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Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A00460004000-1-8 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 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 DISSEMINATION NOTICE 1. This copy of this publication is for the information and use of the recipient designated on the front cover and of individuals under the jurisdiction of the re- cipient's office who require the information for the performance of their official duties. Further dissemination elsewhere in the department to other offices which require the information for the performance of official duties may be authorized by the following: a. Special Assistant to the Secretary for Intelligence, for the Department of State b. Assistant Chief of Staff, G-2, for the Department of the Army c. Director of Naval Intelligence, for the Department of the Navy d. Director of Intelligence, USAF, for the Department of the Air Force e. Deputy Director for Intelligence, Joint Staff, for the Joint Staff f. Director of Intelligence, AEC, for the Atomic Energy Commission g. Assistant to the Director, FBI, for the Federal Bureau of Investigation h. Assistant Director for Collection and Dissemination, CIA, for any other Department or Agency 2. This copy may be either retained or destroyed by burning in accordance with applicable security regulations, or returned to the Central Intelligence Agency by arrangement with the Office of Collection and Dissemination, CIA. 3. The overseas dissemination of this intelligence will be limited to a period of one year or less, at the end of which time it will be destroyed, returned to the forward- ing agency, or permission requested of that agency to retain it in accordance with IAC-D-69/2, 22 June 1953. WARNING This material contains information affecting the National Defense of the United States within the meaning of the espionage laws, Title 18, USC, Secs. 793 and 794, the trans- mission or revelation of which in any manner to an unauthorized person is prohibited by law. DISTRIBUTION: White House National Security Council Department of State Department of Defense . Foreign Operations Administration Operations Coordinating Board Atomic Energy Commission Federal Bureau of Investigation United States Information Agency Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 I '4?6 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 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, , Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 1 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 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. Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 - Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 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 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 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 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 4) Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 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 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 .4) Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 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, Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 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. Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 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 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 .? Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 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. Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8 \ .. ,. Declassified and Approved For Release 2013/01/09: CIA-RDP79R01012A004600040001-8