economy should they launch a strike.
From whatever direction, there is a clear
possibility of serious trouble for the new govern-
ment. The people appear tired of slogans and
impatient for tangible economic progress. There is
a notable, relatively moderate element within the
government, and Mrs. Bandaranaike herself is
probably not a radical leftist. The possibility of
strong leftist pressure from within or without the
government, however, might prompt her to ad-
vocate more extreme solutions. Increased govern-
ment control could lead eventually to creation of
a more authoritarian form of govern-
ment.
Special Report .. 11 -
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