WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A008700030001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 30
• Document Creation Date: December 21, 2016
• Document Release Date: May 2, 2008
• Sequence Number: 1
• Publication Date: April 16, 1971
• Content Type: SUMMARY

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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Secret
State Dept. review completed
16 April 1971
No. 0366/71
Copy N2 49
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CONTENTS
(Information as of noon EST, 15 April 1971)
Indochina: The Communists Press the Fight . . . . . . . . . . . . . . . . . . 2
Cambodia: The Leader Comes Home . . . . . . . . . . . . . . . . . . . 3
Laos: The Calm Before the Storms? . . . . . . . . . . . . . . . . . . . . 4
US-GRC Relations: "Oil on the Fire" . . . . . . . . . . . . . . . . . . . . 5
Peking Starts Some Diplomatic Volleying . . . . . . . . . . . . . . . . . . . 7
USSR: Brezhnev's Gains at the 24th CPSU Congress . . . . . . . . . . . . . . 8
NATO Debates Position on Mutual Force Reductions . . . . . . . . . . . . . . 9
West European Stake in INTELSAT Negotiations . . . . . . . . . . . . . . . 10
Soviets Adopt a New Labor Code . . . . . . . . . . . . . . . . . . . . 11
Hungary: Economic Reform is an Effective Compromise . . . . . . . . . . . 12
Yugoslav Economic Problems Persist . . . . . . . . . . . . . . . . . . . . 12
Croatian Chauvinism Undermines Yugoslav Federation . . . . . . . . . . . . 13
Middle East: The Uneasy Calm Continues . . . . . . . . . . . . . . . . . . 15
More Communist Economic Aid for Iraq . . . . . . . . . . . . . . . . . . 16
Ceylon: The Government's Position Improves Slightly . . . . . . . . . . . . 17
Pakistan: The Issue Remains in Doubt . . . . . . . . . . . . . . . . . . . 20
South Africa: Moving Outward . . . . . .. . . . . . . . . . . . . . . . 21
Brazil: Government Reacts Strongly to Criticism . . . . . . . . . . . . . . . 22
Guyana Faces Serious Problems in Bauxite . . . . . . . . . . . . . . . . . 23
Argentina: Political Activity Renewed . . . . . . . . . . . . . . . . . . . 24
Developments in Chile . . . . . . . . . . . . . . . . . . . . . . . . . 24
NOTES: Burma; Hungary; UN - Middle East; Nepal; Uruguay; Haiti
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Kompony
Som
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FAR EAST
UNCOI~
Indochina: The Communists Press the Fight
Heavy ground combat is still under way in
South Vietnam's central highlands, where the
Communists have been setting a sharp pace for
nearly two months. All the evidence suggests
heavy casualties for the enemy forces, but they
appear as determined as ever to take South Viet-
namese positions and to inflict as much damage as
possible on South Vietnamese units. Numerous
shellings and heavy antiaircraft fire have hindered
allied air resupply operations, and ground con-
tacts up to battalion size have occurred in the
rugged terrain near the Ben Het and Dak To
Ranger camps in western Kontum Province.
Communists are doing now in this regard,
Although the Communists clearly would like
to overrun one or more of the South Vietnamese
highland border camps as part of their follow-up
to the recent fighting in Laos, they probably have
other objectives in mind as well. In the past,
strong attacks in the border regions of Kontum
and Pleiku provinces have often been made in
hopes of drawing allied forces away from the
populated coastal regions of MR-2. Once this hap-
pened, the enemy stepped up attacks along the
coast to disrupt the government's pacificatio25X1
program.
Major General Dzu, commander of MR-2,
recently acknowledged that he has deployed half
of his regular army troops-14 battalions-around
Fire Support Base 6 to combat the three enemy
regiments currently fighting there. Dzu is con-
cerned that he does not have enough reserves to
cope with enemy actions elsewhere, and has ur-
gently requested that Saigon send him additional
support.
Whatever military tactics the Communists
try in the days ahead, as the presidential election
in South Vietnam approaches they will pursue
tactics calculated to help oust President Thieu.
Moreover, because Big Minh is Thieu's most
formidable potential opponent and because the
The Communists appear bent on keeping up Communists almost certainly think their pros-
the pressure in the Ben Het - Dak To sector for pects would be enhanced by Minh's election, they
some time. appear to be looking for ways to help Minh at the
polls next October. 25X1
There is no consistent evidence of what the
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(Viet Cong cadre
nave u ganda effort on
behalf of Minh. They are said to be telling some
villagers that he would be the better man to bring
peace to South Vietnam, and they may eventually
try to conduct a coordinated "whispering cam-
paign" to this effect throughout South Vietnam.
The Communists may also try to help other
groups supporting Minh, but at this stage it seems
most unlikely that they will be able to stimulate
much additional voter support for him.
The South Vietnamese Government prob-
ably is eager to tar Minh with the Communist
brush.
The country observed the beginning of a
new year this week, but about the only cause for
any real rejoicing was Lon Nol's return to Phnom
Penh. Although his health measurably improved
as a result of his two-month stay in Hawaii, it
apparently will be some time before the prime
minister is physically fit to reassume full leader-
ship.
For the moment, however, Lon Nol's physi-
cal presence should help to calm some of the
political agitation that surfaced during his ab-
sence. With him in the wings, the regime may now
be more inclined to deal with the various pres-
sures underlying the recent ferment. Foremost
among these are the persistent demands by stu-
dents, young military officers, and others backing
the government for a high-level housecleaning of
corrupt and inept officials, including some cabi-
net ministers.
Lon Nol was not greeted with news of any
significant Cambodian Army accomplishments.
As was the case when he departed, his soldiers are
still largely on the defensive in many areas of the
country. Moreover, the government's major mili-
tary operation of the moment-the push along
Route 4 to reach the Pich Nil pass-is making
little, if any, real progress. Early in the week, the
roadbound Cambodians were still trying to shake
off the costly and demoralizing effects of the
sharp attacks by Communist forces that halted
and fragmented the column on 7 April. Neverthe-
less, the government apparently is determined to
carry on with the operation when more reinforce-
ments from Phnom Penh are added to the task
force.
I n Kompong Cham Province, South Viet-
namese troops reportedly inflicted heavy
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casualties on the Communists in a succession of
battles. Most of the fighting occurred near the
town of Suong, a few miles southeast of the Chup
plantation. By mid-week, the South Vietnamese
claimed to have killed just over 500 of the enemy.
According to the South Vietnamese their losses
were slight by comparison.
key hill position on 11 April following heavy and
accurate enemy shelling attacks, that had made
resupply drops increasingly difficult. Another ir-
regular company has been airlifted into the area
to reoccupy the position, however.
Luang Prabang Status Quo
Laos: The Calm Before the Storms?
Since the fall of the Ban Na artillery site last
week, the Communists have not pressed major
ground assaults on fortified government positions
around the Long Tieng complex, and the rainy
season-when Communist military activities
around the Plaine des Jarres have traditionally
lessened because of logistic difficulties-is now
only about a month away.
A multibattalion government clearing opera-
tion around Luang Prabang was launched on 11
April, but the two irregular task forces involved
have made very little progress. One task force was
airlifted into an area about 12 miles northeast of
the royal capital to begin sweeping westward
along the Mekong. The second force is to move
northeast along Route 4 from Ban Don Cho, b ~
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Government irregulars have begun strength-
ening defensive positions in a line running roughly
from Hill 1663 northwest of Ban Na, south-
easterly through Phou Long Mat to Pha Dong.
The line is anchored on both ends by howitzer
batteries, which are also deployed at key inter-
mediary positions in the Phou Long Mat area.
The irregulars are expecting stronger Com-
munist attacks on these positions, particularly at
Hill 1663 and at two ridge positions between
Long Tieng and Tha Tam Bleung. Both areas have
been the target of heavy Communist shelling at-
tacks during the week; irregulars trying to take
the eastern highpoint of one of the ridge positions
have been beaten back repeatedly by dug-in
North Vietnamese forces. The determined enemy
defense of these positions suggests that they are
regarded as vital to maintaining and protecting
the supply lines from the Plaine des Jarres. At
nearby Phou Long Mat, irregulars abandoned a
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it has been stymied because the Communists are
occupying the high ground on the force's right
flank.
The Communists continue, however, to
make political gestures suggesting that they do
not intend to overrun the royal capital or to
threaten King Savang. Hanoi sent official greet-
ings to the King on the Lao New Year (April 13
to 16) reasserting the hope that friendly relations
"would be strengthened." In addition, the Pathet
Lao offered to let either the King or the Crown
Prince visit the Pak Ou caves-a holy site north-
east of Luang Prabang-during the New Year fes-
tivities. The royal pilgrimage to Pak Ou has been a
feature of the celebrations for years, and it was
only in the last few weeks that the Communists
occupied the area. The King has not responded to
the overture and probably has little wish to ac-
knowledge even tacitly Communist control of the
area, which is one of the key objectives of the
government's current operation to regain ground
around the royal ca ital.
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I
US-G RC Relations: "Oil on the Fire"
A Gulf Oil Company proposal in early April
to declare a moratorium on oil exploration in the
East China Sea and a US statement that the
Senkaku Islands would be included in reversion of
the Ryukyus to Japan next year have created
additional strains between Washington and Taipei.
Acting Foreign Minister Yang, echoing the shock
expressed by several high-level Nationalist offi-
cials, delivered a strongly worded protest to the
US over the proposed moratorium, which he said
Taipei must reject as deeply prejudicial to its
essential interests. In a later expression of his
government's grave concern over the US state-
ment on the Senkakus, Yang added that the tim-
ing of the comment was impossible to under-
stand, coinciding as it did with the moratorium
proposal and the latest well-publicized demonstra-
tion by Chinese in the US reasserting Chinese
rights to the islets. Yang and Economic Minister
Sun had already said that Taipei viewed current
US treatment of the oil rights dispute as yet
another indication that Washington was ignoring
Nationalist interests to appease Peking.
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There are also domestic reasons for the Na-
tionalists' reaction. They have focused on the
Senkaku issue in their public comments on the
moratorium not only because of the US state-
ment but also in an attempt to counter continu-
ing charges from the Legislative Assembly and the
press, as well as demonstrators abroad, that Taipei
is giving in to pressures that could prejudice its
claims to the resources of the East China Sea.
Many of those charges have focused on the Na-
tionalists' "passive" stance on their sovereignty
over the islets and potential oil deposits in their
immediate area. Chinese and Japanese rival claims
there have a broader significance because the
islets could form part of a base line determining
the division of rights to the whole continental
shelf in a future negotiated settlement.
Peking's claim to the Senkakus is another
factor influencing Taipei's stance. In discussing
the importance of the Senkaku issue with the US
ambassador earlier this month, Yang said his gov-
ernment felt that Peking's propaganda was having
widespread harmful effects and added that Taipei
could not afford to be less zealous than the Com-
munists in opposing Japanese claims. He asked
that Washington refrain in general from actions
that would put Taiwan in a poor light as defender
of a Chinese national interest, and specifically
that it do what is possible to damp down Japan's
pursuit of its claim to the Senkakus. One of the
Nationalists' concerns has been that Peking might
be able to exploit the issue and make permanent
inroads among overseas Chinese communities, es-
pecially student and scholar groups in the US.
Taipei has cited their allegiance as proof that it
represents more than just the people of Taiwan.
Yang told the ambassador that the US statement
on the Senkakus could only "pour oil on the fire"
of the Nationalists' problems caused by the dem-
onstrations. In an apparent effort to show that
the demonstrators' opposition to Japan's claims
to the Senkakus need not also be critical of Tai-
pei's handling of the dispute, and to place addi-
tional pressure on the US, the Nationalists have
staged their own demonstrations by students at
US offices on Taiwan.
Nationalist officials undoubtedly now be-
lieve that acceptance of any proposal to slow or
cease Taipei-sponsored oil exploration would
merely leave the field open to rivals. Japan, in the
short term, could circumvent a moratorium by
contracting with other companies and, over the
long term, could disregard Taipei's claims by
making an arrangement with Peking. At the same
time, the Nationalists fear that failure to gain
public US recognition of their claim to the
Senkakus will have unpleasant repercussions on
Taipei's image at home and abroad. Thus,
Nationalist expressions of outrage, centering on
the moratorium proposal, probably relate as
much to apprehensions regarding US policy
toward Peking and Tokyo as to the specifics of
the proposal itself.
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Peking Starts Some Diplomatic Volleying
The visit to China of the US table tennis
delegation has, in Premier Chou En-lai's words,
"opened a new page" in the relations between the
Chinese and American people. Until Chou's meet-
ing with the group on 14 April, the visit, although
unprecedented, had been a "people-to-people"
one; his decision to meet with them lifted it to
semiofficial status. The meeting with Chou had all
the earmarks of a last-minute decision-the team's
trip to Shanghai had to be set back a day to allow
for the audience-and seems to have been ar-
ranged after Peking's leaders had assessed the
overwhelmingly favorable international reaction
to their diplomatic coup.
Since the US group's first arrival on 10
April, Peking has gone to considerable lengths to
emphasize the friendship between the American
and Chinese people and to ignore completely
Sino-US political differences. According to British
diplomats in Peking, the Chinese even removed
prominent anti-US slogans from the stadium and
the hotel where the team was staying.
Interest is now running high in the US, and
elsewhere, on- the possibility of similar visits and
other cultural exchanges. Indeed, acceptance by
Peking of an invitation to send a table tennis team
of its own to the US is almost a certainty. Chou
specifically pointed out, moreover, that more US
newsmen would be allowed to enter China now
that the ice had been broken. Peking initially
granted visas to three US reporters who were
informed that they could accompany the table
tennis team until it concludes its stay in the
country, presumably this weekend. The Chinese
followed this up by issuing an additional visa to
US correspondent Tillman Durdin of the New
York Times, who probably will be allowed to
remain there beyond this weekend. Scores of
other US journalists are applying for visas, and
Chou has said that they will be allowed to visit
China at intervals.
These unprecedented steps represent Pe-
king's first clear response to the recent US de-
cision to remove all restrictions on travel to the
mainland. The Chinese had studiously ignored
previous US moves to relax gradually long-stand-
ing trade and travel restrictions aimed at China.
Peking's decision to push ahead now is obviously
timed to influence a number of important moves
that will be made this year directly affecting
China's interests. Peking is undoubtedly con-
cerned with presenting a reasonable image in light
of the US initiatives to improve relations and
probably hopes to stir up support in the US for
its side of Sino-US bilateral differences. Funda-
mental to the Chinese is the US attitude on the
subject of Taiwan and the US commitment to the
Nationalist Chinese Government. Peking no doubt
anticipates that its actions will further exacerbate
the already tense relations between Taipei and
Washington.
In a broader sense, the Chinese probably also
hope to improve the atmospherics, both in the:US
and internationally, that surround discussions
concerning various approaches to this year's vote
in the UN on Chinese representation. The visit of
the US table tennis team and newsmen is even
now having a considerable impact in the UN.
According to the US Mission in New York, the
general impression is spreading among the dele-
gates that Peking's actions represent a carefully
timed step in its world-wide campaign to win as
many votes as possible when the China question
comes up this year. Most agree, moreover, that
these efforts are sure to help Peking's case at the
26th General Assembly and make it very difficult
for the US to lobby effectively for its traditional
position that any change in Chinese representa-
tion is an Important Question requirin a two
thirds affirmative vote.
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EUROPE
USSR: Brezhnev's. Gains at the 24th CPSU Congress
General Secretary Brezhnev emerged from
the 24th CPSU Congress with real, if unspectacu-
lar, political gains to match the increased public
pre-eminence he has achieved over the past year.
The congress itself approved the USSR's current
active diplomacy, endorsed the regime's program
for improved consumer welfare, and adopted
several reforms that will probably strengthen the
hand of the party's professional bureaucrats.
On 9 April, the final day of the congress,
Brezhnev announced that the Politburo had been
expanded from 11 to 15 full members by the
elevation of three candidate members and a party
secretary. There were no other changes in the top
ruling organs; all 11 full members and the six
other candidate members retained their Politburo
seats, and the membership of the party Secre-
tariat remained the same.
The new Politburo members are Kazakh
party boss Kunayev, Ukranian Premier Shcherbit-
sky, party secretary Kulakov, and Moscow city
party chief Grishin. Kunayev has been one of
Brezhnev's most unabashed public promoters.
Shcherbitsky comes from Brezhnev's home ter-
ritory in the Ukraine and worked there under
Brezhnev's ally, Kirilenko, for a number of years.
Kulakov has worked closely with Brezhnev and
Deputy Premier Polyansky in formulating policy
for agriculture. Grishin has praised Brezhnev
warmly in public speeches and may also have ties
to Kirilenko.
At least three and probably all four of these
competent but uninspiring bureaucrats can be
counted as Brezhnev supporters. Their addition to
the Politburo probably enables the general secre-
tary to ease one or another of his rivals out of the
leadership if he chooses to do so. At the least, it
will be more difficult for any of Brezhnev's rivals
to organize a majority against him in the near
future. The membership of the CPSU central
committee was also enlarged at the congress, and,
even if the new membership is not a Brezhnev-
packed group, its greater size is likely to reduce
whatever effectiveness the committee has as a real
deliberative and policy-making body.
Brezhnev's domination of the congress was
underscored by the failure of any of his col-
leagues, save Premier Kosygin and Ukrainian
party boss Shelest, to address the gathering. More-
over, several Politburo members who have taken
independent positions in the past-Kosygin, Rus-
sian Republic Premier Voronov, and trade union
chief Shelepin-suffered protocol snubs. Conse-
quently, although the independent-minded party
secretary, Suslov, maintained his high protocol
standing, the proceedings raise real questions
about "collectivity" in the leadership henceforth.
Brezhnev will probably take his time, however, if
he attempts to alter the manner in which policy is
made in Moscow.
In the economic field, the congress resolu-
tion and the final guidelines for the 1971-75
economic plan followed expected patterns in
most respects. The resolution echoed Brezhnev's
report with its emphatic language on behalf of the
consumer sector and, in discussing growth rates,
placed consumer industry in the same category as
the glamor industries critical to technical prog-
ress. The directives leave questions, however, on
how this policy will be implemented.
The resolution gave little comfort to liberal
economists interested in going further with eco-
nomic reforms. It did declare the party's support
for industrial associations, but also repeated
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Brezhnev's call for expanding the rights of party
organizations to control the work of the adminis-
trative apparatus in economic ministries and
scientific agencies.
The congress resolution makes it clear that
the party intends to purge those whose loyalty is
less than undivided. Public support for this pro-
posal was notably thin at the congress, however,
and it remains to be seen just how thorough a
"housecleaning" will take place. The congress also
lengthened the period between such account-
ability sessions as congresses and conferences.
This will make party officials more secure in their
positions and probably will be most beneficial to
those who are resistant to change. At the same
time, the resolution failed to authorize creating
enlarged party committees, which could serve as
an instrument for democratizing the party. On
balance, the congress seems to represent a setback
for those who would reform the Soviet system
from within.
NATO Debates Position on Mutual Force Reductions
Brezhnev's reference to regional disarma- virtue in force reductions, given the current politi-
ment at the 24th Party Congress, the potential cal climate, but should the climate change, he
relationship between SALT and Mutual and Bal- could not see how France could avoid partici-
anced Force Reductions (MBFR), and the antici- pating.
pated need to refer to force reductions at the
NATO June ministerial have made MBFR much
more than a hypothetical question for the Allies.
Nevertheless, they are far from a consensus on the
value of the NATO initiative and on the potential
risks of any such reductions.
The most recent British studies of MBFR
have concluded that NATO's public position is
ahead of its preparedness to move to MBFR talks.
At NATO headquarters, the UK is emphasizing
the difficulties involved in negotiating any reduc-
tions that would be consistent with preserving
Western security and has even referred to MBFR
as the most dangerous thing we have ever played
with." West Germany, however, continues to be a
strong advocate of eventual force reductions,
A crucial concern has been the attitude
NATO should take toward the suggestion of the
Warsaw Pact last June that reductions in "for-
eign" or stationed forces might be possible. At
least one ally, Canada, is eager to pursue this
approach. A recent preliminary US paper on
MBFR was quickly interpreted by the Canadians
and others as support for reductions in stationed
forces as an initial step leading eventually to re-
ductions also in indigenous troops. However, an
informal Canadian suggestion that NATO signal
its readiness to have the US negotiate mutual
US-Soviet force reductions was received coolly by
the European allies.
stressing that MBFR proposals enhance NATO's
detente image and militate against unilateral US Brezhnev's vague appeal in his party congress
troop cuts. Paris has remained aloof from NATO speech for reductions of "armed forces and arma-
discussions of MBFR, but is giving the subject ments" in areas such as Central Europe has clearly
more serious consideration than ever before. A sparked the curiosity of many NATO members.
French official recently said that France sees no Brezhnev did not narrow the issue to "foreign"
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forces, and his remarks may have been a hint that
Moscow is reconsidering its position. However,
Moscow has yet to follow up the statement and it
may have been only political rhetoric.
Nonetheless, his comments, combined with
Secretary Laird's suggestion that forward based
nuclear-capable weapons systems might be
handled in MBFR talks instead of in SALT, as the
Soviets have insisted, will ensure lively discussion
of MBFR in the weeks ahead. The question for
the NATO foreign ministers in June will be
whether to put the emphasis on advancing the 25X1
incipient dialogue with the Pact or on trying to
keep the subject cooled down for the time be-
ing.
West European Stake in INTELSAT Negotiations
The 79-member International Telecommuni-
cations Satellite Corporation began a five-week
meeting in Washington this week to convert the
interim INTELSAT accords-in force since
1964-into definitive arrangements for providing
global communications satellite (comsat) services.
Previous conferences have drawn up drafts of
most of the necessary conventions-including
intergovernmental and operation agreements-but
difficult problems remain. Most of these stem
from Western Europe's desire to safeguard its
future role in space.
The Europeans are particularly concerned
about the US interpretation of Article XIV of the
proposed intergovernmental agreement, which
they claim might enable one third of the INTEL-
SAT members to block the regional comsat sys-
tem Europe plans to establish. They want assur-
ances protecting their interests, and without them
are reluctant to go further in exploring the possi-
bilities of post-Apollo space cooperation with the
US. In the context of closer cooperation with the
US, the Europeans hope to be able to buy US
launch services for regional satellites in return for
their financial contributions to the next genera-
tion of US satellite vehicles.
This is a crucial issue for the Europeans, due
in good part to the fact that cooperation with the
US will largely shape the future European space
effort. Without assured availability of US launch-
ers, the Europeans would have to choose between
launching no satellites or going along with France,
which insists that Europe build its own launchers.
Most members of the Conference on European
Telecommunications Satellites (CETS) would
clearly prefer to avoid this expensive alternative.
In order to assuage European concern over
Article XIV, a new voting arrangement has been
proposed that would allow the Assembly of Par-
ties-in which INTELSAT governments are each
represented by one vote-to approve a regional
system by a simple majority. Although this would
reduce the chances that a regional system could
be voted down, some Europeans believe the
French will still not be satisfied.
Another contentious question is the sharing
of procurement contracts for comsat equipment.
The particular issue is whether to award contracts
on a purely competitive commercial basis onto
use some "sharing" system. The Europeans pre-
sume that the US would be favored under a
competitive system and, as with post-Apollo co-
operation where a similar problem arises, they
would like to assure a significant piece of the
action for European industry.
The French have complained for some time
that the proposed INTELSAT arrangements leave
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the governments-as opposed to the telecommuni-
cations agencies (COMSAT, in the US case)-with
little authority. Paris has in fact proposed either
increasing the governments' powers or completely
revamping the accords into a mere commercial
agreement among agencies. Most countries, how-
Soviets Adopt New Labor Code
A new labor code became effective in the
Soviet Union on 1 January, superseding one pro-
mulgated in 1922. This code, as other recent
labor reforms, is more a change in form than in
substance, however, and will do little to promote
labor efficiency or to improve worker morale.
The new code, officially known as the
Principles of Labor Legislation, is the basic law
regulating all aspects of the labor market, includ-
ing hours, wages, working conditions, trade
unions, and workers' rights and obligations. As in
the past, workers' obligations can be cited in
order to maintain absolute control over the labor
force, while workers' rights are virtually meaning-
less without independent judiciary and trade
union systems. Consequently, power resides not
in the document but with those who enforce it.
The present code contains a number of in-
consistencies. Workers have the right to partici-
pate in the management of production, for
example, but the dominant authority of the
manager cannot be questioned. Discrimination in
hiring based on sex, race, nationality, or religious
attitude is forbidden, but the new code may ac-
tually raise the costs of hiring women because it
provides them with increased benefits. The code
was modified to facilitate implementation of the
economic reforms, but, by adding to management
prerogatives in matters of hiring, firing, and
wages, the rights "guaranteed" to workers in the
labor code have been diminished.
ever, are not prepared to scrap the years of effort
put into working out the present drafts of the
definitive arrangements. The French proposals
could nevertheless gain support among the Euro-
peans if their demands are frustrated.
A discernible strengthening of the code's
provisions governing the conduct of workers is
consistent with the regime's campaign to tighten
labor discipline. The code stipulates the usual
worker obligations to observe work discipline, to
care for public property, and to meet work
quotas. Unlike the former code, however, a new
section is devoted to penalties for violators. There
are also wider grounds for dismissal, specifically
including "coming to work in an intoxicated con-
dition," thus supporting the current campaign
against drunkenness.
The inclusion, for the first time, of a provi-
sion for part-time employment reflects the re-
gime's efforts to bolster the work force. Rather
than adding to the total labor effort, however,
this provision may encourage many workers,
especially women, to withdraw partially from the
labor force to gain more leisure time.
The efficacy of the new code depends, in
part, on its success in improving the allocation of
labor and raising the motivation of workers-the
major obstacles to increased labor productivity.
The new code broadens some managerial preroga-
tives, which will facilitate redistribution of the
work force, but these are only procedural im-
provements. Managers still do not have incentives
to operate with the most efficient use of labor.
Moreover, the code fails to remove the inequities
that have led to a labor force characterized by
cynicism and apathy.
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Hungary: Economic Reform is an Effective Compromise
After more than three years, Hungary's New
Economic Mechanism (NEM) remains essentially
a compromise between market incentives and
continued centralized controls. It does not repre-
sent, as some press articles suggest, a rapid move
toward capitalism, but the end result probably
will be a more flexible and less wasteful economic
system.
The main objective of the NEM is to make
the economy function more efficiently by discon-
tinuing detailed plan directives, reforming the
price system, and encouraging producers to gear
production to demand. The state retains ample
control to assure that national priorities em-
bodied in the economic plan will be attained.
Enterprises now are expected to respond to
the profit motive and their directors have a
greater role in establishing policy and in guiding
the operation of the plants. Worker, as well as
management, bonuses are tied directly to sales
results through a profit sharing fund. Moreover,
the foreign trade system has been revamped to
link foreign and domestic prices and to force
producers engaged in trade to take account of
actual world market prices.
Although the state has reduced its role in
making plans for enterprises, detailed economic
regulation by central authorities has not de-
creased appreciably. The state owns the enter-
prises, and enterprise managers, who continue to
be representatives of the state, remain subject to
ministerial controls and to indirect state in-
fluence. Budapest retains controls on investments,
credit, profits, wages, prices, and foreign trade,
and pays substantial subsidies to cover losses
resulting from the reform of prices and foreign
trade.
There generally has been a smooth transition
to the new system, reflecting comprehensive
preparations and control. In 1968 and 1969, how-
ever, some reform policies contributed to a slow-
down in industrial output and, even more disturb-
ing, a stagnation in industrial labor productivity.
In 1970 output and productivity rebounded. The
Hungarians claim the reform was responsible, but
sustained progress in increasing efficiency will be
necessary before the reform can be judged a
success.
Hungary does not consider the NEM com-
plete and has indicated some future steps that
could lead to a more competitive system. These
probably will include measures to attract foreign
investments and to reform the banking system.
Revisions in the consumer price structure also are
promised, and leaders may revitalize trade unions
to make them more representative of workers'
interests. Hungary's leaders, who remain sensitive
to Soviet opinion on the NEM, will undoubtedly
continue to keep the USSR well informed on
Yugoslav Economic Problems Persist
Serious economic difficulties still plague ficulties in liberalizing imports and revising the
Yugoslavia despite a recent devaluation of the banking system.
dinar and the government's economic stabiliza-
tion program. The persistence of adverse trade According to data just released for the first
and price trends has increased Yugoslavia's dif- quarter of 1971, the trade deficit of $376 million
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was more than double that of the same period last
year. Exports did not increase at all, while im-
ports were up markedly. Other foreign exchange
earnings such as tourism, rose during the period,
however, providing some relief. The Yugoslavs
expect that the 20-percent devaluation made last
January will begin to prod exports later this year,
but it probably will not deter imports, as evi-
denced by first quarter figures.
Across-the-board efforts to reduce inflation-
ary pressures have met with little success. Prices
increased in January and February and again in
March. Industrial and retail price increases, for
example, caused the cost of living to spurt 1.9
percent during the month. Government-approved
hikes in telephone rates and in domestic train
fares contributed to the significant rise in prices.
These adverse trends have blocked plans to
remove controls on prices and imports and have
impeded revisions planned for the banking and
foreign exchange systems. The Federal Executive
Council, which has been criticized sharply for its
lack of initiative in stabilizing the economy, has
only recently answered critics by promising to
present a detailed analysis of the economic situa-
tion to the Federal Assembly before the end of
the month.
The government's proposed decentralization
program, which will transfer a great deal of politi-
cal and economic power to the republics, makes it
imperative to move quickly and decisively in
tackling the country's economic problems. De-
centralization already has resulted in confusion
and bickering among the republics over the
problem of redefining republic and federal
responsibilities. Although Tito expects the new
constitutional amendments to "tidy up" spheres
of responsibility, increased cooperation among
the republics and between republics and the
federal government will be necessary if the system
is to work properly.
The Yugoslavs admit that the success of
their economic policies depends on their ability
to obtain new credits and debt relief from the US
and other major western trading partners. With
these objectives in mind, Finance Minister Smole
is now in the US for high-level talks with govern-
ment and business officials.
Croatian Chauvinism Undermines Yugoslav Federation
Yugoslavia's traditional regional rivalries and
animosities have reached a postwar high in recent
months. Each republic is maneuvering for the
considerable political and economic power that
will be transferred to local levels as a result of
Tito's decentralization programs. Croatian chau-
vinism has been particularly acute, underscoring
the emotional regional attachments Yugoslavia
must overcome if it is to continue as a federation
in the post-Tito period.
Many Croatian officials fervently believe-
recalling pre-Communist Yugoslavia-that unless
they are vigilant, Yugoslavia will one day again be
simply greater Serbia. They have put party dis-
cipline aside in order to prevent this from happen-
ing. Last month, for example, a senior Croatian
party official, Mika Tripalo, called for greater
rights for the autonomous province of Kosovo-a
region the Serbs view as an intergral part of their
republic. Tripalo's action may have been in part a
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25X1
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response to publicly aired accusations from
Serbian party officials that the Croats have been
too tolerant of republic nationalism.
The issue of regional autonomy has become
so sensitive that even a seemingly innocuous event
such as the current population census can surface
bitter hostilities. The Croats became aroused over
the fact that the question on nationality affilia-
tion permitted a wide variety of responses, such
as Dalmatian and Muslim. Croatian officials in-
dignantly claimed that this was an attack on the
integrity of their republic, designed not only to
undercut its national identity but its voice in the
affairs of the federation as well. The Croats won
their case, but not before the census dispute de-
veloped into an unprecedented media imbroglio
between a major Serbian daily, Borba, and the
leading Croatian journal.
Earlier this year, the two papers polemicized
at length over alleged Croatian attempts to pres-
HUNGARY: The Kadar regime's much vaunted
electoral reform has failed to arouse more wide-
spread public interest in the parliamentary
elections due on 25 April, but it seems to have
had some success in maneuvering opponents of
Kadar's reforms into disadvantageous positions.
Voters in only 14 percent of the constituencies
used their new right to nominate candidates to
oppose the party-endorsed candidate and it
appears that half of these "contests" had been
fixed. The reluctance of entrenched bureaucrats
to open the system to new forces was an im-
portant factor preventing more extensive develop-
ment of the electoral reform. Under the new
system, however, some conservatives were
separated from their local strongholds. Party
secretary Zoltan Komocsin, reportedly out of
step with the Kadarist majority, was shifted into a
less significant district, as were trade union chief
Gaspar and politburo member Apro. Other moves
also presage some leadership changes after the
elections.
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sure national minorities living within the borders
of Croatia to identify themselves as Croats. One
fallout from the dispute was the resignation of a
prominent Croat and vice president of the Federal
Assembly, Josip Djerdja, from the editorial board
of Borba because he considered the paper's attack
on his home republic unjustified.
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MIDDLE EAST - AFRICA
Middle East: The Uneasy Calm Continues
Egypt and Israel seem no closer to any real
movement toward peace. If anything, their public
statements suggest that they have moved further
apart by increasing their demands. The Egyptian
proposal for the opening of the Suez Canal-
which would bring Egyptian military units east of
the waterway-was essentially rejected by Israeli
Defense Minister Dayan, who said that any re-
opening must be accompanied by an Egyptian
agreement for a permanent cease-fire with no
Arab troops in the Sinai.
Although Egypt is still working to dislodge
the Israelis from the occupied territories by diplo-
matic means, if diplomacy continues to founder,
President Sadat may find it. difficult to resist the
apparently growing pressures from some political
and military elements for an armed thrust at the
Israelis; for some of these militants, the only real
solution to the territorial problem is war. This
basically pessimistic "war is inevitable" attitude
will probably deepen as the impasse persists and
UN - MIDDLE EAST: Commissioner General
Michelmore of the UN Relief and Works Agency
(UNRWA) has told the US the agency's fiscal
position may not be as gloomy as earlier projec-
tions had indicated. The deficit for 1971 may go
no higher than $1.5 million as a result of several
recently devised cuts in welfare services to the
Middle East refugee camps. None of these meas-
tough language on the question of withdrawal
continues to emanate from Tel Aviv.
In Jordan, there were some fresh clashes this
week, but the significant move was the with-
drawal of most fedayeen from the Amman urban
area. The army had reportedly been prepared to
force the commandos from the city, but the guer-
rillas evacuated voluntarily. The movement of the
fedayeen to the countryside has improved the
prospects for security in the city, but the in-
creasing numbers of guerrillas in the rural areas,
particularly in the north, may result in new fight-
ing there.
In Cairo, meanwhile, Arab representatives
have been discussing the problems in Jordan, but
little of note has come out of these talks. At
midweek, the presidents of the Tripoli Charter
states-Egypt, Libya, Syria, and Sudan-had con-
vened a quadripartite conference in Cairo. They
subsequently shifted to Benghazi, minus Sudanese
President Numayri who flew to Moscow.
ures would vitally affect the education program-
the area in which economies would surely facili-
tate fedayeen recruitment among Palestinian teen-
agers. A special General Assembly session on
UNRWA thus may be put off, leaving the issue
for the annual review at the fall meetin .
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More Communist Economic Aid for Iraq
Moscow, which recently bolstered its aid
program in Egypt and reviewed its commitment
in Syria, has further cemented its Middle East
Arab relations by reaffirming and expanding its
economic commitment to Iraq. Petroleum re-
mains a particular object of Soviet interest. A
recent Hungarian agreement to participate more
in development projects also appears to be linked
largely to securing an additional source of oil.
phosphate mine and help to expand the fishing
industry.
The Soviet delegation, furthermore, dis-
cussed several long-term projects that Moscow
might aid, including the financing of the Rawah
Dam, opening a canal between the Tigris and
Euphrates rivers, surveying and constructing an
iron and steel complex, and providing crude oil
tankers.
Last week a high-level Soviet delegation
agreed to provide about an additional $220 mil-
lion in credit for new project assistance. The loan
will be repaid in oil, a form of repayment often
stipulated recently by the Communist countries
in their economic contracts with Iraq. The
amount of oil and the length of time over which
the loan will be repaid are not known.
The Soviet delegation, which included Dep-
uty Foreign Minister Kozyrev, was almost cer-
tainly empowered to discuss other aspects of
Soviet-Iraqi relations. There have been a number
of Iraqi moves over the past year or so that have
undoubtedly pained the Soviets, such as opposi-
tion to Egypt's acceptance of Secretary Rogers'
initiative, support for extremist fedayeen posi-
tions, and the campaign against the Iraqi Commu-
nist Party. As the new aid pact demonstrates,
however, the Soviets appear as willing to overlook
Iraqi failing vis-a-vis the USSR as they are Syrian
shortcomings.
Under the new pact the Soviets will increase
their direct role in the development of Iraq's
petroleum industry by building a refinery at
Mosul and by laying two pipelines, one to supply
the refinery and another to carry petroleum prod-
ucts from Baghdad to Basra. In addition, the
Soviets will assist other areas of the economy by
building several hydroelectric stations, dairy prod-
uct plants, and a superphosphate fertilizer plant;
they also will assist in the development of a
The USSR still is working on projects under
a 1959 line of credit, against which nearly $60
million remains to be drawn. In addition, in 1969
Moscow extended about $120 million in credits
to develop the oil industry, principally at the
North Rumaylah oil field; part of these credits
will be repaid in oil.
Significant progress has been made at North
Rumaylah since late last year when the Soviets
and Hungarians began drilling operations. The
Soviets also have begun laying a pipeline from
North Rumaylah to the port of Fao and are
constructing several crude oil storage tanks at the
port, Iraqi officials are working on plans for the
second stage of North Rumaylah which will raise
annual production from the five million tons
anticipated at the end of the first stage to 18
million tons.
Hungary also is engaged in the oil industry.
Its technicians have successfully drilled three
wells at North Rumaylah and are working on
their final well, financed by an $11-million credit
extended in 1969. Budapest soon will begin drill-
ing three other wells in northern Iraq. A recent
Hungarian press article stated that Budapest also
may undertake exploration for oil and geological
surveying near the Syrian-Iraqi-Turkish border as
well as just south of Baghdad on the Euphrates.
The foreign exchange costs for this work may be
financed under a $31 million credit extended last
year.
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Ceylon: The Government's Position Improves Slightly
Although the government had earlier been
alerted to expect an attack on Colombo by 14
April, the situation in the city was apparently
under control as of mid-week and no attack
seemed imminent. Insurgents have continued
their scattered attacks outside Colombo, however.
The government still imposes daily curfews, al-
though their length has been shortened. It has
also placed seven of the island's 22 districts under
military control, apparently because civil admin-
25X1 istrations there have virtually collapsed.
Although some estimates of the rebels'
strength have ranged beyond 100,000, it is more
likely that they number 20,000-30,000, roughly a
1-to-1 ratio with the security forces at maximum
strength. Even this lower figure, however, prob-
ably includes many supporters and sympathizers
as well as active insurgents, just as the total for
the security forces includes all reserves, many of
them apparently still unmobilized and generally
more poorly trained than the regular military.
Ideological divergences over the insurgency
have been evident on the government side. In.
speeches last weekend, officials were markedly
inconsistent in assessing the situation. Further-
more, two different civilian security organizations
are being hastily organized. One is under the.
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direction of the moderate home minister, Felix
Bandaranaike, a relative of the prime minister; the
other, apparently planned for Colombo alone, is
headed by leaders within the two leftist parties of
of Mrs. Bandaranaike's coalition, the Ceylon
Communist Party/Moscow and the Trotskyite
party. One or both of these organizations con-
ceivably could be used for political purposes at a
later time.
In addition to the liabilities presented by
inefficient organization and improperly trained
and equipped forces, the government may soon
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be faced with other problems. Rigid implementa-
tion of orders to shoot curfew breakers on sight
may be lowering public morale. Food shortages
have occurred, causing prices to climb. The virtual
stoppage of operations at Colombo's port will
hurt Ceylon's already poor foreign exchange
situation.
Ceylon has, however, begun to receive some
desperately needed military aid. There are now
two Pakistani -operated helicopters and six
Indian-flown helicopters operating from Colom-
bo's two airports. Six helicopters purchased by
the UK from the US for transfer to Ceylon should
arrive shortly. Both India and the UK have sup-
plied some small arms and ammunition. About
150 Indian troops have arrived in Colombo, sup-
posedly to help guard the airport, and Indian
warships are patrolling off Ceylon, probably in an
effort to prevent any arms from being smuggled
onto the island.
During the week, the government arrested
one junior minister, at least four members of
parliament, and the leader of the small Ceylon
Communist Party/Peking (CCP/P).
press reports from Colombo on 15
April claimed Ceylon had broken diplomatic rela-
tions with North Korea. 25X1
Ceylonese military leaders envisage a long,
difficult struggle against the insurgents. For their
part, the rebels apparently are confident they can
take over the country, but at present they do not
seem to have that capability. A drawn-out period
of turmoil, however, could result in the eventual
overthrow of Mrs. Bandaranaike's government by
other elements. The military may eventually
realize that it possesses the only real strength in
the country and may decide to assume complete
command. On the other hand, leftist forces
within the government might believe they are
threatened in some way by Mrs. Bandaranaike
and in the reigning confusion could move against
her to forestall their own ouster.
NEPAL: King Mahendra has appointed a new
cabinet with Kirti Bista as prime minister. Bista,
who has held numerous cabinet portfolios in
recent years, is primarily a nationalist who gives
total allegiance to the King. The cabinet change is
not likely to have much effect on government
policies because the King makes the final decision
on all important matters. Bista's anti-Indian
reputation may make it easier for Kathmandu to
compromise with New Delhi on the long-stalled
Indo-Nepalese trade and transit talks; the Nepa-
lese would not regard any agreement that Bista
reaches as a "capitulation."
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NEPAL
BHUTAN
Pte`
;t-ooch Behir
Rangpur
Rajshahi
Faridpur?
Jessore
Khulna0
?
Calcutta Barisal
S,~t
als- City
Denver
? Cincinnati
Sylhet
Comilla- j
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Cox's Bazar ?
BURMA
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Pakistan: The Issue Remains in Doubt
The army appears to be making gains, par-
ticularly in the western part of East Pakistan, in
occupying the larger cities and in re-establishing
communications between them. American cor-
respondents traveling through the province have
reported that the West Pakistani troops have con-
tinued to destroy villages in an apparent effort to
eliminate all means of cover for the separatists.
Other observers in the area continue to report on
the lack of equipment, disorganization, and poor
leadership of the Bengali forces. Despite these
problems and their recent military reverses, the
secessionist troops give the appearance of having
good-if somewhat fatalistic-morale.
Dacca remains generally quiet; government
offices are functioning with perhaps 25 percent of
the normal work force. One US official estimates
that up to 70 percent of Dacca's population has
fled the city. Reports describe the port of Chit-
tagong as a "dead city," with only minor activity
at the docks and over a score of ships waiting to
be unloaded-many carrying PL-480 grain.
The Martial Law Administration has im-
posed a tough new regulation giving the govern-
ment almost unlimited power of arrest and deten-
tion. At the same time, the West Pakistani author-
ities in Dacca have secured the agreement of some
140 East Pakistanis-including representatives of
several minor political parties-to serve on a "Citi-
zens' Peace Committee" pledged to re-establish a
more normal situation in the province.
The outlawed Awami League, largest party
in East Pakistan-many of whose leaders were
captured or killed during the early hours of the
army crackdown-has announced formation of a
provisional government of Bangla Desh, according
to the Indian radio. Tajuddin Ahmed, who ranks
second to the imprisoned Mujibur Rahman in the
party, has been named prime minister and is cur-
rently in India seeking international recognition
for Bangla Desh. Prime Minister Gandhi, in
commenting publicly on the possibility of her
government extending recognition to the Bengali
regime, stated that the matter would receive "due
consideration." Indian recognition of Bangla Desh
would almost certainly lead to an immediate
break in relations between New Delhi and
Islamabad, and could raise tensions along the In-
dia - West Pakistan border.
Relations between the two nations are al-
ready under severe strain as a result of Pakistan's
allegation that India is supplying arms, ammuni-
tion, and other supplies to the separatists. The
Pakistanis claim Indian troops are operating in
East Pakistan and some resident Western mis-
sionaries claim they have observed Indian troops
in mufti near the city of Mymensingh. A clash of
some nature may already have occurred, as
claimed by Islamabad, between Indian Border
Security Forces and Pakistani troops near the
West Bengal - East Bengal border.
Communist China, meanwhile, has increased
its verbal support for the Pakistani regime. Pre-
mier Chou En-lai, in a message to President Yahya
Khan, pledged China's firm support to Pakistan in
its efforts to maintain its sovereignty and inde-
pendence. Chou accused India, the US, and the
USSR of meddling in Pakistan's internal affairs.
China's "support" however, is likely to remain
purely verbal; Chou's message did not commit
Peking to any course of action.
East Pakistan's economy-one of the poorest
in the world under normal circumstances-has de-
teriorated considerably in recent weeks. The most
critical problem has been the disruption to trans-
portation, resulting in inadequate distribution of
food and other supplies. Some areas already are
short of food and a province-wide crisis could
develop by September if distribution problems
are not overcome. In Dacca, rice and gasoline
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were in short supply, power had been reduced,
and no jute or cotton mills were operating. Else-
where, aid projects have come to a halt-including
work on cyclone rehabilitation.
The economic repercussions are spreading to
West Pakistan as well. The cost of financing the
military intervention has been a heavy new
South Africa: Moving Outward
Prime Minister Vorster is determined to
pursue South Africa's "outward movement"-his
foreign policy of improving relations with black
African states-despite opposition within his
party and a general rebuff from black Africa.
Vorster was encouraged by Ivory Coast President
Houphouet-Boigny's call nearly six months ago
for discussions with southern Africa, but this ap-
proach is still vigorously opposed by the great
majority of the African governments. Vorster has
taken some steps of his own during the past few
weeks, such as inviting Malawi's President Banda
to pay an official visit and stating his intention to
invite other black African leaders to South Africa
for discussions. Additionally, on 26 March,
Swaziland Prime Minister Makhosini paid a semi-
official visit to Vorster, the first meeting between
these two leaders.
These steps have been hailed in the South
African press as evidence that the outward move-
ment is succeeding. The movement was originally
formulated by Vorster's predecessor, Hendrik
Verwoerd, as a means to break South Africa's
isolation, but he was killed before he could work
out the details. Although Vorster-a hard-headed
and cautious politician-floundered for a while
with Verwoerd's phrase, he finally decided to
pursue the policy despite the short-run risk of
dividing his party. During the past several years,
some specific objectives of this policy have
emerged-such as normalizing relations with black
states to the north.
burden on a strained budget. Foreign exchange
reserves were already badly depleted, and will fall
further as a result of the stoppage in exports from
Chittagong. Merchants and manufacturers in West
Pakistan who depend heavily on trade with the
East have probably been hit harde!:J
South African whites are, at best, ambivalent
about the policy. Many believe that increased
contacts with black Africans from other states
could eventually force modification in South
Africa's strict racial policies. Some fear this, and a
smaller number welcome it. Important business
interests endorse the policy because they see new
commercial horizons to explore, and they fear the
economic consequences of South Africa's con-
tinued isolation. Most members of the ruling Na-
tional Party parliamentary caucus-the clique that
makes government policy-are willing to go along,
but are not enthusiastic; in fact, within the Na-
tional Party as a whole, only a vocal minority
approves the policy.
The basic problem is that South Africa's
foreign and domestic policies conflict. If forced
to choose, most South Africans would reject the
outward movement. Vorster and his supporters
may not accept the inevitability of this conflict.
They believe, probably correctly, that they are in
a position of strength, and they see the outward
movement as an opportunity to achieve interna-
tional respectability and to further South Africa's
economic and security interests. Perhaps of equal
importance, they could see this as a chance to
buy much needed time in a changing world; they
may even hope that the world will one day see
the "correctness" of their thinkin with regard to
resolving racial problems.
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WESTERN HEMISPHERE
Brazil: Government Reacts Strongly to Criticism
The Medici government has demonstrated its
hostility to criticism on sensitive issues by crack-
ing down on the country's most prestigious news-
paper.
At the end of March, federal police agents
were ordered to exercise on-the-spot censorship
of 0 Estado de Sao Paulo because of its con-
tinued criticism of some of the administration's
actions, particularly the methods used to in-
vestigate all persons considered for appointment
to public office. Although 0 Estado generally has
supported the military-backed governments since
the 1964 "revolution," it has frequently pub-
lished articles on topics outlawed by the censors.
Several newspapers in Rio de Janeiro have
complained lately about the Sao Paulo period-
ical's apparent immunity from punishment. The
justice minister, with strong backing from top-
level military officers, warned that if there were
any further criticism of military security organiza-
tions or violations of censorship orders 0 Estado 's
offending editions would be seized and the paper
closed. The police censors now have been re-
moved from the premises of 0 Estado in return
for the owners' agreement not to print articles
specifically prohibited. The publishers have in-
sisted, however, that they will not permit their
editorial comment to be affected.
Some of the articles the government con-
sidered objectionable probably contained charges
of torture; they were written by Sao Paulo's re-
cently appointed Archbishop, Paulo Arns. In ad-
dition to publishing the allegation of brutal treat-
ment of a priest, Arns repeated the charges at a
meeting of the important National Council of
Brazilian Bishops (CNBB) and may have told
Pope Paul VI during a recent trip to Rome.
Archbishop Arns with Pope Paul VI
SECRET
The crackdown on 0 Estado demonstrates
again the government's overriding concern about
criticism on topics involving "national security."
Criticism from a broadening sector of the Bra-
zilian Catholic hierarchy has deepened the sus-
picion in the minds of many security officials that
at least part of the church is consciously giving
support to elements who seek to undermine the
"revolution."
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Guyana Faces Serious Problems in Bauxite
The government is having trouble making
some operational arrangements connected with its
prospective nationalization of the Demerara
Bauxite Company (DEMBA), a local subsidiary of
the Aluminum Company of Canada (ALCAN).
Minister of Mines and Forests Hubert 0.
Jack, the cabinet minister responsible for the
operation, said that obtaining a guaranteed source
of raw materials, especially caustic soda, was the
principal problem facing the government. The
government has obtained a six-week supply and
reportedly has an "agreement in principle" from
the Dow Chemical Company to provide caustic
soda in the future. Jack added that "vesting day,"
the date for the take-over of DEMBA, would be
decided after the government has obtained an
assured source for caustic soda.
The government is also having difficulty in
securing shipping facilities in Trinidad
URUGUAY: The government's most recent ef-
forts to clamp down on the Tupamaros thus far
are having only an accelerator effect on terrorist
activities. The administration is again pushing for
harsher jail sentences and has announced that it is
considering construction of a new, high security
prison for captured guerrillas. The Tupamaros
have promised retribution by "peoples' courts"
for legislators and army personnel supporting
such measures.
The terrorists apparently have kidnaped their
tenth hostage this week. A wealthy industrialist,
Another problem is the lack of any person
qualified to analyze the technical aspects of
bauxite contracts entered into by the govern-
ment. Jack said officials fear that, without the
advice of a specialist, the government could be
outwitted and sign an unfavorable contract.
Guyana has not been able to retain the services of
alien staff members necessary to run ALCAN's
operations. In addition, the workers are still un-
certain about the future, despite Burnham's per-
sonal visit to allay their fears. Burnham himself
continues to be optimistic that he can negotiate
the nationalization without disrupting the na-
tion's economy.
who has financial connections with the recently
ousted foreign minister, is missing; the terrorists
may be planning another expose of shady dealings
by government figures. In addition, the terrorists
have recently employed a new tactical weapon
against police-a bazooka type grenade launcher
that has been in the testing stage for several
months. The urban guerrillas have made no
demands for the British ambassador or the adviser
to President Pacheco. They apparently intend
their confinement as a continued public embar-
rassment for the administration.
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Lanusse's plans and actions stem primarily
from the military's growing frustration at its in-
ability to deal effectively with the nation's po-
litical, economic, and social problems since taking
power in 1966. This same frustration, however,
has prompted many military officers to favor a
nationalist-populist approach similar to Peru's
rather than a military withdrawal from govern-
ment.
General Lanusse a 25X1
ppears to have the solid
backing of the major troop commanders at the
present time. If he falters in his handling of the
restoration of political processes or the troubled
national economy, however, he could face serious
trouble from those fearful of a return to old style
politics or from the growing ranks of younger
officers favoring a new military-led "revolu-
tionary" approach.
Within the UP, Communist Party (PCCh)
leaders have rationalized their initial dismay over
the impressive electoral showin of the rival
Socialist Party.
SECRET
Argentina: Political Activity Renewed
The Lanusse government has moved rapidly
during its first few weeks in power to loosen the
restrictions on civilian political activity and to
give assurances that it will return Argentina to
civilian rule within three years. These moves have
been generally well received, although there is
some fear in military circles that Lanusse is pre-
paring to return the nation to the old system and
the old politicians that proved so inadequate be-
fore the military intervention in 1966.
Developments in Chile
Although the recent municipal elections pro-
vided him a personal triumph, President Allende
still faces political and economic challenges./
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SECRET
he had failed to win many peasants away from
the PDC.
Finance Minister Zorilla, one of several Com-
munists in top official economic posts, recently
warned PCCh leaders that the "economic cush-
ion" of foreign reserves inherited from the Frei
government was beginning to wear thin, even
before payments are made for increased imports
of food products. Zorilla said that expenses were
already exceeding the 1971 budget; he blamed
inefficiency, indecision, and miscalculation within
the administration as well as some of the populist
measures that contributed to the coalition's good
electoral showing.
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The newly designated Soviet ambassador to
Santiago was re-elected to full membership in the
Central Committee of the Communist Party of
the USSR at the 24th Congress. He will be one of
only three Central Committee members servin as
ambassadors in non-Communist countries. 25X1
and the armed forces are making contingency
plans to protect the Dominican Republic from
any effects of civil disorders in Haiti.
SECRET
Labor difficulties are among the mounting
economic problems that concern Allende. In a
speech on 9 April he again stressed his preoccupa-
tion over poor labor discipline, and demanded
greater responsibility from workers. He strongly
criticized rampant absenteeism and wage demands
above the 35 percent authorized to meet last
year's inflation rates. Pressure has kept down
some wage settlements, but the government has
not publicized the fact that at one copper installa-
tion where it has majority ownership, workers
won increases of more than 60 percent. Copper
workers, a labor elite in Chile, were reminded by
Allende in the speech that they do not own the
mines. He asked them to join other workers in
voluntarily donating time and making a greater
productive effort to stimulate the economy.
Allende fears that there will be a sharp de-
crease in food production because many land-
owners are cutting back agricultural operations in
response to recent land seizures and to Agricul-
ture Minister Chonchol's handling of the agrarian
reform program. Allende said that Chonchol's
activities were not even a political success because
HAITI: President Duvalier's failure to appear as
planned at public festivities on 14 April disap-
pointed foreign journalists who had been invited
to see the President and is virtual proof that he is
seriously ill. Highly placed Haitians are probably
making plans for the post-Duvalier period, but as
yet there are no obvious signs of general alarm or
uneasiness over the situation. The government of
the Dominican Republic, however, is apprehen-
sive about the course events may take in Haiti,
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