CUBA - A REAPPRAISAL OF THE SITUATION AND OF US POLICY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01676R000500160052-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 14, 2016
• Document Release Date: August 19, 2003
• Sequence Number: 52
• Publication Date: January 25, 1964
• Content Type: MF

Executive Registry
Approved For Release 2003/09/02 : CIW96P80B01676R00050016
25 January 1964
MEMORANDUM FOR THE ACTING DIRECTOR
SUBJECT: Cuba - A Reappraisal of the Situation and
of US Policy
1. This paper is for your information and is in
response to your memorandum of 14 January.
Where We Are
2. Castro's control of Cuba is based upon the fanatic
loyalty and discipline of a very small element of the popu-
lation. His domestic position has eroded during the past
year and he has had to resort to increasingly harsh
measures of repression in order to maintain control. (An
appraisal of Castro's situation and prospects prepared by
0/NE and coordinated within the Agency is attached as
Annex A).
3. Despite his problems within Cuba, Castro's pros-
pects appear brighter as of early 1964 than they did even
as recently as a few months ago.
4. This is largely due to several developments abroad
which have given him an important psychological and political
lift:
a. The increase in Cuban convertible currency
reserves (from $20 million to about $100 million
during the year) as r result of high sugar prices
on the world market.
b. The Soviet-Cuban trade protocol for 1964
and renewed Soviet assurances of substantial aid
and trade.
c. The British bus deal and the apparent
eagerness of Free World countries to trade with
Cuba on generous credit terms. This represents
an important political and psychological triumph
for Castro; its erosive effects are already
evident.
ECRET ~~
/0 /9 0: CIA-RDP80B01676R000500160052-5
 Approved For Release 2003/09/fA9 PHI
- 6768000500160052-5
.' ' SECRET ~`.
25X1
d. The recent events in Panama which, on
the one hand, will add zest and fervor to Castroite
activity elsewhere in Latin America, and, on the
other, will dissipate at least some of the salutary
effects within the OAS which followed the discovery
of the Venezuelan arms cache.
e. The revolt in Zanzibar, however large or
small Castro's actual role, will add to his stature
as a revolutionary with an appeal and an influence
extending beyond the confines of the Western Hemis-
phere.
25X1
Where We Stand
5. It remains the ultimate US objective to replace
the Castro regime with one compatible with US objectives
in Cuba and Latin America. To accomplish this, we are
attempting, by all means short of military force, to
create a situation in which Castro will be overthrown
from within, his capabilities for subversion elsewhere
will be weakened, and his Soviet ally will forsake him as
being too expensive and unreliable a client. In short,
our present objective precludes accommodation with Castro
and our present policy precludes the use of military force
to displace him.
Approved For Releas% Q9/ 2 : CIA-RDP80BO167 ROpg Q160052-5
 Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
Next 2 Page(s) In Document Exempt
Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
 Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
25X1
25X1
25X1
25X1
Chief ,
(DD/P)
A/
C STER L. COOPER
Assistant Deputy Director (Intelligence)
(Policy Support)
Attachment
Approved For Release%9/0 : CIA-RDP80B01676R00 500160052-5
25X1
 Approved For ReleaeE2~034QW/q: CIA-RDP80B01676R000500160052-5
23 January 1964
The Basic Economic Situation
1. Its dismal economic performance has long been a primary
weakness of the Castro regime. We estimate that Cuban gross
national product had, by the end of 1963, fallen 10 to 15 percent
below the 1958 level. Living conditions are depressed; the
economy, stagnant. Only massive infusions of economic aid from
the Bloc -- very largely from the USSR -- have prevented the
situation from becoming worse.
2, AdQini 3tration of the econou it overcentralized; zncL,,ero at
lower levels are not given sufficient responsibility; administrators
at higher levels cannot keep up with the flow of decisions demanding
their attention. There is a severe shortage of managerial talent
GROUP 1
Excluded from automatic
S-E-C-R-E-T downgrading and
declassification
Approved For Release 2003/09/02 : CIA-RDP80B01676R000500160052-5
 Approved For.Release 2003/09/02 : CIA-RDP80B01676R000500160052-5
S-E-C-R-E-T
and trained technicians. There is a persistent lack of spare
parts for all kinds of machinery and equipment. A shortage of
labor in Cuban agriculture has developed since the revolution,
while morale and productivity is low throughout the entire
labor force.
3. The regime is relying increasingly on coercion in
attacking these problems: it has begun to impose work norms
and standardized wages throughout the industrial sector, and
it is using a new obligatory military service program to round
up unreliables and assign them to military-disciplined labor
battalions for agricultural work. If the regime presses such
measures too far too fast and administers them dogmatically or
capriciously, the result may be a sharp increase in labor discontent,
a step-up in deliberate sabotage, and an outbreak of small-scale
worker demonstrations. In any case its relationship with the
labor force will remain a primary internal weakness of the regime
for some time to come.
Recent Trade Developments
4+. Despite this array of serious and continuing problems,
there are a number of indications of somewhat better prospects
Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
 Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
iq~
S-E-C-R-E-T
for the Cuban economy in the next year or two. The value of Cuban
exports to the free world was considerably larger in 1963 than
1962, almost wholly as a result of the sharp rise in sugar prices.
(The average price for Cuban sugar sold to free world customers
was about 6 cents per pound in 1963 compared with about 3 cents
in 1962.) This permitted the regime to expand its convertible
currency reserves from some $20 million in January 1963 to almost
$100 million in January 1964. The further rise will probably
permist Cuba -- despite Hurricane Flora and the relatively small
sugar crop in prospect -- to expand export earnings somewhat
further in 1964.
5. The Castro regime, with some cash in pocket and reasonably
good prospects for future export earnings, has additional bargaining
power and trade flexibility, as well as the wherewithal for some
increase in imports from Western sources. Cuba's improved foreign
exchange situation adds to the mounting pressure among Western
nations not only to expand trade with Cuba, but to extend Cuba
See Table 1, Direction of Cuban Exports; Table 2, Composition
of Cuban Exhorts; Table 3. Volume and Direction of Sugar
Exports; Table , Sources of Cuban Imports; Table 5,
Composition of Cuban Imports.
S-E-C-R-E-T
Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
 Approved For Release 2003/00/Q2 P80BO1676R000500160052-5
%mow --C--- %M
credit. In this context the timing, the magnitude, and the five-year
credit terms of the British bus deal represent an important break-
through for the Castro regime. The psychological boost it provides
is much greater than the economic importance.
6. The improvement in Cuba's trade position in the West has
been accompanied by a continuation of the Soviet commitment to maintain
its trade and aid to Cuba at substantial levels. The Soviet-Cuban
trade protocol for 1964, signed on 11 January in Havana, specifies a
trade turnover between the two countries 22 percent above that in
1963. This suggests that Soviet exports to Cuba -- about 40 percent
of which will be furnished on credit -- will be slightly higher than
the record level of 1962 and at least 10 percent higher than in 1963.
Moreover, the long-range trade agreement concluded during Castro's
current visit provides for Soviet purchases of large and increasing
amounts of Cuban sugar from 1965 through 1970 at six cents per pound.*
7. The improved foreign trade situation should enable the Castro
regime to put a brake to the economic decline of recent years. It
gives the regime a political-psychological lift and a rationale for
claiming that US attempts to isolate and impoverish Cuba have failed.
But gains in output are 1skely to be slow in coming, and improvements
in living conditions even slower.
* The USSR is to purchase 2.1 million tons in 1965, 3 million in
1966, 4 million in 1967, and 5 million in each of the years 1966,
1969, and 1970. This will help to ensure the Castro regime of
steadily increasing income from sugar exports, provided the regime'.
efforts to expand production are successful. The price of six
cents per pound is what the Soviets have been paying for Cuban
sugar since mid-1963.
- 4 -
Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
S-E-C-R-E-T
 Approved For-_Release 2003/09/02 : CIA-RDP80BO16766ROO0500160052-5
%0101 *aoo
S-E-C-R-E-T
Military Forces
8. There are no organized Soviet combat units left in Cuba,
and we estimate the number of Soviet military personnel at between
4,000 and 7,000. Most of these are associated with the air defense
system on which Cubans are being trained in substantial numbers.
It is probable, though not certain, that the Cubans will assume
control of the entire system, including the surface-to-air
missiles, by the middle cf this year. As Soviet training programs
are completed, most Soviet personnel probably will be withdrawn.
Meanwhile, the Cubans are continuing to receive from the USSR
frequent deliveries of ammunition, spare parts and some new
equipment, as well as such military-related items as trucks,
helicopters and light planes.
9. One capabilities of the Cuban armed forces have improved
during the past year as they have assumed control over a wide
variety of advanced Soviet military equipment. In addition, the
Cubans have created two special units in an effort to improve their
capability to cope with internal insurrection and exile raids.
However, the Cubans have not been able to prevent externally
initiated raids, which tend to keep alive the hopes of opposition
elements on the island. Guerrilla activity remains scattered and
uncoordinated though spontaneous acts of sabotage are common.
- 5 -
Approved For Release 2003k 0 '..%i - DP80B01676R000500160052-5
 Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
S-E-C-R-E-T
Political Matters
10. The regime's need to turn increasingly to coercion and,
more specifically, its actions over the past few months in nation-
alizing medium-size farms, in establishing obligatory military
service, and in pressing ahead with its work norm program, will
further erode its popular support. At present, however, there
appears to be no individual or group on the political scene able
to pose a serious threat to Fidel.
11. Castro's speech on 2 January, fifth anniversary of his
revolution, was unusually muted in tone in regard to the policies
of the US and to Cuba's revolutionary role in Latin America. He
spent considerable time explaining his support for the Soviet
policy of coexistence and indicating willingness to normalize
relations with the US -- if Washington is willing to make the
first move and accept his terms.
12. We believe that, at least in part, this speech reflected
the advice the Soviets have pressed upon Castro to exercise
restraint; he must see it as essential to maintain reasonably
close relations with the Soviet leadership because of his continuing
need for economic and military aid. We believe that he will also
Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
 Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
V "W S-E-C-R-E-T ~i.~
seek to demonstrate independence of action in various ways, partly
because this is his personal impulse but also because he is shrewd
enough to see that this helps to keep the Soviets generous. At the
same time, he will probably give high priority to efforts to establish
further trade arrangements with Western suppliers, trying to use the
deals already concluded to undermine the US effort to keep Cuba
isolated. This economic opening to the West almost certainly has
Soviet approval.
13. Castro's public posture and utterances with respect to
revolution in Latin America may vary from time to time in volume and
shrillness as his aim and Moscow's interests dictate. Nevertheless,
the basic rationale of his regime, and his own desire for future
glory, are keyed to the idea that the Cuba revolution is a precursor
for revolution in all Latin America. The mere existence of Castro
gives encouragement to revolutionary upheaval in other states of
Latin America, many of which are vulnerable to such movements.
Moreover, Castro provides training in doctrine and guerrilla warfare,
and he has furnished money, encouragement, organizational guidance,
arms and equipment to revolutionaries in the area.
14. We believe Castro's capability to initiate a leftist in-
surrection in other states is limited, but once such an insurrection
has begun, he can exploit and exacerbate it. His capabilities to do
so at least in the smaller states are slowly increasing. It is likely
that Fidel, during his current visit with Khrushchev, has cited Panama
as indicative of the kind of situation which should be exploited.
Approved For Release 2003/09/02.: gIA.RDP80B01676R000500160052-5
S-E-C-R-E-T
 Approved For-Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
'w.' C-0-N-F-T D-E-N-T-T A-L
Direction of Cuban Exports, 1958-1963 (F.O.B.)
(millions of US $)
1058
1959
1960 1961 1962
1963 (est
Communist Bloc
15
15
150 480 400
285
USSR
15
15
100 310 220
155
Communist China
negl.
negl.
20 70 90
50
Other
negl.
negl.
30 100 90
80
Free World Clearing
32
20
30 24 41
56
Morocco
15
14
18 6 20
30
United Arab Republic
negl.
negl.
1 9 8
9
Spain
17
6
9 8 8
15
Tunisia
negl.
negl.
2 1 5
2
Free World Convertible
687
605
44o 121 79
134
Ua
528
475
357 35 7
-
Canada
19
12
7 5 3
10
UK
45
26
18 13 18
31
France
7
7
12 1 2
3
Netherlands
15
8
11 4 3
15
Italy
2
1
1 negl. negi.
30
West Germany
6
11
9 2 5
3
Japan
45
31
16 21 32
18
Other
20
34
9 40 9
24
Grand Total
734
640
620 625 550
475
Approved For Release ( D, CA EfQjM676R000500160052-5
 Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
1601 C-O-N-F-I-D E-N-T-I .A.?L
Table 2
Composition of Cuban Exports, 1957-1963
(millions of US $)
1957
1958
1959
1960
1961
19
62
1963 (Est.
Sugar
656
594
494
500
540
.
430
400
Tobacco
48
0
55
50
39
25
20
Mineralsa/
49
44
25
25
333
25
35
Other
55
46
66
45
13
40
20
Total
808
734
64o
620
625
520
475
a Primarily n c el.
Table 3
Volume and Direction of Cuban Sugar Exports, 1958-1963
(thousands of metric tons)
1958
1959
1960
1961 1962 1.963 (Est.)
Communist Bloc
,21+9
274
2,342
4,823 3,689 2,200
USSR
188
274
1,577
3,303 2,112 1,200
European Satellites
11
0
215
456 615 500
Communist China
50
0
550
1,064 962 500
Free World
5,383
4,678
3,278
12587 1,441 1
P-00
Grand Total
5..,-63-1
4,952
z62o
5
I
6 410 5 130 X400
_
C -0-N-F-I-D E N-T-I A-L
Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
 Approved For Releas&1676R000500160052-5
Table 4
,,
Sources of Cuban Imports, 1958-1963 (C.I.F.) 1
(millions of US $)
1958
1959
1960
1961
1962W
1963 (Est.)J
Communist Bloc
negi.
negi.
126
511
64,
620
USSR
negi.
negi.
8o
310
420
385
Communist China
negi.
negi.
17
86
95
95
Other
negi.
negi.
29
115
130
140
Free World Clearing
13
9
21
20
20
24
Morocco
negi.
negi.
negi.
3
6
9
United Arab Republic
negi.
negi.
10
11
9
10
Spain
13
9
11
5
2
5
Tunisia
negi.
negl.
negi.
1
3
negi.
Free World Convertible
837
741
409
173
85
86
US
602
482
245
15
5
negl.
Canada
20
18
15
33
11
9
UK
29
47
23
15
8
8
France
10
16
12
6
2
7
Netherlands
7
9
8
12
9
14
Italy
12
9
6
4
2
2
West Germany
34
33
i6
13
6
6
Japan
6
11
7
13
12
4
Other
117
116
77
62
30
36
Grand Total
850
750
556
704
750
730
a. In converting from f.o.b. to c.i.f. values for Cuban imports.
standard factor of 10 percent of f.o.b. value for Free World countries
and 15 percent for Bloc countries was applied.
b. Does not include US ransom payments. If these were included, 1962
imports would be valued at $760 million and 1963 imports would amount
to about $780 million.
Approved For Release 2003/09/6!r3 CIA-RDP80BO1676R000500160052-5
 Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
v C-O-N-F-T D-E-N T-I A-L
Table 5
Composition of Cuban Imports, 1958 and 1960-1963
(millions of $ C.I.F.)
1958
1960
1961
1962
1963 (Est.
Food
170
145
148
152
175
Other Consumer Goods
161
33
40
35
44
Raw Materials and
Intermediate Goods
212
200
246
228
212
Fuel
85
78
70
69
73
Capital Goods
222
100
200
266
226
Total
850
556
704
750
730
T-4
Approved For Release 2003/09/02 : CIA-RDP80BO1676R000500160052-5
 Approved For Release 2003/09/02':;'MIARDP80B01676R0005001600
25X1
25X1
r
3. In the Ii, a
pyre ared in Ao bor
4..criptions of the Cuban political
has on the Cam future. 'rho mo should also
vol.u rie of trade between Cuba and the fr
ItAN . ,, C1: a puty OPirector
ant C aseeee - enat of We current Cuban situation and *W.-
. Cep policy.
ca)
1. In connection with the t ortl co ini 'restd tial revie of
t ;r.oaded c +uraes of action which the
2. I would like D:)/1 to
and other offices as ae
in Cu and its ? Ud4", with r c-t
am on in Cuba ebould be reactivated to provide a fresh reading o
proposed U. S. policies. This did involve Dtl working in close
t this project be co
25X1
Copies to:
'~'A ved F ro R
0
in about 1J) days
lease 2003/I02 A RDP80B01671R000500160052-5
e