TRENDS IN THE PHILIPPINES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R00904A000500010133-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 20, 2016
• Document Release Date: September 8, 2006
• Sequence Number: 133
• Publication Date: January 22, 1959
• Content Type: MF

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CENTRAL INTELLIGENCE AGENCY
22 January 1959
MEMORANDUM FOR: Mr. Allan Evans, State (IRA)
Colonel J, W, Strain, USA (ACSI)
Captain W. S. Howell, USN (ONI)
Colonel R. M, Lawson, USAF (AFCIN 2D2)
Colonel Hugh D. Wallace, USA (J-2, The Joint Staff)
Vr. Frank C. Austin, Dir. of Operational Services, I'
Mr. Randolph V. Zander, Defense (OSO)
SUDJECT s Trends in the Philip?)ines
1. The attached memoran dum on the Philippines is forwarded
for review as per USII3 action on 20 January.
20 It is requested that your representatives meet with us
at 1330, Friday 23 January in Room 115 Administration Puilding
to discuss this memorandum.
JAMES C. GMEAM
Actin; Deputy Assistant Director
Nati,nal Estimates
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C E N T R A L I N T E L L I G E N C E A G E N C Y
22 January 1959
DRAFT
MEMORANDUM FCR THE DIRECTOR OF CENTRAL INTELLIGENCE
SUBJECT: TRENDS IN THE PHILIPPINES
1. Developments in recent months have generally borne out the
rather gloomy assessment of the Philippines situation contained in
our most recent estionte, SNIE 66-58, "The Outlook for the Philippine
Republic," approved 27 May 1958. This estimate emphasized the atmos-
phere of corruption, opportunism and irresponsibility under the
Garcia administration and the consequent loss of public confidence
in the government. The estimate also highlighted the genuine and
growing nationalist sentiment in the country, the likelihood of in-
creased pressures for a more independent foreign policy, and the
possibility that Philippine nationalism might take on an increas-
inly anti-American coloration if outstanding US-Philippine issues
were not successfully settled.
2. The political situation has continued to degenerate. The
government, under Garcia'fs administration, has declined in efficiency
This memorandum is beiL informally coordinated with the USIB
Representatives.
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and has failed to establish a rapport with the general public. The
trust and confidence which Mngsaysay had generated among the common
people are now largely replaced by cynicism and drift. The Garcia
administration is now largely discredited in the public mind.
3. The economic situation has failed to improve,, and in some
respects has worsened. During 1958, the rate of growth in both the
agricultural and industrial sectors of the economy appears to have
declined to a level barely exceeding the rapid rate of population
growth of about 2.9 percent. The rise in world metals prices and
the favorable outlook for crop yields in 1959 forecast an improve-
ment in this situation. The Philippine economy, however, will con-
tinue to suffer from a critical shortage of foreign exchange reserves
and mounting inflationary pressures. The Garcia administration has
taken some steps to cut the budget deficit, curtail imports, and
control credit. However, it has lacked the political strength and
determination to press this "austerity" program. The imbalance of
payments remains critical, and the administration faces the basic
problem of financing the level of capital goods and raw materials
imports necessary to continued economic expansion. Economic con-
trols, and the general inefficiency of the government's administra-
tion of them, have increased the incentive for corruption, raised
AMMM"
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the profitability of imports and attracted investment to import ven-
tures rather than to foreif -exchange earning export industries.
The Garcia administration continues to oppose general programs of
devaluation and decontrol. Instead, it has indicated its inten-
tion to propose to the forthcoming session of the Philippine Congress
a foreign exchange tax (which amounts to partial devaluation) to
discourage imports and raise revenues.
4. Stimulated by the growing popular ,d scontent with the poli-
tival and coono r:;ic situation, the opposition ':,iberal and 'Progres-
sive Parties, led by Vice President Magapagal and by Manahan, are
more actively negotiating for a merger or a coalition. Some members
of Garciats Nacionalista Party, conscious of the weakness of the
government, have shown interest in associating, themselves with the
opposition parties. If these negotiations are successful, opposi-
tion prospects for the Senatorial and local elections scheduled for
the fall of 1959 and for the Presidential elections in 1961 will be
greatly improved.
5. Faced with growing opposition and a lack of public support,
Garcia and his followers have become increasingly sensitive to real
or imagined threats to their positions. In the fall of 1958, various
political groups capitalized on this sensitivity to advance their
lofty
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own positions by spreading rumors of a military coup to be led by
Secretary of National Defense, General Vargas, who seemed, at least
to some Philippine politicians, to be following in the footsteps of
Magsaysay. The coup rumors undoubtedly weakened the position and
influence of Vargas. Although recent reports have stated that
Garcia is now convinced that the rumors were false and that he
would like to retain Vargas, the pressures that have already been
generated for this removal will probably prevail. Furthermore, the
affair damaged the prestige of the military in general and enhanced
the possibility that the Department of Defense and, the armed forces
may become subject to political manipulation.
6. There is evidence of increased covert political activity
on the part of the Philippine Communist Party to foster dissatis-
faction with existing ties between the Philippines and the United
States. Exploiting Philippine nationalist sentiment, the Communist
Party appears to have increased its influence in intellectual,
student, and labor circles. An alarming indication of potential
Communist political influence are reports of a significant Communist
role in spreading the military coup rumors which weakened the posi-
tion of the anti-Communist military leaders.
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7. In seeking issues to strengthen its position and to gain
public support the Garcia administration has turned increasingly
to growing Philippine nationalism and to US-Philippine relations.
Administration spokesmen, and others as well, have become increas-
ingly vocal and insistent in publicly expounding Philippine grievances
against the US. Although many of these grievances are based upon
genuine nationalist convictions, they are being inflated for domes-
tic political purposes.
8. The Philippines feels that it has not received as generous
economic aid as it deserves as a loyal friend and ally of the US.
Garcia undoubtedly hoped to obtain large-scale financial assistance
during his visit to the US in June 1958. Although he was promieed
favorable consideration of credits of $125 million, this amount was
considerably less than he had believed he would get and less than
the administration had led the Philippine people to expect. More-
ever, these credits, some of which are still being negotiated, will
not provide the kind of assistance necessary to stabilize the
Philippine balance of payments position.
9. Another grievance concerns the amount and type of US mili-
tary assistance, which the Philippines believes does not meet its
minimum security needs. Both military and civilian leaders have
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been disappointed that their full demands for increased military
assistance following the Taiwan Strait crisis have not been met.
10. Important Philippine political and commercial leaders feel
that the provisions of the 1955 Revised Trade Agreement, particularly
those granting US citizens equal rights with Philippine citizens in
the development of the country's natural resources, fail to pro-
tect the paramount economic interests of Philippine nationals. In
part this is a logical consequence of increasinly vocal economic
nationalism and the growir.;; desire, esepcially on the part of
business and industrial lenders, to maximize Philippine ownership
and management of the economy.
11. Another grievance stems from an increasing concern that
certain provisions*of the Military Bases Agreement, particularly
those concerning criminal jurisdiction, are an infringement of
Philippine sovereignty. Philippine leaders argue that the existing
agreement is, in important respects, less favorable than provisions
in US similar arrangements with other countries. The present pre-
liminary talks, which began in November 1958, are stalemated on tte
question of criminal jurisdiction, which caused the breakdown of
the 1956 negotiations.
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12. The Garica administration has often deliberately magni-
fied these grievances in hopes of exploiting nationalistic emotions.
Because of its declining political strength, the administration is
now unwilling to take a strong stand against pressures for further
agitation of these issues, and it appears to have created a situation
which it may not be able to control.
13. The outlook for the Philippine Government over the next
year or so is for continuing corruption, irresponsibility, and
ineffectiveness under the Garcia administration. Public dissatisfac-
tion will probably continue to grow, but we believe it will tend
to result in apathy rather than public unrest or widespread anti-
administration demonstrations. The political situation will pro-
bably become increasingly unataLle as individuals and groups within
the Nacionalista Party, as well as the opposition parties, maneuver
for position. The Liberal and Progressive Parties will probably
agree to some form of cooperation before the Senatorial and local
elections next fall, and will probably win a sufficient number of
key elections to further weaken the administration. Although the
economic situation may improve in some respects, the shortage of
foreign exchange will probably continue as a major problem. We do
not believe that the Garica administration will have the courage or
the political power to take effective corrective measures.
".J- T
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14. Given this generally dismal outlook on the domestic
scene, we believe that the present clamor over Philippine grievances
against the US will probably increase. It is likely that the
Garcia administration may feel forced to make some form of public
representations to the US government for redress of these grievances.
The government will probably expand its contacts with other non-
Communist nations with the intent of improving its general interna-
tional status and demonstrating a more independent foreign policy
and decreased dependence upon tha US.
15. There will undoubtedly be increasing public discussion
of neutralism and of the hazards and problems of mutual security.
Although much of the present and recent conduct of the Philippine
Government and of special interest groups can be explained as a
maneuver to put pressure on the US for increased financial support,,
there is the possibility that the maneuver may get out of hand,
forcing the government to take a more adarient position than it had
intended, because of the emotional tendencies of r:~,ny Philippine
leaders and the rapid growth of Philippine nationalism, esepcially
in the urban centers and among intellectuals, youth, businessmen,
and labor. Communist activity will probably increase and be directed
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primarily toward stimulating the Growth of anti-colonial and anti-
American ingredients in Philippine nationalism.
16. Although we believe that the course of US-Philippine rela-
tions over the next year or so will be rough indeed, we do not
believe that the Philippines will leave, or alter the basic frame-
won of, the over-all alliance with the US. Economic, political,
military, and historic ties are still strong. Moreover, there is
still considerable confidence and trust in the US in the Philippine
countryside and among the General voting public. We continue to
believe it unlikely that the Philippines will take action which
would seriously jeopardize the current status and operations of US
military bases over the next year or so. However, the bases will
continue to be used as a lever in negotiating other issues with the
US. If over a period of time, there is no satisfactory resolution
of the Philippine Grievances, it is possible that some steps may
be taken detrimental to effective US use of the bases. This would
be more likely if the current degree of political Instabilit;;? contin-
ues over the next two or three years.
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