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May 11, 2005
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June 30, 1977
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Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Secret Latin America 25X1 AL AND CAL ANAl State Department review completed YS Secret RP ALA 77-046 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700'&10ZfI 1977 25X1 25X1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09&!IRDP79T00912A000700010001-1 25X1 LATIN AMERICA 30 June 1977 CONTENTS The OAS General Assembly and the Human Rights Issue . . . . . . . . . . . . . . 1 Guatemala-Belize: Dispute Escalates Again . . . . . . . . . . . . . . . . . . 5 25X6 Argentina - North Korea: Break in Relations . . . . . . . . . . . . . . . . . . . . . 10 Peru: Government Contains Austerity Protests . . . . . . . . . . . . . . . . 11 Venezuela: Down to the Wire . . . . . . . . . . . .13 Paraguay: Stroessner and the Press. . . . . . . . .19 Bolivia: Pressures To Return to Democracy ... . . . . . . . . . . . . . . . . . 21 Bahamas: Election Campaign . . . . . . . . . . . . .23 Netherlands Antilles: Election Outcome. . . . . . .26 Mexico: International Financial Situation and Outlook . . . . . . . . . . . . . . .28 25X1 This publication is prepared for regional specialists in the Washington community by the Latin America Division, Office of Regional and Political Analysis, with oc- casional contributions from other offices within the Directorate of Intelligence and from other agencies within the Intelligence Community. Comments and queries are welcome. They should be directed to the authors of the individual articles. RP ALA 77-046 30 Approved For Release 2005/06/O?~CeIFATRDP79TOO~i~001C~010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET The OAS General Assembly and the Human Rights Issue Delegates to last week's OAS General Assembly in Grenada returned home convinced of the sincerity of Washington's commitment to the defense of human rights. The conference, in fact, turned out to be a battle- ground for the US human rights policy, and almost all of the discussions were devoted to it. Even though the delegates have been thoroughly sensitized to the issue, the outlook for progress in curbing human rights abuses is still mixed at best. The 13 nations voting for the US initiative on human rights were: Panama, Jamaica, Barbados, Surinam, Grenada, Costa Rica, Trinidad, Mexico, the Dominican Republic, Ecuador, Haiti, Venezuela, and Peru. Seven of these are Caribbean countries. Five are countries visited by Mrs. Carter in early June. The southern cone countries of Brazil, Argentina, Chile, Paraguay, and Uruguay abstained--a polite "no" vote--as did Guatemala, Colombia, and El Salvador. Honduras, Nicaragua, and Bolivia did not vote. It has been apparent for some time now that US spokesmen, including Mrs. Carter, Secretary Vance, and Ambassador Young, have been getting the human rights message across to the Latin Americans. The doubts about Washington's long-term seriousness on the issue have given way in many cases to concrete action by sev- eral. of the countries to curb the worst abuses. For example, Chile claims that it has freed its last polit- ical prisoner. While the OAS was in session the Chilean government also negotiated the settlement of a hunger strike, staged by families of missing persons, that has been in progress at the UN Economic Commission for Latin America headquarters in Santiago. Argentina and Brazil have directed security forces to be more circum- spect when arresting suspected terrorists. Paraguay is again talking about inviting the Inter-American Human Rights Commission to make an on-sight inspection in Asuncion. RP ALA 77-046 30 June 1977 25X1 25X1A 1 Approved For Release 2005/06/095EqI-IjDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET These positive steps, however, do not mean that the OAS community will soon develop a unanimity of views on the human rights issue. Although no country would ever voice opposition to the defense of human rights intrinsically, the reasons for the negative votes con- tinue to be fear of political and economic destabili- zation caused by communism and terrorism. The psycho- logical and real factors are unlikely to go away in the near future. In fact, it is conceivable that some of the countries voting with the US on this issue may be faced in the future with a security problem that could lead to systematic violations of human rights. Haiti, for example, already has one of the worst records in the hemisphere on human rights. Politically related violence is already common in Jamaica, always threat- ening in Panama, and never far from the surface in the Dominican Republic. Haiti's vote for the US resolution is difficult to understand; Ambassador McGee believes the Haitians had decided to vote yes on everything that came up at the meeting. The positive votes by Jamaica, Costa Rica, Ecuador, Peru, and Venezuela could well have been influenced by Mrs. Carter's visit to these countries. More than likely, however, other considerations were just as important. Even though Mrs. Carter reportedly was as- sured by Jamaican Prime Minister Manley that he would support the US on human rights, Manley was effusive in his praise for President Carter on the human rights issue well before Mrs. Carter's trip. Moreover, Jamaica sorely needs US financial assistance now. Costa Rica and Venezuela, two of the few practicing democracies in Latin America, would be expected to support the US, as would Mexico. An Ecuadorean spokesman has said that his country's vote for the US resolution stemmed from a sincere belief in human rights. Another Ecuadorean said, however, that Quito has an ambivalent attitude toward the issue because it could be construed as interference in inter- nal affairs. He added, however, that the government had decided to:support the US policy before Mrs. Carter's visit and could not change its position even if it wanted to. Both denied that the possibility of acquiring arms from the US was a factor in their vote, but the RP ALA 77-046 30 June 1977 2 Approved For Release 2005/06/09 :CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET Ecuadoreans are again inquiring about US aircraft. In the case of Peru, the positive vote was not surprising. Peru has generally supported public declarations of human rights, and it is believed that the US declara- tion on human rights will be incorporated into the new Peruvian constitution. The support for the US position by Barbados, the Dominican Republic, Panama, Surinam, Grenada, and rinidad-Tobago was not unexpected, but Jamaica had to put pressure on the Grenadans in order to get their vote. Progress in the canal negotiations certainly as a factor in winning Panama's vote. In the final analysis, the Grenada meeting of the OAS may be remembered in the future as the beginning of a new era of understanding between the US and Latin America, or it may go down as the final disso- lution of the special relationship most Latin American countries have long assumed they enjoy with Washington. Despite the US victory on the human rights issue, the voting pattern raises disturbing questions. The southern cone countries remain a solid intransigent bloc, with Brazil emerging as a leader of this faction and exerting its influence to a certain extent over Bolivia and Colombia. The US is thus left with solid support from Mexico, Venezuela, Ecuador, Peru, and the Dominican Republic among the Spanish-speaking countries. Continued backing for US initiatives from the English- speaking Caribbean appears to be tenuous at best and may, in the long run, be contingent on the willingness of the US to provide economic assistance. All of the Latin nations are now aware, however, that the issue of human rights is the fundamental basis of inter-American cooperation--at least in US eyes. The linkage of US assistance to human rights is bound to have a great impact on Latin America. It remains to be seen if it will be positive or negative. RP ALA 77-0 30 June 197 46 7 25X1 Approved For Release 2005/06/0SP-cM PRDP79T00912A000700010001-1 Approved For Release 2005/06/92c 1~-RDP79T00912A000700010001-1 GUATEMALA-BELIZE: Military Maneuvers Military Maneuver Orange Walk GUATEMALA Nive~ M~~nk v, RP ALA 77-046 30 June 1977 25X1 Approved For Release 2005/06RtiA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECR EI 25X1A Guatemala-Belize: Dispute Escalates Again In the latest of a series of escalating maneuvers, the Guatemalan army has initiated a week of military activities on the border with Belize, presumably to put pressure on the UK in the continuing negotiations over Guatemalan claims to the British colony. Other Guate- malan moves also continue to point to serious prepara- tions for military action if negotiations fail. The British were officially informed by Guatemala of the military exercises. The maneuvers, along with a recent limited mobilization--or at least stepped-up training--of military reserves, seem designed primarily for diplomatic impact before the Guatemala-UK talks on July 6 and 7. Although some British officials view the Guatemalan moves as irrational, President Laugerud ap- parently believes the British are at least seriously considering terminating the talks, and he is out to con- vince them that such a move would raise a serious risk of military conflict. In response, British forces in Belize--about 1,300 men--have gone to the second stage of a four-stage alert system. The British may well proceed with a limited reinforcement, which has been under considera- tion. Guatemala has indicated it will present its minimal demands during the talks in Washington. Recent report- ing has indicated President Laugerud is focusing on a single cession of territory in Belize south of the Mon- key River. The Guatemalans have, however, at times discussed the Moho River line--a much smaller piece of territory--as a fall-back position. As a result, we believe there is still give in the Guatemalan stand on this point of,a territorial settlement. Guatemalan-UK relations were further strained this past week when authorities in Barbados--suspicious about the cargo of a transiting plane--detained an Argentine RP ALA 77-046 30 June 1977 5 Approved For Release 2005/06, RpA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 aircraft which was en route to Guatemala with a large shipment of ammunition. Guatemala termed the action by the former British dependency a "UK provocation" that demonstrated a lack of interest in a peaceful settlement. of the Belize dispute. Aside from the increase in the level of the rhetoric, the Guatemalans are obviously seeking to bolster their stock of 5.56-mm ammunition for the 15,000 Galil rifles they recently purchased from Israel. Laugerud's room for maneuver is also limited by domestic political complications. Guatemala is now en- tering the campaign period for the March 1978 presiden- tial elections in which the government-backed candidate could face a hard fight. The country is also again experiencing increased political violence. A prominent leftist attorney was assassinated on June 8 and there have been two attempts to kidnap sons of wealthy busi- nessmen this month. Business leaders recently attempted to prevail upon Laugerud to impose a state of siege and crack down on the left or allow the creation of extra- legal anti-terrorist groups. Immediately following Laugerud's reported refusal to authorize paramilitary units, a new right wing group, the Secret Anti-Communist Army, announced its existence. RP ALA 77-046 30 June 1977 6 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECR E1 25X6 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET Faced with these domestic difficulties and the prospect of escalating left-right violence, Laugerud can ill afford. to be perceived as a weak leader. In part, this accounts for his hard line pronouncements on / the :3elize issue. In a speech this week, he again warned of the possible need to take up arms to confront aggression by Great Britain and pledged as commandin general, "to be at the head of all." RP ALA 77-046 30 June 1977 7 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRFT Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET 25X1A Argentina - North Korea: Break in Relations Argentina recently severed. diplomatic relations with North Korea after Pyongyang's entire mission had abruptly left the country. The break was largely a product of the suspicion with which the Videla govern- ment has viewed North Korean activities in Argentina. The move undoubtedly pleased the highly conservative Argentine navy, which controls the Foreign Ministry. The North Koreans contend that they left Argentina because of harassment and surveillance by Argentine security and intelligence services. A note of explan- ation to President Videla stated that until the situation improved, North Korean diplomatic matters with Argentina would be handled by the mission in Cuba; no mention was made, however, of ending diplomatic relations. The staunchly anti-Marxist government in Buenos Aires, suspicious that communist aid is going to sub- versive groups in Argentina, has long kept close watch on the communist missions. Official Soviet and Romanian personnel, as well as communist news correspondents, are restricted to a limited area in and around Buenos Aires, and North Korean staff members were also under travel restrictions. Recent reports indicate that Argentina intended to reduce the number of both North Korean and Cuban personnel assigned to their embassies in Buenos Aires. The decision to do so apparently was awaiting an assess- ment of economic and political benefits and losses. The North Koreans have steadily reduced the staff of their mission in Buenos Aires over the past year in response to obvious Argentine irritation about impro- )rieties and the crude behavior of North Korean diplo- ats. RP ALA 77-046 30 June 1977 10 Approved For Release 2005/0 Q~E-PIA-RDP79T00912A000700010001-1 25X6 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET 25X1A Peru: Government Contains Austerity Protests The Peruvian government, thus far, has succeeded in containing public protest demonstrations triggered by the harsh new economic plan announced on June 10. Bank officials, meanwhile, are hopeful that early Inter- national Monetary Fund approval of the new plan will pave the way for balance-of-payments support loans that Peru badly needs. The government has moved swiftly to localize the protests which have taken place in most major cities by rapidly deploying security forces, imposing curfews, and making hundreds of axrests. The most serious disturbances occurred in the southern cities of Cuzco and Puno. On June 15 and 16, Cuzco was the scene of a confrontation between leftist students and police which deteriorated into general rioting before the civil guard could restore order. During protests over food price increases in Puno on June 23, a train was derailed and a police station and several other government buildings were burned. Further demonstrations, though much less severe, have occurred in Lima, Arequipa, Ayacucho, and several smaller local- ities. Students, with encouragement from leftists, remain the principal agents in the disturbances, with organ- ized labor playing a far less conspicuous role. Lo- calized strikes in support of the students have been only partially successful--undoubtedly the result of government threats of immediate punishment for workers who participate. Although talking tough with union leaders may be sufficient to keep labor at bay, the government continues to fear an open confrontation with the workers. It will face further challenges on June 30 when bank workers RP ALA 77-046 30 June 1977 11 Approved For Release 2005/06/09 SUTAERDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET plan to strike in Lima, and again on July 5, when a nationwide strike has been scheduled by the far-left teachers' union. Peruvian banking officials are optimistic that a team from the International Monetary Fund, now visiting Lima, will find the new economic measures an acceptable response to conditions imposed by the Fund last March for a standby loan. If agreement is imminent, as these sources suggest, discussion with New York com- mercial banks concerning further balance-of-payments assistance--which has been contingent upon the IMF 25X1 RP ALA 77-046 30 June 1977 25X1 12 Approved For Release 2005/06/(9ciA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET 25X1A Venezuela: Down to the Wire More than a million registered members of the gov- erning Democratic Action Party (AD) will cast their votes on July 17 in a nationwide direct primary to select a presidential candidate for the general elec- tion in December 1978. Several weeks later, the op- position Social Christian Party of former president Rafael Caldera and the Marxist Movement Toward Social- ism will each select their standardbearers, actions which will all but officially launch the start of what is likely to be a sharp and bitterly fought campaign. A Unique Approach The AD's new selection experiment is a radical departure from the complex five-level system used in the past to choose the party's National Convention delegates, who, in turn, selected the presidential candidate. This new system involves open assembly voting for delegates, starting at the base of the party's pyramidal structure and proceeding upward through mu- nicipal and state committees. A side effect of the system is to reduce the traditional influence of party power brokers who formerly dictated the party's choice at the party convention. Now, an element of uncertainty has been added both because secret ballots will be cast and by the fact that all party members are eligible to participate, thus ensuring a large vote. The universal suffrage experiment will be limited to presidential primaries; legislative and other elective posts will still be filled through the traditional system. Al- though some older party leaders consider the electoral reform transitory, there is widespread pressure from younger AD members to institutionalize the new system. It may even be a precursor of further changes that will affect other parties as well. Venezuela's traditional system of obligatory party block voting for congressional RP ALA 77-046 30 June 1977 Approved For Release 2005/06/09 s;OIAERDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET and municipal posts, where a split ticket is impossible, is under heavy fire from an electorate largely composed of independent voters. Supporters of both major candidates, AD congres- sional whip Jaime Lusinchi and party secretary general Luis Pinerua Ordaz, are predicting victory. The fever- ish activity in both camps belies this confidence, how- ever, and suggests that both men consider the next few weeks critical. Former president Romulo Betancourt had made clear his strong preference for the party's secretary general and has stated privately that he is determined to do whatever is necessary to secure the nomination for Pinerua. His statement may reflect some anxiety that Pinerua's campaign has stalled in recent weeks while Lusinchi's campaign, starting virtually from nowhere six months ago, is beginning to pay off at the grass roots level, offsetting to some extent bene- fits Pinerua receives from his tight grip on the party machinery. By again taking an active role within the party and the country, Betancourt, the party's "president for life," has directly challenged President Carlos Andres Perez over the question of party leadership, especially as it relates to the choice of the party's 1978 presi- dential candidate. Perez is known to favor Lusinchi and some of Perez' closest advisers publicly support him. The President, a strong-willed man, will not take lying down Betancourt's reassertion of a leadership role for himself within the party. Neither will Perez tolerate remarks openly critical of major aspects of his foreign policies. While Perez has not openly chal- lenged Betancourt, he has issued thinly veiled public rebuttals to Betancourt's analysis of foreign policy issues. A Party in Transition The struggle for the party nomination has tended to overshadow the fact that the AD is going through a period of considerable soul-searching and strain as it approaches the elections. The aging fathers of the RP ALA 77-046 30 June 1977 Approved For Release 2005/p@TCIA-RDP79T00912A000700010001-1 25X1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Next 1 Page(s) In Document Exempt Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET party, Betancourt and Gonzalo Barrios, are nearing the end of their political careers, but still retain enor- mous party power. President Perez, 53 years old, has great influence, but is something of a lame duck since he cannot become a candidate for president again for ten years after he leaves office. This explains in part his great interest in demonstrating his political skills on the domestic and international levels in an effort to obtain a secure hold on the party leadership when Betancourt departs the scene. The competition with- in the party also represents something more than the ri- valry between two well-known politicians; it is also a clear reflection of the changing times in the country. Lusinchi has not defined his political goals very well, but he insists that the old-line leadership, Betancourt and Barrios among others, is no longer rep- resentative of the Venezuela of 1977. Lusinchi is more at ease with the big merchants and industrialists and less dependent on the traditional base of the party, the unions and peasants. In keeping with what his supporters believe to be the present day Venezuelan reality, he seeks to project a more sophisticated and polished image than his rival. Pinerua is more representative of the AD party which was formed under the Gomez dictatorship during the 1930s--an organization made up largely of workers, peasants, and small-business men. He is more provincial, suspicious of big-city ways and big business, and is firmly opposed to the Communists and any kind of deals with them. He is also critical of the corruption and immorality that he feels are characteristic of many of the newly rich elements of Venezuelan society. AChallenge The problem facing the Democratic Action Party is to determine how much the country has changed since the last general election--before massive oil-gener- ated revenues poured into the country--and how many people have changed with it. If the AD is to continue to claim to represent the Venezuelan average man, it will have to decide who he is. While he may no longer be the "Juan Bimba" in peasant attire and sandals, he is probably also not the well-dressed young man riding RP ALA 77-046 30 June 1977 17 Approved For Release 2005/06/0$E(IA-fRDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET around Caracas in a Mercedes. Lusinchi and Pinerua serve as opposing symbols for what the party is and what its future role is to be. This explains the feel- ing of many party leaders who see that what is at stake is not necessarily the political fortunes of two very ambitious politicians but the control of the ideo- logical heart and soul of Venezuela's largest poll 1 al party. I RP ALA 77-046 30 June 1977 18 Approved For Release 2005/49%T CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET 25X1A Paraguay: Stroessner and the Press President Stroessner has repeatedly demonstrated his ability to perpetuate his stay in office by manipulating "democratic" procedures. Now, he apparently is moving behind the scenes to gain control over the Paraguayan press. Within the past few months two evening newspapers have been started in Asuncion,, apparently to compete with the morning daily A B C Color, the only Paraguayan period- ical that occasionally criticizes the government. Both new publications are said to have financial backing from pro-government sources, and the principal stockholder in one launched this month is Stroessner's son-in-law, Humberto Dominguez Dibb. Stroessner recently took strong exception to a state- ment by the Inter-American Press Association that there is no freedom of the press in Paraguay, but he has frequently been sensitive to public criticism of his policies. On one occasion, he jailed the editor of a newspaper for publishing a joke about the Chaco War that was apolitical, but one that Stroessner considered to be in poor taste. Most newspapers practice self- censorship and even A B C Color refrains from attacking the President directly. Nevertheless, A B C Color has probably aroused of- ficial ire by its repeated criticism of the terms of the Itaipu hydroelectric project which, it alleges, consti- tutes a virtual sell-out to Brazilian interests, and by the paper's propensity to call attention to the grosser abuses of the contraband trade--reportedly run by some of St.roessner's closest associates. According to estimates of the United States Infor- mation Agency, the two new dailies already have achieved a combined circulation of approximately 55,000 rivaling that of A B C Color. They also enjoy the latest offset RP ALA 77-046 30 June 1977 19 Approved For Release 2005/06/OQ WRDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET presses and new typesetting and photo-reproduction equipment--all purchased in the US. A B C CoZor, how- ever, also has considerable financial resources and is not likely to fold in the near future. cording to one report, he and s ing his son-in-law and Army Co plan to launch a weekly magazin station (the two Paraguayan cha are state-controlled). Such de complete Stroessner's hold on t everal associates, includ- mander General Rodrigues, e and a third television nnels now in operation velopments would virtually he country's media. RP ALA 77-046 30 June 1977 Stroessner may be planning additional moves. Ac- 20 Approved For Release 2005/0, /REICIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET 25X1A Bolivia: Pressures To Return to Democracy Demands from various public sectors have resulted in a ground swell of pressure on the government to open the way for a resumption of political activities. President [Banter has responded by reassuring the nation that Bolivia will be "constitutionalized" by 1980 but at the same time he is monitoring the momentum being created by unofficial political activities. Over 100 prominent Bolivians, including former offi- cials of the current government, peasant and labor leaders, retired military officers, and former president Luis Adolfo Siles, signed a published letter calling for elections by 1978 and an end to the suspension of political parties and trade unions imposed in 1974. The letter was probably precipitated by a speech in which Banzer announced that Bolivia would not return to a "formal democracy," which he termed a "great hypocrisy." The latest official declaration restates what has become a familiar theme--that the "transitory" Banzer government intends to "institutionalize" Bolivia and pro- vide for a "new" democracy beginning at a "moment best suited to the national interests." He reiterated his three-stage plan for democratization: institutional sta- bility, which has already been accomplished; strengthening of economic and social structure, now in progress; and democratic institutionalization. Banzer apparently has consulted with his advisers about the restoration of democratic principles, but as yet has neither defined the "new" democracy nor decided how it will come about. In fact, the President's remarks go no further than the armed forces "Plan for a New Bolivia"--issued last October-- which offered a justification for continued military rule and a rough blueprint for the country's future. The Banzer regime is clearly opposed, however, to the reactivation any time soon of traditional political parties. In early June the President said that he would RP ALA '77-046 30 June 1977 Approved For Release 2005/06/09siECIf1 RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET not permit a return to "false democracy." Minister of Interior Pereda coincidentally made a statement precluding the lifting of the 1974 decrees that suspended political and labor union activities. A recent official communique says that to return "to politicking is to vitiate democracy, check development, and prevent civilized coexistence." These statements characterize La Paz's reactions to the increasing efforts of the two major Bolivian political parties, the Nationalist Revolutionary Movement (MNR) and Bolivian Socialist Falange (FSB), to regain the right to engage in political activity. The FSB has for some time been insisting it will hold a national convention in August to plan future activities. The MNR demanded elections in an open letter published on the 25th anniversary of the 1952 revolution in April. Both parties have been sharply reminded that the ban on political activity is still in force. Banzer further warned that parties would be allowed to resume activities only when they could guarantee "unity, well being, peaceful coexistence, and political stability for every citizen without exception." Banzer is undoubtedly concerned about the potentially destabilizing effect on his government of lifting the lid off party activity. At a minimum, the strong official criticism directed toward the MNR and the FSB is intended to retard their efforts toward constitutionalization, while ensuring Banzer's continued control over the direction and rate of the process. More important, the government's censure of the parties may be signaling the end of the truce under which the MNR and FSB have existed with the Banzer regime since the installation of the all-military government three years ago. In any case, the official reaction for democratization will probably not sa opposition leaders. The government's va response to their demands offers little the 1980 deadline less reversible. Crit Banzer regime's rule by decree is likely is the call for more explicit plans for to the demands tisfy political gue and repetitive beyond making icism of the to continue as Bolivia's future. RP ALA 77-046 30 June 1977 22 Approved For Release 2005/06/q RQIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET 25X1A Bahamas: Election Campaign The popularity of Prime Minister Lynden Pindling and his Popular Liberal Party (PLP) appears to have slipped in the last year. The fragmentation of the op- position, however, is likely to allow him to return to power in the July 19 House of Assembly election, al- though perhaps with a reduced, margin. Elected in 1967 as the first black head of govern- ment, Pindling enjoyed wide popularity. He strengthened his position by leading his country of 213,000 inhabi- tants to independence in July 1973 and by chartering a generally moderate though nationalistic course. In recent months, however, he has had to beat back chal- lenges even from within his own party. Opposition to Pindling from within the PLP culmi- nated in May when a group of backbench "rebels"--opposed to Pindling's increasingly personal control of the party-- tried to thwart the Prime Minister's efforts to manage the party's nomination process. Only after threatening to resign did Pindling succeed in dropping 10 members of parliament from the party's list of candidates. Many of these individuals are running as independents and their strength in their home constituencies could cost the PLP several seats. Pindling's growing awareness that he may be in for a tough battle led him to cut short his attendance at the Commonwealth conference in London earlier this month so that he could return home and begin campaigning. He got off to a bad start, however. Speaking to a rally of party faithful and not a few opposition hecklers on June 13, Pindling lacked his customary charisma and misjudged the mood of the crowd. Challenged in advance by an opposition party leader to use the occasion to discuss major campaign issues of underemployment--espe- cially of youth--and government corruption, Pindling instead delivered a prepared statement concerning the results of the Commonwealth conference. RP ALA 77-046 30 June 1977 23 Approved For Release 2005/06/( COQI#-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET The Bahamas Kilometers GRAND: BAHAMA GREAT ABACO Miarni., BIMINI ISLANDS BERRY ISLANDS - . Ounmore Town Governors Harbor, NASSAUO ELEUTHERA ANDROS pROV DENCI= Rock Sound ISLAND Andros Town. CAT ISLAND GREAT EXUMA George Town SAN SALVADOR LONG ISLAND C 4a / r GREAT INAGUA RP ALA 77-046 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET Pindling is now on the defensive, but he is likely to be saved by the fact that the opposition is even more divided than the ruling party. Last December, the parliamentary faction of the major opposition party, the Free National Movement (FNM), broke away and formed the Bahamian Democratic Party (BDP) led by Henry Bostwick. In April, the BDP and FNM made a last ditch attempt to submerge their differences--which are based more on personality than on ideology--and to present a single list of candidates. Efforts at conciliation failed, however, and now both parties are running nearly a full slate of candidates for the 38 available seats. The BDP was originally expected to have more voter appeal than the FNM but has so far concluded a lackluster campaign. In addition, Pindling appears to be having some success in exploiting the reputation of the BDP as a spokesman for the white business community. The FNM remains basically a creature of its controversial leader Cecil Wallace-Whitfield, who left the PLP in 1970. It is offering a group of young, mainly untested candidates, but the party has so far had surprising success in attracting new voters. In the unlikely event that Pindling fails to obtain a majority, he might well strike an alliance with Wallace-Whitfield. '.Phis election offers little prospect of a signifi- cant change of course in The Bahamas since neither of the ruling party's two major challengers offers a pro- gram that differs markedly from that espoused by the government. There are forces at work below the surface, however. The Bahamas has been less affected by the more militant ideologies and movements--such as black power in the early 1970s and more recently third world social- ism--than have other countries in the Caribbean. As young people from the isolated "out islands" continue to migrate to the overcrowded, unemployment plagued main islands of New Providence and Grand Bahama, a breeding ground for adherents to more radical political movements may be forming. More immediately, the government is likely to come under increasing pressure as the campaign progresses to shake its image as a haven for geriatric "fat cats." It has to persuade the electorate that after 10 years of rule it maintains its dynamism and is not indifferent to the country's socio-economic problems. ALA 77-046 June 1977 25X1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET 25X1A Netherlands Antilles: Election Outcome The victory of Sylvius G. M. "Boy" Rozendal and his Democratic Party in the June 17 Staten elections is likely to ensure continued centrist leadership and will enhance the prospects for an accommodation with separatist forces in Aruba. With a combination of business and labor support the Democratic Party won 6 of a possible 12 seats from the federation's largest island, Curacao. The Staten has a total of 22 seats. Rozendal will replace Juan Evertsz as Minister President and is currently in the process of forging a new coalition. The major loser was Wilson "Papa" Godett and his left-leaning Workers' Party of Liberation (FOL). The strongest party on the island following local elections in 1975, the FOL won only three seats this time. The FOL's poor showing was due in large part to successful efforts by its oppo- nents to arouse popular suspicion that Godett planned to bring Cuban-style socialism to Curacao. The FOL may be hard pressed to remain united as new lead- ers, including the dynamic Don Martina, try to give the party a new direction. As expected, Gilberto "Betico" Croes and the People's Electoral Movement (MEP) were the big winners in Aruba where they captured five of the eight Staten seats. The election outcome has reinforced Croes' belief that he has broad popular support for moving toward Aruban separation from Curacao. Croes hopes to join the new governing coalition and reportedly would settle in the short run for a government commit- Iment to grant Aruba increased local autonomy. Croes has threatened to demand immediate separation for Aruba, however, if the MEP is excluded from the coalition. RP ALA 77-046 30 June 1977 26 Approved For Release 2005/06/09;E-,RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET The composition of the new coalition is still uncertain, but Rozendal reportedly favors establishing a government that would include the MEP, as well as the Aruban Patri- otic Party (PPA), and a representative from Bonaire. To form this coalition Rozendal is apparently willing to make concessions to the MEP by moving toward a more decentralized system of government. In addition, he will undoubtedly have to overcome the resentment the PPA must feel toward the MEP, following a campaign that saw Croes' followers resort to violence to prevent the PPA from opening a campaign headquarters. 25X1 25X1A RP ALA 77-046 30 June 1977 27 Approved For Release 2005/06/OOEx t1 RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET Mexico: Foreign Financial Gap Million US $ Current account deficit 1,175 2,558 3,769 3,024 2,400 Debt amortization -845 -596 -839 -1,141 -1,600 Financial gap -2,020 -3,154 -4,608 -4,165 -4,000 Medium- and long-term capital inflows 2,520 3,326 5,179 6,031 5,200 Official borrowing 1,962 2,739 4,349 5,032 4,500 Direct private investment 287 362 362 331 400 Other net private inflows 271 225 468 668 300 Net short-term capital and errors and omissions -378 -136 1106 -2,199 -300 Change in reserves 122 36 165 -333 900 Other financial items: External public debt yearend (including short-term) 7,617 10,497 14,449 19,600 22,500 Debt service ratio (public medium- and long-term) 25 18 29 36 45 Million US $ Exports, f.o.b.4 2,348 3,293 3,313 3,818 4,600 Imports, c.i.f. 3,813 6,057 6,580 6,030 5,900 1. Provisional. -~ -- _~ 2. Projected. 3. Including amortization of public and publicly guaranteed debt, the great bulk of the medium- and long-term debt. 4. Including value added by border industry operations. IZP ALA 77-046 30 June 1977 Approved For Release 2005/06/0921bIA-RDP79T00912A000700010001-1 SECRET Approved For Release 2005/06/098E% rRDP79T00912A000700010001-1 25X1A Mexico: International Financial Situation and Outlook The Mexican economy is passing through a difficult readjustment period, but its future remains exceptionally bright. Sharply rising debt amortization obligations will keep the foreign financial gap* large this year despite extreme austerity measures. The pace of future improvement will depend on how rapidly Mexico City de- velops its new-found oil reserves and what rates of eco- nomic growth it decides to maintain. By 1980, Mexico could be achieving substantial current-account surpluses; at worst, it should be running a considerably smaller deficit. The Oil Crisis Period Mexico's foreign financial gap more than doubled between 1973 and 1975, to $4.6 billion, mainly as a re- sult of a worsening trade imbalance. During this period, the higher oil bills that plagued other LDCs were not a problem for Mexico; in fact it had become a net oil ex- porter by 1975. Nonoil imports nearly doubled because of: --A highly import-intensive program of public investments. --Inventory accumulation spurred by inflationary expectations. --Shortfalls in domestic food production due to poor weather and low government support prices. --The steady inflation of Mexico's cost-price structure relative to those of its major trading partners. *In this article, financial gap is defined as the current- account deficit plus amortization of medium- and Long- term debt; shifts in short-term capital are not included. RP ALA 77-046 30 June 1977 Approved For Release 2005/06/09 S$rADP79T00912A000700010001-1 Approved For Release 2005/06/1~2l .I.A-RDP79T00912A000700010001-1 Export earnings grew by 40 percent in 1974 but stag- nated in 1975 as recession struck world commodity mar- kets. Exports also suffered from a continued erosion in the international competitive position of Mexican manufactures and from poor harvests. By 1975, the trade deficit totaled $3.3 billion, compared with $1.5 billion in 1973. To make matters worse, the services account--tra- ditionally in substantial surplus--shifted into the red in 1974 and registered a deficit of $700 million in 1975. The predominant cause of the shift was a rapid rise in interest payments on external public sector debt, from $378 million in 1973 to $850 million in 1975. In addi- tion, net earnings from tourism stagnated as Mexico's inflation outpaced the US rate by an annual average of 11 percentage points. As news of its new-found oil riches spread, Mexico found it easy to tap private markets to meet the bulk of its foreign capital needs. Borrowing by the public sec- tor--long the main user of foreign capital markets--in- creased from $2 billion in 1973 to $4.3 billion in 1975. Mexico: Foreign Trade and Net Tourism, 1976 Net x ~awrlsm 50 Jan Feb Mar Apr May Jun Jul Aug SOP Oct Nov Dec 1. Excluding value added by border industries operations. Data on border industries are available only on a quarterly basis. 2. Including border transactions. 573344 6-77 CIA 25X1 30 RP ALA 77-046 Approved For Release 2005/06/ (?gJiA-RDP7 r0iff A01DBg070010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SEC13ET Throughout the period, Mexico continued its policy of borrowing somewhat more than it needed to cover the fi- nancial gap plus short-term capital losses to increase its foreign exchange reserves. Paying the Piper in 1976 Last year was probably the most difficult year for the Mexican economy in more than two decades. The fi- nancial gap narrowed in 1976 only because of the sharp drop in industrial production and real GDP that followed the loss of business confidence with the September float of the peso. Immense short-term capital flight both be- fore and after the devaluation required a jump in foreign borrowing. Although medium- and long-term capital inflows rose to a record $56 billion, Mexico City was still forced to draw on reserves to cover its needs. The substantial improvement in the current account in 1976 resulted from a $1.1-billion drop in the trade deficit, split between a $500-million increase in ex- ports and a $600-million reduction in imports. The 15- percent increase in exports was largely due to higher prices for agricultural products, particularly coffee, and increased petroleum sales. Exports of manufactures failed to respond to economic recovery in the industrial countries largely because they were not priced competi- tively prior to the peso float. Speculative import pur- chases prior to September were held down by licensing requirements imposed in mid-1975 and economic recession. With the further loss of business confidence following the floating of the peso, imports in the last four months declined by 25 percent from year earlier levels. Public sector foreign debt increased substantially in 1976 as the government again turned to foreign bor- rowing to increase public spending, to cover the financial gap, and--most important--to offset a short-term capital flight exceeding $2-billion net. Public sector foreign debt, which accounts for the great bulk of total foreign debt, had climbed to $19.6 billion by the end of 1976. Public debt servicing had increased by almost 40 percent, to $2.5 billion, or 36 percent of exports of goods and services. RP ALA 77-046 30 June 1977 31. Approved For Release 2005/06/09 .cJ \j RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET Outlook for 1977 So far, the Lopez Portillo administration has placed adherence to an International Monetary Fund (IMF) agree- ment signed late last year and its own financial stabili- zation goals well ahead of economic expansion. Tight fiscal and monetary policies to control inflation will likely result in a year of zero or negative economic growth. The matching of last year's 2-percent increase in real GDP is probably the best that can be hoped for. Austerity measures coupled with the 45-percent de- preciation of the peso should dramatically improve the current account, but higher amortization payments will allow only a slight narrowing in the financial gap. The estimated $600-million improvement in the current account results from an expected 40-percent decline in the trade deficit. Since Mexico City is expected to sharply in- crease its spending on imported equipment needed to expand petroleum production, the decline in the trade deficit is not as large as might be expected from the government's extreme austerity policies. Nevertheless, because of peso devaluation, economic stagnation, continued import controls, and increased domestic production of oil and chemicals, imports are expected to decline in value as well as volume. Imports were down 20 percent in Janu- ary-April but should rise later in the year as the econ- omy picks up, inventories are worked off, food imports increase, and, most important, Pemex increases its for- eign procurement. 25X1 Exports are expected to increase 20 percent largely because of higher earnings from coffee and petroleum. Exports of manufactures and other goods will also be RP ALA 77-046 30 June 1977 32 Approved For Release 2005/06/ 9IA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 SECRET buoyed by low domestic demand, an improved competitive position, and the reinstitution of export incentives withdrawn last year. A sharp runup in debt servicing will hold down im- provement in the financial gap. Servicing of the public medium- and long-term debt will require $3.2 billion, yielding a debt service ratio of 45 percent; amortization payments alone will increase by $460 million, to $1.6 billion. As a result, the financial gap will decrease by only about 4 percent, to $4 billion. We estimate Mexico's total medium- and long-term capital needs this year at $5.2 billion, an amount suf- ficient to cover the financial gap and moderate losses of short-term capital while adding $900 million to inter- national reserves. Official borrowing totaling $4.5 billion would fall within IMF restrictions on net additions to debt. In addition, the government will have to roll over close to 4 billion in short-term debt. obtain the necessary capita from the private market, Mexico can be expected to turn to international financial organizations and the US for additional assistance. As a result of IMF limitations placed on government borrowing and the tighter credit situation, Mexico is looking for new sources to finance Pemex development programs. For the first time, it appears willing to commit future oil and gas exports to foreign companies in exchange for financing and other help in developing its vast oil potential. RP ALA 77-046 30 June 1977 25X1 25X1 Approved For Release 2005/06/69Q RR4-RDP79T00912A000700010001-1 25X1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Next 2 Page(s) In Document Exempt Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Secret Secret Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 25X1 Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1 Next 11 Page(s) In Document Exempt Approved For Release 2005/06/09 : CIA-RDP79T00912A000700010001-1