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December 15, 2016
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August 28, 2002
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June 14, 1949
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25X1 CO FI E T1AL Weekl Contributions 34 Mme Approved 1114 Release 2O O A-RDP79-O OA000200020011-6 GEN L: Poru?s relations nth t' uador and Colombia, which were tense a* a r e4 'U1 -~ 47-f I~? aarri.>; roports regarding Peru's military intentions, sre tow iirtprovcd (p. 2). Th3 Caribbean Legion, which is reported to be p"..aiaiing -.n :invasiorr, of the Dominican Republic, is not expected .to take preyipi:.sse action if.. the an nediaie future (p. 2). CLUViI, D'67I8TON: ;`~:-_o,:a:i ~a congressional election returns are expected tr tihow a gait. for .ii, Cor~sea ti es, but Liberals will retain control of t o ruse cf Reprossrhtatives (,p. 3). The resignation of Brazil's Finance N.mistsr will not a?.rersely affect that country or US interests in Bra .l (p. 3). SOttl 1 EItN LI1JISTON: Differences between Chile and the US have developed during recent trade negotiations (p. 3). In .Argentina,, prospects for stability are 3mpw; d, at least for the short run, by recent economic developmnt r (p. 4). NO CHANGE IN CLASS. ^ C7 DECLASSIFIED CLASS. CHANGED TO: TS S NEXT REVIEW DATE: State Dept. review completed C O N F I D I E N TIAL DATE/O__ 7 REVIEWER: 25X1 Approved For Release 2002/10/10: CIA-RDP79-0109OA000200020011-6 Tie Ciirren:. Situation in Chile . . . . . i ? . . ? . . . . ? . ? . 6 DOCUMENT NO. AJ Approved r Release VIOULMN 2/' 4 ' IA-RDP79-O OA000200020011-6 V eelcly Contributions,, (CIA Working Paper) ~p~4 24 June 1949 1. GENERAL: Peru's Relations with Scuador and Colombia Improved Tension previously existing in Ecuador and Colombia has been reduced by the discrediting of alarmist reports from those countries that Peru had hostile intentions toward them, Ecuadoran concern had reached such a point that its army staff had planned t~ mobilize on 14 June, but these plans were cancelled after an Ecuadoran border mapping flight over the areas in question failed to reveal the concentrations of Peruvian-troops. Similarly, re- ported non-routine movements of Peruvian troops to the north have not been substantiated, The present low effectiveness of the Peruvian armed forces is another factor which should further allay the sincere but largely urearranted fears on the part of Colombia -M- and es?- pecjallyr Ecuador - of a major aggressive move by Peru. As a re- suit of the low pay scales and low prestige of Peru's array, which numbers 32,000 men, there are almost no voluntary enlistments and reenlistments, and there is a 50 percent turnover in enlisted per- sonnel each year. As the faulty execution of the conscription system largely exempts the better classes, the conscripts are al- most entirely illiterate Indians, Army morale, training, and strength are now at a low ebb,. Transportation is in bad condition, An attempt to transfer troops, which are normally in great4st strength along the northwestern portion of the Ecuadoran border and in or near Li mar, to frontier points would be difficult of acoomplishment at this tinter In view of existing disaffection within Peru, the Peruvian military Junta conceivably might feel it expedient to divert the at- tention of the people from the conduct of domestic affairs by creat- ing a border incident somewhere along the Peruvian frontiers with Ecuador or Colombia. There is little likelihood, however,, of a major invasion attempt by Para because indications of such aggres- sive Intent are lacking: its army is apparently unprepared, and Peruvians in general realize that such an act would have repercus- sions impairing Peru's relations throughout the Hemisphere. Possible Preparations for Invasion of Dominican Re ubl.ic E7 _J the ari Legion, in jolnz action with the governments of Costa Rica, Guate- mala, and Cuba, is completing plans for an invasion of the Domini- can Republic and the overthr yr of Trujillo. Recent reports of an imminent revolutionary move by the' Caribbean Legion either against Trujillo in the Dominican Republic or Somoza in Nicaragua, have apparently been set off by an unusual amount of activity among Central American Caribbean revolutionary CONIFIDEPITHAL 2, Approved For Release 2002/10/10 : CIA-RDP79-0109OA000200020011-6 Approved Release 2002/) ,r IA-RDP79-01OA000200020011-6 Weekly Contributions, (CIA Working Paper) J1 June 1949 circles, including a regrouping of forces and materiel in Guatemala. I Iestimates, however, that the superior strength of both Trujillo an oraoza will continue to deter the Caribbean Legion from taking precipitate action in the immediate future, C0L0LBIA: Colombia's Liberal Party retained control of the House o esen a ives in the 5 June elections, although the margin of Liberal control declined from 15 to an estimated 5 seats, With one-third of the army policing the country, the elections were relatively calm: only 10 people were killed,, and fraud is claimed by the Liberals in only 2 of 15 departments. The Conserva- tives' gain, following an election campaign during which Liberals were accused of too close affiliation with the Communists, may well strengthen anti-Communism in the Liberal Party. 4,. BRAZIL.- Finance Minister's Resignation Accepted ' President Dutra Pedro o e Cas roe Brazil' s unpopular Finance ' nisi, resigned on 9 June, apparently as a result of a series of attacks against him, both in the press and in congress,, in connection with govern ent contracts for the installation and operation of petrol- eum refineries, the liquidation of the coffee stocks of the National Coffee Department, and a letter written by the 11.1nister to LIS Secre- tary of Treasury Snyder during his visit to Brazil in 1947. (Cori tents of the letter were brought to public attention during the past several days, and Brazilians in general did not like the begging tone of the letter in which the Minister allegedly wrote "Lend me your handy if you do not wish to carry me on your back".5 t+anoel Ouilhermre da Silveira, present President of the Bank of Brazil, has been appointed Interim Finance Minister,, and he is con- sidered as a possible replacement for Correa e Castro, who was scheduled to come to the US this month as an official guest. Although this event has contributed to a dampening of the enthusiasm which followed President Dutra's return from the US, there is no present indication that Correa e Castro's resignation will affect Brazil's official attitude towards important pending financial problems, nor will his resignation be detrimental to US interests in Brazil, 5, CHIIZ* US-Gnilean Disagreement Regarding GATT Couxnitments e US-MiMa-n difference which eve apes-during recent bi- lateral trade negotiations arises from the US complaint that Chilean 33 Approved For Release 2002/10/10 : CIA-RDP79'9 Approved r Release 2002/3WUTCIA-RDP79-0 OA000200020011-6 weekly Contributions, (CIA Working Paper) 14 dune 1949 import tax increases are contrary to GATT commitments. Chile has rejected the US suggestion that the controversy be referred to the contracting parties of GATT, and has threatened to withdraw from GATT if any decision adverse to Chile is rendered by the contracting parties. In view of the Chilean position, the US has agreed to resume bilateral talks before submitting a complaint to GATT. Although Chilean obduracy in the present negotiations pro- bably stems from the Gonzalez administration's fear of a financial crisis resulting from reduced government revenues caused by the recent decline in copper prices, Chile's record at previous meet- ings (particularly the Havana Conference), and the delay entailed in obtaining ratification of GATT, indicate its coolness to-ward she entire project. The record indicates that this reluctance to restrict freedom to manipulate import rr:gulations and tariffs that protect domestic industries and provide a substantial portion of government revenues is not peculiar to Chile alone but is shared by other Latin. American countries such as Argentina, F3razil and Cuba, all of whom fear competition with highly industrialized countries. ARGENTINA: Current Developments Favor Sfabili recently concluded en Argentina and the UK on conditions of balanced trace for. the next five years has undesirable features, but it is, at least for the short run, favorable for the stability of the Peron regime. The US has shown its disapproral by protesting to the UK that the agreement will artifi.cally clwnnel Argentine trade in contravention of ITO principles, to the disadvantage of US trade (for example, it renders the position of L petroleum interests in Argentina most uncertain). Within Argenina, the short-term advantages are not unclouded. Labor problev.s, military dissen- sion (see I kly, 31 May 49) and nationalist obstruction will continue to pose serious problems for the administration. A nunr- ber of immediate advantages, however, are apparent. Most import- ant, perhaps, is the possibility that the conclusion of this agree:aent may pave the way for a substantial expansion of Argen- tina's foreign trade - a development which is essential to the restoration of the government's stability. Furthermore, the suc-a cess attending Dramuglia's efforts to reach an agreement with the UK and to conduct negotiations looking toward the expansion of exports to the US, despite the obstruction of nationalist elements in the Cabinet, is evidence that forces working for the restora- tion of stability through international coopera.',ion are for the Approved For Release 2002/10/10 : CIA-RDP79-0109OA00020002001 Approved Release 2 , ,QRDP79-01DJOA000200020011-6 L Weekly Contributions, (CIA Ylorking Paper) 14 June 191;9 time being in the ascendant. Ar r discontent with the regime will be reduced to the extent that the agreement appears to o.1-Ter relief from Argentina's economic plight, The higher price being charged the British for meat will provide the administration with at least a partial answer to the nationaliuts, who have charged that Argerr tine interests are being sacrificed to international. exploitation.. Even though these developments are generally favorable for the Peron regime in the immediate future, it still is by no means certain that the government can, without resorting to ex- tremes, withstand domestic pressure during the considerable period required for such iiupz ,vement to be realized. 5. Approved For Release 2002/10/10 : CIA-RDP79-0109OA000200020011-6 Approvedr Release 20 cekly Contributions'. (CIA Working Paper) Situation Memorandum 36-49 The Current Situation in Chile 14 June l(J49 (Summa : The situation in regard to US security interests con uses to be favorable. In the political field, post election maneuvering by political parties has undermined the pro-government coalition. Economic prospects are less promising than formerly. The Communist Party is concen- trating on recouping its losses,, particularly in the labor field where a general restlessness is becoming noticeable. The armed forces remain loyal to the government. In inter- national affairs, Chile remains a voluble opponent of mili- tary regines and friend of the US.) The principal political problem facing the Gonzalez administration at this time is that of maintaining a measure of party support for the Exevutive. Although the President has overcome one cabinet crisis and has reiterated his intention to pursue a policy of "national unity", the individual parties are jockeying for advantages with the 1952 presidential election in mind. Since the opening of Congress on 21 i.'-ay and the subse- quent scramble for congressional offices, the solidarity of the pro- government coalition has been undermined by growing estrangement of the Liberals and Traditionalist Conservatives., whose candidates for office were defeated by Radicals in combination with opposition groups. There is a strong indication that the Radical Party, victorious in the recent election and strengthened by reunion with the dissident Radical Democrats, has deserted its pre-election allies entirely and may attempt a realign- ment of left-wing forces or may adopt an independent policy in regard to political alliances with either the right or the left. It may be as- sumed that any rightist Liberal and Traditionalist Conservative coopera- tion with the administration would have as its only basis agreement re- garding the anti-Communist issue, so that it may be expected that if the President is to secure sufficient support for his ambitious economic and social program he will find it necessary to arrive at an understanding with the non-Communist left. Although significant progress has been made in the economic field during the past year, problems arising from the chrvnic dollar shortage, aggravated by the decline in copper prices ~lkly, 19 Apr and 17 ',:ay 25X1 1j9),, have darkened the general economic outlook and pointed to the neces- sity of preventing a serious imbalance between exports and imports, of revising budgetary and foreign exchange estimates, and of stabilizing the ; 6. Approved For Release 2002/10/10 : CIA-RDP79-0109OA000200020011-6 Approved Release 2002/1~~' "~F9 A000200020011-6 Weekly Contributions, (CIA Working Paper) l1 June 1949 Situation Memorandum 36-4(,) economy, At present, dollar exchange is being allocated with extreme caution, and wherever possible, trade is being diverted to non-dollar areas rather than to the US. It is anticipated that the panm nts agree- ment recently signed with ;lestern Germany will reopen that important mar- ket for Chilean commodities, While there have been no labor disturbances of serious proportions, an increasing number of disputes and short-lived strikes indicate a gen- eral restlessness in labor's ranks, a restlessness which probably will increase if any widespread unemployment due to plant cutbacks and shut- downs should result from the drop in copper prices. Up to the present the absence of well organized labor leadership, together with the government's continued policy of intervention in the initial. stages of labor disputes, accounts for the apparent labor peace. Reports of radical Party efforts to establish a national Radical labor confederation indicate a breakdown of any trade-union agreement between the Radical, the CTCH Socialist, and Democratico labor forces? and also point up the lessened possibility of the establishment of any non-political national labor organization as ad- vocated by President Gonzalez. The Communist Party retains its latent ability to threaten the inter- nal. peace of the country, but it has been considerably weakened political ly by the 6 March elections. If succeeding months witness an economic set- back of major proportions, it may be expected that the hard core of mili- tant Communists will become increasingly active. 25X1 Party plans for the future now center on internal reorganization and pre- paration for underground activity of the Party., possible formation of a united political front with at least a portion of the left--wing Socialists, and resumption of activity in the labor field, as evidenced by radio re- ports of a Communist victory in the recent election of the Lota coal miners union. It is true that rivalry among the various factions of norr-Communist labor will aid the Communists in their efforts to regain strength in the labor field, but the President' a alarmist speeches regarding the dangers of a revolutionary attempt appear to over-estimate Communist strength. estimates that Communist power at this time is still too dispersed or effective action. The overwhelming majority of the armed forces is considered loyal to the constitutional government and not inclined to interfere in political matters, despite the administration's concern over some discontented ele- ments. The annual complement of recruits was called up in 6pril (as is the usual custom) for a 9-12 months' period, bringing army strength to its normal maximum of' approximately 23,794 men, about 39 percent of the 7. Approved For Release 2002/10/10 : CIA-RDP79-0109OA000200020011-6 Approved Release 2002/1 - A000200020011-6 Weekly Contributions., (CIA Working Paper) Situation Memorandum 36-0 3.4 June 1949 60,894 total military and national police personnel. Efficiency is rela?-? tively high, but hampered by lack of up-to-date equipment., a deficiency which has also served to lower morale somewhat, particularly in the air force. Approximately 20-21 percent of the government's total expenditures go to the armed forces; during the first portion of the fiscal year., how- ever., the major portion of the funds were spent. In international affairs,, Chile continues to deplore the rise of military regimes in Latin America., and to denounce generally, both at hors and abroad,, the "Communists and Fascists" who seek the overthrow of demo- cratic go a ments. Chile is attitude toward Argentina and Peru remains one of outward courtesy and inner reserve and watchfulness, The Gonzalez administration, greatly concerned over the Bolivian disturbances., hay, re' moved Bolivian exiles in Chile from border areas in order to aid the neigh'- boring goverment. Recognition was extended to the Paraguayan Go4rer=ent on 22 April. The new ambassador from !x1exico, the first since :n nst year, arrived during the quarter. Toward the ITS., Chilean policy continues to be g.neral3y favorable with a marked eagerness for US financial. aid. In the United nations,, Chile prides itself or, active participation; ho ver., recent disagreements with the US over GATT commitments have led to a Chilean threat of withdrawal from GATT if the US presses for a general., rather than a bilateral, discussion of the dispute (see page 3 of this ti9k} . C DAL SECRET"_` Approved For Release 2002/10/10 : CIA-RDP79-0109OA000200020011-6 9.