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March 1, 1985
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Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Economic War Directorate of Intelligence Cuba: Castro Declares ALA 85-10030 March 1985 -fix+ Copy 405 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Intelligence 25X1 Economic War Cuba: Castro Declares the Office of African and Latin American Analysis. It was coordinated with the Directorate of Operations. Comments and queries are welcome and may be directed to the Chief, Middle America-Caribbean Secret ALA 85-10030 March 1985 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret Cuba: Castro Declares Economic Warl 25X1 Key Judgments Cuba's mounting economic problems and Soviet criticism of Havana's Information available economic management probably are behind President Fidel Castro's recent as of 28 February 1985 emphasis on increasing access to Western markets, implementing austerity was used in this report. measures at home, and reducing tensions with the United States. The Cuban leader's statements over the last few months, as well as the hasty re- vision of Cuba's 1985 economic goals-aimed at boosting exports to the West, meeting trade commitments to the Soviet Bloc, limiting imports, and honoring Western and Soviet debt obligations-indicate that he is heeding Moscow's implicit warnings about future levels of economic assistance. Castro has called on all Cubans to wage an "economic war" against waste and inefficiency, and warned them that they will face continuing hardships for at least another 15 years. Castro's economic battle plan and the punitive action taken in January against several high-ranking party hardliners who seem to have opposed the policy shifts indicate a resurgence of more pragmatic economic planning in Havana. For example, Castro apparently recognizes that Cuba cannot afford the increased imports to stimulate long-term economic growth without expanding exports. Havana's ability to export, however, is limited by its dependence on sugar exports-its primary foreign exchange earner-and the weak world market for sugar. The Castro regime's new fo- cus on austerity and conservation measures probably will cause Cuba to fall far short of its 5-percent economic growth target this year, especially as energy rationing takes hold and cuts are made in construction and social service projects.-] The influence of the pragmatists appears to extend to other policy areas as well. They probably are counseling Castro that improved trade relations with the West will require a lowering of Castro's profile in subversive activities as well as an easing of political tensions with Washington. In our opinion, this could explain Castro's propaganda efforts since early January emphasizing his willingness to be more conciliatory toward the United States on a variety of issues, and his contention that the emigration agreement reached with Washington presages a general improvement in US-Cuban relations. Castro's campaign to project an image of responsibil- ity and moderation probably is the cornerstone of a broader campaign to reduce Cuba's isolation and deflect US pressure on Central America, as well as to locate willing trading partners-especially in Western Europe and Latin America. Secret ALA 85-10030 March 1985 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 By hinting that the emigration agreement with Washington is the start of a trend toward a general reconciliation, Castro appears bent on exploiting fears that a sudden breakthrough in relations with the United States will leave Latin American governments politically embarrassed and West European firms at a trade disadvantage. For their part, many Latin American leaders view upgraded ties to Cuba as an expression of their independence and Third World credentials, although they remain suspi- cious of Havana's intentions and are likely to be guarded in their association with Castro. Despite Castro's conciliatory overtures, we do not believe the new policy thrust portends a change in Castro's basic distrust of and antipathy toward the United States. Even in his most recent public statements, the Cuban leader reiterated his unwillingness to alter Cuba's relations with the Soviet Union, to renounce his commitment to revolution, or terminate his support to the Sandinistas or the Salvadoran insurgents Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret Key Judgments Growing Economic Pressures Little Improvement in Sight Pragmatists Versus Hardliners 4 Key Hardline and Pragmatist Personalities 13 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Figure 1 North Pacific Ocean sited States Gulf of Mexico 704528 (A04683) 3-85 Secret Costa Rica Jamaica Dominican Haiti Republic I Antigua St. Christopher'' ..andiBarbuda Caribbean Sea Cayman Islands (U.K.) and Nevis tF Dommicaa A St. Luciaa`. .~1 St. Vincent ands the Grenadine a`Gre Venezuela antiago IeTCuba Guantanamo (U.S. Naval Basel .Barbados nada rn dad,~and Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret Cuba: Castro Declares Economic Warl Growing Economic Pressures After two years of tightened economic austerity caused in part by debt rescheduling agreements with its Western creditors, Havana apparently gambled in 1984 that a burst of spending on imports and govern- ment construction projects would stimulate sustained economic growth. The Cuban leadership probably hoped that pumping up the economy would increase employment and eventually improve dreary Cuban living standards, and that this might soothe growing popular discontent and divert attention from its recent foreign policy blunders. By the middle of last year, however, it was apparent that unfavorable world markets for Cuban commodities and domestic eco- nomic bottlenecks were foiling Havana's recovery effort. At best, the costly experiment was producing moderate short-term economic growth, but at the cost of a rapid expansion of the hard currency trade deficit, and sharp criticism from Havana's Western Figure 2 Cuba's Trade Balance With Communist and Non-Communist Countries Trade with Communist countries Trade with non-Communist countries and Soviet creditors. We estimate that the real growth of the Cuban economy was close to 3 percent last year, far less than the 7.4-percent real growth claimed by the Cuban Government, which has traditionally ignored or un- derestimated the impact of domestic inflation.' Ac- cording to official statistics, growth was driven by a surge in the construction sector-apparently stimulat- ed by large government investments in transportation and city planning projects-and a 6-percent increase in industrial production. In reality, Cuba's economic growth last year probably was made possible only because of a sharp rise in imports that allowed a short-term boost in production. Earlier restraints on imports-applied in 1982 and 1983 while Havana grappled with foreign exchange shortages and two debt renegotiation exercises-were abandoned in 1984. According to Cuban data, im- ports as a percentage of national income rose from 34 percent in 1983 to 43 percent in 1984. During the first ' The US Interests Section in Havana estimates that the cost of living rose about 7 percent last year-almost 5 percentage points 0 1980 81 82 83 84a,b a Projected, based on trade patterns over the first 6 months of 1984. b Cuban trade with non-Communist countries is based on hard currency world prices, while most of its Communist country trade uses soft currency-negotiated prices that are frequently subsidized in Cuba's favor and do not reflect real market values. The result is a more favorable global trade balance than if Cuba conducted all of its trade at world market prices. half of last year, imports from the Soviet Bloc rose 19 percent while those from the West jumped 69 percent, probably largely the result of an expanded line of credit from Argentina and the resumption of govern- ment-guaranteed export insurance from Japan. Past Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Table 1 Composition of Western Imports by Country and Economic Sector for 1983 Total 964 8 100.0 Argentina 95 10.0 Canada 43 4.5 France 116 12.0 Italy 22 2.3 Japan 99 10.3 Mexico 27 2.8 43 4.5 123 12.6 37 3.8 Switzerland 37 3.8 United Kingdom 107 11.1 West Germany 75 7.8 140 14.5 Total 964 100.0 Capital goods 186 19 Consumer goods 64 7 Intermediate goods 670 70 trends and official Cuban policy suggest that more than half of the imports from the West consisted of raw materials and intermediate goods that would have 25X1 contributed directly to domestic growth. Little Improvement in Sight As 1984 drew to a close, Cuban policymakers were confronted by a series of unpromising economic events that probably convinced them that moderate econom- ic growth could not be repeated easily in 1985. Soviet economic assistance has leveled off in recent years and Cuban press reports indicate that, despite Havana's vigorous lobbying, Cuba received little as- surance of any real increase in aid from its Soviet and East European benefactors at the annual CEMA head-of-state summit in October. Nor was the outlook Table 2 Million US $ Soviet Assistance to Cuba Total economic aid 3,463 4,558 4,666 4,215 3,750 Development aid b 830 1,415 975 1,070 850 Trade subsidies 2,633 3,143 3,691 3,145 2,900 Sugars 1,165 1,366 2,580 2,740 2,800 Petroleum d 1,480 1,657 1,006 300 0 Nickel c -12 120 105 105 100 a Projection for 1984 is based on preliminary trade data. b Based on balance-of-payments aid necessary to cover Cuban trade Moscow, and public statements by Cuban and Soviet officials concerning the amount of development aid extended. This aid is repayable, but terms are highly concessional. S ugar an d n i c k e l su b s idi es are est i d mate as the difference betw een the price Moscow pays for these commodities and their world market value. The difference is considered as a grant. d The petroleum subsidy reflects the difference between the value of the petroleum purchased from the USSR and the value of these imports at world market prices. It is considered as a grant. for new lending from Western creditors bright. Offi- cial statistics released last fall indicated that Havana was falling far short of meeting yearend targets for hard currency trade and reserves set by official Western creditors as conditions to any further debt rescheduling. F___-] The short-term outlook for hard currency export earnings at the end of last year also indicated that Havana would be unable to fund increased levels of hard currency imports in the future. ? The world sugar price was continuing on its down- ward spiral and was projected to stabilize near the record low through much of 1985 owing, in part, to the disintegration of the International Sugar Agree- ment in December and massive world sugar stocks. Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret ? The inferior quality of Cuban citrus and contracts obligating Havana to ship the bulk of its crop to the Soviet Union and Eastern Europe were limiting short-term growth of hard currency citrus earnings. ? Despite Havana's expectations of increased nickel production. as new factories are brought on line, hard currency nickel earnings will be limited by a continued weakness in the world market price and by US agreements with Japan and several West European nations prohibiting the sale of steel con- taining Cuban nickel to the United States. Furthermore, with no promise of increased levels of energy shipments from the Soviets forthcoming, Ha- vana was doubtless realizing that maintaining its ability to resell surplus Soviet petroleum for hard currency would require strong energy-conservation measures to support the demands of new factories, particularly in the energy-intensive nickel sector. Havana's Economic Management Under Fire Havana's handling of its economic problems came under sharp attack from the Soviets last year. imports. Commercial and Western government credi- tors probably will make their concerns known as negotiations over the rescheduling of Cuba's 1985 debt get under way later this spring. Economic War Declared In recent policy addresses, Castro declared a "pro- found economic revolution" to be fought by all Cu- bans against waste and inefficiency. The Cuban Presi- dent announced the appointment of a high-level working group charged with reviewing the economic crisis and making emergency revisions in economic plans. Discussions are to be held in every workplace on the new economic priorities: ? Increase nonsugar export earnings to the West by at least 20 percent. ? Meet export commitments to the Soviet Bloc. ? Limit import spending. ? Honor debts from both Western and Soviet credi- tors. Havana has released only general information on the implementation measures that will be required to meet its new goals. Judging from Castro's recent speeches, Havana will attempt to generate increased hard currency earnings by developing and marketing nontraditional export products and by increasing the availability of Soviet-supplied petroleum products for resale on spot markets through stricter energy-conser- vation measures. Import expenditures are to be cut by the local production of import substitutes and by increasing domestic productivity and savings. For example, Cuban budget planners have warned that cuts in construction expenditures and trimming of some social service projects may be forthcoming. Cuba's economic performance was also being scruti- nized by Cuban economists and Western creditors. According to the US Interests Section in Havana, Cuban economists warned that the government's as- sertions regarding economic growth should be adjust- ed downward to reflect reality. Western creditors, kept relatively well informed of Cuba's financial situation through quarterly reports required under the terms of past debt reschedulings, could not have been pleased with Havana's free-wheeling spending on Cuban economists may well have run up against problems in detailing an implementation scheme; when taken together, Havana's targets are unrealistic and often contradictory. For example: ? Havana's overambitious plan to boost hard currency export earnings will be limited by the need to funnel exports to CEMA members to meet trade quotas, by Soviet insistence that Cuba concentrate on the production of traditional export products such as sugar, where Cuba has a comparative advantage, and by the difficulty of conserving energy for resale. Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 ? Despite the goal to limit total import expenditures, Castro has admitted that Cuba will need increased levels of Western inputs to production to support economic growth this year. ? With the uncertain outlook for export earnings, and barring substantial new trade credits, Havana prob- ably will have insufficient hard currency reserves with which to import necessary Western inputs. In our judgment, implementation of Castro's "war plan" will cause the country to fall far short of its announced 4.5-to-5-percent growth target for 1985. For example, planned cuts in government spending for construction and social service projects, as well as energy rationing, will dampen economic activity. In addition, Havana will have to push ahead with sugar production if it is to meet export commitments to the Soviets and maintain sales to hard currency markets. However, industry analysts report that even Havana has lowered its 10-million-ton target for sugar produc- tion next year, owing to the extended cane-cutting season last year, unseasonable rainfall, and a shortage of Western herbicides. The Cuban population will feel the brunt of the new austerity policies as the simultaneous drive to cut imports and increase exports reduces domestic con- sumption and as it becomes apparent that the produc- tion, as well as the importation, of consumer goods will become Havana's lowest priority. Castro's clear warning that Cuba will continue to face at least another 15 years of economic hardships is a severe blow to the long-suffering Cuban whose rising expec- tations have been fed by recent moderate economic growth and optimistic rhetoric. government polls re- vealed great dissatisfaction over housing, public trans- port, restaurants, and other services. New regulations to stimulate productivity-such as longer working hours and the relocation of workers from inefficient factories-are likely to add to popular discontent. In an apparent attempt to mollify the populace, Castro already has assured Cubans that there will be no decline in current living standards. Havana is likely to dangle the possibility of emigration to the United States under the recent bilateral agreement as a means of temporarily quieting critics.2 Havana also may loosen some economic controls, as it did recently with a new housing law that allows the private ownership and leasing of real estate, to assuage the population and help stimulate production without directly taxing government finances.F___1 However, new measures such as the housing law carry the danger of unleashing long-pent-up expectations within the populace for additional reform. These demands could lead to serious ideological conflict within the leadership. Civil disobedience is almost certain to increase, as it has in past periods of heightened austerity and shortages, and the regime may have to resort to increased repression when it needs to project an impression of governmental re- straint. Pragmatists Versus Hardliners The far-reaching remedial measures Castro has en- dorsed to meet the challenge that these economic pressures have placed on him suggest a revitalization of the influence of those individuals in the leadership who have usually argued for pragmatic policies to alleviate problems on both the domestic and interna- tional fronts. In policy deliberations, these pragma- tists, who are responsible for the day-to-day function- ing of the Cuban economy, must compete with the hardline element of the leadership for Castro's atten- tion. The hardliners, most of whom took part in the guerrilla struggle that brought Castro to power, head the military and internal security establishments and the ideological apparatus The competition between these two general elements of the leadership is not new, and, in our judgment, stems largely from the pressures that each official feels as a result of individual job responsibilities. We believe those in the security or ideology fields see permanent confrontation with the West as necessary to prevent ideological penetration and contamination, 2 The United States and Cuba reached agreement last December to return to Havana approximately 2,700 "undesirable" refugees and to allow up to 30,000 Cubans to emigrate to the United States annually.F__1 25X1 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret 25X1 25X1 and they apparently view "exporting" revolution as a defensive measure as well as an ideological necessity. Those who must ensure Cuba's economic survival, on the other hand, see increased contacts and trade with the West as imperative at this stage of Cuba's revolution and argue that the promotion of armed struggle contributes to Cuba's isolation and thus is costly economically. These job-related tensions have appeared in many policy areas. In the moral-versus-material-incentives debate that has continued off and on since the early 1960s, for example, the pragmatists claim that mate- rial incentives are still a necessary evil required to overcome worker apathy and boost productivity; but the hardliners insist that moral incentives are the only ideologically acceptable motivation if Cuba is to remain true to Che Guevara's ethic of forming the "new man." To cite another example, the pragmatists were successful in late 1978 in convincing Castro- over the hardliners' objections-that allowing Cuban exiles to visit their families in Cuba would prove financially rewarding for Havana, The pragmatists' predictions were borne out in 1979 as the flood of exile visitors enriched Cuban coffers by some $100 million, but, as the hardliners had warned, the exiles' obvious affluence was a major source of disenchantment for those who had remained in Cuba. This laid the groundwork for the massive exodus that took place the following year during the Mariel boatlift. As a confirmed revolutionary, Castro, in our view, clearly prefers the dramatic activism advocated by the hardliners, but economic reality, especially when rein- forced by pressure from Moscow, has caused him to pay greater heed to the pragmatists when major policy issues are being debated. This has resulted in policy swings of a cyclical nature as one group replaces the other as the predominant influence in the leadership. Cuba's current economic difficulties, cou- pled with Soviet pressure and foreign policy setbacks that embarrassed the hardliners-Grenada, for exam- ple-appear to have vaulted the pragmatists back into predominance. A measure of their success can be found in the ease with which Cuba's ideologically controversial housing law was promulgated last fall and approved in December by the National Assembly. Many of its provisions-such as those permitting the reemergence of landlords-almost certainly were op- posed by the regime's ideological purists. Similarly, Castro's decision in January to allow France to establish a cultural center in Havana was a means of adding substance to his stated intention to improve ties with the West, but it must have appalled those in the regime charged with preventing ideological pene- tration of Cuba. Castro appears to have ridden roughshod over those who exhibited a reluctance to accept even temporary ideological backtracking. Havana, for example, pub- licly announced that the party's Secretary for Ideolo- gy, Antonio Perez Herrero, was "released" from that post, as well as from his alternate seat on the ruling Politburo, at an unusual special plenum of the Central Committee on 31 January, presumably for resisting too strongly the changes Castro has been champion- ing. Two other hardline officials' were shifted to lesser posts at the same time and the plenum, accord- ing to the Cuban media, "fully approved and gave its highest evaluation of Fidel's untiring and creative activities" in the formulation and execution of foreign policy. The plenum's message is clear: Castro's deci- sion to heed those in the leadership who would give top priority to pressing economic matters enjoys the firm support of the country's highest political, body. Impact on Policy If past patterns hold true, the current predominance of the pragmatists among Castro's circle of advisers will have a major impact on Cuban policy in terms of tactics and focus, but not in ultimate goals. It has become clear from the pattern of Cuban policy over the past quarter of a century that the pragmatists' differences with the hardliners lie only in how to achieve those goals. Both groups are firmly united, for example, in their deep-seated antipathy toward the United States. Moreover, the hardliners continue to ' One, Orlando Fundora, headed the Central Committee's Depart- ment of Revolutionary Orientation and had ideological control of virtually all the Cuban media; he was subordinate to Perez Herrero. The other was Politburo member and Havana City Province party First Secretary Julio Camacho Aguilera, who was shifted to eastern Cuba as first secretary in Santiago de Cuba Province. Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Cyclical Swings in Policy Although we know little of the inner workings of the Cuban policymaking machinery, it is reasonable to assume that, in the guns-versus-butter type of deliberations, the pragma- tists and hardliners are pitted against each other for a share of the country's limited resources. It is clearfrom his actions over the years that, in weighing the advice of both groups during policy debates, Castro has favored the arguments of his old guerrilla comrades among the ranks of the hardliners. From 1959 through 1967, for example, when Castro had virtually no institutional restrictions on his exercise of power, he gave free rein to those who called for radical political, economic, and social measures to resolve Cuba's problems and pressed for a continuation of violent revolution throughout the hemisphere. This initial period of hardliner predominance saw large-scale national- izations of private property, the destruction of virtually all old institutions and the creation of new "revolutionary" institutions, unswerving antagonism toward the United States, and the launching of subversive operations through- out Latin America as well as in several colonies in Africa. Anyone who warned that these policies were detrimental to the Cuban economy or leading to Havana's diplomatic isolation went unheeded or was suspected of harboring "counter revolutionary" sentiments.0 The swing toward the pragmatists began in 1967 when the Soviet patience with Cuban behavior ran out. Cuba's almost indiscriminate promotion of violent revolution- without a single success-clashed head-on with the more realistic policies of various Latin American Communist parties and became a serious point of friction with Moscow as demonstrated by strong public statements from both sides. The Soviets also were critical of Havana's massive waste of their economic assistance and eventually brought pressure on Castro through Cuba's heavy dependence on Soviet oil. Moscow's pressure coincided with the failure of Che Guevara's subversive operations in Bolivia-Cuba's most embarrassing guerrilla defeat in nine years offruitless sponsorship of terrorism-and eventually convinced Castro that major changes in Cuban policy were long overdue. The period of pragmatist predominance lasted from 1968 to the late 1970s and featured the wholesale reorganization of the government, party, and mass organizations; the adop- tion of a new constitution; a 60 percent reduction in the manpower of the Cuban armed forces; and the holding of the party's first congress. In addition, a number of top military officers were shifted to key posts in the government to add discipline and organizational talent to the bureau- cracy. This resulted in the adoption of a number of measures-the militarization of much of the school system, for example-that sharply increased the regimentation of Cuban society. This period became known as the era of institutionalization.) In the foreign policy area, Havana greatly reduced its promotion of guerrilla warfare and made a major effort to bring its policy in line with that of Moscow. Cuba's broad campaign to break out of its diplomatic isolation paid off as formal ties were established with several dozen coun- tries. Relations with Moscow, at a low point in 1967, improved dramatically and Cuba became a member of the Council for Mutual Economic Assistance. Castro's efforts to woo the Third World also were rewarded and he became chairman of the Nonaligned Movement.0 The performance of the Cuban military establishment in Angola beginning in 1975, and later in Ethiopia during the Ogaden campaign, however, served to redeem the hard- liners-as well as impress Moscow-and by 1978 they apparently had convinced Castro that the time was ripe for a dramatic increase in the promotion of armed struggle. This resulted in a major guerrilla support operation for the Sandinista insurgents in Nicaragua, involving Havana's shipment of more arms and supplies than it had provided to any guerrilla group during the 1960s. The victory of the Sandinistas returned the hardliners to the predominant position in the leadership and led to greater Cuban involve- ment in El Salvador, Colombia, and Honduras in subse- quent years. The Grenada intervention in October 1983, however, put the hardliners'fortunes again on a steep downhill slide. the performance o t e Cuban military detachment in Grenada was so bad-in Castro's eyes at least-that the detachment's personnel were cashiered on return to Cuba and sent off to Angola as common soldiers to redeem themselves in combat. So outraged was Castro over the defeat that the Interior Ministry's chief of foreign intelligence, one of the regime's top military officers, was dismissed and the chief political officer of the armed forces, an alternate member of the party's Political Bureau, was reassigned. Moreover, the hardliners' efforts to exploit the revolution in Suriname failed as Colonel Bouterse expelled virtually all Cubans from the country; Cuba's military involvement in southern Africa seemed threatened as Presidents Machel and dos Santos opened negotiations with South Africa; and the trend in Central America seemed to turn against Cuba and its insurgent allies. It was again time for the pragmatists. We believe Soviet pressure played a key role in the current resurgence of the pragmatists just as it did in 1967. Moscow's determination to halt the ever-ballooning cost of its investment in Cuba, coupled with Cuba's own deterio- rating economic position, appears to have precipitated a reordering of priorities to place major emphasis on econom- ic matters and a downplaying of support for violent revolu- tion in Latin America. 25X1 25X1 25X1 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret wield considerable power by virtue of their positions in the party and government, and they will take advantage of any opportunity to regain lost ground. As has occurred before, Castro will temporarily pay them less heed when he seeks the counsel of the members of the leadership, but we expect he will again turn to them and give them freer rein if the pragmatists' policies fail to ease tensions with the United States and alleviate Cuba's economic pres- sures. The advice that Castro is now receiving-and heed- ing-from the pragmatists seems to be much the same as that which they offered during their previous period of predominance in the 1970s. Havana thus is placing great stress on developing diplomatic, com- mercial, and cultural ties with other countries (except- ing, of course, political pariahs such as Chile, Para- guay, and. South Africa) in a behavior modification program aimed at developing new markets and in- creasing Cuban exports. To promote these ties and, in the process, achieve Havana's economic goals, Castro has donned the cloak of peacemaker and is relying heavily on his own formidable persuasive skills to refurbish Cuba's-and his own-image in Western Europe, Latin America, and the United States. Exud- ing charm and sincerity, he has already been able to convince a steady stream of Western visitors to carry the message abroad that he is ready to negotiate virtually any differences Cuba may have with any 25X1 country, especially the United States.F__1 Former Chancellor of West Germany and President of the Socialist International Willy Brandt, for exam- ple, came home from a visit to Havana last October 25X1 with the clear impression that Castro would like to free himself from his current dependence on the Soviet Union, according to a discussion Brandt had at our Embassy in Bonn. Brandt said that Castro denied he was a Communist before the revolution, claiming he was persuaded by events that Communism was the proper course to take. The record shows that Castro has used this bait effectively with other West Europe- an leaders, feeding unrealistic hopes of weaning him away from the USSR and perpetuating the myth that Cuban-US frictions are solely the result of Washing- ton's intransigent hostility. More recently, Helmut Schaefer, a deputy in West Germany's Parliament and international affairs spokesman for the Liberal Democratic Party, spent a Figure 3. West Germany's Willy Brandt was only one of several West European visitors to get the red-carpet treatment in Havana during the Cas- tro regime's current drive to expand diplomatic and commercial relations. week in Cuba in mid-January and told the press that Havana was obviously seeking greater independence from Moscow and wanted a dialogue with the United States. Although his scheduled meeting with Castro was canceled when Castro abruptly decided to attend the inaugural ceremonies in Nicaragua, Schaefer met with Vice President Rodriguez and other high-rank- ing spokesmen for the regime and, judging from his comments to the press, came away convinced-de- spite Cuba's obvious economic problems and Castro's public pledges to meet his trade commitments to Eastern Europe-that Havana is ready to increase trade significantly with the West at the expense of the Eastern Bloc.'I In our opinion, Castro's politicking in Managua in January is probably a foretaste of what Cuban behav- ior will be like at least for the rest of this year. ' This claim, of course, contradicts the long-held-and, in our estimation, unchanged-Cuban position that any increase in trade with the West will not involve a shift in trade from the Soviet Bloc. Schaefer's interlocutors are engaging in misleading semantics and are taking advantage of Western hopes of enticing Cuba back to the West because they want to encourage greater Western contacts and openness with Cuba. What they mean, in reality, is not that Cuba's trade with the Bloc will decline but that the Bloc's share of overall Cuban foreign trade will be less than the current 85 percent. F_ Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Judging from his statements as well as his overt efforts to contact a broad range of personalities then visiting Nicaragua, Castro wanted to use his trip to Daniel Ortega's inauguration to project an image of responsibility and moderation. The subsequent com- ments of the people he talked with suggest that Castro favorably impressed a number of observers. Accord- ing to reports from several US diplomatic missions, for example, in a private meeting that he and Vice President Rodriguez had with three of the four Conta- dora foreign ministers, Castro chided the Nicara- guans for adopting a hard line and pledged to do whatever the Contadora group wanted to assure the success of the process. These reports indicate that the three ministers came away convinced that he had taken a constructive stance and would use his influ- ence to moderate the Nicaraguan position. In addi- tion, his meeting with British Labor Party leader Neil Kinnock in Managua, according to the US Embassy in London, helped to ensure the full and generally positive coverage that the British press gave the Nicaraguan inaugural ceremonies, and in a long meeting with Guillermo Ungo of El Salvador's Revo- lutionary Democratic Front, according to a source of our Embassy in San Salvador, Castro advised him to seek an "alliance" with Salvadoran President Duarte. Outlook Castro's recent statements and the broad effort he has set in motion over the past several months indicate he is seriously attempting to address his economic prob- lems. He appears to be placing great hope in an opening to the West as a means of alleviating Cuba's mounting economic pressures. He seems convinced that, if Cuba is to increase exports, attract more tourists, and send surplus labor abroad for hard currency, Havana will have to adopt a posture of appearing more responsible in its international behav- claims the Pope has been invited-as well as trips abroad by Castro, Vice President Rodriguez, and other top Cubans who can sell Havana's new image convincingly. On the defensive ever since the Grenada intervention, Havana will continue to place increased emphasis on expanding its diplomatic, commercial, and cultural relations, particularly with the countries that hold some promise of providing Cuba with economic relief, and this will require the Castro regime to behave in a manner that will lend substance to the new image of respectability that is being projected. Support for insurgents in Central America will continue, in our judgment, but Havana is likely to be reluctant to promote major new "armed struggle" undertakings unless they are especially promising or are aimed at a government that is generally held in international disrepute. A similar pattern of restraint occurred during the previous period of pragmatist predomi- nance in the early 1970s. Diplomatic reporting over the years has indicated that leaders in some Latin American countries that do not have formal ties to Cuba have always feared that they will be caught short by a sudden breakthrough in the Cuban-US relationship. The Cubans, to "stampede" such countries into establishing formal ties, will con- tinue hinting-as they have already following the bilateral agreement on the Mariel excludables and emigration from Cuba-that a reconciliation may be developing rapidly. The Cubans will probably also use the same ploy in the area of foreign trade, hoping to attract otherwise reluctant businessmen eager to pre- empt potential US competition. To buttress their case, they are likely to give wide press play to any state- ments by US businessmen or other US notables suggesting that relations are, or should be, on the mend. ior. Apparently it has begun to do so~ As part of his attempt to pull Cuba out of its economic doldrums, we believe Castro will continue to place heavy emphasis on personal diplomacy in which he can impress important foreign figures with his sincerity, statesmanship, and reasonableness. This probably will entail many more invitations to visit Cuba-Argentina's President Alfonsin has already been invited, according to press reports, and Castro Cuban officials will not simply limit their attention to foreign government officials. Special care will also probably be given to cultivating groups positioned to influence policy in their homelands. Havana, for example, has a campaign already well under way to Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret Table 3 Cuba-South America: Scope of Relations Diplomatic Initiatives Support to Subversives Argentina Full relations at ambassador level; political ties correct but not Havana continues its support to the Monto- warm; commercial ties growing. neros and the People's Revolutionary Army, but apparently is advocating a nonviolent path for now. Bolivia Relations at charge level; Siles's domestic problems probably Cuba provides limited training and funding to rule out any change before elections this summer. radical groups, but apparently playing down its support to avoid providing ammunition to Siles's opposition. No relations; slight chance of full relations being established Little or no activity. this year; commercial relations more likely but still not assured. No relations. Cuba continues actively supporting several leftist groups with funding and training; Ha- vana advocating armed revolution to-oust-the government. Colombia No relations, but Castro and President Betancur have developed Cuba continues to provide training and possi- personal working relationship. Restoration of relations could bly arms to the M-19, but Castro apparently occur this year, but there is strong domestic opposition. advising them to limit their terrorist activities for now. Full relations at ambassador level, but President Febres- Cuba provides training and funding to two Cordero cool to Cuba. radical leftist groups, one of which has in- creased terrorist activity over the last year. Relations at charge level; likely to be raised to ambassadorial Havana apparently has no contact with the level if current favorite-a center-leftist-wins upcoming elec- Sendero Luminoso guerrillas. tion. No relations; full relations at ambassadorial level expected after Castro maintains contact with, and support to, inauguration of new Uruguayan civilian government. Tupamaro guerrillas, who are mostly in exile, but apparently not involved in.supporting antigovernment activity in Uruguay. Venezuelan charge in Havana, but Cuba has no official repre- Little activity. sentative in Caracas. Full relations could be restored this year, but bilateral problems persist. enhance its standing among foreign religious repre- restrictions on religious practices that have hampered sentatives. This January, a delegation from the US church groups in Cuba for more than two decades. Bishop's Conference, including two archbishops, met 25X1 in Havana to discuss aid for the Catholic Church in Cuba and ways to improve Cuban-US relations, Other groups and individuals in the United States- according to press reports. In addressing the US journalists, businessmen, politicians, academics-will delegation, Vice President Rodriguez called for probably also be invited to Cuba in the expectation "peaceful coexistence" between Catholics and Marx- that they will return home gratified for the'red-carpet ists and openly admitted the group's propaganda treatment they have received and ready to plead-the usefulness. In our judgment, Castro's sudden "toler- ance" toward religion is wholly tactical; it will be pursued only as it contributes to a positive image of the regime, as evidenced by his failure to loosen the Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 case for a less hostile relationship. Ever since the Grenada intervention in 1983, Castro has been con- cerned about improving the US press coverage of Cuba. He seems determined to create a constituency in the United States that will serve as a restraining factor in Washington's Central America policy and will promote expectation of great economic benefits for the United States in restoring commercial ties with Havana. Elsewhere, we believe that Cuba will try to address its economic problems directly by increasing its efforts to export surplus labor for hard currency. Castro's sug- gestion of years ago that Cuban workers go to Siberia to cut timber may yet come to fruition. He probably also entertains hopes that Cuban labor can be export- ed to Iran and Iraq once the war there ends, and, despite the odds, he may continue to seek a peacemak- er role in that conflict as a means of enhancing his prestige in the Third World as well as for economic reasons. A new urgency will probably be added to expanding the tourist industry in Cuba, which will require significant investment in hotel construction and relat- ed facilities. The two Cuban airlines, Cubana and Aerocaribe, may look for additional aircraft to maxi- mize the profit from the flow of tourists. In addition to a drive to boost exports, Havana will also increase its efforts to sell services abroad; Cuban commercial representatives in Western Europe, for example, act as purchasing agents for Angola, and Cuban front companies do business in more than a dozen countries, have been hints in recent speeches that the armed forces will have to share economic cutbacks along with the civilian bureaucracy. Implications for the United States In our judgment, the economic pressures Castro is now facing will not be sufficient to bring about any breakthrough on the two key policy issues: relations with the Soviets and support for foreign revolutionary movements. Abandoning ties with Moscow would be suicidal for the Cuban economy and the military establishment, and abandoning foreign revolutionary movements would be a betrayal of the very core of the philosophy of Castroism. Indeed, it is largely Soviet pressure that is influencing Castro to make the cur- rent policy shifts, and the direction he is now taking appears to have gained Moscow's blessing and helped the bilateral relationship recover from the period of coolness it experienced in mid-1984. As for halting arms shipments and other support for guerrillas, Castro recently told Washington Post editors "if that is the price for improved relations with the United States, we cannot pay that price." He has maintained since the 1960s that these two issues involve immuta- ble principles of his revolution and thus are not, and never will be, negotiable. He reaffirmed this position during his recent lengthy interview on US television, and his chief of policy toward Latin America, Manuel Pineiro, bluntly admitted to a visiting US official in February that Cuba continues to support-with arms, equipment, and training-insurgents in El Salvador, Guatemala, and Chile. Regardless of the exact mix of economic and diplo- matic moves, if this period parallels the last era of pragamatist predominance in the 1970s, there will be a shifting of top military officers to the civilian sector to bring to the bureaucracy much-needed discipline and administrative talent. There are already some tentative indicators that such changes are in the offing for senior military personnel. We believe they are intended, at least in part, to make headroom for young professionals in the military establishment as well as to increase civilian regimentation-the latter was a major feature of the pragmatists' policy in the late 1960s and early 1970s. Although there is no evidence that the regime is considering military per- sonnel cutbacks of the magnitude of that era, there This is not to say that Castro would not take a more judicious approach to launching new guerrilla opera- tions in the region if the economic equities in his relationship with the United States were enhanced. We believe, for example, that a restoration of trade with the United States would give him a vested interest in more acceptable international behavior. Moreover, popular expectations certain to be fueled by a resumption of trade would increase the domestic cost to Castro of taking some precipitate action that was likely to cause Washington to reinstitute the "economic blockade." A resumption of trade would also enhance the position of the pragmatists in the Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret leadership and create a constituency that would have a vital interest in maintaining improved ties. This almost certainly would not deter Castro from involve- ment in some especially promising new opportunity for subversion-against Pinochet in Chile, perhaps, or Stroessner in Paraguay-that might arise, nor would it prevent him from meddling in such ways as financ- ing electoral candidates or training trade union cadres in how to gain influence; but we believe it would increase his.reluctance to promote "armed struggle" where success is uncertain.) The pressures on Castro will probably make him more amenable to negotiate solutions to other, less critical bilateral matters-a new antihijacking agreement, perhaps-and to be more flexible on multilateral issues. On Central America, for example, we believe he now sees negotiations as a means of preserving a flagging insurgency in El Salvador and buying time for the Sandinistas in Nicaragua. In addition to providing him with a veneer of statesmanship, negoti- ations, in our opinion, are appealing to Castro because they hold the promise of achieving international legiti- macy for the Salvadoran insurgents-something they have not been able to gain through force of arms-as well as providing at least tacit international approval of Cuba's self-assumed right to determine which regimes in the region are fit to govern and which are not. We see nothing to convince us, however, that the Cubans, as inexperienced as they are in compromise, are ready to make any concessions on Central Ameri- can issues that might threaten the consolidation of the Sandinistas' grip on power or undermine the political or military strength of the Salvadoran insurgents. Neither do we see anything in Castro's new mood that suggests a lessening of his basic aversion for and distrust of the United States. Indeed, the fact that circumstances-economic problems plus Soviet and US pressure-have put him openly on the defensive is likely to reinforce his personal antipathy for the United States as well as his determination to persist in what he sees as his historic mission against imperial- ism. Moreover, he knows he cannot relax his overt hostility toward Washington without the risk of feed- ing popular expectations that an imminent improve- ment in relations with the United States will bring immediate economic relief, and, in our opinion, he wants no such internal pressure that might limit his policy options. In a sense, he is a captive of his own anti-US bias.) Indeed, under some conditions, we believe Cuban-US relations could take a turn for the worse despite the pragmatists' hopes of eventually gaining access to US markets. If Castro became convinced that Radio Marti was playing a key role in inciting the popula- tion, or if austerity boosted popular dissatisfaction to a dangerous level, he could unleash another Mariel refugee exodus. As 1980 proved, Castro is not beyond undertaking some precipitate action that is detrimen- tal to Cuba if it helps to satisfy his desire to punish the United States. Because of his current economic headaches and the grim prospects for the future, Castro seems willing to negotiate a more comfortable modus vivendi with the United States, but we see no chance that he will permit any fundamental change in the adversarial nature of the relationship. F_~ At the same time, Castro's relationships with other countries, particularly in South America, are likely to improve, and the United States will almost certainly be faced with greater challenges in maintaining the effectiveness of its economic denial program against Cuba. The dissipation of Cuba's diplomatic isolation would enhance Castro's potential for troublemaking in multilateral forums, and Cuba's greater interna- tional respectability would probably provoke criticism of Washington, even from some of its allies, for not reacting in a positive way to the "reborn" Castro. Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret Appendix Key Hardline and Pragmatist Personalities Hardliners generally are veterans of the 1956-58 guerrilla war against Batista. They occupy positions of responsibility primarily in the armed forces, the Interior Ministry, and the ideological apparatus. Their most influential representatives include the following. Raul Castro Former guerrilla leader; has been Armed Forces Minister since 1959; charter member of the Politburo; second only to Fidel in the party, government, and military establishment; constitutional successor to Fidel; bitterly anti-US. Ramiro Valdes Guerrilla veteran; charter member of the Politburo; as Interior Minister (1961-68, 1979 present), controls Border Guard, police, internal security forces, and foreign intelligence collection agency; Vice President of Councils of State and Ministers; well-earned reputation for ruthlessness. Antonio Perez Herrero Guerrilla veteran; held various military positions and eventually was appointed chief political officer for the armed forces with the title of Vice Minister; named party secretary for ideology in 1973; named alternate member of the Politburo at the Second Party Congress in December 1980; ousted from both Politburo and Secretariat posts, but not the Central Committee, at special plenum of the Central Committee on 31 January 1985. Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Abelardo Colome Ibarra Guerrilla veteran; held several high military posts; in mid-1960s, report- edly served with guerrilla groups abroad as adviser; now is First Vice Minister of the armed forces in charge of all Cuban military operations abroad; served in both Angola and Ethiopia; has rank of division general; alternate member of Politburo; member of Council of State. Arnaldo Ochoa Sanchez Guerrilla veteran; has held many military posts and served in Angola and Ethiopia; has rank of division general; appointed Vice Minister of the armed forces in 1980; at present, is reportedly in charge of Cuban military and security personnel in Nicaragua. Pragmatists generally are members of the pre-Castro Communist Party or are technocrats and involved mainly in positions of responsibility in the economic area. Their most influential representatives include the following. Carlos Rafael Rodriguez Leader of the pre-Castro Communist Party since 1930s; was Minister (without portfolio) under Batista; joined Castro's guerrillas in August 1958; charter member of the Politburo; Vice President of Councils of State and Ministers; oversees Cuban foreign and economic policy; plays major role in Cuban-Soviet relations. Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret Blas Roca Former secretary general of pre-Castro Communist Party; charter mem- ber of the Politburo; Vice President of Council of State; former president of the National Assembly; influence now fading due to age and illness. Armando Acosta Cordero Member of the pre-Castro Communist Party; former party chief in Oriente Province; removed from that post in 1967 during Castro's angry reaction to Soviet pressure but remained on Central Committee; reportedly complained successfully to Fidel about beatings given publicly to would-be emigres by police goons in 1980; now heads neighborhood vigilante groups (Committees for the Defense of the Revolution); alternate member of the Politburo. Lionel Soto Prieto Member of pre-Castro Communist Party; formerly National Director of Schools of Revolutionary Instruction; former Cuban Ambassador to Great Britain; member of the party Secretariat; currently is Cuba's Ambassador to the USSR. Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Roberto Viega Prerevolution activities unknown; member of the Council of State; alter- nate member of the Politburo; heads Cuban Central Organization of Trade Unions (federation of all labor unions). Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8 Secret Secret Sanitized Copy Approved for Release 2011/04/13: CIA-RDP86T00589R000100130005-8