WEEKLY CONTRIBUTIONS LATIN AMERICA BRANCH, ORE, CIA 26 JULY 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000200030004-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 9, 2016
• Document Release Date: September 28, 1998
• Sequence Number: 4
• Publication Date: July 26, 1949
• Content Type: SUMMARY

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qe~- Csntriauti.ens
~L
Latin Auriga Brand, OR CIA
'
26 July 194e-)
NOILTf3EflN DIVISION: Suppression of the 39 July uprising in Guatemala has
strengthen d. President .Areva;io's control. (p. 2).
CEN`CIFLAL DIVISION: Prospects are reasonably good for economic treaties
between the US and Brazil advantageous to both countries (p. 2)?
S MITMRN DIVISION: The Peruvian coup reported to be planned for 28 July
is u nl.ikely to take place (p. 3). Stability prospects in Paraguay are
again uncertain (p. 3).
SPECIAL SUBJECTS
6rgerrtlne Crisis lased Since Agreeirei t with the UK
Communist Situation in Martinique and Guadaloupe
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COMM
weekly Contributions, B/LA 26 July 1949
(CIA Working Paper)
1. GUAZEFAIA: Control of the Guatemalan Government by President
assumed fol-t
lowing the recent but abortive uprising in the -wake-of-the
assassination of Colonel Arana, Chief of the Armed Forces. The sue-
cess of the government in quelling this revolt of conservative-
minded young array officers was partially due to the cooperation
given the police force and loyal elements within the army by organ-
ized armed civilian groups affiliated with the leftist political
parties and labor unions. The military effectiveness of these here-
tofore untested groups and replacement of disloyal officers with
those of proven ;royalty should greatly strengthen President Arevalo's
regime. The somewhat hostile attitude of the administration toward
the US and US business interests is not expected to change as a
result of the uprising. (From CIA lee 22 Jul 49)
2. BRAZIL: pros cts for Economic Treaties
The US is now prepared enter into formal negotiations
with Brazil regarding economic subjects of mutual concern, accord-
ing to a note from the US SecretMr of State to the Brazilian Am-
bassador., The US proposes that the negotiations include: (1) a
treaty of friendship, economic development and commerce, with in-
vestment provisions; (2) a treaty on the tax relations between the
two countries; (3) a joint undertaking. relative to exchange cone' -
tibi.lity guarantee; and (L) an arrangement for liquidation of past
due commercial dollar exchange commitments in Brazil. These pro-
posals are in accordance with the joint announcement of Presidents
Truman and Dutra, during the latter's recent visit to "ashington,
as to the desirability of fostering mutually beneficial economic
development and social progress.
An arrangement for the liquidation of the dollar baoklog
due US exporters would do much to alleviate the present economic
difficulties of Brazil (see l3/LA .lk1y, 19 Jul 49).. and the suc-
cessful negotiation of the remainder of the US proposals would
greatly encourage the flow of US capital Investment into Brazil and
thus, on a long-term basis, strengthen and develop that country's
economW and increase its capacity to provide the US with critical
materials.
It is probable that the majority of these proposals will be
well received in Brazil. There may be some difficulty, however,
with the draft treaty of. Friendship, Economic Development and Com-
merce in its present form. It may therefore be several months be-
fore the negotiations are concluded and treaties submitted to the
I 'DIAL 2.
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Weekly Contributions, B/
Fi ENTIAL
(Cia Working Paper)
26 July l9L.9
respective governments for ratification. There may be, also, cer-
tain fields in which the Brazil .an Government will not find it
politically feasible to encourage US investadtents; for eerie,
in the field of petrolaann development. President Dutra and other
govermmnt officials are known to fear the pressure that could be
brought to bear by the ultra'-nationals and Comm nists in a re-
vival of the "Defense of Petroleum Campaign" that gained such mo
ontum during 1948 (see B/LA Wk3y, 31 Aug 149 and 22 .r 49).
25X'(61
MW: Reported Plans for Revolt
25X1X4^
two exiled Peruvian Array officers have plans for a 'coup against
the Peruvian Government to take place on or about 2.5 July. The
Peruvian officers chin to have support within Peru and good
chances for success.
The present Peruvian rogi 1s maintained in porgy prtnoii
pa13y by. the support of the arm r, which is divided into opposing
political factions. Thus open dissension and even an a d . coup
is always a possibility. The leaders of the reported plot are
known to be members of groups that oppose the Odr a adm nistration;
they are, fui'thexrmore, incltvidua,e likely to take long chances.
Possibilities for success in this psr. ti.cu r venture, ho never,, do-
pend largely the officers' ability to gain reentry Into Peru
and to establish contact with dissident elements of the Peruvian
AzW, neither of which is certain. The strength of Ode's fac-
tion, moreover, is such that D/LA. eet' tes the chimes for a suc-
cessful coup by this Sup are not good. (Substance used in CIA
Weekly', 22 Jul 1.9 )
. - RAGU ! t Recent tension between the ar and the civilian Co3
rumen ouso concern in-Asutlc can ann:~
apparently sponSIM_ 716r~ ruundrs of an mnpez Sing military coup,
Reports of division among the civilian e ats of the govor rat
add weight to those rumors, The announced cause of friction be-
tween the arntr and the ggvernment is the presence of a civilian
in the post of Minister Of Defense, but this is 'possibly only one
aspect of the army's resentment over their subordinate role in the
Mlolas government, Genera. Diaz de Vi, mar, Corder Chief of
the Armed Forces,, was given fun authority in Februaryto raorg-
anize the army, so that by now he should be its effective leader
and in a position to orgarsise such a coup with the aid of a few
other key leaders, in view of Paraguay's propensity to ainned re-
Volt, B/LA estimates that the smoldering troubles within Paraguay
could easily flare into open violence at at y time. The t m n.g of
a revolt - or its. indefinite postponement - lies in the hands of
a few individuals whose intentions are not yet know,..
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C G N F T A L
Weekly Contributions, B/ IA 26 July if 9
(CIA 'Working Pater)
Article 13'4.9
Aaentanr_ Crisis Eased Since Agreement with the UK
(Sim + : Signature of the trade agreement with the UK on
2fl me now appears to have introduced a new phase in the
Peron government's effort to cope with the Argentine
politic(r-economic crisis. The goverrin nt has demonstrated
rronevmd confidence and has made important decisions affect-
ing prices and labor policy, ifforts to improve relations
w h the US have not sly ckencd. But, even successful .I ple
ntation of the treaty-would in itself by no rzeans ass r
the revival of foreign trade which is essential to tote re-
storation of Argentine political and economic health.)
Because considerable time 'Dula necessarily elapse before e-pansion
of trade pursuant to the a ement could register an improvement in the
economy., the renewed confidence + the government is to a large extent
based on psychological factors. Supplies and cgizipnent for industry and
agriculture held in reserve against an emergency can now be released in
anticipation of replenishment from the UK. Assurance provided in the
treaty that Argentina will obtain its minimum fuel requirements, coming
at a thin when light and power are being severely rationed as an indirect
result of the dollar shortage, has greatly relieved ex eut:I:ve an dety.
FurtherTmsore, completion of the agreement with the UK appears to have
broken the logjam in trade :;otia'ons with many other c ountr s.es which
had developed pending knowledge] of availabilities and prices in the light
of the UK accord.
Recent decisions are in marked contrast with the virtual paralysis
that prevailed during the latter part of the protracted negotiations
with the UK (see 13/LA 1' kly, 3 gay, 31 ,:ay 49). The removal of price
ceilings on rmilk, oils,, edible fats, soap and tallow and elamanation of
the subsidy for meat consumption in the federal capital are outstanding
among measures indicative of renetcd executive confidence and capacity.
This economically constructive step, clearly designed to improve the
competitive relationship between domestic and external prices and thus
expand exports, involves considerable political risk.
Labor discontent, which has been a paramount concern of the admini-
stration for rr rq months (see 3/VL Wkly, 26 Apr tt0)q will be aggravated
by the sharp rise in prices of these necessities c from 50 to 100 percent
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1CONFODMEMEAL
l eok'iy Contx'ibcations, B/14
(o A nor ' , P per
A.rt3.cle 19
26 S 1949
that has a3.re ad r resulted from the romova . of controls and the s ubsi dyy.
3n all probability Peron .3. be forced to concede ms's wage 3ncresasea,
thus acce3Arat ing Argentina is eeriozte inflation; In oomn tt ng h3 elf
to this course, therefore,, Perim vast have been con ident of his ability
to media hiia recent reported rroned relations with arnq leadors.
He a rident1y counts on the provision in the out r+ent3q logs Sated budget
of the largmt t ilitary a ropriat .on In Argentine history and the apr
pe r anoe, at least of moving the econoa y f'rm ; "dead center" with the tilt
ag oment ands bec1,uent action to placate those officers who were former-
3y digaffected ov r b 1B "codd3,tng of labor" arid the deterration of the
Contrary to earlier apprehensions that Peron might resorts to a
aharpYy antisUS policy It.., dissatisfied with the amount of 1E as Lance
extended Argent a in its crisis,, he felt oompeUed to resort to other
ap oach to ooov'ery (see B/iA ',11 , 24 N and 33. Vfayr 49) them has an
yet been no evidence of serious recrimination against the US. It 1r
t ?e that Peron w de an acid oor nt regardi U 3ntt rentd onion apropos
of the US protest to the British concerning the UK-Argentir agreement
and he also point 4* selected a British vehicle from huh to review the
9 July parader On the other hand, in coz trust with these relatively
mi phew, ' hich could to explained .ta terms of domestic political
exiled eney, there have been s u eral recent developments which in them-
selves a p p e a r to aver won for U Ar enti relations,. Amon ; these re-
lativOlyy favorable ind1oations are (I5 the dispatching to Washington of
the lay Argentite economists to work with the joint 1JS-ArgelTM e
mission for expansion of USA-Argentine trade, suggestd that PoAm is
taking We a fort serlous3y despite the mer r practical obstacles, (2)
reports that US za t-ps c1dmg firms are re:l atively w13. satisfied with
current Argentina arrangements to protect their interests, (3) informa-
tion to the effect that Finance Minister Core1jo has noticeably mmodif d
his nationalist anti-US position,, and (4) Argentine gmt1fication with a
recent substantial dollar purchase of meat by the US Ax r.
Through its renewed e;csni'iden a and Initiatives the Porn regime:
rnr sue d, as It has in the past, in deflecting serious political. re-
percussions from economic ma lad justmnts. But the basic probl om of a
high3y inflated exposit-tom econca r confronted wi declird world de-
tend persists and no fundamental solution has yet been projected. Them
may be hesitancy on the part of either or of both the signatories fd.]y
to implement the treaty with the UN. Tmporary export advantages gained
through of .Ration of price controls and subsidies may very well be off' "
sot t y the i etu to icflation whi oh resultant wage demands will engender.
The competitive export position wou$.d thus'Vain suer and the impact of
shortages and further in . ation again result in aggravated internal du.a
locations with their usual threats to stability.
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We-eok1.y Cont ibut1On;9, B/
(CIA, liorking Paper)
Article 14-49
26 July 1949
lou
Crrninu'ttst Situation in T rtirrLque and G da
heaver a suffered by the Communist Park'T in rM`t!n1-Que arx1 Gua -
lou are due pri ariiy to changes in the under1y ng situatt.Orl in
trop l tan Franee and secondarily to changes in the islands them, elves.
it ir, i ri1ike , saving a reversal of trend in France, that the Co),mw ists
in the i; nds will be able to recover their political ascendancy i .thin
the next year. The decline of Communist nfluence in the French 17est
Indies, formerly one of the strongcst links bet'reen 1'`urvpoan and i'Testern
Her:d.spbaex Co nunisms, is a gain for US security interests.
in the November 191 Z elections., the. Socialists capti'ed both of
pa,arytin Lque l s seats in the Comc of the Republic., Frame's upper house
from the Comrnur fists. In June 19149 one of the islands' four Conmuk i.st
deputies to the French National Assembly resigned from the Party, probab-
ly because he s ordered to vacate his seat to make rooms. for one of the
defeated Cannuuist couxneiiors. The two French prefects., both actively
ant..LConmunIst, have thwarted Core .unist attempts to di Grupt the sugar-
grinding season with labor disorders.
Coo auxai..st poor and inflt1once in IJarti fie;ue and Guadeloupe in the
1945-4,.', period partJal y reflected Communist influonce in n etropolitan
:r a.?ance. The fact, that Co imists are now no longer participants in the
ntropol itau governmerst coalition and appear zrnlikely to come to power,
wn& to inf: sex e the islanders to select as their nr ssAn':-nt ye to
:France individuals more acceptable to the central govetn nt and tkvas
more likely to receive benefits from it. Also, French color al author-
ities are no longer deterred from actin; against the local Ccomzruatsts.
On the islands 1945 the Cara .unist leader?sht p alone had the or-
ganiza'tion and popular appeal -- associated with resistance activities
in continental 1F,'3nCe during World War It - to fi 'the political vacu' rn
created the di sos editing of the Viol rite colonial x'o :bne and its loc-
al s u p p o r t e r s , t h e cite planters? Today., t h e non-u~1fi ed Soc lists
and the recently organized de Gu~aUtst 3 offer an al tornitive to Gonmiz
ist l ooderstrip.
MONFIDENTIAL
StcrmT 6.
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