PROBABLE DEVELOPMENTS IN ARGENTINA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A004600040001-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 27, 2016
• Document Release Date: January 9, 2013
• Sequence Number: 1
• Publication Date: March 9, 1954
• Content Type: NIE

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Utif X ' L#P
4 _
ASSISTANT DIRECTOR,ONE
P,
NATIONAL INTELLIGENCE ESTIMATE
PROBABLE DEVELOPMENTS IN 'ARGENTINA
NIE 91-54
(Supersedes NiE-66)
Approved 2 March 1954
Published 9 March 1954
DOCUMENT NO.
NO CHANGE IN CLASS. L
x
DECLASSIFIED
CLASS. CHANGED TO: TS S C
NEXT REVIEW DATE:
AUTH: ' 70-
DATE?.
The Intelligence Advisory Committee concurred in this
estimate on 2 March 1954. The FBI abstained, the
subject being outside of its jurisdiction.
The following member organizations of the Intelligence s
Advisory Committee participated with the Central Intel-
ligence Agency in the preparation of this estimate: The
intelligence organizations of the Departments of State,
the Army, the Navy, the Air Force, and The Joint Staff.
EVIEWEF3:4V4r, 4.3
?
CENTRAL INTELLIGENCE AGENCY
liWaRek-4
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INVONNOsi
PROBABLE DEVELOPMENTS IN ARGENTINA
THE PROBLEM
To assess the situation in Argentina and to estimate probable developments
through 1955.
CONCLUSIONS
1. Peron now dominates Argentina more
completely than ever before. He has the
active political support of a substantial
majority of the population, including
especially urban and rural labor, the nu-
merous bureaucracy, and many indus-
trialists. He has also secure control of
the armed forces, the police, the princi-
pal labor organizations, the Peronist
Party machine, the national Congress,
and the provincial governments. Exten-
sive decree and police powers enable him
to interfere in any aspect of national life.
He has in effect a monopoly of all media
of public information. There exists no
effective opposition to his regime.
2. For his own purposes, Peron has some-
times adopted policies advocated by the
Communists, but we do not believe that
they have had a determining influence on
the basic objectives of his regime. The
Argentine Communist Party has little
popular support. It has had virtually no
success in infiltrating the armed forces
and little in the bureaucracy. It is cur-
rently critical of the regime and is being
harassed by it. A small group of dis-
sident Communists advocates collabora-
tion with Peron and is tolerated by him.
3. Peron's most pressing problem is the
solution of Argentina's economic difficul-
ties. Barring a serious crop failure or a
seriously adverse change in the terms of
trade, Peron can probably achieve a slight
and gradual improvement in the eco-
nomic situation during the next several
years. It is unlikely, however, that Ar-
gentine foreign exchange earnings will
be sufficient to finance the major develop-
ment projects envisioned in Peron's sec-
ond Five-Year Plan (1953-1957) . For
this purpose, Peron seeks private foreign
credits and investments, but he will prob-
ably be unable to attract sufficient for-
eign private capital .to permit substantial
fulfillment of these major projects.
4. Peron has abandoned his former anti-
US foreign policy and propaganda line,
and has sought a rapprochement with the
United States, stressing the value of Ar-
gentina as an anti-Communist force in
South America. He apparently hopes
thereby: (a) to induce the United States
to adopt a benevolent attitude toward the
extension of Argentine political and eco-
nomic influence in neighboring countries;
(b) to facilitate the investment of US pri-
vate capital in Argentine economic de-
wasawiszo, ,
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kflailiftetr 2
velopment; and (c) to (secure US aid in
the expansion of Argentine military fa-
cilities. It is to be expected, however,
that Peron will continue to maintain dip-
lomatic relations with the Soviet Bloc and
will seek to increase Argentine non-stra-
tegic trade with the Bloc.
5. Peron will probably continue his policy
of rapprochement with the United States
as long as his internal political position
remains secure and as long as collabora-
tion with the United States appears on
balance to favor the realization of Argen-
tine national aspirations. In these cir-
cumstances, he will probably continue to
curb Communist activities in Argentina.
6. If Peron should conclude that his rap-
prochement with the United States was
proving unproductive, or if, for any rea-
son, the Argentine economic situation
should deteriorate to such a degree as to
threaten the stability of the regime, Peron
would probably revert to a demagogic in-
ternal policy and an antagonistic foreign
policy. Such developments would prob-
ably result in some increase in Commu-
nist influence, but Peron would not be
likely to permit the Communists or any
other group to become serious competi-
tors for his power.
7. The Argentine armed forces are more
than adequate for the maintenance of
internal security. In the event of general
war, Argentina would be capable of pro-
viding one or two divisions for use out-
side the country, but they would lack
modern and heavy equipment and train-
ing in modern warfare. The Navy and
Air Force would require considerable out-
side material assistance and training be-
fore they would make a significant con-
tribution.
8. In the event of general war, Peron
would exploit the situation to obtain the
maximum price for Argentine goods and
services. He would probably seek to avoid
belligerent participation as long as pos-
sible, and in any case would probably be
reluctant to provide forces for service out-
side the Western Hemisphere.
9. In the event of Peron's demise the
Army would probably have the predom-
inant voice in the choice of his successor.
In its early stages, any successor govern-
ment would probably attempt to follow
the same general internal and external
policies as were being followed by Peron at
the time of his death.
DISCUSSION'
trating in his hands guch political, economic,
and military power that he can almost cer-
tainly prevent the emergence of any effective
opposition.
11. The Peronist Revolution, in the name of
"social justice, economic independence, and
political sovereignty," has wrought many far-
reaching political, social, and economic
changes which will probably be more perma-
nent than either the Peronist Party or its
leaders. Peron has shifted the balance of
political power by redistributing income for
I. POLITICAL SITUATION
10. Peron now dominates Argentina more
completely than ever before. His position has
gradually been strengthened over the years to
the point where it is virtually unchallenged.
He has the support of large segments of the
population. He has also succeeded in concen-
This estimate supersedes NIE-66, "Probable De-
velopments in Argentina," published 13 June
1952. However, the background information
contained in NIE-66 is still considered to be gen-
erally valid.
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6411166a 3
the benefit of labor and by giving direct assist-
ance to industry. The State has assumed a
dominant role in the economic and political
life of the nation. Peronism has borrowed
from foreign ideologies, including Fascism and
Marxism, and it emphasizes ultranationalism,
industrialization, the political and social im-
portance of labor, and state-supported wel-
fare measures.
12. Peron's most important source of popular
support is labor, which owes to Peron its im-
proved social and political status as well as
such material benefits as higher wages, low-
cost housing, schools, clinics, and hospitals.
Peron also has the active support of: (a)
tenant farmers, who benefited from Peronist
tenant-landlord legislation; (b) government
employees, who are dependent for their jobs
on loyalty to Peron; (c) many industrialists
who favor Peron's protectionist policies and
his industrial expansion program; and (d) the
country's principal ultranationalist organiza-
tion, the Nationalist Liberating Alliance.
13. Since the death of Eva Peron, the influ-
ential Roman Catholic Church has adopted a
friendlier attitude toward Peron. It is now
lending its support to Peron's appeals for
cooperation of all parties in solving Argen-
tina's current problems. Although certain
areas of friction in Argentine Church-State
relations still remain, there is no indication
that Peron is contemplating any action
against the Church which would cause it to
abandon its traditional policy of avoiding open
conflict with the regime in power.
14. Peron's dominant position in Argentina
does not depend solely on the popular support
his regime commands. Peron has solidified
his control over the government and the coun-
try through the following instrumentalities:
a. The Armed Forces: Since the abortive at-
tempt by certain officers to seize power in
1951, Peron has strengthened his control over
the armed forces. He has purged those sus-
pected of disloyalty and appointed personal
followers to positions of command. He has
also opened the officer ranks to enlisted men,
who are largely pro-Peron. In addition, he
has improved morale by bettering the living
conditions of service personnel.
b. The Police: The Federal Police, National
Gendarmerie, and Maritime Police, technical-
ly under the Ministry of the Interior, are loyal
to Peron personally and are effectively con-
trolled by him. These forces have been
strengthened and are believed capable of
maintaining internal security, even without
Army support, but could not prevent an Army
coup.
c. Organized Labor: The General Confeder-
ation of Labor (CGT) is Peronist-dominated
and represents the majority of Argentine
organized labor. Its leaders are influential
members of the Peronist Party and many are
also members of Congress. Through them,
Peron exercises considerable control over the
laboring masses and can, when necessary,
quickly organize mass demonstrations in sup-
port of his policies. Since 1948, however,
Labor's economic position has deteriorated as
a result of inflation and the Administration
has followed a hbld-the-line policy on wage
increases since March 1952. As a result of
some evidences of labor unrest, Peron has
recently taken steps to widen his control over
labor by sponsoring the Confederation of Pro-
fessional Workers. By this means, Peron
hopes not only to split organized labor into
two groups, neither of which would be strong
enough to threaten his position, but also to
attract professional and skilled workers who
were dissatisfied with or would not join the
largely unskilled CGT.
d. The Peronist Party: The Peronist Party
is well-organized and responsive to Peron's
wishes. It occupies all 34 seats in the Senate
and 141 out of 155 seats in the Chamber of
Deputies. Peron also has a strong hold on
the provinces through this Party, which has
elected all the provincial governors and has
large majorities in all the provincial legisla-
tures. The national and provincial judiciaries
are dominated by Peronist appointees.
e. Government Controls: A docile Congress
has granted Peron extensive decree and police
powers with which he can effectively interfere
in almost every phase of national life. The
government supervises, and in some cases
owns and operates, the press, radio, television,
and other public information media. The new
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SECRET
?
Five-Year Plan gives Peron extensive powers
over the economy, including strict regulation
of imports, exports, credits, wages, and prices,
as well as the power to dissolve any political
party which opposes the principles of Peron-
ism. Peron also has the power to impose
martial law, curtail civil liberties, and apply
severe penalties against any who criticize
government officials.
15. Opposition to Peron still exists, but it is
divided and lacks a popular program. It con-
sists primarily of large landowners, profes-
sional groups, some of the more highly skilled
workers who belonged to the pro-Peron
unions, and some industrial and commercial
elements. Many of Peron's opponents have
been mollified by his recent policy of modera-
tion and amnesty called the "national con-
ciliation" movement. Moreover, the opposi-
tion has been unable to develop leaders or
issues to challenge Peron's popular support,
the principal opposition groups either merely
demanding greater civil liberties (which has
little appeal to labor) or seeking to outbid
Peron's appeal to nationalist and isola-
tionist opinions. The principal opposition
party ? the Radical Civic Union (UCR) ?
holds only 14 seats out of 155 in the Chamber
of Deputies. It represents primarily urban
elements rather than landowners, and is itself
split into two main factions. One faction
advocates merely passive opposition to Peron;
the other advocates and occasionally perpe-
trates acts of violence against the regime. All
opposition parties are further handicapped by
restrictions placed on their campaign activi-
ties, by legal prohibitions against forming
coalitions, and by being denied use of press
and radio.
16. The Argentine Communists have not con-
sistently opposed Peron. They are divided
into two factions. The official Argentine Com-
munist Party (PCA) has an estimated
strength of 35,000, composed chiefly of work-
ers, students, and intellectuals. It has little
popular support. It has had virtually no suc-
cess in infiltrating the armed forces and little
in the bureaucracy. Its penetration of the
CGT has been limited to secondary positions
in some unions. A small dissident Commu-
4
nist group (probably now numbering no more
than a few thousand) split from the official
Party in 1946, although there is no evidence
that it has abandoned its loyalty to Moscow.
This group held that it could gain more by
collaborating with Peron, and from time to
time some of its members have had access to
him as advisers.
17. Peron, for his own purposes, has some-
times followed policies advocated by the Com-
munists, but we do not believe that either
Communist group has had a determining in-
fluence on the basic objectives of the Peron
regime. Peron accepted Communist advice
and support while he was pursuing an anti-US
policy. He has used the dissident group as a
bait to oppositionists of the left, especially in
the labor movement, to throw in their lot with
Peronism. Now that Peron is seeking an ac-
commodation with the US, he has stepped up
police surveillance and harassment of the
PCA. There are also indications that the
CGT is taking steps to expel PCA members
from union leadership. However, Peron ap-
parently has not taken any steps against the
dissident Communists. Although Peron's cur-
rent stand against Communism is in part de-
signed to impress the US, we believe that he
is basically unsympathetic to Communism and
would move promptly against the Communists
if he felt they were becoming a threat to his
position.
II. ECONOMIC SITUATION
18. Solution of Argentina's economic prob-
lems is the most pressing task facing Peron.
The possibility of economic deterioration is the
most important latent threat to Peron's ability
to maintain himself in power.
19. Although a severe drought was the im-
mediate cause of an economic crisis in 1951-
1952, economic conditions had been deteriorat-
ing steadily under the strain imposed by
Peronist economic policies and programs.
Overambitious goals for rapid industrializa-
tion and expansion of social services, and
faulty allocation of foreign exchange, were
largely to blame. Nationalization of foreign-
owned public utilities, repatriation of the for-
eign debt, and inefficient purchasing and
SECRET
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1N414011T
utilization of imported equipment depleted the
substantial gold and foreign exchange hold-
ings which had accumulated during World
War II. Meanwhile, the government's policy
on land tenure and farm prices, combined with
the movement of agricultural labor to the
cities and the lack of compensating farm
mechanization, had caused a progressive drop
in agricultural production, and consequently
in exports. Insufficient imports of essential
raw materials and replacement parts led to a
decline in industrial output. Total gross na-
tional product (GNP) declined in the period
1949-1952 at an average annual rate of 5.6
percent, the cost of living index more than
doubled, and the government's internal and
foreign commercial indebtedness increased
three-fold.
20. Economic conditions have improved since
the low point in 1952. The 1952-1953 harvest
was excellent and the incoming 1953-1954
harvest is also good. The resulting rise in
exports, combined with a sharp curtailment of
imports, produced a favorable balance of trade
in 1953 and permitted the government to in-
crease its gold reserves and reduce its short-
term foreign indebtedness. Inflation was
checked by strict management of credit and
by freezing prices and wages. However, Peron
still faces many economic problems. Agricul-
tural costs are inflated and productivity is
low. Industrial production is hampered by
obsolescence of plant and equipment, by tight
credit restrictions, and by shortages of im-
ported raw materials. Wage and price sta-
bility is threatened by strong pressure for
another round of wage increases.
21. Peron's second Five-Year Plan (1953-
1957) was passed by Congress in December
1952. It is an ambitious and exhaustive blue-
print of the government's economic objectives
and gives Peron virtually unlimited powers to
regulate nearly every phase of Argentine eco-
nomic life. The Plan calls for an annual
growth of GNP of 3.6 percent and allows for a
total expenditure by the national government
over the five years of 33.5 billion pesos (6.7
billion dollars at the official rate of exchange) .
The bulk of government investment under
this Plan is earmarked for transportation,
5
fuel, and power. Peron could probably fi-
nance the domestic costs of the Plan without
resort to inflationary deficit financing or credit
expansion by such measures as using social
security funds and reducing normal govern-
ment expenditures. Peron is apparently first
concentrating on the agricultural portion of
the Plan. He is allocating a substantial por-
tion of Argentina's foreign exchange earnings
to the importing of tractors, fertilizers, etc.
However, Argentina's foreign exchange earn-
ings within the next two years are not likely
to suffice for the large-scale importation of
developmental equipment envisioned in the
Plan.
III. CAPABILITIES OF THE ARMED FORCES
22. Argentine manpower available for military
service is of excellent quality. The Argentine
armed forces have an, estimated strength of
145,500 divided as follows:
a. Army: The Army has approximately 102,-
000 men, of whom about 75,000 are one-year
conscripts. There are 6 infantry, 1 motorized
infantry, 1 armored, and 3 cavalry divisions,
and 2 infantry divisional-equivalent group-
ments (1 mountain, 1 motorized) , supple-
mented by smaller combat units. The Army's
morale and training are excellent by Latin
American standards, but it is short of modern
and heavy equipment and lacks training and
experience in large-scale operations.
b. Navy: The Navy, with personnel totalling
approximately 28,500, maintains the largest
fleet in Latin America. It consists of 2/old
battleships, an old monitor, 2 italry and1,84
light cruisers, 6 des49yers and 9 old destroy-
ers, and various minor combatant ships and
amphibious and auxiliary vessels. The Naval
Air Arm has approximately 190 aircraft,
mainly in transport and reconnaissance cate-
gories, about 50 of which are assigned to tac-
tical units, and 2,700 men, including some
150 pilots. Although basic seamanship, train-
ing, and morale are good by Latin American
standards, the Navy's combat effectiveness is
low because of aging ships, obsolete aircraft,
prewar doctrine, and an almost complete lack
of modern AA and ASW weapons and fire-con-
trol and electronic gear.
IgaswAINFt
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c. Air Force: The Air Force has 15,000 men,
including 430 trained pilots. Approximately
375 of its 712 aircraft are in tactical units ?
the remainder being trainers or in storage.
There are about 80 Gloster meteor jets and a
few operational Lancaster and Lincoln bomb-
ers. The combat effectiveness of the Air
Force is limited by the total lack of electronic
early warning and intercept equipment and
by critical shortages of fuel, spare parts, and
armament.
23. The armed forces are supplemented by
the Federal Police (47,000 men) , the National
Gendarmerie (15,000), and the Maritime Po-
lice (3,500). Their morale and training are
excellent and they are believed capable of
maintaining internal security.
24. The Argentine armed forces are more
than adequate for internal security. Peron
desires to strengthen and modernize the
armed forces in order to: (a) enhance Argen-
tina's prestige in Latin America, particularly
vis-a-vis Brazil, and (b) increase his bargain-
ing power in negotiations for US assistance by
pointing to Argentina's capabilities for sup-
pressing Communism and for contributing to
Hemisphere defense. In the event of general
war, Argentina would be capable of providing
one or two divisions for use outside the coun-
try, but they would lack modern and heavy
equipment and training in modern warfare.
The Navy and Air Force would require consid
erable outside material assistance and train
ing before they could make any significan
contribution to coastal and antisubmari
patrol and convoy operations.
IV. INTERNATIONAL POLICIES
25. Under Peron, Argentina has been faced
with the problem of adjusting to a new world-
power pattern. At present, Argentina has no
secure tie with any great power. The British
connection no longer serves as a major sup-
port for Argentine economic progress and
stability. Argentina has been unable to es-
tablish a friendly collaboration with the
United States such as Brazil enjoys. Basic
political, ideological, and economic considera-
tions make it virtually impossible for Peron
to align Argentina definitely with the USSR.
Peron's "Third Position," which proclaimed
Argentina's independence with respect to the
opposing world camps, was developed as a
rationalization of changes in the past decade
superimposed upon Argentina's traditional
isolationist tendencies.
26. Argentina's international aspirations in-
clude a dominant position in southern South
America, a position of leadership in Latin
America, and a place in the world correspond-
ing to somewhat inflated views of national
capabilities. To reach these goals, Peron re-
quires internal economic expansion, a free
hand to assert Argentine influence over neigh-
boring countries, and foreign support for Ar-
gentine pretensions in world affairs. For such
purposes, the cooperation of a major power is
essential, but such cooperation has not been
obtained. Consequently the foreign policy of
the Peron regime has been unstable, respon-
sive to the momentary requirements of
domestic politics, and, in general, character-
ized by a high degree of opportunism.
27. Argentine policy toward the US, tradi-
tionally one of aloofness, has been conditioned
by long-standing British ties, limitations on
Argentine exports to the US, and US policy
barriers to Argentine expansionism and lead-
ership in the Hemisphere. Under Peron, Ar-
gentine foreign policy became increasingly
aggressive, and its antagonism toward the US
more pronounced. By 1951-1952, Peronist
propaganda was lending volume and coverage
to ultranationalist, Communist-line attacks
on the US. This aggressively anti-US line
reflected Argentine feelings of insecurity, was
colored by the Peronist revolution's heavy em-
phasis on "anti-capitalist" and "anti-imperi-
alist" political slogans, and was intensified by
general economic deterioration.
28. By late 1952, however, Peron apparently
calculated that this anti-US policy was un-
profitable. It was having little effect in un-
dermining US influence in Latin America, and
Argentina was making little progress in
strengthening its economy and achieving a
dominant position in southern South America.
Most important, Peron apparently concluded
that substantial foreign economic support was
essential to the achievement of his internal
'1014ougg,
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economic goals, which in turn was a prereq-
uisite to his remaining in power and achiev-
ing his foreign policy objectives in Latin
America. The timing of Peron's decision to
seek an accommodation with the US was also
in part determined by: (a) his strengthened
internal political controls which made him
less dependent on the support of anti-US ele-
ments, and (b) the change in administration
in the US and the subsequent visit of Dr.
Milton Eisenhower.
29. At present, Argentine anti-US propaganda
has virtually ceased. The "Third Position"
line has virtually disappeared, restrictions
have been lifted on US press services and pub-
lications, and more favorable conditions are
being created for US-owned business interests.
There are also indications that Peron will give
greater support to US objectives and proposals
in the OAS and the UN.
30. Although gills seeking an accommodation
with the US, Peron apparently feels he cannot
alienate his nationalist supporters to the ex-
tent of seeking direct US loans or aid, or pro-
posing a military assistance pact. Instead,
Peron is apparently seeking to pursuade the
US: (a) to adopt a benevolent attitude toward
Argentine political and economic objectives in
Latin America; (b) to encourage US private
business to invest in Argentina and to lib-
eralize credit terms; and (c) to aid in the
expansion of Argentine military facilities by
making technical advice and materials avail-
able on liberal terms. Peron has stressed that
such support would benefit the US by enabling
Peron to adopt a stronger stand against Com-
munism in Argentina, and by increasing
Argentine capabilities for combatting the
growth of Communism throughout Latin
America and for defending southern South
America in the event of external Communist
aggression.
31. Argentina's efforts to extend its influence
in Latin America have had little success ex-
cept in the cultural field. The Argentine-
sponsored labor movement (ATLAS), assisted
by Argentina's extensive network of labor
attaches, has not attracted the support of the
major Latin American labor organizations.
7
Although Argentina has signed "economic
union" pacts with Paraguay, Chile, and Ecua-
dor, any significant extension of Argentina's
economic influence has been blocked by its
inability to fulfill its trade commitments.
32. Argentine-Brazilian rivalry remains strong
and may pose special problems for the US
now that Argentina is seeking friendlier rela-
tions with the US. Each country will be quick
to claim that the US is favoring the other.
There are already indications of increasing
anti-US sentiment in Brazil, which may be
strengthened if the impression grows that the
US is favoring Argentina at the expense of
Brazil. Thus, closer US-Argentine relations,
in addition to causing friction between the
US and Brazil, may complicate US relations
with other Latin American countries ? such
as Uruguay ? which are suspicious of Argen-
tine expansionist ambitions.
33. Argentina maintains diplomatic relations
with the USSR and all the European Satellites
except Albania. All these countries have resi-
dent missions in Buenos Aires which provide
channels for the dissemination of Communist
propaganda both within Argentina and to
neighboring countries. Argentina in turn
has resident missions in the USSR, Czecho-
slovakia (accredited also to Hungary) , Poland,
and Rumania (accredited also to Bulgaria).
34. Argentina's trade with the Soviet Bloc is
now about 2.5 percent of its total foreign
trade. This percentage will increase substan-
tially if commitments under the recent
Argentine-Soviet trade agreement are carried
out. The agreement calls for an exchange of
goods totalling $150 million, with Argentina
exporting non-strategic raw materials in ex-
change for Soviet capital goods and fuels. To
facilitate this trade, the USSR advanced to
Argentina a $30 million dollar credit for the
import of Soviet capital goods. There is no
time limit on delivery. Soviet exports would
be small in relation to Argentina's total im-
port requirements, but would satisfy Argen-
tina's needs in certain important categories,
particularly petroleum drilling and refining
equipment.
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dilligritatPT 8
V. PROBABLE DEVELOPMENTS
35. The Peronist Party will almost certainly
win a decisive victory in the Congressional and
Vice-Presidential elections scheduled for 25
April 1954, thus substantially strengthening
Peron's position. As long as there is no seri-
ous economic deterioration, political opposi-
tion to Peron will be ineffective and Peron will
maintain his hold over the country.
36. The principal potential ?threat to Peron
is the unrest, particularly in the laboring
class, that would result from a major crop
failure or severe economic depression. We
believe that through his control over the CGT
leadership Peron would probably be able to
prevent labor unrest from becoming unman-
ageable. In the event that the CGT leader-
ship were unable to control its mass member-
ship, we believe that Peron would retain the
support -of the armed forces and the police,
and that these forces would be able to control
any disturbances or revolt that might occur.
We believe that there is little chance that
Peron will be ousted by an armed forces coup.
37. Barring a serious crop failure or a severe
drop in the world demand or price for Argen-
tine exports, we believe that there will be a
slight and gradual improvement in the Ar-
gentine economy through 1955. There will
probably be sufficient foreign exchange earn-
ings from agricultural exports to maintain
essential imports at present levels and at the
same time to permit: (a) increases in agri-
cultural productivity through the import of
tractors, fertilizers, seed, etc., and (b) some
rehabilitation and modernization of indus-
trial plant and equipment. Foreign exchange
earnings, however, will remain inadequate to
permit a relaxation of present stringent im-
port controls or to undertake many of the
major development projects called for by the
Five-Year Plan.
38. In these circumstances, Peron will prob-
ably seek to implement the developmental
aspects of the Plan through private foreign
credits and private foreign investment. Al-
though Western Europe and Japan are in-
creasing their trade with and investment in
Argentina, and West Germany has recently
become one of Argentina's most important
sources of short-term commercial credits,
Peron apparently believes that the US is his
principal potential source of foreign private
capital. Peron has already liberalized the
law applying to new foreign investment. He
will also probably offer more attractive terms
to investors in fields of special interest to the
government, particularly petroleum. He may
also permit present private investors to remit
accumulated backlogs of profits, royalties, and
dividends, to the extent that exchange avail-
abilities permit. Despite such measures, it is
unlikely that Peron will be able to attract
sufficient foreign capital, particularly in the
field of transport, power, and other basic serv-
ices, to permit substantial fulfillment of the
major development projects included in the
Five-Year Plan.
39. Although Peron will probably concentrate
on agricultural and industrial rehabilitation,
there will remain the danger that for political
or prestige reasons Peron will feel compelled
before the end of 1955 to adopt measures
which would have serious inflationary results.
For example, he may feel it necessary, under
pressure of popular demands, to relax con-
trols on imports, wages, or credits. If he
does not succeed in attracting sufficient for-
eign capital, he may also feel compelled to
distract attention from continued austerity
conditions by pushing ahead rapidly with
spectacular projects at the expense of
strengthening agriculture and industry.
40. The influence of the Communist Party
will probably not increase. Peron will prob-
ably continue repressive measures against the
official Communist Party, and will attempt to
curb its efforts to promote anti-US opinion.
A few "dissident" Communists, however, may
succeed in infiltrating the Peron Administra-
tion. If Peron should abandon his policy of
accommodation with the US, a more favor-
able climate for the extension of Communist
influence would exist, but the Communists
would still not pose a serious threat to the
Peron regime.
41. Peron will continue his policy of accom-
modation with the US as long as his internal
political control remains strong, and as long
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Slat10E7 9
as collaboration with the US appears on bal-
ance to favor Argentine national aspirations.
Peron will be sensitive to any US intrusion in
foreign markets vital to Argentina's exports,
and resentful of US actions that appear to
him to block the extension of Argentine in-
fluence in Latin America. During the period
of accommodation with the US, Peron will
probably continue to facilitate the solution of
problems facing US enterprises, including
news services and publications. Argentina
will probably be more cooperative with the US
in international organizations.
42. Argentina will almost certainly continue
to maintain diplomatic relations with the So-
viet Bloc and attempt to increase Argentine
trade with the Bloc, especially with the USSR.
To the extent that -Argentine economic de-
velopment objectives are not attained through
collaboration with the US and other Free
World nations, Peron will probably seek a fur-
ther expansion of trade with the Bloc, espe-
cially if the USSR fulfills within a reasonable
time at least the major part of its commit-
ments under the recent trade pact.
43. Peron will continue to seek to expand
Argentine influence in Latin America. Ar-
gentina's prestige throughout the Hemisphere
will probably improve during the next two
years, provided Peron continues his policy of
accommodation with the US and refrains from
undue interference in the internal affairs of
other Latin American nations. Although Ar-
gentine trade with other Latin American na-
tions will probably increase somewhat, Argen-
tina is not likely to develop sufficient eco-
nomic strength to increase significantly its
economic influence in Latin America gen-
erally.
44. In the event of general war, Peron is not
likely immediately to enter the war in active
support of the US. His primary objective
would be to exploit the war to Argentina's
advantage. He would almost certainly de-
mand high prices for exports of food and raw
materials to the Allied powers. Although
initially he would probably wish to remain
neutral, he might subsequently enter the war
and offer: (a) to cooperate in measures to
suppress the Communists in South America,
and (b) to collaborate with the US in Argen-
tine coastal defense and patrol activities. He
would probably be reluctant to provide forces
for service outside the Western Hemisphere.
45. Peron's disregard of personal security pre-
cautions increases the chances of his death
by accident or assassination. He has kept in
his own hands so many of the instruments of
control that the problem of succession would
be extremely difficult. A struggle for power
would almost certainly ensue. In such a
struggle, the Army would almost certainly
play a determining role. The most likely im-
mediate development would be an Army-
backed caretaker government. In its early
stages, any successor government would prob-
ably attempt to follow the same general inter-
nal and external policies as were being fol-
lowed by Peron at the time of his death.
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