THE NEW LOOK OF THE ONGANIA ADMINISTRATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R002000150004-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 12, 2016
• Document Release Date: January 3, 2002
• Sequence Number: 4
• Publication Date: June 28, 1967
• Content Type: MEMO

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SPECIAL
MEMORANIDUM
noARD or
NATIONAL ESTIMATES
The New Look of the Ongariia Administration
1~~~~`~ y ~Q,~ ~4~'~
secret
28 June 1967
No. 4-67
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C E N T R A L I N T E L L I G E N C E A G E N C Y
OFFICE OF NATIONAL ESTIMATES
28 .Tune 1967
SPECIAL MEMORANLUM N0. ~+-67
SUBJECT: The New Lock of the Ongania Administration*
In recent months the administration of Gen. Juan Carlos
Ongania (Ret.) has made an impressive start on resolution of
s~~me of Argentina's most difficult pol3.tical and economic prob-
lems. After an inauspicious beginning, Ongania has undertaken
a program of economic reform which is already winning both in-
ternational and domestic respect. He has responded to public
criticism, improved his cabinet, and now 'has a highly-skilled
group oi' economic advisers. The dimensions of the problems
still ahead are large, and for many there can be no quick or
painless solutigns. But there are grounds for hope in the fact
that Argentina, after three decades of floundering, now has a
reform-minded government, both determined to govern and possess-
ing the power to do so.
* This memorandum has been prepared solely by CIA. It has been
coordinated with the Office of Current Intelligence, the Office
of Research and Reports, and the Clandestine Services.
GROUP 1
Excluded from automatic
downgrading and
S-E-C-R-E-T declassificAtion
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I. AACKGROUND
Eroromic Prob:+.ems
1. For several decades Argentina has railed to achieve a
rate of economic growth commensura~~e with its natural and
human reaources.~ Since the removal of Peron in late 155,
Gross National Product (GNP) has increased at an average annual
rate of less than 3 percent. Over the last five years (1962-1966),
despite xecord harvests that spurred the economy to a growth rate
of S percent in two successive years, the average annual rate for
the period as a whole was only 1.7 percent -- about the same as
the rate of pop~ilation increase. '.>rne general stagnation of the
econou~r has been accomkanied by strong inf~.ationary pressures,
deriving mainly from large budget deficits caused by falling
revenues and the subsidies required by increasingly inefficient
state enterprises -- notably the railroads. Since 1961, annual
cost of living and wage increases have averaged 27 and 31 percent
respectively.
~ Argentina has an extensive and fertile agricultural area and
a sizable industrial base. Its hoLsogeneous population is one
of the world's best fed and clothed and the literacy rate is
high (some 90f).
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2. Domestic economic problems have also been reflected in
i:he e:sternal sector. Rising, requirements for industrial imports,
diminishing agricultural exports, and periodic flights of capital
have produced Large balance-of-payments deficits. 73~ose deficits
were financed by the accumulation of a heavy foreign debt and by
the reduction of foreign exchange reserves to perilously low
levels. The restrictions on imports reguired to maintain foreign
r~yments in recent years, in turn, have speeded the inflation and
inhibited economic growth.
Political Problems
3. Politically, Argentina has not yet recovered from the
decade of Peron (1946-1955)? Many Argentines attribute virtually
all their country's troubles to the deleterious effect of his
dictatorship, but no government since his overthrow has been able
to achieve aqy consensus on national goals and programs, and em-
body both the power and the will to govern. The Percaistas are
still the most unified political force in the country; with some
*~ Total foreign indebtedness reached $3e2 billion in 1863 and was
gradually reduced to $2.7 billion by the end of 1966. Gross
foreign reserves, however, continued to hover about ?the $200
million mark -- sufficient to cover only two months' imports --
until the devaluation in March 1967.
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35-40~ );percent of the electorate they would probably wan aqy
free';:,y' conducted national election and such important provincial
elec'~aons as those of Buenos Aires and Cordoba. The central
feai~~,~re of Argentine politics since 1955 has been merely negative:
the refusal of the military estabL.shment to permit the Peronistas
tc,~ recover effective political power. Meanwhile the economic and
p.~:lltical problems of Argentina have piled up, and caused each
~: c~ccessive government to flounder more ineffectually. I~'inally,
iu late June 1966, when the Illia admw~tnistration was sti7.l
struggling to get its budget for calendar and fiscal 166 past
an ctzatreperous Congress, the military intervened.
II. THE PRESENT ADMINISTRATION
~. Character of the Ongaria Government, The Ongania govern-
ment is a dictatorship whose ultimate source of power is the
collective leadership of the Army. Although it has preempted all
executive and legislative powers on the national and provincial
levels, it has used them with restraint. The press and the ,judicial
system function freely, and political opponents can criticize
official policies and actions. Ongan3a anal his military supporters
appear. determined, however, to retain power far as long as required
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to carry out their plans for the modernization of Argentina.
TYzus far Ongania has shcYwn lii;tle interest in restructuring the
country's political parties. Nor has he t,~ied to create an
official party to prov9.de a facade of constitutionalism for his
virtual monopoly of political power.
5. The Ongania administration started badl;,r, with a
heavy-handed effort to control disorders in the national univer-
sities. Police forces overreacted to provocation by university
stidents~ and many liberal as well as radical professors rc~.+igned~
depleting some faculties~of the National Una.versity of Buenos Aires.
Mat~pr of these factx].ty members have not returned. Later actions by
the gover:mient proved to be more sensible and successful: the
universities are now functioning under regulations which bar poli-
tical activity from the university buildings and grounds, give the
faculties control over university administratior~ and policy, and
11mit the role of students in university councils to that of ob-
servers. The extra-territorial status of the universities has
been removed, and requirements for retaining student status have
been tightened.
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6. Peronism still dominates the labor movement;, S,lhen
Ongania ~~ssumed powers however, the Peron.iat-controlled General
Confederation of Labor (CGT) had split into twa main factions,
one of which continues to be subservient to Peron himself. The
]Waders of the other group maintain only a nominal loy-alty to
Peron apparently behaving that he will never return to peer.
The administration has profited from this split and it has
further weakened labor resistance by granting wage and other
benefits to ';Bose unions which cooperate with it. On the other
handy the administration has dealt firmly with recalcitrant
unions by employing police and military frrces to contain 311egal
strikes, by taking over control of key unions and freezing their
funds, and by dismissing or refusing uo reemploy strik3.ng union
members and leaders. Thus far, these tactics have kept the
unions off balance and without an issue strong eno~zgh to brim
the workers out into the streets against the government.
7. I~ is clear that the Ongania government assumed office
with no clear idea how to go about stabilizing and modernizing
the econompr as promised and i?ts initial mo:~ths were spent trying
to decide upon the most effective path to follow. !m~:Pre were
successful moves against some obvious targets for change sual~ as
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the inefficient ana costly port system, the sugar problem in
Tuci.xmAn province, rind drawing up new worlc xules for the raiJ.-
roads. But little progress had been made by the end of 1866
in solving basic economic problems, and inflationary pressures
were stronger than before the revolution. At that point (late
Decemberj, Ongania fo.ced up to the need to change economists.
He installed a new minister of Economy and Tabor, Dr. A~lalbert
Krieger Vasena, an internationally respected economist who we
believe ins3s ted upon and received carte blanche to devise
economic reforms.
8. Within three monv'hs, Dr. Krieger?s new economic team
drew up a broad and complex grogram for financial stab~.lizat:~on
and economic development and moved quickly to invroduce a wide
variety of necessary -- and often unpopular -- reforms. In
March of 1867 a]inost all restrictions on international payments
azd t~~nnsfErs were lifted. At the sane time the peso was de-
valued by ~+0 percent in an attempt -- at least init3.ally suc-
cessful - - to reverse t$e flight of capitals encourage the
development of new exports, and attract foreign investment. 'die
goverrmient also has taken the initiative of discussing with the
United States an agreement to guarantee investments has signed
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new settlements with petroleum companies whose contracts had
been an~.ul].ed by the 21L~ta actninistration, and has drawn up a
code of laws encouraging foreign perticipation in the exploita-
tion of petxoleum and other mineral resources. Legislation has
also been issued to stiatu:!ate domestic iavestnent by pLoaiding
tax benefit~t far inves~tznent in both industry and agricu?lure,
revising the land tenure system, and liberalizing credit re-
quirements for imports of capital equipment;.
g. The government, moreover, has taken strong measures in
both the public and private sectors to combat +.he chronic 3nfla-
lion. These involve reduction of the budget deficit, freezing
wages of p;tblic and private employees, and limiting the opera-
tional deficits of the public enterprises. A drive for greater
efficiency througho~xt the government has been launched and, while
large scale dismissals are being avoided, the government is pre-
paring to transfer 150,000 surplus workers into more productive
employment. mo discourage the inflationa:r~~ mentality of producers
~ That the government already has succeeded to an impressive
degree in increasing investor confidence is evident in the
rejuvenation of the Euenos fires bolsa, where after years
of inactivity stock sates have zocimed and gu~;ernment bond
issttss have been widely oversubscribed.
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and retailers, the govermnent has threatened the use oi'price
ceilings, the freeing of specific imports, and other methods cif
forcing reduced costs and increased efdiciency, and has enacted
a price control law involving particularly stiff penalties. The
xecent decision by the leaders of the ~businesa community to
collaborate in a "voluntary" price control program indicates
that they do take the government's stabilization efforts seri-
ously.
Relations with the United Staten
10. The shaxp contrast between the alacrity with which the
US recognized the Castello Branco government in Brazil and the
delay in recognizing the Onga~a3a government raised the hackles
of some of the more nationalist members of the new adm3.nistration
in Argentina. Ongan3a, however; did not react to that delay, or
to unfriendly reporting by the US press, by whipF3ng up nation-
alist fervox. Instead, his administration has been reasonably
cooperative with the US; has stressed its anti-Communist orienta-
tion; and, at the same time, has made it clear that its policies
in any field will be made in Argentina by ArgEntines.
11. It is easy enoagh for Ongan~a to understand the general
US preference for constitutional governments bx~-ouEzht to power in
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freely contested elections. Indeed it was he, as Commander-in-
Chief of the Army, who held off military pressures against the
Illia administration for some two years -- as long as he thought
there wa,s atil]. any chance that it could accomplish even a ftw
constructl.ve steps toward the modernization of Argentina. But
the reality of political life in Argentina has repeatedly demon-
strated the inability of eluted governments to achieve the
modernization of the country. Ongania has suppressed much poli-
tical activity but has shown more respect for civil liberties --
not connected wi?!;h elections -- than have some constitutional
govex?n~~nents in Argentina end elsewhere in Latin America. Thus
far, ae has benefitted frcm widespread disillusionment in
Argentina wish the traditional political parties and their leaders,
and there he,s been no effective political opposition to his govern-
ment.
12. When the Onganl.a administration took power Argentina=s
prospects appeared 'bleak indeed. But the dP_monstrated G331ity of
that military dictatorship to respond to constructive criticism
is now one of the hopeful aspects of the Argentine situation.
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Moreover its courage in t3ktng the politically unpopular actions
necessary to implement its stabilization programs appears to
have won the confidence of important elements of the country's
business and financial community and of foreign observers as
well. When the present situation is compared with that of a
year ago, we believe it is clear that a corner has been turned
and that the goverment is now making noteworthy progress on
the task confronting it.
13. Ongan3a's further progress will also depend heavily
upon maintaining the support of key military leaders a:~d keeping
control over organi..ed labor. Although the basic antagonism
between leaders of the anti~Peronist military and of Peronist
labor makes the admiri.strationts relationship with each of these
elements a very tricky one, Ongan3a can also use that antagonism
to his advantage. Thus labor recalcitrance, late last year and
early this year, brought a closing of ranks in the military behind
Ongan3a. While indications of personal rivalry among ambitious
~ In recent weeks the Ongania administration has received $125
_ million from the International Monetary Fund, $75 million
from the US Treasury Stabilization Funds and two loans of
$100 million eac'~. fxom ::uro-pean and US banks, bosh, of which
were oversubscribed.
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military leaders persist, they have di,~n3nishod sharply since
Ongani.a began to take action on basic economic problems and
sha~~Qd that, at x,earri; in the short run, he could deal. effec-
tively with 7.abor.
14. This is not to say that an end to Argentinats prolonged
time of troubles is at hand. Much still needs to be done in the
economic sphere, and there are key factors such as weather and
world market prices which are beyond Onganiats control. At the
same time the administration must maintain its successful
record in dealing with the military leadership and organized
labor. For it is in these delicate fields of military and labor
relations that there is still the greatest danger of some: s7.ip
up by the ad~.nistration which could lead to its undoing.
15. The combination of ccntinued strong military support,
control over organized labor, bumper harvests, and fay orable
world market prices may all fall neatly into place. Tn that
event the chances would be excellent for Ongaz:ia staying the
course and restoring the Argentine economy to reasonable levels
of performance. '.i'here is, however, no realistic way of toting
up the odds on ouch a combination. And there is still the
danger that as a result of miscalculation by the administration
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or the opposition Ongani.a and his military supporters might
become much more authoritarian in their treatment of the
opposition. Newartheless, we conclude that under the p:e~ent
government there is more reason to he opt~,mistic, as to both
the short and longer-run i~turo of Argentina, than there has
been at any other time in the last three decades of Argentine
history.
FOR THE BOARD OF IJATIOIdAL ESTIMATES
SIIERMAN ISENT
Chairman
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