SNIE 66-59: TRENDS IN THE PHILIPPINES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R00904A000500010134-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 20, 2016
• Document Release Date: September 8, 2006
• Sequence Number: 134
• Publication Date: January 21, 1959
• Content Type: MEMO

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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
OFFICE OF NATIONAL ESTIMATES
21 January 1959
SUBJECT: SNIE 66-59: TRENDS IN THE PHILIPPINES
(Staff Draft for Board Consideration)
1. The most recent estimate on the Philip?:pines* presented
a gloomy outlook of corruption, opportunism and irresponsibility
under the Garcia administration and brought out the possibility
of continuing loss of Philippine public confidence in their t ov..
ernment institutions. The estimate also highlighted the likeli-
hood of increased pressures for a more independent foreign
policy, the genuine and growing nationalist sentiment in the
country, and the possibility that Philippine nationalism might
take on an increasingly anti-American coloration if outstanding
US-.Philippine issues were not successfully settled.
2. We see no reason now to alter these estimates or the
basic thrust of SNIE 66-58. However, several, recent developments
have further clouded the domestic Philippine scene and increased
the difficulties in maintaining smooth US-Philippine relations.
*SNIE 66-58: "The Outlook for the Philippine Republic," 27 May 1958
ligim
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30 The political situation has continued to degenerate.
The government, under Garcia's administration, has declined in
efficiency and has lacked a program to retain public support.
It has failed to establish a rapport with the general public,
and the spirit of trust and confidence which Magsaysay had gen-
erated among the common people is now largely gone, replaced by
cynicism and drift.. The Garcia administration is now largely dis-
credited in the public mind.
lt. Stimulated by the growing popular discontent with the pol-
itical end economic situation, the opposition Liberal and Progres-
sive Parties, led by Vice President Nagapagal and by Manahan, have
stepped up negotiation pointed toward a merger or a coalition.
Some Nacionalista politicians, conscious of the weakness of the
Garcia government, have shown interest in associating themselves
with the opposition parties. If the negotiations are successful
opposition prospects for the Senatorial and local elections
scheduled for the fall of 1959 and for the Presidential elections
in 1961 would be greatly improved.
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,,
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various political groups capitalized on this sensitivity to ad-
vance their 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 incident undoubtedly
weakened the position and influence of Vargas and, although recent
reports have stated that Garcia is now convinced that the coup
rumors were false and that he would like to retain Vargas, it
now appears probable that Vargas will in time be removed from his
cabinet post, Purthermorej, the affair damaged the prestige of the
military in general and enhanced the possibility that the Department
of Defense and,, in time, 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 Commu-
nist role in the recent spreadin;, of the military coup rumors which
weakened the position of the anti-Communist military leaders,
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7. The economic situati-n has failed to improve, and in some
respects has worsened. During 19558, 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 pop-
ulation growth of about 2.9 percent. The rise in world metals
prices and the favorable outlook for crop yields in 1959 forecast
an improvement in this situation,. The Philippine economy will
continue to suffer from a critical shortage of foreign exchange
reserves and mounting inflationary pressures. The Garcia admin-
istration has taken steps to cut the budget deficit, curtail im-
ports and control credit; however, it has lacked the political
strength and determination to press its "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 necessary to continued economic expansion.
Economic controls, and the general inefficiency of the governments
administration of them, have increased the incentive for corruption,
raised the profitability of imports, and attracted investment to
import ventures rather than to foreign-exchange earning export
industries. The Garcia administration continues to oppose general
programs of devaluation and decontrol. Instead, it has indicated
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its intention 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,,
8. In seeking issues to stren;thon its position and to gain
public support the Garcia administration has turned increasingly
to a roving Philippine nationalism and to US?Philippino relations.
Administration spokesmen, and others as well,, have become increasingly
vocal and insistent in publicly expounding Philippine grievances
against the US. Although many of those grievances are based upon
widespread nationalist convictions, they are being inflated for
domestic political purposes.
9o The Philippines feelthat 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 did receive
prospective credits of $125 million, this was considerably less
than Garcia believed he would get and loss than the administration
had led the Philippine people to expect. Moreover, there have been
delays in negotiating the credits he did receive and those credits
do not provide the kind of assistance necessary to stabilize the
Philippine balance of payments positional
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2NOT
10. Another grievance concerns the amount and type of US
military assistance, which the Philippines believes does not meet
its minimum security needs. Both military and civilian leaders
have been disq~pointod that their full demands for increased mil-
itary assistance following the Taiwan Strait crisis have not been
met. They are concerned with the Philippine role in US strategic
plans in the event of war in the Far Easte
11. Important Philippine political and commercial leaders
feel that the provisions of the 1955 Revised Trade Agreement fail
to protect the paramount economic interests of Philippine nationals
in the development of the countryls natural resources. In part
this is a logical consequence of increasingly vocal economic nation-
alism and the growing desire, especially on the part of business
and industrial leaders, to maximize Philippine ownership and
management of the economy.
12. Another grievance stems from an increasing concern that
certain provisions of the Military Bases 411.greement, particularly
concerning criminal jurisdiction are a violation of Philippine
sovereignty. Philippine leaders argue that the existing agreement
isy in important respects, less favorable than provisions in US
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similar arrangements with other countries. The present prelim-
inary talks., which began in November 1958, are stalemated on the
question of criminal jurisdiction which caused the breakdown of
the 1956 negotiations.
13. Thc. Garcia administration has often deliberately mag-
nified these grievances in hopes of exploiting public national-
istic emotions. Because of its declining political strength,
the administration is now unwilling to risk taking a strong stand
against pressures for further agitation of these issues., and it
appears to have created a situation which it might not be able to
controls
11. The o""tloo?- for the - h'1i., .nc over. n ^ont over tb,bc
next year or so Is for corlt nuin corr?''"?t'oa, 'res Opt b .1 t ~
and %offoct'_venesr c'nc r t',c Garcic. 'ublic
i ssat3: 'c^Ct:~_on ? l1 rrob'!a ).1.7 conti'?.1?o to roar, bit ??c believe
it will tend to r~ si'lt in an-.Vr r;:.tY^:r than -11,,11c or
wic'csnread an 'V -ad: '. nin'i,ra t ~ 7?' .t'.ons. The political
situation. l:ill ?rob'1] i eco :er si)7r y 3?nr-t:?.b e as l.nC.iv-
ic'L?als an(' ~'rotu i with' n tl"e 1'~;-C? O)1'.~'i 3t": ....~'~s?'~ as well the
o-,iositinn r4xties, rnnnccuv:cr for nocit3.on. The Liberal and
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orressi.v^ na-tic-s t:! 1:~_ ni o' .' ? r to so for o'
~~:tion ?~e- ore the Scnatori..l an' locaa. ::1ccLi :n:.:r nc: rt i'all,
and will. pro x-.bly twin a sw_ f_~.cient nui bcr of ke? elections to
further w -al-on the ar7 -i nistrat:i.on. Althou~-'h Vic, ocono. i, c s:?.t-
Elation nay irlnrove n some re ? cts, the short: , e of foroi n
oxchanre i.,11l. probe~`-1 r cone'nuc s. major Problem. .,,To do not
believe that t'-ac Garcia aci 'nl.strc:.tion m.11 have cour:a--c or
political nol!er to tc -e cr;7oci-31.1- correct'.ve :I:icasl res.
15. Given this roncrally ial of tlook on the c'orneF.tic
scene, trc believe that t' e present clamor over rhilin-1-no
priovanocs c Fa_i r:^t the US "+ Herasc. It is lilte-
lyT that the Garcia i"1ci^ti nistration r feel forced to ;-e some
form of forual ron,rosentet:i.on:~ to the US ovcrn~;rcnt for rc c'ross
of these rrievancos. There ?will rrobc b]e be increased ihil-
i. --ine efforts to cxx^nc' contacts t!ith other non-Con mist
nations irith the intent of i ;nrovint its re lerryl int r
e national
status and cdc -ionstre.tin - a tore i nr'endent foreirn poli.c? -,,-Yld
clecrea.sed c'epenr':.ence tr.-on to US.
16. There will 17n('iou'_)tcc71, ?"he incre-a in public d l.ecussion
of neutralism and of tine ha,,ar(s anci -)roblcrls of -lutual occurity.
Althour 1 nzch of the r)rescnt an(' recent conr'uct of the lhil'- v-,7 ne
-V~
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O
government and of sneci.al interost r~rou ;s can be, etc?'lai ne(' as
a maneuver to -mt -nrns::ttre on t' )e US for increased financial
sup ?ort there is the ? ,oss' bi.1=t;,T thr t the maneuver may ct
out of hand ',eceusc of the cmot-?anal tcnclerc'.cs of ,r ,, hi.l-
iniline loiclers and the rrro!rth of 1i731:1."1'3 c nc ti =- is especially, .in the urihan certers and a:ionr intellectuals, s,,.outh,
business nen, and la nor, Con ir-ni_st activ-1 tj, u.ri.ll probably in-
crea se and be r' i ' ctcr' *)ri_mzri.ly to'rarcl sti-a?tl^ti the iroi?tth
of anti.-colonial and. anti.-I'; er:i.can ir.e ecli.ents in c=hili 'c-.-Ano
nati.oneli.sm.
17. Uthourh we helicve that the course of S-?:'h 1j.'~tai ne
relations over the nc7;t year or so Will 1)e rota.; ,h indeed, lye do
not believe that the .:hili_-mrocs will leave or alter the
ba s is framework of the overall alliance with the USA iJconorlic,
Political iil 1.t.: rv, and h ^toric t,i_es are still strong . ore-
over, t'hcg'p to still cor,si_dcr; '.lc corn' clence vncl trust in the
US in the lbili 'pIne count: -sir's and a-,iont Vic rencra]. vot uor
nul' ile, as clernonstrt tcd i.r the ':cent a esi clent:i al elections.
Jo continue to believe it t!nl-i-'-e3 ,- that the 1-Ir'.J .L ;i_tzes fill
take action which world sari ousl * jeon r'. '. e the current status
n
and operations of US ' ,' es over the next year or So?
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?Iowever, the b:?,cs .r!.11 cor't: nii e to ?,e used. ~~s a lever : n
no otiatin other i-, suc:; r't?z 'W;Ie IIS, .nnc; over ,erioci of
tilde, V, re is no ctoz~r racolution .ne
`r ievances it is possible Vi.:t ::;oric s t Q',,S liay be taken to
co;'Yxslicatc effective US use of the bases. This ttould be :More
li?-oly if the current c1eurec of '"o1_i.t i_cal Instability contin-
ues over the next taro or three years.
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