WORKING PAPER ON LATIN AMERICA 52-50 O/RR, CIA 28 DECEMBER 1950

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000200060013-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 16, 2016
• Document Release Date: August 31, 2004
• Sequence Number: 13
• Publication Date: December 28, 1950
• Content Type: REPORT

NCRTIIEItN: In Cuba., Chibaa, tho is a major candidate for the presidency
in 1952, has not declared himse3f on Communism (p4 2).
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17orldng Paper on Iatin America 52?50
0/ItI3 CIA
28 December 1950
SPECIAL SUBJECTS
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The Current Situation In Brazil .
The Current Situation in Chile. .
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CONFI?ENTIA1?_
Working Paper on L&, 52.50
29 December 1950
1? CUBA: Chibas Remains Silont on Attitude Toird Cats
uFAUUen po a vence makes his fail-
to deala himself regarding Cor nism espec3al]y significant. As
a major candidate for the presidency in 1952, Chibas ac-
tive since his return from a serious illnese and 25X1
his reputation as the most powerful Cuban exponent or ones government
has continued to strengthen his political position, However' members
of has party, the Qrtodoxos9 have been collaborating with the Comlmr-
Cis~$ tappppaare an a" to forthright Communist support in the 1952 elections,
Stand on Communism during the de-
teriorating world situation of recent months has been one important
factor in delaying congmssional action to authorize effective suppres-
sion of Communist activities in Cuba,
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t~~ tea ~~r~ anci~t~a g ~~0 2g December 1950
The Current Situaluon in Brazil
(_____ Post-elaation political tensions have been etabi-^
tee , and Vargas Vill be inaugurated an 51 January without
incident. Economic activity has been relatively high and will
remain so, barring tridespread world conflict, The preparedness
of the armed forces has received increased attention recent3y,
although there are no present plans for an offer of Brazilian
troops to the nit,
- US interests have been favored 1 continued progress
toard the opening up of the Amapa' and Urucum manganese deposits,)
Political
Po 3tical tension continued to run high for more than a month after
the October elections in which Oetulio Vargas won by a landslide, but irr
aisteuce by outgoing President Dutra and Tar Minister Canrobert that the
democratic perooess be respected prevented any violent disturbances. Sine
the end of November when the government party (PSD) and the "loyal opposi-
tion" party (UDNN) publicly recognized the results of the election and
abandoned the "absolute majority thesis" (Getulto received a plurality,
L$a5%,, of the vote), even this challenge to an order3y transfer of power
has been removed, There is no reason, therefore, to change earlier esti-p
ustes that Vargas will be inaugurated
as scbe on 31 arv&ary,
influenced at least in part by the fact that the PSD retained the
lest block of spats in the.congress and that his own PTI3 ranks a poor
third, Vargas has intimated that he will not limit his cabinet to members
of his own party. He announced shortly after election day that his govern
merit trould be of a "laborist" orientation and.; more 25X1
recently, PTI3 leaders have said that he uould establish three ncrr ministries;
health, econox r, and information; and two nor: barks : rural credit and social
security, t;hile it is generally felt that he will atteript to govern without
resort to "totalitarian" methods, he apparently trill have at hand some of
the appropriate machinery - for example, the new ministries of information
and econoqr - should he feel the need to use it,
Economic
"Vazil continues to enjoy a relatively high level of economic activity,
and the incoming Vargas regime is expected to make every effort to improve
the situation further? Although Vargas has still not committed himelf to
specific measures for the elimination of trouble-spots in the econo r, it is 25X1
generally believed that ho Trill focus his efforts chiefly around tho working-
man's problem - Inflation - and further development of the basic industries.,
Rumors .that he will devalue the cruzeiro within the near future are judge
unfounded, although 3t ismpossible that her establish some
m o iple rates of exchange?
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Working Paper on LA, 52-50 - 2 at
Situation Denorandum 79-50
28 December 1950
Brazilis steadily improving eeonordc condition is unlike]y to deteri-
orate approciab1y in the near future, except as the result of world conflict.
Although this year's unprecedented coffee and cocoa prices dropped sli,ht2y
in September and October, they are edging up again In the US narlmt, and
coffee,, at least, mill probably remain at levels calculated to improve the
already-favorable terms of trade. Commercial dollar payments are virtually
current oxcept for certain special categories, and thilo the backlog of
commercial sterling and other European cuncy obligations has increased
in recent months, the dollar holdings are such (about t1S$121 million) that
all comerci.al arrears could be liquidated at this time should it seem
desirable.
Negotiations to establish the frame7ork of a Joint US-Brazil Co mission
under the US Point Four Program are completed; the commission is scheduled
to begin work in 1951 rri.th a budget of US$800, 000 for the first year. Em-
phasis will be away from general surveys and tomrd specific projects -
chiefly power and transportation - already sketched in by previous surveys.
Immediate prospects for increased manganese production and export to
the US remain poor,, but longer-range prospects have improved con iderably,
The Brazilian congress on 17 November passed a bill guaranteeing an II3PJb
loan for the joint U.9l3razil development of the Amapa deposits. Icanwhilep
plans for a port near the Amapa area have been completed, and studies for
the construction of a connecting railroad are under way. It is estimated
that all plans and financial negotiations mill be completed Tdthin six months.
In addition, a second major US steel canparrry has reportedly settled its dif-
ferences with Brazilian concessionaires and will negotiate an agreement for
the development of the large deposits at Uructim,
preparedness of the armed forces has received increased attention
reoontly,, although Bzmzil apparently vil.l not give military support to the
MI forces in Korea in the next few months (see International). The Brazilian
congress is currently considering a supplementary 37uion for the
purchase of two 13 cruisers and other equipment for the improvement of the
armed fords. The president has asked revision of the military service law
to make all men betrsen 17 and 45 subject to draft. In addition, the Bra-
zilian press reports a joint anti-submarine warfare tactical exorcise In
September., the first since World War II, and a large joint argr-navy-airy
force maneuver in November. The latter aunmmr r- that of the let Liil.itary
Region involved over 20 percent of Brazil's total armed forces., according
to the press,, and was locally acclaimed as a "brilliant performance".
The determination of the majority of the important high-ranking offi-
cers to keep the armd .farces out of politics at this time was dramatically
illustrated by the rensval of Vieo"Ad al Pinto de Lima, Couu rider in Chief
of the Fleet, for challenging tlx3 validity of Vargas' election.
considers it most unlikely that the military crimll r.n1 ar;y attempt to pro-
vent Vargas from assuming office.
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Working Paper on IA, 52-50 - 3 28 December 1950
Situation LicmorandLm 79-50
Subversive
der an upsurge of activity in preparation for the October election,
the illegal Communist party has apparently withdra a to mini== "peac&'' and
front-group activity. There is no indication that last sumor"s militant
calls for revolutionary activity can be inpiemented even in a small tray.
Seemingly disoriented by its failure as a political rallying-point (the
Communists exchanged two federal deputies for one, and apparently sustained
a not lose in most state and local situations), the party has attempted to
save face by interpreting the Vargas victory as victory against Communist
scapegoats like "Yankee imperialism". The national conference of "Partisans
of the Peace",, rhich had to announce that no state had met its quota of
signatures for the Stockholm appeal, met in October, as scheduled,, in Sgo
Paulo and elected over forty delegates to the international congress. It
is doubtful that more than a few were able to make the necessary arrange-
ments to attend, however. .
During the past few months, the Coununist press has stopped - -44M
campaign against the presence of US military personnel in Brazil.
STAT
The only really aggressive Communist activity recently eras the effort
of the Communists during the past meek to attempt to organize strikes and to
stage demonstrations. Through this intensified pro-Christmas agitation, the
Communists had hoped to induce nom-Communists to participate in the strikes
by exploiting the popular demand for congressional action to provide a
Christmas bonus for all workers. Despite the popularity of the bonus issue,,
the Gomauni.sts had practically no success in inciting strikes, and, reported-
ly, the police rapidly arrested marW Communists in Rio, Sao Paulo, and Recife,
There are no apparent reasons to chang stimates that the Con- 25X
munists present no serious threat to the t a : ?;y o Brazil.
International
Brazil Ims been somewhat handicapped in the conduct of her foreign
relations, during the past few months, by the virtual lack of liaison be-
tween the outgoing and incoming governments. The Dutra administration is
probably sincere in wanting to give all possible aid to the US and UN forces
in Korea, At the same time,, however, Foreign Minister Fernandes apparently
feels that he cannot comit the country to policies that might or might not
be carried out under Vargas. In answer to direct question, Fernandes has
said that there are no plans at present for an offer of Brazilian troops.
Current stater nts by Vargas offer fern clues, and can be best described as
resounding "double talk" designed to keep open all cources of action. It
seems likely that t h e congress w i l l approve a D u t r a request f o r t 2.7
million worth of food and supplies, but no further action is likely to be
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17orking Paper on TA, P-50
Situation Ilemor:mdum 79-50
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29 December 1950
taken rrithin the next two months I I The Brazilian
foreign minister has stated that az avors testing of the foreign
ministers of the Aneriean mpublics -- a meeting requested by the US under
the regional arrangonents of the Organization of American States -- but he
adds that Brazil favors the meeting in February after the nor government
has had some time to begone oriented to world ratters. 11cau hi1os, it has
been reported that Dutra noy soon meet -with Vargas to talk over the criti-
cal world situation.
Barring the rapid spread of armed conflict, Vargas can be expected to
be generally lose favorable to US influence than Dutra and to be mere friendly
toward Argentina,, but specific lines of foreign policy will probably be da-
ternined on an ad hoc basis.
The official radio station reported on 22 December that Brazil had
canceled the exog bur of Polish Consul Alexander Bodak at Curitiba in the
state of Parana, His Jurisdiction included the states of Paeans,, Rio Grande
do Sul, Santa Catarina., and Mato Grasso, Although the gavorment did not
indicate what caused this action., it probably resulted from 13odak9s increased
political activities among the local Polish Commriunists,,
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Working Paper on LA9 52-50 28 December 1950
Situation LScmoranduma-50
Current Situation in Chile
(S Increasinc political tension slightly threatens the
a~abi '3 y ~- of the Gonzalez Videla - government. On balance the
economic position during the recent quarter appears favgrable,
largely because of heavy sales of copper. L?torale,, loyalty,
training and efficiency of the armed forces remain at a satis-
factory level. Chilean Communists are reaping the benefit of
the pressure exerted by non-Communist groups for repeal of the
repressive Defense of Democracy Lan. Chile's international
relations remain basically unchanged; in the Fast-West struggle..
Chile is expected to support the M.
-- US security interests are not threatened seriously
at present but may be damaged if pressure groups succeed in
modifying the anti-Com mist Dofense of Democracy Law.)
Political
cr asing political tension -N- arising largely from current pressures
from restive labor groups and groups advocating ropeal of the Defense of
Democracy law -^- slightly threatens the stability of the Gonzalez Videla
government. Furtherrmore,, preliminary Jockeying for position for the 1952
elections indicates that government stability may remain sonevhat precari-
ous for at least the next quarter. The most serious iriediate problem
facing the government is the settlement of the current strikes of government
and welfare workers, Satisfying demands for special bonuses would not only
vwk a financial hardship on the government but would also establish a pre-
cedent for further group action. Me firmness of the goverment thus far
indicates eventual control of the situation Tdthout conceding too much to
the workers.
The political situation is further complicated by the increasing grou d-
small of opposition., largely among leftist political and student groups as
Tsl1 as the labor groups that are most directly affected, to the repressive
measures alloyed the government under the Defense of Democracy Law. Since
this law has been the administration's most effective weapon for the control
of Commrxnxmism,, the president and the more conservative elements of the gov-
ernment until recently have consistently opposed any efforts of leftist
groups to effect its repeal or modification. Recently., however, Gonzalez.,
in another of his politically astute moves designed to maintain labor sup-
port., admitted a willingness to modify the labor aspects of the law.' Although
the administration may find it expedient to .oomprozmise in order to maintain
the vital support of labor and leftist political groups, such a course would
reduce goverment ability to control the Communist elements that have alreacbr
infiltrated to a certain extent and will continue infiltrating labor groups,,
particularly in the copper and nitrate industries. A setback in US security
interests could develop from a more leftist orientation of the government
which would give' Communists greater freedom of activity,
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17arking Paper on LAS 52-50
Situation LSemorandum 90-50
29 December 1950
Economic
a]ance Chile to econmmdc position during the recent quarter appears.
generally favorable, largely because of oontianod sales of copper at pre-
vailing high prices. Loss favorable factors - continued monetary in#ya-
ticn, reduced production and income resulting from a lone series of strums,
and general oocnoaaic uncertainty caused by a shifting policy of the govern-
ment follog the change of leadership in the L'Ini.atry of Finance have
reduced the beneficial. effects of the strong copper sales. To date that
portion of former Minister of Finance Vial's economic plan that has been
4=3 implemented ?-* namely, the proposal for tax increases to finance the wage
increases granted u-mernmont eaaployees, armed fcroes, the judiciary and
teachers '-- has fallen far short of its goal. Indications that the Vial
economic plan rill probably be pigeonholed in congress are: (1) failure of
Vial to win the 26 November senatorial ter-election; (2) inclination of the
new finance minister away from Vial's polio-; and (3) unpopularity of the
"forced savings" aspect of the policy. Although the policy of the now fi-
nance minister in not clearly defined, it is doubtful that axe program that
must appease divergent political groups in a pare-election period will alle-
viate the basic economic problems facing the administration.
UL its
There has been no significant change in the morals, loyalty, trainixng,
or effioierx of the armed forces in the last quarter. The navy and air
farce have indicated a willingness to participate actively in the Korean war,
Howevor,, no definite commitment has yet been made.
Subversive
U~c~rnu>ists' are reaping the ?advantage of an overlapping of political and
ideological views of certain labor and political groups espooially with re-
gard to demands for the repeal of the Defense of Democracy Law. At the saw
time, they are capitalizing on every opportunity to advance their cause by
increased attempts to infiltrate political, labor, and student organizations
and to embarrass the covernment by promoting and participating in strilms.
The chances of increased CoErlunist activities are great if the Defense of
Democracy Tarr is modified in the next quarter.
International
There has been no significant change in Chile's international relations
in this quarter. Chile continues in general to #ollocr US policy and to
support the US in international. organizations. In matters involving the
East-Vest struggle, Chile will undoubtedly continue to support the US and,
specifically, will maintain the flo%7 of copper to the US, despite the possi-
bility of having to adopt a somewhat conciliatory domestic policy towards the
Communists.
CONFIDENTIAL
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