WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011500110001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 21, 2016
• Document Release Date: June 5, 2008
• Sequence Number: 1
• Publication Date: March 18, 1977
• Content Type: SUMMARY

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Secret
Weekly Summary
State Dept. review completed.
Secret
CG WS 77-011
March 18, 1977
Copy
DIA review
completed.
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 Approved For Release 2008/06/05
The WEEKLY SUMMARY, issued every Friday morning by the
Current Reporting Group, reports and analyzes significant
developments of the week through noon on Thursday. it fre-
quently includes material coordinated with or prepared by the
Office of Regional and Political Analysis, the Office of Eco-
nomic Research, the Office of Strategic Research, the Office of
Scientific Intelligence, the Office of Weapons intelligence,
and the Office of Geographic and Cartographic Research.
8 Bolivia: A President with Tenure
10 Rhodesia: The Front-Line Presidents and the War
12 Canada: Climate for Foreign Investment
14 The Cuban Economy and Trade with the West
A
CIA-RDP79-00927A011500110001-4
I Western Europe
France; Italy; Spain
2 Eastern Europe
USSR; Romania
4 Africa
Zaire; Namibia
5 Asia
Pakistan; Philippines; China
Saudi Arabia; Lebanon;
Iraq-France
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FRANCE
The alliance of Socialists and Com-
munists made major overall gains against
the governing coalition of center-right
parties in the first round of France's
nationwide municipal elections last
weekend. In Paris, won by the conser-
vatives, the outcome gives Gaullist leader
Jacques Chirac a significant boost in his
bid to replace President Giscard as leader
of the conservative forces.
In the more than 200 cities with a pop-
ulation of over 30,000, the left obtained
some 52 percent of the vote while the con-
servatives won 46 percent. The left gained
control of about 32 townships that had
been held by the conservatives, including
Brest, Chartres, and Reims. Pro-govern-
ment political forces were able to take
only three towns from the Socialist-Com-
munist alliance. Although many contests
remain to be settled in the run-off election
on March 20, the left is expected to con-
tinue to make a strong showing in the
larger cities.
The municipal campaign has been
fought mainly over local issues and per-
sonalities. Nevertheless, the outcome
appears to confirm recent polls indicating
a nationwide trend to the left. If it con-
tinues, the Socialist-Communist alliance
formed in 1972 is likely to present a
strong challenge to the conservatives in
the national parliamentary election next
year. Much will depend on whether the
center-right parties can bury their
differences and work together effectively.
Although the Gaullist Party did not do
well outside the capital, Chirac's victory
there has given it a psychological lift.
Municipal council candidates on the list
headed by Chirac led those on the list
headed by Ministry of Industry d'Or-
nano-Giscard's personal choice for the
important new post of mayor of Paris-in
11 of the 17 districts in which they com-
peted. On March 15, d'Ornano and
Chirac each agreed to withdraw from the
second round those of his candidates who
finished second to the other's last
weekend. The joint move, made to pre-
vent the left parties from winning the run-
off, virtually assures Chirac's election as
mayor by the Paris councilors following
ITALY -3 __ q
Clashes between students and police in
Italy last weekend were the most serious
and widespread so far in the country's
current wave of student unrest. The in-
cidents are symptomatic of the growing
political violence in the country, which
has begun to rival economic problems as a
matter of concern for Italian government
and party leaders.
The climate of violence on Italian cam-
puses stems in part from shrinking job op-
portunities for graduates and a distrust of
the government's motives in its recent
university reform proposals. The immedi-
ate cause of the events last weekend, how-
ever, was the killing of a leftist student
leader by police in Communist-run
Bologna, where students had barricaded
the university in a protest action. The
incident triggered violent student demon-
strations in Rome, Naples, Florence,
Turin, and Milan.
Student-related violence is posing a
particular problem for the Communist
Party, which is increasingly regarded by
students as part of the establishment
because of its tacit support for the minori-
ty Christian Democratic government.
Last month, students drove the head of
the Communist-dominated labor union
from the campus of Rome University.
The Communists are doubtless es-
pecially embarrassed by the outbreak of
student violence in Bologna, which the
party always holds up as a model of ef-
ficient municipal administration. The
youth vote made a major contribution to
the Communists' sharp gains in recent
elections, and the party is likely to
mount a major campaign in the coming
weeks to improve its image with students.
Other political violence has also been
increasing since last fall. Many of the in-
cidents are the work of left- and right-
wing extremist groups not associated with 25X1
the regular political parties. The attacks
are increasingly focused on public in-
stitutions as well as on business offices
and industrial plants.
The government has issued new laws
making it easier for the authorities to
move against extremists. Prime Minister
Andreotti may use the violence last
weekend to speed up consideration of
police, judicial. and educational reform
legislation
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,t/
Prime Minister Suarez continues to im-
plemert his program for giving Spain a
democratic system despite the hostility of
political extremists and continuing unrest
in the northern Basque country. During
the past week, he took important new
steps ;:o prepare the way for a free
parliamentary election this spring.
A decree approved by the cabinet on
March 15 setting out the ground rules for
the election appears in several respects to
be a tactical victory for the parties of the
left. The decree provides for equal access
to the media, which the left had been
demanding, and in effect stipulates a
minimum of three deputies from each
province. Right-wing parties had been
seeking a minimum of five deputies to
offset anticipated leftist strength in the
cities. The Communists in particular gain
from the new law, which appears to allow
them to run as independents if the
Supreme Court should rule against the
party's petition for legalization, now un-
der court review.
The law also prohibits senior govern-
ment officials from participation in the
election without first resigning their posts.
Because some ministers are likely to run,
the decree will probably trigger at least a
minor cabinet shuffle.
The government also announced late
last week the long-awaited broadening of
the amnesty for political prisoners that
was originally extended last summer. All
those convicted of crimes not posing a
threat to human life-about 100
people-are to be pardoned shortly. The
sentences of the remaining 70 or so
prisoners will be reviewed with the aim of
shortening or canceling them.
The amnesty applies only to offenses
committed prior to December 15 of last
year. It thus excludes those left- and
right-wing extremists arrested in connec-
tion with the extensive political violence
of the past three months.
Most of the remaining political
prisoners are Basques, and the govern-
ment undoubtedly hopes that the widened
amnesty will reduce tensions in that
volatile region. The initial response of
Basque politicians has been favorable, but
the positive impact of the amnesty has
been undercut by a new wave of
demonstrations and violence in which
three Basques were killed and Basque
terrorists retaliated by killing a member
of the Civil Guard.
The cycle of recurrent violence in the
Basque provinces is likely to continue un-
til the government can find a means to
dampen or obviate the bitter hatred
between the native population and the
Civil Guard. The new head of the Civil
Guard is considering moving his com-
mand posts out of the major population
centers in a possible effort to reduce con-
USSR '7-)d11 Z-
The USSR's determination to muffle
the Soviet dissidents before further
damage is done to its foreign and
domestic policies suggests that Soviet
authorities may soon take some tough ac-
tions.
Although the Soviets are concerned
that harsher measures could inflame
Western public opinion, they nevertheless
recognize that they must move quickly in
order to avoid embarrassment at this
summer's conference in Belgrade to
review progress on the 1975 Helsinki ac-
cords, which included provisions on
human rights.
On March 15, the KGB detained
Anatoly Shcharansky, one of several
Jewish activists accused by Izvestia on
March 4 of being espionage agents for the
US. Shcharansky is a colleague of human
rights activists Aleksandr Ginzburg and
Yury Orlov, who were arrested last
month.
One day earlier, two dissident artists
accused of painting anti-Soviet slogans on
buildings and buses last year went on trial
in Leningrad. There are some signs that
the authorities are preparing criminal
charges against other dissidents, with ex-
pulsion from the USSR as a possible
alternative.
WEEKLY SUMMARY Mar 18, 77
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charges of anti-Soviet activity have been
brought against Ginzburg. There are
rumors in Moscow that both Ginzburg
and Orlov might be allowed to leave the
country.
The Soviets may ultimately put the
choice of prosecution or expulsion to
leading dissident spokesman Andrey
Sakharov. In recent weeks Moscow has
not only protested US embassy contacts
with Sakharov, but has also been building
in Soviet and Western media a legal case
against his activities.
So far, Sakharov's domestic and inter-
national prestige has constrained the
authorities from taking harsh steps
against him. Now, however, they could
use the legal pretense that 10 years have
elapsed since his last access to classified
material and that he is thus eligible to
leave. Although such action would be ac-
companied by an outpouring of un-
favorable publicity in the West, Moscow
might well decide that was not too high a
price to pay for the damage that would
probably be inflicted on the remnants of
the human rights movement in the USSR
by Sakharov's departure.
At present, the regime and the dis-
sidents are on something of a collision
course. As the Belgrade meeting ap-
proaches, both may feel impelled to use
more dramatic means of asserting their
respective positions, thus increasing the
risk of serious confrontation.
US Relations
During the past several weeks the
Soviets-obviously smarting over US
contacts with Sakharov-have warned in
private and in public that continued sup-
port of human rights in the USSR would
hamper some aspects of bilateral
relations. Last weekend, Pravda carried
the first public reference to the adverse
effect that the human rights debate could
have on Secretary Vance's trip to Moscow
later this month. The party newspaper in-
directly warned that US criticism could
interfere with detente, including talks on
limiting strategic weapons.
There have been other recent Soviet ef-
forts to link human rights and the arms
talks. For example, an article in the army
newspaper Red Star alleged that "anti-
Soviet hysteria" in the US could "poi-
son" the arms limitation talks. The
article said the talks cannot be conducted
successfully while a am ai n a ainst he
USSR is under wa
ROMANIA /L/' S
Earthquake-related problems are
likely to add to existing popular dis-
satisfaction in Romania.
President Ceausescu has taken a highly
personal role in the direction of rescue
work, which has not set well in some
quarters according to the US embassy.
Local officials in charge of rescue
operations have been antagonized by the
President's open criticism of their work,
and housing authorities have been in-
timidated by his promise to investigate the
builders of houses that collapsed during
the quake.
Private citizens tend to be cynical about
Ceausescu's appointment of his wife to a
committee in charge of coordinating aid
donations and also about the President's
own efforts to make political capital out
of the disaster. The possibility that the
regime will use the earthquake damage as
an excuse to squeeze more work out of
people is widely discussed, and the party's
decision to postpone implementation of
the promised five-day work week appears
to have fueled those fears.
Romania's communist neighbors have
begun to pledge economic assistance to
repair earthquake damage. The Soviets
have offered $13 million worth of the kind
of construction materials and transporta-
tion equipment Romania has said are
needed for reconstruction. The size of the
donation contrasts with Moscow's token
assistance during the floods of 1970 and
1975 and reflects the improvement in
bilateral relations that has resulted from
Ceausescu's efforts to mend his fences
with the USSR
3 WEEKLY SUMMARY Mar 18, 77
25X1
25X1
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ZAIRE
The incursion launched into southern
Zaire last week by former Katangan
soldiers long exiled in Angola has made
headway against ineffective resistance by
President Mobutu's forces. The success of
the attackers, who are operating in their
home area, is causing tension to rise in
Kinshasa, where Mobutu's political posi-
tion appears to be deteriorating.
The size of the invading force is still not
known, but estimates range up to 2,000;
about 4,000 former Katangan troops are
believed to have been living in Angola
since the suppression in the early 1960s of
their attempt, led by Moise Tshombe, to
make their home area-now Zaire's
Shaba Region-an independent state.
7
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Rhodesia
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Probably more important than the
number of attackers is the success they
are apparently having enlisting new
recruits from the local population. They
have been welcomed in many places.
This week the Katangans consolidated
their hold over the three or four towns
they initially occupied and have moved
into others, including Kasaji-a key
transportation center. Their forces in the
southern part of the region are said to be
moving east toward Mutshatsha. So far,
the Katangans have been cautious, ap-
parently reflecting concern for es-
tablishing a firm base area and for secur-
ing supply lines from Angola.
In any event, they have not encountered
effective opposition from the Zairian
armed forces. Although the government
has sent reinforcements tp Shaba, its
commanders have not been able to get a
counteroffensive going and the troops
seem to be deliberately avoiding battle.
Ground units are short of ammunition,
transportation, communications equip-
ment, and field rations; most of the air
force is not operational. Fuel and spare-
parts shortages are hamstringing both-ser-
vices, and they also have serious morale
problems.
The progress being made by the exiles
and the poor performance of the Zairian
troops are beginning to have serious
domestic consequences. Economic activi-
ty in Shaba, where Zaire's important
copper - mines and most of its other in-
dustries are located, has reportedly slow-
ed to a near standstill. In Kinshasa, there
is said to be noticeable tension in govern-
ment circles; if the situation in Shaba con-
tinues to deteriorate, serious opposition to
Mobutu could develop quickly.
Mobutu has not made a formal com-
plaint either to the UN or the Organiza-
tion of African Unity, probably in part
because he does not want to admit the
seriousness of the incursion. He is,
however, apparently prepared to do so if
any major towns are taken by the
Katangans. He has appealed openly to
other African states for political support;
so far, his approaches seem to have
NAMIBIA 2 2,'2 `'
White and nonwhite delegates to the
South African - sponsored multiracial
constitutional conference on Namibia
that began in September 1975 have ap-
parently agreed on bases for an interim
government to lead the territory to in-
dependence in cooperation with Pretoria.
After some vigorous arguments that
seemed at times to threaten the continua-
tion of the conference, the one white and
ten nonwhite delegations reportedly ap-
proved a draft document. Its provisions
reflect some concessions to the nonwhites
but will enable the whites to retain control
over the disputed territory's rich mineral
resources-their primary concern-and
will also give them an important veto
authority in the proposed interim regime.
Whites make up about 14 percent of
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Namibia's 900,000 people.
Under the draft constitution, a central
government is to have nominal jurisdic-
tion over such matters as industry, labor,
social services, and justice. Its prescribed
composition, however, leaves the
"second-tier" units-the governing bodies
of each of the 11 separate ethnic
areas-with power to block actions by the
central government. The nonwhite groups
had pushed for a system giving stronger
powers to the central authority.
Each ethnic group is to select one
Prime Minister Vorster
C.L 'r-s!
member for a council of ministers, and
decisions of the council are to be by con-
sensus. Its chairman must be approved
unanimously by the delegations of all 11
ethnic groups in the National Assembly.
The draft constitution incorporates a
"bill of rights" including guarantees of
free speech and association and provisions
against racial discrimination. The rights
section, however, is not legally en-
forceable, another of the numerous
defeats suffered by the nonwhites.
A formal proposal for the establish-
ment of an interim government based on
the conference's draft is likely to go to
Pretoria shortly. Prime Minister Vorster
is likely to push the necessary enabling
legislation through the South African
parliament quickly.
The South-West Africa People's
Organization, which is recognized by the
UN and the Organization of African Uni-
ty as the sole Namibian nationalist group,
has consistently denounced the con-
stitutional conference from which it was
excluded. It is sure to make the proposed
interim regime a major propaganda target
in coming months. SWAPO demands
direct negotiations on independence with
Vorster's government, to be held under
UN auspices and outside South Africa.
PAKISTAN
Prime Minister Bhutto's opponents are
pushing their post-election effort to turn
the people against him, but by late this
week it was not clear whether they would
be able to develop enough popular sup-
port to seriously threaten his leadership.
Opposition leaders have charged Bhut-
to with rigging the National Assembly
election last week and have been organiz-
ing demonstrations to support their de-
mand that he resign and a new election be
held. The US embassy believes Bhutto's
commanding majority in the new
assembly was in fact due to electoral
fraud but says his party might have
emerged with a majority, although
smaller, in an honest vote.
Opposition strategy appears to be aim-
ed at bringing about a gradual erosion of
Bhutto's position by continuing the
demonstrations, in the hope that the
military will intervene and remove him.
The defeated parties apparently will con-
centrate for now on the cities, where they
know they have strength, but they
presumably hope eventually to organize a
nationwide mass movement that would in-
clude rural areas, where Bhutto piled up
his majority.
At this time, the security situation,
although apparently growing worse, does
not yet appear to have deteriorated to the
point that the military would be prompted
to move. Bhutto probably can count on
the loyalty of the security forces as long as
they believe he has the support of a ma-
jority of Pakistanis.
Bhutto, for his part, made some con-
ciliatory gestures toward his opponents in
a speech on March 12. Although he said
the National Assembly election would
stand, he implied that the opposition
might be able to double its representation
by challenging the results before the elec-
tion commission. Bhutto offered to hold 25X1
talks with opposition leaders without
preconditions and implied that the provin-
cial assembly elections held on March
10-which the opposition
boycotted-could be held a second time.
The Prime Minister is also trying to
avoid giving the opposition any new
issues. Most opposition leaders were
arrested early this week when they created
a situation that left the police with little
choice, but they were quickly released.
Bhutto is having some success in dividing
the opposition. Its leaders could not
agree, for example, on whether to
negotiate with him on his offer to hold the
provincial elections again.
PHILIPPINES 7d - I
President Marcos backed down this
week in the negotiations with the Philip-
pine Muslim rebels that have been going
on intermittently for several months un-
der the sponsorship of Libyan leader
Qadhafi.
The talks, which are being held in
Libya, are currently stalemated over the
issue of a plebiscite in the autonomous
zone promised to the Muslims in a cease-
fire agreement they signed with Marcos'
government last December. The Muslims
insist that the agreement does not include
a plebiscite; Marcos insists it does and
recently set the date for March 17. He
also planned to reduce the size of the
proposed region by leaving out several
Christian-dominated provinces.
As the date for the vote approached, the
exchanges between Qadhafi and Marcos,
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both public and private, became in-
creasingly acrimonious. On March 15,
Marcos finessed the issue by postponing
the pl(:biscite until April 21. He has also
sent his wife Imelda to Libya to try to
break the impasse. Mrs. Marcos par-
ticipated in the first round of the
negotiations and has claimed partial
credit for the December agreement.
The President may hope that his con-
cession and his wife's persuasiveness will
put some pressure on the Muslims to back
down on their extreme demands for con-
trol of the local administration in the
autonomous zone and their own armed
forces
CHINA 44 r6l C
A purchase by China from Australia of
2 million tons of wheat, announced last
week, raises the total amount of wheat
scheduled for delivery to China this year
to 5.1 million tons; this could cost Peking
more than $500 million. Reduced harvests
last year made the imports necessary.
Chinese wheat imports declined in 1975
and 1976. Thus far this year, the Chinese
have purchased 2.5 million tons from
Australia, 2.3 million tons from Canada,
and 303,000 tons from Argentina.
The Chinese also recently asked
Canada to deliver wheat purchased in
December as soon as possible and to begin
deliveries on new contracts in February
rather than March. The two countries
plan to meet again this spring to discuss a
long-term wheat contract.
China's grain output has increased only
about .2 to 3 percent since 1974, mainly
because of weather problems. The pattern
has been for early crops to be retarded by
cool, damp, overcast weather, causing the
planting of the more important crops
harvested in the fall to be in turn delayed.
Then, the wind, frost, and increased rain
that occur as the season wears on reduce
harvests.
Total grain production last year
probably was 280 million tons, about the
same as in 1975. The government claimed
rtrfedi'e,, neon Sea 'eda AQ
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RIYADH
the 1976 crop set an all-time record and
that production in most of the 29
provinces, municipalities, and
autonomous regions exceeded or reached
1975 levels. It appears, however, that
locales claiming increases for the year did
so on the strength of a good yield of
early-harvested grains, whereas output of
the more important fall-harvested grains
was down. Coarse grains were particular-
ly hard hit.
China probably will not make further
grain purchases until late spring or
summer when the outcome of this year's
early harvest is known. Thus far, winter
wheat-accounting for about 16 percent
of national grain output-appears to be
suffering from drought. Although
timely rains could alleviate the prob-
lem, additional wheat imports are still
a possibility.
If the weather is bad and buying
resumes, China would likely purchase at
least another 1 million tons from Canada
before considering purchases from the
G ,Jf-. f
:odor
SAUDI ARABIA G"6 -.5,4
Saudi Arabia is moving ahead with its
plan for the construction of a
1,270-kilometer crude oil pipeline linking
the country's oil fields with the Red Sea.
The new line will provide a second oil ex-
port route that avoids the Persian Gulf
and the vulnerable Strait of Hormuz; the
Trans-Arabian Pipeline now leads to the
Mediterranean, but it has been closed to
exports for more than two years.
The Saudis' state oil company last
month awarded Mobil Overseas Pipeline
Company a contract to manage the design
and construction of the new pipeline, the
projected cost of which is $1.6 billion.
Construction will be handled by a
Japanese firm.
The pipeline will carry crude oil from
the Khurais and Ghawar fields to Yanbu
on the Red Sea. Three additional
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Vest?~n
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fields-Mazalij, Abu Jifan, and Qirdi
-may be developed to feed the new
line. The Saudis expect the pipeline to be
completed in late 1981. It will eventually
have a capacity of between 2 million and
2.3 million barrels per day.
A terminal capable of berthing the
largest tankers now in operation will be
built at Yanbu. Most of the oil will be
shipped to the Mediterranean, through
the Suez-Mediterranean pipeline or the
Suez Canal, which Egypt is planning to
expand to accommodate larger tankers by
1982. Some oil will also be used to supply
a refinery and petrochemical complex at
Yanbu.
Saudi Arabia is a part owner of the
Suez-Mediterranean line and probably
will set transit fees for its new pipeline at a
level that will make the transport opera-
tion to the Mediterranean-including
shuttling oil across the Red Sea by
LEBANON q
The assassination on March 16 of
Progressive Socialist Party leader Kamal
Jumblatt leaves the political left in
Lebanon significantly weaker. Provided
the murder does not lead to a renewal of
major fighting between Christians and
their Muslim-leftist adversaries,
Jumblatt's departure from the scene
should facilitate the efforts of President
Sarkis and his Syrian backers to work out
an eventual political settlement for the
country.
The identity of the assassins, who es-
caped in a car, is still unknown. The kill-
ing triggered widespread concern among
Lebanese that the fragile cease-fire in
their country might collapse in a new out-
break of large-scale violence. Lebanese
government leaders and at least one major
Christian leader immediately issued
statements designed to head off trouble,
as did Syrian President Asad, and the
predominantly Syrian peacekeeping force
has been put on alert.
As of noon on March 17, no serious
fighting had been reported, although
Jumblatt's followers had apparently
attempted some reprisals against Chris-
tian residents of Shuf Province, where
Jumblatt lived and was killed.
Jumblatt was the hereditary chieftain of
Lebanon's Druze sect-an early offshoot
from Islam-to which about 10 percent of
the population belongs. He was active in
Lebanese politics since the 1940s and a
major power broker for over two decades.
Jumblatt was unique in being both the
feudal leader of a conservative religious
community and an avowed socialist with a
strong following among the working class
of Beirut.
Because of his stature and his deter-
mination to destroy the old confessional
political system that favored the Maronite
Christians and major Muslim sects,
Jumblatt became the rallying point and
recognized leader of the disparate group
of Muslim leftists and other radicals that,
in alliance with the Palestinians, took on
the Christians in the recent civil war. The
Druze leader strongly opposed, at all
stages of the Lebanese crisis, the involve-
ment of Syria, and at least some of his
followers are now sure to conclude that
the Syrians had a hand in his death.
IRAQ-FRANCE
ment for logistic support
Iraqis probably also hope to get training
of a higher quality than they have had
from the Soviets and a better arrancte-
equipment from the USSR, have recently
been trying to diversify their sources.
Iraqi pilots and mechanics have arrived
in France for training on the F-1, ac-
cording to the US defense attache in
Paris. Their arrival suggests that a sales
contract either has been or is about to
be signed. The number of aircraft in-
volved may be about 70.
At present, all of Iraq's fighters are
Soviet-made planes, except for a few
British-built Hawker Hunters.
The F-I will provide Iraq with an in-
terceptor generally superior to their
Soviet-built MIG-23s. The F-1 has more
advanced electronic equipment. The
Iraq will apparently soon acquire some
F-I aircraft from France. The Iraqis, who
have long obtained most of their military 25X1
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President Banzer's success in staying in office for over fve
years is a notable achievement in a country that has been known
for frequent leadership changes-usually forced. Bolivia has
made modest economic and social progress under his rule.
When President Hugo Banzer seized
power five and a half years ago, there was
no reason to believe he would stand out
among the 187 men who have passed
through the executive office in the 152
years of Bolivian independence. Given the
turbulent record of the presidency,
Banzer's tenure alone assures him a place
in history. The Bolivian leader also has
implemented policies that have improved
the country's social and economic con-
ditions.
Banzer's security is not assured. He
must continue to deal with a possible
resurgence of political activity in the
country'; tin mines, demands by the
military to increase its strength, and
Bolivia's long-standing desire for an out-
let to the sea, along with economic dif-
ficulties. As in the past, Banzer will han-
dle problems by isolating, eliminating, or
coopting his opponents, using political ex-
ile, cabinet shakeups, and purges of dissi-
dent military officers.
His Political Start
The disruptive nature of Bolivian
politics has inhibited the emergence of
strong political institutions. Instead, the
country has relied on, and been disap-
pointed by, strong individual leaders
whose accession to office inevitably has
been followed by turbulence and eventual
overthrow.
Banzer came to power after directing a
coup against General Juan Jose Torres in
August 1971. He maintained his position
for a time by balancing the factions of the
two important civilian parties, the
military, and some prominent private
citizens. Following a coup attempt in
Bolivia: A President with Tenure
1974, Banzer outlawed the political par-
ties and trade unions and announced that
the country would be run by the armed
forces until 1980.
The President had promised a national
election in 1975, but even before the coup
attempt there were signs that he was look-
ing for a way out. Banzer probably could
have won the presidency in a free election,
but the campaign would have been costly
and risky; by tradition, an incumbent
president steps down from office six
months prior to an election. Banzer
believed he could not afford even a tem-
porary ceding of executive power to a
potential rival.
Instead, he convinced enough military
officers that any attempt to con-
stitutionalize the regime would jeopardize
Bolivia's recent progress and expose the
military to infighting and internal decay.
Page
8 WEEKLY SUMMARY
Banzer as a Leader
Since the coup that brought him to
power,Banzer, and his senior military col-
leagues have sought little help in govern-
ing Bolivia. A personally unimpressive
figure, the President lost much of the
shaky civilian support he had prior to
1974 when he banned political activity.
The established families of Santa Cruz,
Banzer's home town and the only wealthy
region in Bolivia, are about the only
members of the President's civilian con-
stituency.
Banzer has managed thus far to avoid
the pitfalls that have toppled other
presidents. He has skillfully out-
maneuvered coup attempts and oc-
casionally used them to his advantage.
Much of Bolivia's economic progress, in
fact, is related to the stability the Banzer
regime has provided and some forceful
Mar 18, 77
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economic and political policies that may
have a favorable long-term impact on
Bolivia.
Banzer has dealt with the protest
groups-primarily university students and
miners-by neutralizing their leadership.
For example, when miners in the leftist-
led National Mineworkers Federation
last summer staged a series of strikes for
higher wages, Banzer ordered the military
to occupy the mines and exiled or im-
prisoned the union's leaders. The govern-
ment created a new union for the workers,
leaving the miners little choice but to
accept the government's offer of moderate
wage increases and social welfare benefits.
Despite his early career as minister of
education, Banzer considers the continued
neutralization of the universities a main
tenet of his political strategy. Whenever
there is a sign of resistance, the
educational system is purged and
reorganized, thereby eliminating potential
opposition.
An Improved Economy
Banzer continually extols his regime's
economic progress and its contribution to
domestic political tranquility. Major
reasons for Bolivia's economic growth un-
der Banzer include high world prices for
its minerals and hydrocarbons, diver-
sification and expansion of its exports,
and a recent influx of foreign loans. The
inflation rate is comparatively low-10
percent in 1976-and the gross national
product is growing at an annual rate
between 6 and 7 percent.
The benefits of the new prosperity,
however, have been spread unequally. The
middle class has enjoyed a boost in con-
suming powers, but the Altiplano
peasants have felt little or no change.
Bolivia is still one of the poorest countries
in South America; half of its citizens are
illiterate, and the country has one of the
highest infant mortality rates in the world.
Foreign Policy
With the domestic scene relatively calm
and the economic outlook promising, the
Banzer government is devoting more
attention to foreign policy'.
The President is anxious to maintain
good relations with the US. US aid during
the Banzer administration has ranged
from direct financial assistance and help
with loans to military training and securi-
ty assistance. Banzer has moved recently
to spruce up Bolivia's international image
by making promises to restore democratic
institutions.
Another major foreign policy goal is
access to the sea, which Bolivia lost to
Chile in the War of the Pacific
(1879-1883). Two years ago the Bolivian
leader renewed relations with
Chile-suspended for 13 years-and in-
itiated negotiations with it and Peru for
an outlet to the Pacific. The talks are now
deadlocked, however, and Banzer may
have some difficulty in dealing with the
strong nationalistic sentiment attached to
the issue that he helped to inflate.
Banzer has said that Bolivia will follow
a policy of active neutrality in the event of
war between Peru and Chile, which are
hostile to one another. He is reportedly
pessimistic about the chance for peace
and fears both Peruvian and Chilean in-
cursions into Bolivian territory. Despite
his declarations of neutrality, the Presi-
dent is under pressure from the military to
authorize major arms purchases from
various countries.
Relations with the Military
Banzer, who promoted himself to ma-
jor general last year, appears to have con-
solidated his control over the military. He
has exiled, retired, and reassigned poten-
tial rivals and rewarded his supporters.
The scope for military opposition to
Banzer has decreased since the country
began to make economic progress. In ad-
dition, many senior military officers are
apolitical or unwilling to risk their posi-
tion by dabbling in politics. Rumors of
dissatisfaction among middle-level of-
ficers still exist, but Banzer is likely
to continue to outwit potential plotters,
at least for the short term.
The President continues to rely heavily
on the officer corps for support and is
attentive to their requests. Although he
prefers to commit much of Bolivia's
meager resources to economic and social
development, Banzer has acquiesced in
expanding and modernizing the armed
a 400
Kilometers
forces. The "Plan for a New Bolivia," a
rationale for continued military rule
issued last October, in part deals with ac-
quiring more equipment for the military
and increasing its numbers.
Outlook
At present, Banzer's position seems
relatively secure; a continued strong
economy will enhance his chances for
remaining in power. He has promised to
return the country to civilian rule by the
end of the decade. He also recently
promised an early resumption of political
and trade union activities.
Such promises probably do not signal
any real change. Banzer confers with his
military advisers about ways to
democratize the government but has not
yet come up with a firm plan.
Banzer is an adept politician and a
master at neutralizing real or potential
opposition, but he offers no strong
political or ideological basis for legitimiz-
ing his rule. His strength lies in his ability
to cope with problems on an incident-
by-incident basis, but should he make a
serious tactical error, military officers
could begin jockeying for power again.
His major challenge is the in-
stitutionalization of Bolivian political
stability to serve as a basis for economic
development.
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The five African front-line presidents recognize that a
military solution in Rhodesia would be a long and costly
process and still hope for a negotiated settlement.
Rhodesia:
P
,5
The Front-Line Presidents and the War
For the moment, diplomatic efforts to
resolve the Rhodesian problem seem to
be in abeyance. Pursuit of the military op-
tion.. however, raises serious problems for
the front-line African presidents, who
have been actively involved in trying to
bring about a Rhodesian settlement since
1974. It is doubtful that a consensus exists
among them to take the war route.
Instead, the presidents will continue to
give priority to a negotiated settlement,
hoping that the US and the UK can help
bring about a solution before all-out war
becomes a reality.
Most if not all the front-line
presidents-the group now includes the
leaders of Zambia, Tanzania, Mozam-
bique, Botswana, and Angola-recognize
that exclusive reliance on military action
to bring down the Smith regime would not
mean. a quick or an easy solution.
? It would be a long struggle; the
presidents themselves are reported to have
estimated early this year that a military
solution could not be achieved in less than
four years.
? It would be costly in human lives;
there is growing evidence that, although
the number of insurgents inside Rhodesia
has grown, many are poorly trained and
casualties are high. The Rhodesian securi-
ty and military forces are confident they
can contain the current level of insurgent
operations for the short term.
? It would be costly in scarce money
and goods; the front-line countries have
limited resources, and their efforts and
those of other Africans are not likely
significantly to improve the capability of
the insurgents any time soon.
? It would increase the opportunities
for communist countries to become in-
volved; the USSR and Cuba would be the
most willing sources outside Africa of new
arms and advisers needed to support a
prolonged insurgency. The Zambian and
Page 10
Tanzanian presidents are particularly
wary of communist involvement in the
Rhodesian fighting.
? It would complicate and prolong the
difficulty the presidents already have in
maintaining some control over the in-
surgent leaders. One of the presidents'
major disappointments last year was their
failure to create a new political leadership
from the insurgent ranks to replace the
old-line politicians whose rivalries had
kept black Rhodesians divided for years.
Tanzanian President Nyerere
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The insurgent leaders have proven as un-
able as the politicians to put aside
political and tribal differences.
Differences Among the Presidents
For the public record, the five front-line
presidents are unanimous now on the need
to strengthen the Rhodesian insurgency
for a long struggle. Privately, they all
would probably prefer a negotiated settle-
ment if it appeared to them that there was
some way to achieve their goals peaceful-
ly. They differ among themselves,
however, on how much they would be will-
ing to compromise to reach a settlement.
Zambia's President K:aunda, although
ready to support total armed struggle
against the Smith regime as a last resort,
clearly prefers a negotiated settlement.
He fears that widespread and prolonged
violence in southern Africa would be
detrimental to Zambia, which already has
serious economic problems.
Botswanan President Khama, who has
been a follower rather than a leader in the
group, is close to Kaunda in his thinking.
He is already concerned that Botswana is
being dragged into an activist role and
that further involvement will bring about
Rhodesian retaliation that his meager
sending Tanzanian troops to Mozam-
bique can be interpreted partly as an
attempt to keep the problem in African
hands. He has recently floated new ideas
about resuming negotiations, suggesting
that he still attaches high priority to a
political solution.
Mozambique's President Machel
appears at times to be the most militant of
the five. He has consistently pushed the
armed struggle in meetings of the
presidents and has been willing to expose
his country both to Rhodesian strikes and
economic hardships by opening Mozam-
bique to the insurgents for their
operations.
From the outset, Machel was
pessimistic about the British-chaired
settlement talks held in Geneva last fall;
but in an effort to maintain front-line uni-
ty he seems to have deferred to Nyerere's
and Kaunda's insistence on the impor-
tance of negotiations. Despite his
preference for a revolutionary leadership
in Rhodesia, his country's severe
economic and other domestic problems
could push him toward support of a
negotiated Rhodesian settlement.
security forces could not handle.
The views of Angolan President Neto,
who joined the front-line group last fall,
are not widely known. He strongly sup-
ports the Patriotic Front-he has been a
firm backer of Joshua Nkomo-and has
pledged military aid to his old friend
President Machel to defend Mozambique
against Rhodesian incursions. He
probably would back a decision to step up
the war, but, since Angola does not border
Rhodesia, it would be less involved than
some of the other states.
Tanzanian President Nyerere's views
are sometimes hard to pin down. He gives
the impression of being an idea man and
seems to be the focal point in presidential
gatherings. Some observers refer to him
as the "chairman" of the front-line group.
Over the past year, two themes ap-
parently have influenced Nyerere's think-
ing on Rhodesia. He, along with the other
presidents, believes that negotiations and
the military effort against Smith must go
hand in hand, and he seems equally com-
mitted to preventing the kind of great-
power involvement that occurred in
Angola.
Nyerere's effort to bolster Machel by
Page 11
WEEKLY SUMMARY Mar 18, 77
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Canadian authorities appear to be taking a second look at
the ncrtionalist policies of the past several years that have dis-
couraged foreign investment.
Canada: Climate for Foreign Investment
The climate for foreign investment in
Canada has become less attractive over
the past three years. Sharply increased
labor costs, continued labor unrest, uncer-
tainty over ending wage and price con-
trols, and the fear of further government
takeover of foreign buildings have under-
mined investor confidence. The election of
the separatist Parti Quebecois last
November has heightened investor con-
cern about Quebec Province and raised
questions about the stability of the Cana-
dian confederation as a whole.
Traditionally a net recipient of invest-
ment funds, Canada has experienced a
movement of funds out of the country
since 1972. This movement accelerated
rapidly in 1976, reaching a record 800
million Canadian dollars.
In that year, foreign direct investment
in Canada, which exceeded $900 million
annually in the early 1970s, gave way to a
deficit totaling about $300 million. The
decline reflects cuts in US, Japanese, and
European investment, and increases in
Canadian purchases of foreign-owned
firms--mainly US subsidiaries-in
Canada.
Canadian funds, meanwhile, have left
the country at near-record levels. Direct
investment in other countries averaged
$700 million between 1973 and 1975,
about triple the long-term average.
US investment funds recently have ac-
counted for about 80 to 90 percent of in-
vestment in Canada, but this is changing.
US investment is being increasingly offset
by Canadian purchases of foreign-owned
firms in Canada as the national govern-
ment seeks to reduce the influence of US
firms particularly in Canadian resources
and manufacturing industries.
Canadian purchases of foreign assets
jumped from about $130 million in 1975
to more than $530 million in 1976. Ad-
ditional purchases are likely this year.
These takeovers are by private Cana-
dian companies and provincial
governments, as well as by the national
government. The Canadian Development
Corporation was established by the
national government in 1971 to expand
Canadian ownership of domestic in-
dustries. To date, the corporation's
largest deal has been the purchase of a
one-third interest in the US-based
Texas-Gulf mining corporation. Canada's
new national oil company, Petrocan,
shows every sign of becoming a major
presence in the domestic oil industry,
which is now 90-percent foreign-con-
trolled.
Paralleling the decline of US invest-
ment in Canada are continuing large
Canadian outlays in the US. These two
trends first moved Canada into a net
deficit position with the US in late 1975;
the deficit continued last year. Canadians
put their funds mainly into manufac-
turing. They also have been increasing an
already sizable stake in financial and in-
Page 12 WEEKLY SUMMARY
surance activities and are investing heavi-
ly in real estate.
Canadian Investors Look Abroad
Many of the same economic and
political factors behind foreign hesitancy
to invest in Canada are behind the recent
large Canadian investment in the USand
elsewhere. Investments in US manufac-
tures, for example, are being made to es-
cape Canada's deteriorating competitive
position.
One large Canadian textile firm asserts
that operating costs in its 10 US plants
are now 10 to 15 percent lower than in
Canada-a reverse of the situation in the
early 1970s. Another firm in
prefabricated housing estimates that
production costs in its US manufacturing
facilities are as much as 25 percent lower
than in Canada. According to a recent
survey of Canadian industrial firms, ex-
penditures to build new facilities are 30 to
50 percent lower in the US.
Canadian investment in US resources
industries is also being spurred by the
Canadian federal and provincial tax struc-
ture. Canada's three leading steel com-
panies, for example, are looking to US
iron ore reserves rather than domestic
sources to meet much of their future need.
Canadian investment elsewhere is es-
sentially the same. Canadian firms have
been increasing their manufacturing ac-
tivities in Western Europe to bypass EC
tariff barriers. They are continuing to in-
crease their stake in North Sea oil
development.
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Provincial Reactions
Several provinces are far more concern-
ed about the drop in foreign investment in
Canada than is the national government.
The maritime provinces, which face the
threat of being isolated from the rest of
Canada if Quebec becomes independent,
depend almost entirely on foreign invest-
ment to fund major industrial projects.
Ontario is actively courting foreign in-
vestors. Premier Davis visited several
European countries last October and
made an especially strong pitch in West
Germany for Volkswagen to consider
building an assembly plant in the
province.
In western Canada, Alberta is actively
encouraging foreign participation in joint
ventures in the petrochemical industry,
which needs technical expertise. British
Columbia is looking for foreign investors
to help develop its abundant mineral
resources, especially coal.
The new government in Quebec is con-
ducting an extensive campaign to reassure
foreign investors about the pace and
direction of its economic policies. Quebec
is the second largest recipient, after On-
tario, of foreign investment.
Foreign investors in Quebec are es-
pecially apprehensive about the socialist
image of the Parti Quebecois and the par-
ty's announced goal of increasing provin-
cial control in key economic areas. They
are taking a "wait-and-see" attitude. In
the asbestos industry, which the party has
already singled out for greater local con-
trol, the leading producer-US-owned
Johns Manville Ltd.-recently announced
it is deferring a $77-million expansion
program until the government clarifies its
policy.
Ottawa's View
Until recently, the Canadian govern-
ment publicly has shown little concern
about the turnaround of investment flows.
The large direct investment deficit thus
far has created no balance-of-payments
problem. Long-term borrowing abroad
provided more than enough to cover the
net investment outflow last year as well as
the estimated $4. 1-billion current-account
deficit and should be sufficient to cover
large deficits again this year.
The Trudeau government almost cer-
tainly welcomed the slackened pace of US
investment. The drop in investment from
other countries, on the other hand, is
almost certainly troubling Ottawa, as it
underscores Canada's lack of success in
encouraging non-US investment as a
counterweight to the US presence.
The movement of Canadian capital out
of the country in the light of the decline in
real domestic capital spending on plant
and equipment is also a problem. The
Page 13 WEEKLY SUMMARY
government is well aware that the
economy needs substantial growth in in-
vestment in machinery and equipment to
improve on the poor productivity per-
formances of recent years.
Already in a shaky political position,
the government is coming under further
attack over continuing high unemploy-
ment. Critics of the current government's
economic policy are calling for a more
effective attack on the problems of un-
employment and lagging investment.
Given the sluggish state of the
economy, the government is taking a
closer look at the economic costs of its
nationalist policies on foreign investment
and is showing a more receptive attitude
toward foreign investment than it has in
several years. Minister of Industry,
Trade, and Commerce Chretien has been
conducting a public relations campaign
for several months. His theme that
foreign investment is welcome in Canada
was echoed by Prime Minister Trudeau
when he visited Washington in late
February.
Chretien is making good on a promise
to speed up processing of applications by
the Foreign Investment Review Agency.
In several cases, he has even given foreign
investors prior assurances that their
applications would be favorably received.
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Cuba's new five year plan emphasizes Increases in sugar
production in an effort to earn more hard currency.
The Cuban Economy and Trade with the West
Cuba is staking its future economic
development on another concerted effort
to expand sugar production and exports.
Influenced partly by the 1974-75 sugar
boom, Havana hopes to boost hard-
currency sugar sales to finance greater im-
ports from the West. Cuba can be ex-
pected to seek a relationship with the US
that would provide a large new market for
its sugar.
A Sugar Economy
Cuba's one-crop economy is highly
dependent on foreign trade. Sugar
harvesting and milling account for 20 per-
cent of gross national product, and sugar
sales provide about 85 percent of export
earnings. Annual production has averaged
about 6 million tons both before and since
Castro came to power; the new plan calls
for production to rise to more than 8
million tons a year by 1980.
Cuba, in fact, has the resources to in-
crease annual output to about 7.5 million
tons by the target date without seriously
straining other economic sectors. If things
go well, sugar available for hard-currency
export will increase to 3.5 million tons
from the current 2 million. The Cubans
will have difficulty getting acceptable
prices for this much sugar on the free
market, however, without access to the
large US sugar market.
Demand for sugar on the world free
market-the US accounts for 25-30 per-
cent oil the demand-is not expected to in-
crease much beyond the current 14 to 15
million-ton level because of continued
growth of sugar substitutes in the major
importing countries. Moreover, intense
competition is expected from other ex-
porters, such as Brazil, that are also ex-
panding output.
Even if markets are found, Cuba will
face a hard-currency shortage for several
years because world sugar prices will
probably not go much above 15 cents per
pound. As a result, imports from the West
through 1979 are unlikely to exceed the
1976 level of $1.25 billion-some 15-20
percent below the 1974-75 average in real
terms.
Need for Hard Currency
Cuba needs these Western goods for
economic development. Cuba must im-
port all of its capital goods and petroleum
and a substantial share of its other raw
materials, intermediate goods, and
foodstuffs.
Although Havana remains heavily
dependent on Soviet trade and economic
assistance, rising world sugar prices
between 1970 and 1975 enabled Cuba to
sharply step up purchases from the West.
Despite a doubling of Cuban-Soviet trade
in this same period, the share of imports
from the West rose from 31 percent in
1970 to 48 percent in 1975. Havana con-
siders many Western capital goods to be
of higher quality than Soviet counterparts
and has sought for some time to diversify
its import sources.
In 1975, Cuban imports from the West
reached $1.8 billion as a result of the
sharp jump in hard-currency earnings
Page 14 WEEKLY SUMMARY
from sugar sales, some $3.2 billion in
trade credits, and $385 million in
Eurocurrency loans. Increased purchases
of capital goods and transportation equip-
ment from Argentina, Japan, West Ger-
many, and Spain accounted for most of
the 1975 hard-currency imports. Cuban
purchases from US subsidiaries abroad
have also been substantial since the lifting
of US restrictions in August 1975. They
reached $213 million in 1976, some 17
percent of estimated Cuban imports from
the West.
Setbacks in 1976
Stagnating Cuban sugar production,
declining world sugar prices, and rapidly
rising hard-currency debt led to a sharp
cutback in Cuban imports from the West
last year. Hard-currency earnings fell by
approximately half, as the world free
market price for sugar plummeted from
14 cents per pound at the beginning of the
year to 7 or 8 cents per pound at the end
of the year.
At the same time, Havana was forced
to restrict additional borrowing because
of its mounting hard-currency debt, es-
timated at $1.3 billion, and the bleak
prospects for a significant rebound in
world free market sugar prices. An es-
timated 30 percent of deliveries from the
noncommunist world were held up at
Cuba's request.
Prospects for 1977
Continued low world sugar prices will
limit Havana's hard-currency earnings in
1977 to about $800 million-close to the
1976 level. Sugar prices are currently
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hovering around 8 or 9 cents per pound
and will probably not average above 12
cents for the year. Moreover, Soviet
hard-currency payments for sugar will not
exceed last year's level.
Exports of nonsugar items-nickel,
tobacco, and seafood-will increase only
moderately at best. Fish exports, in fact,
could decrease. Fish account for about 10
percent of exports to the West, and Cuban
fishing operations are threatened by the
new 200-mile economic zones being im-
posed by countries throughout the world.
Cuba takes about 10 percent of its
catch from US waters and is planning to
ask for continued fishing rights. The
Cubans have already stopped fishing in
the claimed limit of some of their South
American neighbors and are worried
about important fishing operations in
waters off Namibia and South Africa.
Cuba's stagnant hard-currency earn-
ings and its continued reluctance to ex-
pand significantly its noncommunist debt
are likely to induce Havana to cut imports
from the West another 35 percent this
year, to between $750 and $850 million.
Further large increases in debt during
1977 would aggravate an already burden-
some long-term repayment schedule, and
hard-currency exchange reserves are low.
Impact on the Economy
The decline in imports from the West is
adversely affecting the Cuban capital in-
vestment program and will continue to do
so. Total Cuban imports of capital goods
are likely to decline some 20 percent this
year, after falling about 18 percent last
year.
Although the anticipated decline will
mainly affect the investment program,
some reduction in Western-supplied raw
materials will probably hold Cuban
economic growth in 1977 to about half the
6-percent annual rate envisioned in the
five year plan.
Growth of agricultural production will
be hampered by last year's drought and by
reduced availability of fertilizers and
other materials, as well as by delays in
modernizing the sugar harvesting and
milling industry. Construction activity
will be affected by the probable reduction
in the availability of construction
materials and by the postponement and
cancellation of several development pro-
Page 15
jects. Gains in industrial output, par-
ticularly textiles, will be affected by
reduced supplies of some raw materials.
Cuban import reductions may require
cancellations of some outstanding con-
tracts and thus aggravate Havana's
already strained commercial relations
with noncommunist countries. Cuba has
contract commitments for nearly $700
million in Western capital equipment for
delivery in 1977, including $300 million in
backlogged goods. Havana realizes it can-
not make these purchases and also buy es-
sential Western commodities, such as
medicines and agricultural chemicals.
Negotiations are under way to delay
shipment of the backlogged goods up to
another 15 months with only limited com-
pensation to exporters for interest and
warehousing costs. The Cubans hope such
hard-line tactics will encourage Western
firms to abrogate at least $50 million
worth of contracts on their own. Such
Cuban actions are unpopular with several
Western countries and may make it
harder for Cuba to negotiate bilateral
commercial agreements in the future.
Approved For Release 2008/06/05: CIA-RDP79-00927A011500110001-4
 Approved For Release 2008/06/05: CIA-RDP79-00927A011500110001-4
Approved For Release 2008/06/05: CIA-RDP79-00927A011500110001-4
 Approved For Release 2008/06/05: CIA-RDP79-00927A011500110001-4
Secret
Secret
Approved For Release 2008/06/05: CIA-RDP79-00927A011500110001-4