Document Type: 
Document Number (FOIA) /ESDN (CREST): 
Release Decision: 
Original Classification: 
Document Page Count: 
Document Creation Date: 
December 20, 2016
Document Release Date: 
February 1, 2006
Sequence Number: 
Case Number: 
Publication Date: 
August 25, 1977
Content Type: 
PDF icon CIA-RDP79T00912A000700010009-3.pdf2.44 MB
25X1 Approved For Release 2006/03/17 : CIA-RDP79T00912A0007( 01Q0 Latin America NAL AND ITICAL ANALYST State Department review completed Secret 137 RP ALA 77-054 25 August 1977 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 25X1 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/1 , . ~ -RDP79T00912A000700010009-3 LATIN AMERICA 25 August 1977 Panama: On the Road to Ratification . . . . . . . . 1 El Salvador: Terrorist Activity . . . . . . . . . . 5 Argentina: Changes in the Human Rights Situation . . . . . . . . . . . . . . . . . 7 St. Kitts - Nevis: Fragmentation in the Caribbean . . . . . . . . . . . . . . . . . . 11 Brazil: Possible Shift in Technology Transfer Policy . . . . . . . . . . . . . . . . . 13 Colombia: Politics, Campaigns and the Presidency . . . . . . . . . . . . . . . . . . . 15 Birth Control vs. the Church in Brazil . . . . . . . 19 Venezuela: Oil Agreement Postscript . . . . . . . . 21 Chilean Payments Position: Breathing Spell . . . . . . . . . . . . . . . . . . . . . . 25 Brazil: Renewal of Protest . . . . . . . . . . . . 33 RP ALA 77-054 25 August 1977 Approved For Release 2006/03/1 ~E~IAZRDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECR ET Panama: On The Road to Ratification The treaty ratification debate began officially last Friday when Chief of Govern- ment Torrijos and major gov- ernment figures made speeches defending the accords to a receptive legislative assembly. Backstage, the government has pressured some groups into early support for the treaty and plans to warn government officials not to risk opposi- tion. The thrust of the gov- ernment's emerging public strategy is to picture the accords as the most Panama could realistically hope to achieve and therefore a major triumph. Chief negotiator Escobar's public threats against the US were given con- siderable international press; play, but were taken out of context; such explosive rhetoric runs counter to the primary Panamanian strategy. The Government Argument General Torrijos, along with his ministers for for- eign. affairs, education, and planning and two leading negotiators, addressed the legislative assembly on 19 August, each discussing an aspect of the agreements. Most pushed a similar argument--that the alternatives for Panama were to: -- Do without a treaty---and live with the reality of a US presence in perpetuity. -- Choose the path of violence--and sacrifice an entire generation of Panamanians. RP ALA 77-054 25 August 1.977 Approved For Release 2006/03/$TC IA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET -- Negotiate--and achieve the best possible terms, given the circumstances. In support of their decision and the new treaty, officials are highlighting such benefits as the total $345 million economic-military package and the $50-60 million annuity, while exaggerating such provisions as a US commitment to reduce its military presence. A newspaper recently published a map depicting the final lands and water agreement contrasted with the 1975 posi- tions of the two sides in order to highlight Panamanian gains. Responding predictably to the official arguments, the hand-picked legislative assembly endorsed the ac- complishments of the negotiators. Chief treaty negotiator Escobar has been the pri- mary public defender of the treaty and has drawn the toughest tasks--talking to student groups and defending the neutrality provisions. In addition to sounding the general government themes, Escobar has addressed his audiences with considerable candor, contending that great powers "intervene wherever they damn well please, with or without a (neutrality) pact." He has also in- vited critics of the treaty to attempt to dislodge the "gringos" themselves from the Canal Zone rather than spout rhetoric. Thus, although he did warn in his speech last Friday that Panama would take the path of violence if the US Congress did not approve the trea- ties, this was not--as international press accounts sug- gested--the major thrust of his remarks. On the con- trary, since the treaty agreement was concluded, Escobar has been the most outspoken advocate of the negotiating path. His "threat" can more properly be read as a do- mestic effort to flank at least some of the recent left- ist criticism directed at the government for its treaty concessions. RP ALA 77-054 25 August 1977 Approved For Release 2006/?$ :rCIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET Treaty Opposition The expected domestic opposition to the treaties has been quick to surface, although insufficient to change the opinion of most observers that Torrijos should be able to produce a plebiscite victory for the accords. Last week, a pro-government daily headlined critical statements by a prominent ultranationalist lawyer, the Independent Lawyers Movement, the far left- ist Revolutionary Student Front, the Christian Demo- cratic Party, and Panamanian exiles in Miami--all of whom were expected to oppose the new accord. . And Government Limits The publicity given opposition statements in a con- trolled newspaper was further evidence of Torrijos pub- lic commitment to permit debate, Intelligence Chief Noriega's orders a student emonstrations against the US are inappro- priate apparently still stands. A small group of left- ist students did enter the Foreign Ministry last week, but by the next day National Guard officers were sta- tioned on the scene to control access to the building. Thus far domestic debate--still somewhat handi- capped by the lack of official treaty texts--has gone about as expected. Public enthusiasm has yet to catch RP ALA 77-054 25 August 1977 25X1 25X1 Approved For Release 2006/03/1s7Ee -RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET fire--a crowd of several thousand gathered at the legis- lative palace to launch the treaty campaign last Friday, but most were gone by the time Torrijos spoke and, as usual, his performance was mediocre. Overall, however, the government has begun to sketch out an effective argument and appears to be willing to accept at least a few public lumps in the process of securing a majority plebiscite vote. RP ALA 77-054 25 August 1977 4 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SEC:R ET Approved For Release 2006/03/1 ?E&IA-RDP79T00912A000700010009-3 El Salvador: Terrorist Activity The left-wing People's Revolutionary Army (ERP) has claimed credit for placing 35 bombs in various cities throughout the country last Sunday morning. Government officials believe the well-coordinated effort was de- signed to goad the government into repressive action, thus negating any improvement the government may have been making in its human rights image. Although con- cerned over this increased activity, especially in view of the visit of the King and Queen of Spain in September, Vice President Astasio told a US Embassy officer that the government plans to prosecute any perpetrators it may arrest for criminal--rather than subversive--activity. Sunday's events were the most widespread and best coordinated efforts of terrorist groups to date. Twenty- seven of the 35 bombs exploded, six in the capital city and 21 in other major cities and towns throughout the country--all set to explode at approximately the same time. Property damage was minimal, and only six persons were slightly injured. The degree of coordination and the relatively minor nature of the damage indicate that the action was undertaken for publicity value and as a warning to the government of the terrorists' potential. Another group, the Armed Forces of National Resistance (FARN), received a bit of publicity as well as a fat ransom by kidnaping a prominent doctor. In addition to the ransom, the FARN demanded--and got--the publication of a manifesto on the front page of four leading news- papers. Thus far, the strongest public reaction has come from Minister of Defense Castillo, who said the violence is evidence that terrorist groups have no understanding of, or belief in, the democratic process they claim to promote. He called on the public to join forces to pre- serve social peace. The government has one suspect in custody and clues to the identities of others. RP ALA 77-054 25 August 1977 Approved For Release 2006/03/1 f~ ATRDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET Salvadoran officials are probably right in viewing the terrorist incidents as an attempt to make the govern- ment revert to repressive tactics. Even if the new ad- ministration's efforts to improve its image are mere window-dressing rather than a sincere commitment to change, it will probably try to avoid falling into the trap being set by the terrorists. RP ALA 77-054 25 August 1977 Approved For Release 2006/03/173Eg1#2DP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET Argentina: Changes in the Human Rights Situation The government reportedly has recently made a num- ber of changes in its countersubversive campaign that appear to be aimed at lessening human rights abuses and hastening the judicial resolution of some subversive cases. Nevertheless, the day-to-day fight against sub- version reportedly still involves serious violations of human rights. Several recent "disappearances" are evi- dence of what appears to be an increasing use of violence and illegal counterterrorist techniques by small groups within the military and security forces, apparently for internal political purposes. Such activity is more a .3 reflection of the regime's inability to control hard liners in the military than an indication that the gov- ernment condones the use of these techniques. The government has already taken steps to reduce blatant human rights abuses and to lessen the enormous margin for error tolerated in the official fight against i terror sm. More cases are being turned over to military and civilian tribunals, thus reducing the number of de- tainees in executive custody under state-of-seige pro- visions. This change marks only the increased use of the judicial system, however, and will not necessarily result in improved prisoner conditions. Seriously com- promised terrorists continue to be treated harshly and systematically eliminated. As a result of the significantly reduced capability of the terrorist organization, the government is treat- ing with special considerations, including reduced sen- tences, those arrested who are only marginally affiliated with subversives. Some detainees have been released, and others have been authorized to leave the country. The government also has published lists of those released and tried. According to US Embassy sources, a central- ized computer information retrieval system and new re- quirements for multiple prior clearances on suspected subversives have reduced the chances of "mistakes." RP ALA 77-054 25 August 1977 Approved For Release 2006/03/19ECeb -RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET The government is taking advantage of the reduced terrorist threat to assert more control over and to com- partment further the anti-subversive activities of its .2- forces. As the war against terrorism ebbs, however, the abuses and violence that are a part of inter- and intra- service rivalry, including schemes by some officials to discredit others, are becoming more apparent. The unsolved abduction of the Argentine Ambassador to Venezuela, the disappearances, among others, of a prominent labor leader in February and a number of law- yers more recently, probably are more attributable to 2 internal high-level politics than a result of the war against subversion. The backgrounds of most of the vic- tims offer little information to connect them with ter- RP ALA. 77-054 25 August 1977 8 Approved For Release 2006/03 t? R CIA-RDP79T00912A000700010009-3 25X1 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/11dR9'-RDP79T00912A000700010009-3 St. Kitts - Nevis: Fragmentation in the Caribbean . . > BEEIZE a. HONDIIAAS is/at IDna )THE ,,@AHAMAS Virgin Is. (U.K.) ?=Anegada !namos -aSt. Martin (Guadeloupe) r &w. is Virgin Is.\ .St. Barthelemy (Guadeloupe) ) St. Maarten, (Pto Rico) (U S }. A ~ry REPUBLIC "4 a VENEZUELA PA .'. .' ._... ... .T.._. Aruba j(Neth.) Curacao \(Neth.) Bonaire `(Neth.) ,/ ,$t. Vincent (U.K) r BARBADOS Via RENADA 'Tobago TRINIDAD ND TOBAGO VENEZUELA RP ALA 77-054 25 August 1977 (Neth) yt Kitts i - St. Kitts 'd Naws /Antigua (U.K.) - _ _ ., GV.adeioupe T Dominica (U.K,) Martinique (Fr.) I. Lucia +i (U.K.) Approved For Release 2006/03/'f~IA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : Qs QP79T00912A000700010009-3 St. Kitts - Nevis: Fragmentation in the Caribbean The 18 August referendum on Nevis produced an over- whelming victory for those who favor separation from the St. Kitts - Nevis federation. While the near unan- imous vote is not legally binding, it will complicate the attempt of federation Premier Robert Bradshaw to lead this twin-island British Associated State t i o n- dependence as a joint entity. Residents of Nevis have for a long while adamantly refused to become independent as part of the current federation preferring instead to revert to the island's prior status as a British colony. They are fearful of Bradshaw's autocratic tendencies and are convinced that, because of their islands' smaller size, they will con- tinue to be given second-class treatment. As it became increasingly clear this summer that Bradshaw intended to declare independence soon--perhaps before the end of the year--Nevisian leaders headed by Simeon Daniel felt compelled to call a referendum. Convinced that refusal would result in violence, Bradshaw--to the surprise of many observers--shelved his earlier threats to "crush" any attempt at secession by Nevis and allowed the refer- endum to be held. The referendum results are not only a defeat for Bradshaw but a setback to British efforts to avoid further fragmentation of the federation. In a classic example of the problems in achieving unity among the island entities of the Caribbean,* the secession of Nevis would mean the final dismemberment of a three- island federation that also included Anguilla until it effectively broke away from the other two islands 10 years ago. It now appears likely that only resort to force by Bradshaw, severe pressure from Britain, or a RP ALA 77-054 25 August 1977 SECRET Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET postponement of independence can keep St. Kitts - Nevis together. No doubt anticipating the outcome of the referendum, the leading opposition party in St. Kitts-- which would prefer to retain the present relationship with Britain--has called for a plebiscite on the ques- tion of independence for St. Kitts - Nevis. RP ALA 77-054 25 August 1977 Approved For Release 2006/03MQR:ECIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : C&~p$79T00912A000700010009-3 Brazil: Possible Shift in Technology Transfer Policy The Government of Brazil recently announced its willingness to accept bids from foreign minicomputer manufacturers to establish two joint ventures in Brazil. This is a departure from recent technology policies that have sought to minimize competition in the local computer industry and may also indicate a relaxation of Brazil's very strict technology transfer code. Such a relaxation is necessary if Brazil's indigenous industries are to receive the technical assistance they need from foreign firms. US firms may not get equal consideration because of political tensions. The Brazilian decision is the result of recent pres- sure by IBM to produce its System 32 small business com- puters at its wholly owned subsidiary in Sumare. Brazil has delayed approval of IBM's plans for several months. While the IBM operation will provide jobs and exports for Brazil and use a large percentage of Brazilian-made components, Brazil fears that it will further strengthen :[BM's already dominant market position (75 percent in- stalled value as of 1976). IBM would be too strong a competitor for Brazil's nascent minicomputer industry. The country was faced with the choices of restricting IBM, strengthening domestic industry through other for- eign technology, or forcing concessions by IBM. The decision to invite foreign firms to participate may be ineffective unless Brazil is willing to modify its technology transfer code, a requirement that any tech- nology purchased by Brazil must be effectively transferred to the Brazilian buyer at the end of five years. Such a transfer would include all evolutionary improvements made in the technology by the original seller, and, further, would give the Brazilian buyer the right to manufacture and export to other markets. Thus the original seller could be creating his own competition. In negotiations RP ALA 77-054 25 August 1977 Approved For Release 2006/03/17 : d C-P79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET earlier this year, Brazilian officials indicated they might even change the code to exempt certain kinds of technology. US bids may be at a disadvantage because of polit- ical difficulties between the two governments. I Brazilian efforts to minimize foreign participation in its computer market have been associated with the gov- ernment's desire to strengthen and protect its indigenous manufacturer of small computers, the Cobra S. A. Estab- lished in 1974, Cobra is a joint venture of the Brazilian Government's computer agency (Digibras), Brazil's largest bank, a small electronics company, and the British com- puter manufacturer, Ferranti. In addition to producing the small Ferranti Argus-700 minicomputer, Cobra earlier this year signed a technology transfer agreement with Sycor, Inc. to produce a small business computer com- petitive with the IBM System 32. While opposition to foreign participation in the computer industry has em- phasized minicomputers, the Brazilian definition of a minicomputer has been sufficiently general to include small business systems like the System 32. Unless Brazilian policies toward foreign technolo- gies are modified, it is unlikely that any of the truly capable foreign manufacturers will enter into the joint ventures. The past partnership with Ferranti, a project that was plagued with financial, design, and production problems, is an example of the results of such policies. In technology, Ferranti's minicomputer product line is among the least competitive available from foreign com- mercial minicomputer firms.. Ferranti's heavy involve- ment in military electronics and bias toward total sys- tems sales have made it historically a very unsuccessful commercial minicomputer manufacturer. RP ALA 77-054 25 August 1977 Approved For Release 2006/03// k -RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET z Colombia: Politics, Campaigns, and the Presidency As next April's national election draws nearer, the campaigns and political maneuverings of the several presi- dential hopefuls assume increasing urgency and importance. Although a number of independent and minor leftist party candidates are entered in the race, most attention will focus on the traditional Liberal and Conservative Party nominees--one of whom will govern Colombia for the next four years from the Palacio San Carlos, the Colombian White House. Until recently, the Conservatives seemed irreconcil- ably split between the factions of former President Misael Pastrana Borrero and Alvaro Gomez Hurtado. Both groups, each claiming sole legitimacy as the true Conservative Party, now have agreed to unite behind Belisario Betancur, a compromise candidate who may also pick up support from dissatisfied elements of the Liberal Party. The Pastrana wing of the Conservative Party will hold a national convention in October to name its candi- date officially and outline the campaign platform. Even if the Gomez faction decides to hold a separate conven- tion, the joint agreement to support Betancur's candidacy probably will not be jeopardized. Betancur, a leftist-nationalist who is not well dis- posed toward the US, is viewed by his contemporaries and constituency as an antiestablishment politician who be- lieves the government should be more responsive to the needs of the people. He has a complicated sense of social justice and a seemingly genuine concern for the under privileged masses of Colombia; nevertheless, he identifies closely with the privileged class into which he has worked himself. While Conservatives seek to mend their political fences, President Lopez' governing Liberal Party is tak- ing steps to eliminate the divisiveness and inertia that have thus far hampered the party's campaign efforts. In RP ALA 77-054 25 August 1977 15 Approved For Release 2006/03/4L7cRCwAA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET Contenders for 1978 Presidential Race Hernando Agudelo Villa Liberal Party Contender Belisario Betancur Conservative Party Contender Carlos Llcras Restrepo Liberal F'.iriy Contender Julio Cesar Turbay Liberal P,irty Contender RP ALA '7-054 25 August 1977 16 Approved For Release 2006/03/1 EIVIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 :sq4JP79T00912A000700010009-3 3 a major drive to achieve party unity among the four war- ring factions, former President Carlos Lleras Restrepo and party Mogul Julio Cesar Turbay Ayala--the leading contenders--met with Carlos Holmes Trujillo and Hernando Agudelo Villa to iron out details of an informal pact guaranteeing the nomination of a single candidate. Under the agreement the nominee will be the candi- date who receives the greatest number of popular votes in the February congressional elections, when Liberal congressional candidates will be identified with presi- dential aspirants. The nominee will then be proclaimed by a united Liberal Party national convention slated for early March. The political pendulum may be swinging away from Turbay, the party's front-runner in weeks past, to Lleras Restrepo, an accomplished statesman whose presidency (1966-70) was characterized by well-administered fiscal programs that slowed the rate of inflation. Turbay, who played a major role in the 1974 election of President Lopez, has the President's tacit backing, but the mutual support is merely a marriage of convenience maskinna longstanding personal antipathy between the two. EZ Espectador, Bogota's liberal morning newspaper, has come out in opposition to Turbay, stating that he is not qualified to manage the country's numerous and press- ing problems. At the same time, EZ Tiempo, the nation's leading and highly influential news daily, has endorsed Lleras, calling him the candidate with the clearest vi- sion of Colombia's future and the most capable person to deal with national problems. Most, if indeed not all, of the numerous problems that have plagued the Lopez administration are likely to be inherited by the succeeding president. Highlighting Colombia's worsening social and economic problems are 3 government corruption, student unrest, kidnapings, ram- pant crime, and guerrilla activity. A 30 percent annual rate of inflation, brought on in part by massive foreign revenues from windfall coffee exports and huge black- market profits from narcotics trafficking and contraband smuggling, has reduced the average wage earner's buying power to record lows. RP ALA 77-054 25 August 1977 Approved For Release 2006/03/17 : EI~ 1 6P79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET President Lopez, who twice during his tenure has had to impose a state of siege to quell massive public dis- turbances, is bracing for another national work stoppage scheduled for next month. The labor unions have called the strike to protest spiraling inflation, perhaps the most serious and. persistent issue to be faced by next year's new chief of state. The explosive social and economic situation, coupled with the political turmoil surrounding a campaign of heavy-handed, muckraking attacks on the incumbent as well as the contenders have given the military cause for con- cern. There is no evidence, however, of coup plotting by the armed forces. Indeed, most Colombians have a strong attachment to their country's democratic institu- tions, and political leaders will be careful to avoid giving the military any pretext for political interven- tion. In the months ahead, pre-election campaigning will continue to be highly partisan and stir controversy. Many of the enduring political animosities which will characterize that campaign are a vestige of the rigid coalition system of government that was in effect from 1958-1974. The purpose of the coalition, known as the National Front, was to end the bloody, internecine polit- ical warfare that raged throughout the 1950s. Under the Front system, which was designed by leaders of the two major parties, the presidency alternated for four terms and there was parity for both Liberals and Conservatives in all public elective bodies, executive departments, and administrative posts. Since the demise of the Front in 1974, however, new power blocs and political allegiances have formed in the House, Senate, department assemblies, and municipal coun- cils. As a result, the new president's ability to solve Colombia's pressing problems will depend on the extent to which he can garner support from among the political opposition likely to emerge in February's congressional RP ALA 77-054 25 August 1977 18 Approved For Release 2006/03/1. :~P. i1-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET In contrast, only $3.7 million is earmarked for the prevention of "high risk" pregnancy, and public advertise- ment of this program will not be permitted. As one presidential spokesman said, the government is seeking individual decisions rather than mass action. Doctors may now prescribe or provide free contraceptives in cases where age, health, mental problems, or socioeco- nomic family conditions cause complications, but they may not "coerce or encourage" the use of contraceptives. Abortion and sterilization are still illegal--except in a few cases. In an apparent attempt to head off public criticism, Health Minister Machedo observed that since Brazil is a Catholic country and the 'church condemns the pill, prob- ably only a few couples will decide in favor of family planning. This observation, however, has had little soothing effect on the Brazilian clergy, who have already voiced strong opposition to the program. While conserva- tive spokesmen predict that it will start Brazil on the path of permissiveness "from divorce to the pill to abortion to homosexuality," their more liberal colleagues assert that what is really needed is social justice along with profound reforms to alleviate the misery of the poor. The church apparently is concerned that the govern- ment will be far more flexible in implementing the new measures than current accounts suggest. It is estimated that between three and four million Brazilians are al- ready using contraceptives, and that the abortion rate may be as high as 2.5 million a year. Indeed, if Brazil's 3 economic growth rate fails to keep pace with population / / increases and per capita income begins to decline, pub- lic opinion could well shift to favor more government sponsorship of family planning programs. RP ALA 77-054 25 August 1977 Approved For Release 2006/86T CIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET Birth Control vs. the Church in Brazil Recent moves by the Brazilian Government to launch a limited family planning program and to encourage birth control in "high risk" pregnancies constitutes a sharp / break with the tradition of noninterference in family matters. So far, the reaction has been strongly emo- tional, particularly among Catholics, who--regardless of political orientation--have condemned the measure. Brazil's population, now approximately 110 million, is growing at an annual rate of 2.8 percent--faster than any other large country in the world, with the possible exception of Indonesia. Demographic experts predict that the population could double by the year 2000. While Brazil's food supply is adequate, serious overcrowding exists in some areas--especially in the sprawling industrial center of Sao Paulo, the economically depressed Northeast, and in certain frontier regions where the migrant popu- lation has grown rapidly and squatters have become a major problem. At the Itaipu hydroelectric site, thou- sands of Brazilian settlers have already poured across the Parana River to clear farming tracts in eastern Paraguay, virtually eliminating the border between the two countries. The uncontrolled movement of people in search of jobs and land is obviously a subject of concern to the Geisel government. Until recently, however, it has been unwilling to tackle the issue of population control, apparently because it fears that an almost certain con- frontation with the Catholic Church would only complicate its numerous political problems. The government's tentative moves in the name of social welfare are primarily directed toward reducing health risks to both the mother and child and, for the most part, do not address the population problem directly. Under the new plan, which will receive widespread pub- licity on radio and television, approximately $50 mil- lion per year for the next four years will be devoted to health care. RP ALA 77-054 25 August 1977 Approved For Release 2006/03/17 S flA RDP79T00912A000700010009-3 Approved For Release 2006/03/17: CIA-RDP79T00912A000700010009-3 Venezuela: Oil- AcTreement Postscript The petroleum agreement announced by Pr, .dent Perez on his official visit to Moscow last Novernbc,r is a dead letter., according to rdcent. reports. The "agreement in principle" with the 1J~ IR provided [or Venezuela to initially sell Cuba 10,000 ;~,rrels per day of crude oil, about 8 percent of Cuba's ":ude re- quirement. In return, amount of petroleum to Europe. the USSR would supply L similar some of Venezuela's cry 1-omers in r r< sr en erez and oviet, ea ers witness the signing ,W i oil ?rlreernent in Moscow in November 1976 When the aq.-eement. was announced with mu, :h fanfare by President Perez and then elaborately defened in December in an improvised "rancho-side chat" 'n the na- t:ion,, there were a number of major obstacles ; c-eventinq i._rnlDlementation o!= the deal. 1RP ALA 77 ...! E 4 215 August `~77 Approved For Release 2006/03/17.taCIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET Rising political opposition at home based on the promises that Venezuela would gain nothing from the arrangement, that the agreement did not represent a significant diversification of oil markets and that Venezuela would be required to ship some light crude to Cuba. The latter action would run counter to the government's stated policy to conserve light crudes and market more of its heavy crudes. The difficulty in overcoming the reluctance of Venezuela's West European customers to be- come overly dependent on Soviet oil and the problem of determining the equivalence of Venezuelan and Soviet oils of differing com- positions. Lead- ers of the governing Democratic Action Party have not been enthusiastic about the agreement or about Perez' single-handed conduct of the country's policy. The party's founder and president-for-life-, Romulo Betancourt, RP ALA 77-054 25 August 1977 22 Approved For Release 2006/Oai R CIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17E~ CI RDP79T00912A000700010009-3 has been particularly critical of the government's policy toward Cuba and anything that smacks of economic or po- litical support for the Castro regime. If the govern- ment intends to implement this agreement, it will have to release the text to the Venezuelan Congress for debate and approval, a step that the administration has resisted 25X1 until now and one that it is unlikely to take in the midst of a general election campaign. RP ALA 77-054 25 August 1977 23 Approved For Release 2006/03/175EfJIAARDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET Chile: Foreign Financial Gap 1973 1974 1975 1976' 19772 Exports, f.o.b. 1,267 2,244 1,570 2,077 2,000 Imports, f.o.b. 1,363 1,821 1,577 1,412 1,650 Net services and transfers -363 -626 -571 -612 -680 Current account balance -459 -203 -578 53 -330 Debt amortization -407 -367 -524 -556 -589 Financial gap -866 -570 -1,102 -503 -919 Medium- and long-term capital inflows 646 742 1,051 890 730 Direct private investment 0 -98 50 80 90 Official lending agencies 172 310 516 463 180 Bilateral debt relief 352 287 232 0 0 Private foreign credit 122 243 253 347 460 Net short-term capital and errors and omissions 251 -250 59 -42 0 Change in reserves 31 -78 8 345 -189 .External debt at yearend (including short-term) 4,218 4,849 5,225 5,725 5,776 Debt service ratio Due 36 24 41 33 35 Paid 11 12 28 33 35 ' Provisional. 2Projected. RP ALA 77-054 25 August 1977 24 Approved For Release 2006/03/ hfglb-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : %q- P79TO0912A000700010009-3 Chilean Payments Position,: Breathing Spell Two years of harsh austerity have reduced Chile's financial gap* to a manageable size. The military junta is now gradually easing austerity and allowing imports to increase by 15 to 20 percent this year. Although Santiago is counting on increased commercial bank and supplier credits, it will have to draw heavily on its small foreign reserves to cover this year's projected $900 million financial gap. The military government's ability to further relax demand management policies will be constrained by slug- gish copper prices and difficulties in obtaining more foreign capital. Availability of foreign funds depends partly on the junta's willingness to curb its human rights violations. The recent announcement that the gov- ernment has disbanded the National Intelligence Directorate (DINA) seems to be a genuine effort to curtail past abuses and modify the most: severe aspects of political repression. Given the prospects for aid, even with im- proved human rights policies, Chile's growth for the next few years will not support a sharp rise in the living standards of most of the population. The Allende Legacy and the 1975 .Crisis Chile's precarious payments position--in large part the aftermath of economic mismanagement by the Marxist regime of Salvador Allende (1970-73)--developed into a financial crisis in 1975. The crunch was brought on by the collapse of world copper prices and the due date *Financial gap is defined as the current-account deficit plus amortization of medium- and Long-term debt; shifts in short-term capital are not included. RP ALA 77-054 25 August 1977 Approved For Release 2006/03/17 : i iP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET Foreign Debt Service Payments Million US$ 769 796 Copper Exports and Earnings Million US $ Unemployment Rate Percent 14.5 Annual Average Central Government Deficit as a Percent of Expenditures 59.0 3 1. Estimated 2. Projected 3. Including large-scale deficit spending not reported in the official budget. RP ALA 77-054 25 August 1977 Approved For Release 2006/03/t cp#>:UA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET of large scheduled debt repayments, which pushed the current-account deficit to $580 million and the financial gap to $1.1 billion. The gap was closed only by post- poning roughly a third of the $730 million in scheduled debt repayments. To prevent an even larger deficit and ease the in- flation rate, the new military government--which had seized power in September 1973--imposed an austerity program. Private sector credit all but disappeared in 1975, while government spending was slashed by one fourth. The squeeze on domestic demand cut the volume of foreign purchases by nearly one fifth; real GDP fell 13 percent and industrial output plummeted 28 percent. From the viewpoint of the military government, such unpopular and wrenching changes could be installed only by tightening the junta's already strong political grip on institutions and individuals. Restoring Equilibrium in 1976 The effects of the austerity program carried over to 1976 when import volume fell another 13 percent to about the 1972 level. At the same time, Chile benefited from the recovery in copper prices and from rapidly ex- panding non-copper exports, the result of a vigorous export promotion campaign and devaluation of the peso roughly in.line with the country's triple-digit inflation. Total exports gained more than 30 percent in value, al- lowing a small current-account surplus and more than halving the financial gap to $500 million. By narrowing the gap, Santiago was able to meet scheduled debt repayments for the first time since 1971. Private foreign lenders, encouraged by the government's belt-tightening and improved ability to repay its debts, provided about a $100 million increase in long-term capital last year, more than offsetting a fall in official lending brought on by Chile's human rights policies. These funds, together with $80 million in direct invest- ment inflows, closed the financial gap and permitted a substantial increase in foreign exchange reserves. By the end of the year, reserves amounted to about four month's imports. RP ALA 77-054 25 August 1977 Approved For Release 2006/03/17 : (W JP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET The improved payments situation paved the way for the gradual easing of fiscal and monetary restraints beginning in mid-1976. Despite somewhat easier private credit and increased foreign demand, real GDP rose rose only 3.5 percent and industrial output recovered by a mere 6.5 percent. The strongest revival occurred in the copper industry where output last year averaged 1 million tons, up from 828,1)00 tons in 1975. The growth in economic activity barely put a dent in the record unemployment rate. The inflation rate, fueled by con- tinued large budget deficits and parallel monetary growth, averaged 174 percent for the year as a whole, compared with 341 percent in 1975. The 1977 Pa ents Situation We expect: Chile's financial gap to widen by more than 80 percent this year, to about $900 million. Al- though foreign sales are being bouyed by non-copper ex- port earnings, sagging copper demand and prices will prevent any increase in total. exports. Copper shipments this year will. total about 951,000 tons, down 6 percent from last year, while copper earnings are projected to slip more than 10 percent. At the same time, Santiago is providing enough re- flation to induce a 15- to 20-percent rise in imports, leaving a trade surplus of $350 million this year. The deficit in transportation, other services, and interest payments, together with debt amortization costs, will leave Chile with the estimated financial gap of about $900 million in 1977. The military government is relying on commercial bank borrowing and expanded use of supplier credits to finance the payments gap. Anticipating criticism and pressure from the US and other creditors for its human rights practices, Santiago has forgone negotiations for debt relief again this year. For the same reason, bor- rowing from bilateral and multilateral sources is off sharply. Funds from these sources will amount to less than half of last year's inflows. Direct investment will not grow much, partly because of bureaucratic de- lays in approving new projects. Consequently, a decrease in reserves of nearly $200 million probably will be re- quired this year. RP ALA 77-054 25 August 1977 28 Approved For Release 2006/03R/17 : CIA-RDP79T00912A000700010009-3 SECET Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET To keep import growth within bounds and maintain progress against inflation, the junta is staying with its plan to ease austerity measures only gradually. Real wages'this year are being allowed to increase only about 5 percent, leaving them still well below 1972 levels. On the budgetary side, Santiago's program calls for moderate tax reductions, small increases in social spend- ing, and some limited wage increases for government workers. In these circumstances, Santiago will run a budget deficit equal to 12 percent of government ex- penditures, 5 percentage points smaller than last year. Consumer credit is also being eased, but not very fast. On balance, we estimate that these measures will allow real GDP to rise by close to the junta's 6 to 7 percent target this year. Real output for 1977 will still be slightly below the 1974 level, unemployment will remain at about 12 percent, and inflation is likely to average about 100 percent. Given the authority of the junta, Chilean labor is in no position to protest the slow revival in its real income. For its part, the business community still feels it is better off under the present regime than under.the Allende government. Looking Ahead Unless world copper prices rise more than can reasonably be expected, the military government will be unable to further relax its austerity measures over the next few years and may have to tighten them again. Debt amortization payments will not begin to decline until after 1980, and obtaining external financing will con- tinue to be a serious problem. By the end of this year, foreign reserves will be down to two month's import cover and thus cannot continue to underwrite increased imports. Without higher copper prices, Santiago needs $800 million to $900 million a year in gross capital in- flows if the junta's target of 6 to 7 percent economic growth is to be met. Even though the junta seemingly is relaxing its human rights attitudes, Chile cannot count on filling much of the gap with bilateral or multi- lateral financing. RP ALA 77-054 25 August 1977 29 Approved For Release 2006/03/17 gIQJMDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET Substantial increases in direct foreign investment are also unlikely over the next few years. Thus, the outlook is for prolonged constraints on imports, slower economic growth, and continued high unemployment levels. RP ALA, 77-054 25 August 1977 30 Approved For Release 2006/03t ~ ,R E4A-RDP79T00912A000700010009-3 25X1 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 Approved For Release 2006/03/17: CIA-RDP79T00912A000700010009-3 RP ALA I ?34 2 Aia.qust 977 Approved For Release 2006/03/.117,,fiCMA-RDP79T00912A000700010009-3 Approved For Release 2006/03/157ECM4 RDP79T00912A000700010009-3 Albuquerque Lima has said that he thinks the letter helps President Geisel in his efforts to open paths to democracy in Brazil. The letter doubtless also gives impetus to the views of such individuals as former Min- ister of Industry and Commerce Severo Gomes, who re- cently published a book called Time for Change which argues that the military should return the government to civilians for economic as well as political reasons. The publication of the letter touched off an im- mediate public reaction, which was strongest in Sao Paulo, but was also evident in other urban centers. A spontaneous parade through the streets of downtown Sao Paulo by students attending the law school soon grew into a peaceful demonstration of some 7,000 people. Security officials did not interfere with the parade, claiming that they did not consider it a confrontation. Since then, however, the government has taken a harder line against public protests. Several students have been arrested, and earlier this week police in Sao Paulo used tear gas and billy clubs to disperse thousands of students. The government's response to the letter, however, has been both indirect and muted. President Geisel and his top advisers have avoided making any public statements, and the presidential press secretary has refused to comment. One of the law professors who signed the letter says that he now has information that the government's reaction will continue to be mild and that no one will be punished for collaboration. The failure to respond to such a challenge can only reinforce ?a growing belief in educated Brazilian circles that the Geisel government and the military high command are in- creasingly aware of the decline in popular support for their policies and are unsure of their future political course. Continuing and increasing pressure from in- fluential sectors of Brazilian society to return Brazil to democratic rule could conceivably bolster the chances of those civilian politicians, such as pro-government Senator Magalhaes Pinto and Minister of Education Ney Braga, who have already expressed interest in obtaining high political office--possibly the vice presidency--in the government that succeeds Geisel in 1979. It still seems highly unlikely, however, that the military-- Brazil's only cohesive political institution--will be willing to return any real measure of power to civilians by that date, I P ALA 77-054 25 August 1977 Approved For Release 2006/03/1 I -RDP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3 SECRET '1 2 3t Brazil: Renewal of Protest A letter signed by 93 Brazilian jurists calling for an immediate return to government under law is having a major political impact among educated and in- fluential Brazilians. It has apparently provided the spark for a renewal of the student protests that swept the nation three months ago and has focused national attention on similar expressions of opinion in recent weeks by retired military leaders and former government ministers who favor a return to civilian rule. The letter, which was read publicly two weeks ago at Brazil's most prestigious law faculty--located in Sao Paulo--was part of a series of events commemorating the 150th anniversary of the founding of law schools in Brazil. The initial drafting, however, began late last spring after President Geisel recessed Congress for 15 days and issued a series of major decrees now popularly known as the "April Reforms." The letter, which was un- doubtedly a direct response to Geisel's actions, pro- claims that the Constitution is sovereign and that no law or person can be above it. It also says that "secu- rity and development"--the slogan of the Geisel adminis- tration--is the slogan of totalitarian regimes. Political reaction to the letter has divided along predictable lines. Pro-government leaders have called it injurious, even claiming that it is of "Communist inspiration," while members of the opposition party attribute great political significance to it as "an appeal without hate to the nation." Several retired military officers who have recently urged publicly that the military return to the barracks have seen their comments thrown into high relief by the timing of the letter--which has become the front page story of national news magazines and is now being cir- culated throughout the country for signatures. One of the most supportive statements has come from retired General Albuquerque Lima, Minister of Interior under President Costa e Silva and known for his liberal views. RP ALA 77-054 25 August 1977 33 Approved For Release 2006/03/1 7 C3f-T DP79T00912A000700010009-3 Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009, 3 Secret Secret Approved For Release 2006/03/17 : CIA-RDP79T00912A000700010009-3