CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A025300070001-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 12
• Document Creation Date: December 15, 2016
• Document Release Date: October 7, 2003
• Sequence Number: 1
• Publication Date: September 25, 1973
• Content Type: REPORT

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Top Secret
Central Intelligence Bulletin
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c 204
25 September 1973
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25 September 197-3
Central Intelligence Bulletin
CHILE: Government inaugurates "national reconstruc-
tion." (Page 1)
EUROPEAN COMMUNITIES: Community officials foresee
dissension this fall over pace of economic and mone-
tary union. (Page 3)
GATT: Some views of pending trade talks. (Page 4)
JORDAN: Grant of amnesty to imprisoned and exiled
fedayeen not yet having desired effects. (Page 5)
AUSTRALIA: Loss of by-election will increase gov-
ernment's doubts about calling national elections.
(Page 6)
FOR THE RECORD: (Page 7)
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CHILE: The "phase of national reconstruction"
has officially been inaugurated, and the junta's
economic policy is taking shape. Despite continued
preoccupation with security, the new government is
concentrating on reviving production, controlling
government finances, and securing foreign credit and
investment.
Nationalized industries will remain in govern-
ment hands, but illegally seized enterprises are to
be returned to their owners. It is not yet clear
where the line between these categories will be
drawn, but the nationalized US-owned copper companies
will not be returned. The junta is anxious to re-
solve the compensation dispute with US firms, how-
ever, and US technical advice will be requested on
a contract basis.
Industrial workers repeatedly have been told
that their economic gains are secure and a profit-
sharing program has been promised. There will be
little tolerance of politicized labor activity, how-
ever, and the government is in the process of rid-
ding the state sector of leftist militants. There
have been no reports of widespread worker absenteeism,
and the regime claims that production in the facto-
ries and mines already is surpassing pre-coup levels.
The junta has announced a program to bring gov-
ernment finances under control in an initial step
to control inflation. This means that Chile's con-
sumption spree is over and that belt-tightening must
begin. The regime has frozen the money supply and
declared that public enterprises must become self-
financing. This can be accomplished only through
price increases. Price controls on agricultural
products probably will be lifted as an inducement
to increase output, and peasants on legally expro-
priated lands will be given individual titles.
These moves will bring higher.-prices initially,
but if the regime succeeds in sharply reducing the
public sector deficit and stemming the growth in
the money supply, inflation should eventually slow.
There are also likely to be strict controls over
25 Sep 73
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wages and expenditures, which would produce a reduc-
tion in workers' real purchasing power. This result
would be partly offset initially by an increased
availability of goods, but in the longer run, reha-
bilitation of the economy and the "preservation of
workers' gains" will to some extent be incompatible.
The junta wants to postpone the next meeting of
the "Paris Club," Chile's creditors, until a high-
level international commission can be put together
to prepare an impartial report on the nation's eco-
nomic condition. The government also hopes that a
scheduled Interamerican Committee for the Alliance
for Progress (CLAP) country report on Chile can be
completed in time for use at the meeting. In the
meantime, Brazil, less concerned with Chile's econ-
omy than with strengthening Brazilian influence, is
preparing to extend significant economic assistance.
Chile has "opened the door" to private foreign
investment, but the response may be slow to materi-
alize. Investors with a. stake in Chile may be will-
ing to return, but the junta will probably find it
considerably harder to attract new venture capital.
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EUROPEAN COMMUNITIES: Some EC officials are
concerned that the community may face a crisis this
fall over how fast to proceed with economic and mon-
etary union.
Germany, France, and the Netherlands--for vary-
ing reasons--want to delay implementing the union's
second stage significantly beyond the beginning of
1974. Paris in fact maintains that, contrary to the
general understanding, the EC summit last October
made no commitment to inaugurate the second stage
"automatically" next January. Moreover, the im-
probability that Britain and Italy will join the
floating band of EC currencies provides further
argument for delaying steps toward meaningful de-
velopment of economic and monetary union, including
provisions for closer policy coordination and a
start toward pooling monetary reserves.
Failure to overcome an impasse on this issue
could hold up progress on other important issues
such as a new policy for regional development. This
would include a community fund having important
financial and political implications for several
members--Britain, Italy, and Ireland in particular.
Failure to set up a regional fund, for example,
could be a severe blow to the already faltering
public support in the UK for participation in the
EC.
Despite the shaky outlook for further progress
in the monetary area--illustrated by the failure of
the Dutch to consult with their partners prior to
the Netherlands' recent revaluation--not all EC
officials foresee a necessarily gloomy scenario.
Enough matters of importance to the member states
are on the agenda this year to enable the EC to
reach agreement on a package that would preserve
a semblance of forward momentum. Moreover, the
need to show a common EC front in relations with
the US, as well as with the East, will be a strong
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incentive to avoid an internal crisis.
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GATT: The West German Economics Ministry feels
that the GATT multilateral trade negotiations will
get off to a slow start because of the vagueness of
the Declaration of Tokyo. The officials, neverthe-
less, expect that the imprecise wording on the link
between trade and monetary negotiations will make it
virtually impossible for any nation--presumably a
reference to France--to block the discussions on
monetary grounds alone. The ministry stressed that
actual bargaining would be stopped only if the US
Congress did not give the President negotiating au-
thority. Achievement of a final agreement, however,
could be threatened unless there is progress on mon-
etary reform.
French Finance Minister Giscard d'Estaing,
meanwhile, has approached his German counterpart with
an idea which, he implied, would increase the effi-
ciency of EC deliberations on trade negotiations.
Giscard raised the possibility of taking away from
the EC Council the responsibility for GATT questions
and giving it to a new EC committee of ministers.
This step, however, could reduce the role of the EC
Commission, which tends to modify extreme positions
of individual member states and proposes compromises,
thus increasing French leverage in EC decision-making.
In a committee of ministers, even the theoretical
possibility of outvoting a member state could be
eliminated.
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JORDAN: King Husayn has been able to manage
the unhappiness in his army created by the amnestying
of imprisoned and exiled fedayeen. The amnesty may
still not be enough to enable Syrian President Asad
to resume diplomatic relations with Amman or to pry
loose the suspended subsidy payments from Kuwait.
The amnesty order has infuriated many East Bank
Jordanians, inside and out of the army, who still
carry scars from the fighting with the fedayeen in
1970 and 1971. Some Bedouin shaykhs have been talk-
ing about collecting on old blood debts. Neverthe-
less, most of the army has appar accepted the
King's rationale for the amnesty
So far, only a few fedayeen have r c ed
back into Jordan in response to the King's offer,
after spending a day or more undergoing border se-
curity checks.
Damascus radio and press commentators and Pres-
ident Asad himself have welcomed the amnesty, but
Asad remains cautiously noncommittal about resuming
diplomatic relations at present. He may believe
that he needs more time or a more substantial gesture
from Husayn before he can overcome opposition from
the fedayeen and radical elements in Syria who oppose
rapprochement with Jordan.
Meanwhile, there is no indication that amnesty
has softened the position of the Kuwaitis. Their
first reaction to the amnesty was one of anger be-
cause it put them under pressure to release the five
terrorists who temporarily took over the Saudi Ara-
bian Embassy in Paris earlier this month.
25 Sep 73 Central Intelligence Bulletin 5
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AUSTRALIA: The government's loss of an im-
portant by-election will reinforce its doubts about
calling national elections in the next several months.
The contest on 22 September in the Sydney suburb
of Parramatta for a vacated seat in the federal House
of Representatives had been looked on as a major test
of the ten-month-old Labor government. Although by-
elections normally favor the opposition party, the
Liberals' margin of victory in Parramatta was un-
expectedly large. The Liberal candidate won a clear
majority, ruling out any need to count second prefer-
ence votes.
Local factors probably contributed to the Lib-
erals' margin. They spent heavily, by five to one
over Labor. Just before the election, Prime Minister
Whitlam announced plans for a second Sydney airport
that would put Parramatta squarely in its flight
path, a maladroit move that no doubt pushed some
waverers into the Liberal camp. The Liberals ap-
parently won the bulk of their vote, however, by
hammering hard on the inflation issue--of concern
to the national electorate--and one on which the
government had no good defense. Foreign policy did
not figure in the campaign.
The election results, which buttressed public
opinion polls showing a slippage in the government's
support, will give Whitlam pause before calling new
elections. He has considered going to the electorate
if, as expected, the opposition-controlled Senate
again rejects legislation first defeated last spring.
The government probably realizes that the bills on
which it is challenging the Senate for the second
time--mainly concerned with electoral reform, parlia-
mentary representation, and states rights--will spark
little interest in an eleCt-nratp more directly con-
Inarnal inflation.
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International Monetary Developments: The
strengthening o the French franc in European money
markets yesterday continues to reflect Paris' moves
against speculation last week. No large-scale in-
tervention was noted. The dollar was stable inst
all major currencies except the franc,
South Vietnam: In Military Region 2, the Com-
munists have overrun and destroyed a battalion-sized
Ranger outpost at Plei Djering in western Pleiku
Province. This is the first battalion-sized base
lost to the Communists since the cease-fire began
last January. The Communists may have used tanks in
the battle. The fate of the defenders--who have been
out of radio contact for two days--is not known. F_
Chile-USSR: The military junta informed Moscow
on 20 September that the visit of an Ugra-class sub-
marine tender to Valparaiso was to be canceled. The
junta's action preceded the USSR's suspension of
diplomatic relations with Chile by one day. The
visit, arranged before the coup of 11 September, had
been scheduled for 4 to 9 October. The next sched-
uled port of call for the tender is Callao, Peru,
from 17 to 22 October.
(continued)
25 Sep 73 Central Intelligence Bulletin
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