LATIN AMERICA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00289R000200960001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 44
• Document Creation Date: December 27, 2016
• Document Release Date: July 26, 2011
• Sequence Number: 1
• Publication Date: December 20, 1985
• Content Type: REPORT

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Latin America
Review
20 December 1985
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ALA LAR 85-027
20 December 1985
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Latin America
Review
20 December 1985
Page
Articles The Nicaraguan Insurgency: A Yearend Assessment
Although both the Sandinistas and the rebels have improved their
military performance over the past year, the fighting appears
stalemated, with little indication that either side can gain a decisive
edge in the near term.
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Panama: The Catholic Church in Politics
Archbishop McGrath, who recently denounced the military's role in
handling the murder of an outspoken critic of the Defense Chief, has
gained credibility as a peacemaker that could lead the
administration to ask him to mediate differences between the regime
and its opponents.
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Argentina: Civil-Military Relations
Arrests of present and former officers who allegedly masterminded
a wave of terrorist bombings have led to deteriorating relations
between the government and the armed forces, but President
Alfonsin is taking actions to deal firmly with coup plotters and calm
the military.
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Jamaica: Accelerating Economic Slide
The declining economy is causing concern about possible social
unrest, eroding Prime Minister Seaga's already weak popular
support, and boosting the electoral chances of his leftist opponents.
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Cuba: Seeking New Trade Ties to Latin America
Despite efforts to build its regional influence through increased
trade ties and renewed diplomatic ties to neighboring countries,
Havana is unlikely to achieve a significant trading presence in the
region.
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Brazil: Labor Tests the Sarney Administration
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Unions are confronting the new civilian government with strikes and
inflationary wage demands, but they are unlikely to pose a serious
threat to President Sarney over the next year.
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Costa Rica: Labor's Political Role
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Further labor unrest is likely next year, but limited union
membership, disunity, and weak party ties probably will prevent
organized labor from exercising much influence on national politics.
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Briefs
Cuba: Hurricane Damage
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Cuba-Bahamas: Discussing Expanded Contacts
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Peru: Local Elections
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Cuba Chronology
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Articles have been coordinated as appropriate with other offices within CIA.
Comments and queries regarding this publication may be directed to the Chief,
Production Staff Office of African and Latin American Analysis
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Articles
The Nicaraguan Insurgency:
A Yearend Assessment
The fighting in Nicaragua, which exhibited peaks and
lulls in intensity over the last year, appears
stalemated, with little indication that either side can
achieve a decisive edge in the near term. The course of
the war has highlighted both the improved military
capability of the Sandinista forces and the resiliency
of the main insurgent group, the Nicaraguan
Democratic Force (FDN). Events also have
underscored the rebels' vulnerability to supply
problems and the vagaries of external supporters. The
drain on Managua's economic and manpower
resources has required tighter domestic controls while
further diminishing the regime's popular support and
driving new recruits to the FDN.
The Setting
Organized in 1981 by supporters of former President
Somoza, the rebel forces have grown to include
businessmen, civic oppositionists, and disaffected
Sandinistas. The insurgents claim to be fighting for
the original goals of the revolution?pluralism, a
mixed economy, and nonalignment. Several political
parties, businessmen's organizations, and independent
labor unions comprise the small domestic opposition.
In addition, the traditionally passive population of late
has expressed disgruntlement over the economic
situation, the draft, and state controls in a few
spontaneous demonstrations, according to a variety of
US Embassy and press reports.
Of the groups comprising the insurgency, the FDN is
the largest?with some 18,000 troops?best equipped,
and most viable. Staging out of Honduran bases, it
operates widely in Nicaragua's northwest, central
highlands, and south-central region. In the south, the
forces of former Sandinista Eden Pastora have
dwindled to an estimated 600 because of supply
problems, poor leadership, and Sandinista military
pressure. Although Pastora consistently has rejected
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unity with the FDN, some of his commanders recently
initiated cooperation with the rival organization,
. The Indian
insurgents operating on the Atlantic coast, who
number about 1,200, also have been plagued by
logistic shortfalls and political infighting. Several
factions recently formed an umbrella organization,
KISAN, and are coordinating actions with the FDN.
Government Strategy and Rebel Response
At the outset of 1985, Sandinista Defense Minister
Humberto Ortega publicly declared it the year the
insurgents would be defeated. To upgrade military
capabilities, Managua increased the draft, organized
elite counterinsurgency battalions?now numbering
some 12 to 14?and acquired advanced Soviet
equipment such as the MI-25 helicopter gunship. In
addition, the US Embassy and press reported that the
regime relocated much of the population in the
northern border area to deny the FDN safehaven and
create a free-fire zone. From February through May,
the government pressured the insurgents in the north
with artillery and multibattalion sweeps?interdicting
infiltration routes, disrupting insurgent concentrations
across the border in Honduras, and forcing the rebels
to expend scarce ammunition.
For their part, the anti-Sandinistas concentrated on
small unit tactics and ambushes, maintaining their
integrity as a fighting force and incorporating the
swelling number of recruits that increased FDN ranks
from 14,000 to 18,000 during the year.
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By late spring, the rebels had alleviated some of their
supply difficulties, and an increasing number of troops
were able to bypass Sandinista blocking positions
along the border and penetrate deeper into
Nicaragua. The leasing and acquisition of new
aircraft improved resupply capabilities,
and the resumption of
US funding boosted morale. Moreover, the regime
was forced to spread out its troops to counter
expanded insurgent actions in central Zelaya, Boaco,
and Chontales Departments. The FDN has
sporadically challenged the regime with aggressive
rebel attacks in Esteli and Chontales Departments in
midsummer and along the vital arms route from
Rama to Managua in the fall, demonstrating the
resiliency of the insurgency. In November, Ortega
publicly amended his prediction, admitting that the
war probably will last into 1987.
Nonetheless, steady improvements in Sandinista
capabilities and lingering rebel difficulties averted
any significant shift in momentum toward the
insurgents. The regime effectively employed both
helicopters and fixed-wing aircraft for close air
support and convoy escort, upgraded coordination
between ground and air forces, and developed a
capability to intercept insurgent communications. For
its part, the FDN
remained at the mercy of a tenuous supply line and
Tegucigalpa's erratic support. Moreover, command
and control deficiencies have limited the FDN's
control over individual field commanders inside
Nicaragua.
The Political Battle
Regime efforts to garner international support were
undercut by repressive domestic policies, especially
the expanded state of emergency announced in mid-
October. The regime's foreign strategy centered on
cultivating condemnation of the insurgency and of US
aid to the rebel forces through the International Court
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of Justice, Contadora regional peace negotiations, the
United Nations, and other international bodies.
Although these efforts have had some success, a
variety of recent US Embassy and press reports
indicate some Latin and Western leaders are having
second thoughts about their support for the
Sandinistas. With the goal of denying the insurgents
safehaven in neighboring countries, the regime
increased diplomatic and military pressure?
primarily through cross-border shelling?on Costa
Rica and Honduras to agree to bilateral
accommodations. At home, the Sandinistas
reorganized the party and government bureaucracies,
campaigned against corruption, and exhorted the
population to increase revolutionary vigilance to
counter US "aggression." Nonetheless, public
dissatisfaction grew as a result of deepening economic
hardships, tighter restrictions on civil liberties, and
the renewal of militar conscri tion, according to US
Embassy reporting.
Taking a page from the Sandinistas' book, the
insurgents tried to improve their international image.
In March, insurgent and exiled political leaders called
for a dialogue with the regime?which Managua has
repeatedly rejected?timed to coincide with a similar
call by the internal opposition. In June, the formation
of the United Nicaraguan Opposition (UNO) brought
respected anti-Sandinista civilians into an umbrella
organization incorporating the FDN and associated
insurgent groups. Late in the year, UNO created a
human rights staff and prosecuted some 20 FDN
combatants for offenses committed against civilians.
It also laid plans for a civic action medical program in
the Honduran border area to promote good relations
with the local population and authorities. In addition,
he FDN plans to remove several
former National Guardsmen from command
positions.
The FDN has failed, however, to develop a political
support base within Nicaragua. While the traditional
passivity of the Nicaraguan people and fear of
government retaliation present significant constraints,
the FDN's vague political program for Nicaragua's
future apparently has not inspired the population to
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translate its disgruntlement with the regime into acts
of civil disobedience or graffiti campaigns in support
of the rebel cause.
Outlook
We expect that the Sandinista military will be able to
meet most insurgent challenges over the next several
months. Given increased government firepower and
capabilities, the FDN will have to make significant
strides in improving logistics, training, and command
and control to give it the potential to shift momentum
in its favor.
External assistance will remain vital to each side.
Continued receipt of Soviet military equipment?
possibly including more advanced systems such as
SA-2s?will further strengthen Sandinista forces,
while increased economic aid will be necessary to
prevent further deterioration in living standards and
popular tolerance. For its part, the FDN will be
hampered in its efforts at long-term strategic planning
or significant growth in its forces by the lack of
military training of many of its leaders, uncertainty
generated by its still tenuous supply network, and the
sensitivity of its external supporters, especially
Honduras.
Although neither side currently is poised for victory,
continued domestic disgruntlement with the regime
could provide new opportunities for the rebels to
establish internal support networks and attract
additional recruits. To do so, the FDN needs to move
into the populated areas on the Pacific coast and
redouble efforts to present itself as a viable alternative
to the Sandinistas.
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Panama: The Catholic
Church in Politics
The murder last September of Hugo Spadafora, a
former government official and outspoken critic of
Defense Chief Noriega, has led the Catholic Church
to once again enter the political limelight. Although
Panama's Archbishop McGrath has focused primarily
on clerical matters and programs for the poor, he has
also made periodic public statements chastising the
military for its encroachment into civilian government
matters. In the most recent instance, his denunciation
of the military's role in the handling of the Spadafora
case has made him a lightning rod for opposition
protests and drawn sharp rebukes from the armed
forces. Nevertheless, McGrath's measured responses
during previous government crises have given him
credibility as a peacemaker, and the administration
could call on him again to mediate government and
opposition differences.
The Catholic Church traditionally has been a
circumspect player in Panamanian politics.
Archbishop McGrath, a former US citizen who has
headed the Panamanian Church since 1969, has been
vocal on issues such as the canal treaties and human
rights, according to the US Embassy, although he
generally has maintained a relatively low political
profile. In another instance, during the 1984
presidential election campaign, he chastised the
contenders for neglecting social and economic
problems. Moreover, later in the year he played a
mediating role in the political negotiations associated
with then President Barletta's ill-fated fiscal reform
package.
Relations With the Military
Although the church has generally refrained from
criticizing the Defense Forces directly, it has called
attention to military intervention into national
politics. The US Embassy reports that the Catholic
hierarchy objected to the authoritarian hold on power
of the military regime headed by General Torrijos,
but favored Torrijos' social reforms. Relations were
especially cool in 1971 when Father Gallegos, a
Colombian priest organizing farmers' cooperatives,
was kidnaped and murdered. Speculation centered on
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La Nacion
Marcos Gregorio McGrath . . .
Archbishop of Panama since
1969 . . . 61 years old . . . born
in Canal Zone. . . parents US
citizens . . . chose Panamanian
citizenship. . . educated pri-
marily in United States . . . re-
ceived Ph.D. in theology in
Rome . . . taught in Chile . . .
consecrated as bishop in
1961 . . . involved in programs
to improve the economic, so-
cial, and political well-being of
Panamanians and other Latin
Americans . . . aspires to be
next Cardinal for Central
America.
military duplicity, and McGrath condemned the
government for its failure to solve the case. In 1978
the Archbishop publicly berated the military's
supremacy in the country's political/economic system,
its authoritarianism, and growing corruption.
Recent Involvement
The advent of the Barletta government in November
1984 rekindled McGrath's political activism. Last
May, a report coauthored by the Archbishop called
the government corrupt and accused the military of
trying to increase its power, according to the press.
McGrath, along with the papal nuncio and other
priests, has taken a public position in support of an
impartial investigation into the murder of Spadafora,
which Defense Chief Noriega has blocked?probably
due to military involvement in the killing. Encouraged
by the public affirmation of the church, Spadafora's
family and supporters have undertaken a series of
protests including a five-day vigil culminating in a
rally at the papal nuncio's residence. The church also
embarked on a series of religious activities to promote
an effective investigation.
Church alignment with the public clamor for a special
investigation has led to renewed friction with the
military. Although the military-controlled press later
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apologized for accusing the church of sponsoring
political sedition, it warned the papal nuncio that, as a
diplomat, he should not intervene in domestic affairs.
Acknowledging the tense political climate, prominent
figures recently have called for the negotiation of
national political reforms under the auspices of the
church. The US Embassy reports that Archbishop
McGrath also advocates a dialogue involving various
political groups. An opposition newspaper, however,
says that McGrath believes that, despite his desire to
reach a political accord, such an agreement is not
feasible as long as the military-backed government
feels secure in its power.
Prospects
We believe that the church's involvement in the
Spadafora controversy is another temporary excursion
into politics. Archbishop McGrath probably will
continue to support the Spadafora family's efforts to
obtain an impartial investigation into his murder, but
he is unlikely to take the lead. McGrath is likely to be
constrained by recent warnings from armed forces
officials and will probably return to strictly religious
issues rather than risk undermining the authority of
the church over the longer term. Despite his apparent
unwillingness to become involved in a new dialogue
between government and opposition leaders and
despite recent harsh words from the military,
however, the Archbishop remains the likely mediator
if talks between opposing sectors are organized.
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apologized for accusing the church of sponsoring
political sedition, it warned the papal nuncio that, as a
diplomat, he should not intervene in domestic affairs.
Acknowledging the tense political climate, prominent
figures recently have called for the negotiation of
national political reforms under the auspices of the
church. The US Embassy reports that Archbishop
McGrath also advocates a dialogue involving various
political groups. An opposition newspaper, however,
says that McGrath believes that, despite his desire to
reach a political accord, such an agreement is not
feasible as long as the military-backed government
feels secure in its power.
Prospects
We believe that the church's involvement in the
Spadafora controversy is another temporary excursion
into politics. Archbishop McGrath probably will
continue to support the Spadafora family's efforts to
obtain an impartial investigation into his murder, but
he is unlikely to take the lead. McGrath is likely to be
constrained by recent warnings from armed forces
officials and will probably return to strictly religious
issues rather than risk undermining the authority of
the church over the longer term. Despite his apparent
unwillingness to become involved in a new dialogue
between government and opposition leaders and
despite recent harsh words from the military,
however, the Archbishop remains the likely mediator
if talks between opposing sectors are organized.
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As public and
judicial criticism rose over the legality of the
government's action, Alfonsin was forced to invoke
the state of siege to maintain legal grounds for
holding the accused.
The arrests and the state of siege, in our view, fueled
discontent in the armed forces and increased the
chances of a military move against the government.
many
officers viewed the arrests as part of a civilian
campaign to discredit the armed forces.
rumors began circulating within
the military that the detentions were forerunners of a
wholesale purge of the officer corps. The US Embassy
adds that some officers believed that the government
planned to arrest additional individuals for plotting
and intended to cripple the military further by trying
junior officers for human rights violations.
Coup rumors spread rapidly after the arrests,
according to the US Embassy
We believe that hotheads within the
Army were indeed prepared to overthrow Alfonsin to
stave off what they perceived as a threat to the
institutional integrity of the armed forces. The top
military leadership, however, realizing that the
military lacked the popular support and civilian allies
to govern successfully, reigned in the malcontents and
sullenly allowed the congressional elections to be held
as scheduled.
Election Aftermath
Under the state of siege, congressional elections were
held as scheduled. Alfonsin's UCR made a strong
showing, winning 44 percent of the vote and gaining
an additional seat in the lower house. Moreover, the
UCR did unexpectedly well in the traditionally
Peronist-dominated interior provinces. We believe the
election results buttressed Alfonsin's political
standing and will enable him to move decisively to
reduce the tensions created by the state of sie e and
mend overall relations with the military.
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the US Embassy
report that Alfonsin promised senior military leaders
shortly after the election that he would halt the
arrests for coup plotting and block human rights trials
for most junior and midlevel officers. The latter
pledge will probably be effected through an amnesty
law applied to both subordinate military officers and
minor leftist terrorists. Such a move, in our view,
would enable Alfonsin to pardon junior officers for
human rights crimes and deflect some of the
inevitable leftist criticism of amnesty for abuses
committed under military rule.
Press and Embassy reports indicate that the
government may already have drafted an amnesty
proposal and is merely determining how best to
introduce it. According to the press, key Radical
leaders are divided over whether the courts or
Congress should have the jurisdiction to issue an
amnesty. Alfonsin, according to press and US
Embassy reports, favors the law's passage through
Congress, but he may eventually decide to expedite
the process by decreeing an amnesty in his role as
commander and chief of the armed forces
Alfonsin is taking other measures to mend his
relations with the armed forces and reduce the danger
of a coup.
He will also pursue
the Defense Ministry's plans to reorganize the armed
forces and give the officer corps a clear military?
rather than internal political?mission.
To control the military?and possibly some
overzealous members of his own party?Alfonsin also
is reorganizing the intelligence services. Press reports
say that the government
has a tentative plan to create a National Intelligence
Center that would be directly responsible to the
President. The plan would put both civilian and
military intelligence organizations under the control
of the Center and reshuffle SIDE and 601st
personnel. Although the three service chiefs would
have a part in managing the Center, the armed forces
role would probably be limited to the collection of
foreign strategic military intelligence.
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Risk of Coup Remains
Although civilian-military tensions are subsiding, we
believe there are still certain conditions that might
prompt the armed forces to attempt a coup. In the
near term, the military could still move against
Alfonsin if it feels threatened as an institution. Such
an action would differ from traditional Argentine
coups, which have enjoyed a measure of popular
support and powerful civilian allies. Conditions for
such a coup would include:
? Trials of junior and midlevel officers for human
rights abuses. Although the President has assured
the military that the trials will end with the
convictions of the five ex-junta leaders, human
rights and leftist groups, as well as elements within
the UCR, are pressuring Alfonsin for further
prosecutions.
? More arrests for coup plotting similar to those that
precipitated the state of siege. Such arrests?
especially if based on flimsy evidence?would
almost certainly be perceived by the military as a
prelude to a general purge of the armed forces.
? Organizational changes in the armed forces without
prior consultation with key military leaders or
changes that abolish the military's role in key areas,
such as intelligence.
Over the longer term, the danger persists that wider
political and economic developments could spawn a
coup. If Alfonsin's economic reform policies fail and
hyperinflation returns, labor and other opposition
groups would step up antigovernment agitation.
Under such conditions, Alfonsin's personal popularity
could fall sharply, possibly causing the President to
lose control of his own party. The military?with at
least the acquiesence of the public and the political
elite?would probably attempt to fill the resulting
leadership vacuum, as has occurred so frequently in
the past.
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Jamaica: Accelerating
Economic Slide
Unless Jamaica substantially improves its track
record with the IMF and increases diversification, its
economy?hobbled largely by sagging
bauxite/alumina production?probably will continue
to deteriorate over the next few years. With real
income per capita lower than when he took office in
1980, Prime Minister Seaga fears?correctly, in our
view?that social unrest would recur quickly if he
complies with existing IMF stipulations to raise
consumer prices on key imports or allows the
Jamaican dollar to depreciate further. The IMF
apparently will meet in January to consider a waiver
to permit Jamaica to resume drawing on its $118
million standby program. Even if the Fund approves a
waiver, Seaga's stated unwillingness to implement
needed austerity measures would impede the
country's ability to retain IMF funding in the coming
months. Meanwhile, the continuing economic decline
will further erode Seaga's already weak popular
support and boost the electoral chances of former
Prime Minister Manley and his leftist People's
National Party (PNP).
Seaga's Accumulating Problems
To rebuild the flagging economy he inherited in 1980
from Manley, Seaga endorsed new policies designed
to dismantle Manley's state-managed economic
system and rejuvenate the private sector.' These
included quickly arranging a $650 million, three-year
IMF package that paved the way for substantial debt
relief and new funds from Western donors, especially
the United States. Unprecedented foreign funding in
1981 sparked the first real growth in Jamaica in eight
years-3.9 percent. This spurt, however, quickly
fizzled in 1982 due to the deepening world recession
and backsliding on Seaga's original promises to
deregulate the economy.
Kingston spent much of 1983 and 1984 struggling to
keep on the IMF track, but by yearend 1984,
11
Jamaica's noncompliance with IMF spending targets
required a waiver to retain the Fund program. Seaga
publicly acknowledged that economic output fell 1
percent in 1984; slumps in key sectors?traditional
agriculture, bauxite/alumina, and tourism?were
largely responsible. The inflation rate in this import-
dependent economy (imports are equal to 60 percent
of GDP) reached 28 percent, prompting a sharp drop
in real wages for most Jamaicans. Public-sector
layoffs, cutbacks in the sugar and banana industries,
and the closure of the Reynolds bauxite mining
operations pushed the unemployment rate to about 30
percent?roughly on a par with that inherited from
the Manley administration.
The Dismal 1985 Record
According to the World Bank, the Jamaican economy
will contract 4 percent this year due to poor
performances in key economic sectors. As a result,
overall output in 1985 will barely match the depressed
level in 1980:
? Virtually all domestic crops showed sizable declines
during the first half of the year. In addition,
hurricane Kate in November reportedly destroyed
several million dollars in crops, primarily fruits and
vegetables destined for the US market.
? Kingston expects construction and manufacturing
activities to drop more than 20 percent and 8
percent, respectively, compared with last year's
already reduced level.
? The tourist industry, buffeted by bad publicity from
widespread demonstrations against oil price hikes
last January and increasing crime, is expected to
decline by $80-100 million; arrivals of stayover
visitors fell 5 percent during the first eight months
of this year, compared to the same period in 1984.
In contrast, tourism in the Caribbean as a whole is
up 6 percent this year.
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Jamaica: Economic Indicators, 1981-85
Real GDP Growth Consumer Price Inflation
Percent Percent
4
2
17-1
?2
UI
?4 1981 82 83 84 850
End of period.
0 Period average.
i= Based on 1980 prices.
Projected.
30
25
20
15
10
5.
0 1981 82 83 84
Foreign Exchange Reserves a
Weeks of imports
Exchange Rates b
US cents per Jamaican dollar
6
60
5
50
4
40
Trade-price
adjusted c
3
30
Nominal
2
20
10
85d 0
1981 82 83 84 85d
0
1981 82 83 84
55d
307669 12.65
Perhaps most important, however, is the continuing
decline in the production of bauxite/alumina?now
ranking after tourism as Jamaica's largest foreign
exchange earner. Press reports indicate that bauxite
and alumina output fell 42 percent and 14 percent,
respectively, during the first six months of 1985. This
slump resulted largely because of the temporary
closure of the ALCOA alumina refinery in February
and weak world demand that lowered production at
other facilities. Moreover, the subsequent reopening
of ALCOA in mid-1985 under a government lease
arrangement was offset by the July shutdown of the
ALPART refinery. According to government data,
bauxite production in 1985 will total only 6 million
tons, or 40 percent of the peak 1974 level.
Developments on the foreign payments front are
equally bleak. Based on Embassy reporting,
we believe the balance-of-payments deficit will reach
$50 million this year despite recent commercial bank
and Paris Club debt reschedulings. The declines in
exports and tourism are partly responsible. During the
first eight months of the year, for example, exports of
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bauxite, alumina, and sugar?which account for more
than half of total exports?fell by 60, 28, and 30
percent, respectively, compared to the same period in
1984. We predict that the net loss of foreign exchange
in the bauxite/alumina sector alone will be at least
$150 million this year. Even though exports from
other sectors?particularly light manufacturing and
nontraditional agriculture?have increased sharply
this year because of the depreciation of the Jamaican
dollar, such sales still account for a relatively small
share of total exports.
Foot-dragging on limiting imports has compounded
Jamaica's payments difficulties. Bank policies aimed
at propping up the Jamaican dollar have slowed the
rise in import prices. Moreover, Seaga, worried about
a repetition of last January's widespread protests, has
helped to maintain imports by refusing further
reductions in food and petroleum subsidies. As a
result, local currency prices of foreign purchases have
risen, but not sufficiently to reduce imports.
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Jamaica: Balance of Payments
Million US $
1981
1982
1983
1984
1985b
Current account
-336.6
-400.2
-375.4
-306.2
-465.0
Trade account
-483.4
-619.2
-595.4
-437.9
-595.0
Exports (f.o.b.)
974.0
767.4
685.7
745.3
605.0
Bauxite/alumina
760.2
513.8
423.8
486.4
290.0
Other
213.8
253.6
261.9
258.9
315.0
Imports (c.i.f.)
1,457.4
1,386.6
1,281.1
1,183.2
1,200.0
Bauxite related
336.7
202.3
195.5
185.0
150.0
Other
1,120.7
1,184.3
1,085.6
' 998.2
1,050.0
Services (net)
22.5
68.6
118.5
4.7
-10.0
Travel
270.6
306.1
374.3
403.3
370.0
Interest payments/investment income
-201.3
-183.5
-185.1
-304.8
-270.0
Other
-46.8
-54.0
-70.7
-93.8
-110.0
Transfers (net)
124.3
150.4
101.5
127.0
140.0
Capital account
316.8
424.0
329.6
339.9
415.0
Public (net)
240.3
450.7
284.2
528.1
230.0
Private (net) a
0.9
20.1
-325.7
95.6
145.0
Short term (net)
75.6
-46.8
371.1
-283.8
40.0
Change in gross reserves
-19.8
23.8
-45.8
33.7
-50.0
External debt, yearend c
1,811.0
2,197.0
2,350.0
2,550.0
2,610.0
a Includes errors and omissions.
b Projected.
c Guaranteed and nonguaranteed medium- and long-term
obligations.
Jamaica's foreign payments problems worsened in
September when the island failed to meet
performance criteria under a $118 million, 22-month
standby agreement that had won IMF approval only
two months previously. Seaga attributed the failure to
the delayed arrival of $19 million in USAID funds.
The IMF, however, indicated that Jamaica would
have missed the performance targets even if these
funds had been received promptly. In an effort to
salvage the standby program, Seaga has petitioned
the IMF for a technical waiver, which the Fund
apparently will consider in January. Moreover, in
hopes of softening IMF terms, Seaga has requested
that a joint team of IMF, USAID, and World Bank
representatives visit Jamaica soon to analyze the
economy with "fresh eyes."
13
Political Impact
Jamaica's mounting economic woes have reduced the
already low standard of living for most Jamaicans.
We expect real GDP per capita by the end of this year
to fall to only 88 percent of the 1979 level, Manley's
last full year in office. Despite the maintenance of
subsidies on a number of basic items, inflation has
continued to erode real incomes largely because the
Jamaican dollar, although weakening more slowly in
recent months, has raised the prices of many imports.
According to IMF data, consumer prices rose 19
percent during the first eight months of this year. In
addition, although Kingston claims the
unemployment rate is 25.4 percent, we believe-based
on Embassy and press reporting-that the actual rate
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remains closer to 30 percent; job losses in the bauxite
and public sectors alone total at least 4,200 in 1985.
This summer, following weeks of labor unrest, a
three-day strike by public-sector workers protesting
low government wage offers and increased layoffs
nearly paralyzed the nation.
The country's deepening economic problems are
spilling over into the political arena. The most recent
public opinion survey by a respected Jamaican pollster
indicates that Seaga's popularity has fallen to a
record low and is little higher than that recorded by
Manley in 1980, when he was trounced by Seaga in
elections. According to the survey, less than 25
percent of those polled support the ruling Jamaica
Labor Party and most Jamaicans favor a change of
government. Manley's political fortunes have risen
accordingly; the poll indicated he and the PNP could
win 61 percent of the vote?roughly Seaga's share in
1980?if a general election were held now.
Grim Near-Term Outlook
We believe that any recovery in the next few years
hinges on Jamaica's ability to retain a valid IMF
program, a prerequisite for stimulating investor
interest, tapping foreign capital markets, and
obtaining critical debt rescheduling agreements.
Seaga, however, faces a serious dilemma in dealing
with the IMF because the Fund is likely to insist that
the Jamaican dollar?already substantially
undervalued by historical standards?float freely and
that the government phase out subsidies on food and
petroleum. We believe these actions would lead
quickly to significant price increases and probably
new social turmoil that would further erode Seaga's
already slipping political support.
Even if Jamaica can retain the IMF's imprimatur,
any turnaround still depends heavily on economic
diversification because of poor prospects in traditional
sectors:
? In the unlikely event that world aluminum demand
increases significantly, US producers would
continue to supply the bulk of the market from
lower cost operations, particularly in Australia,
Brazil, and Guinea.
Secret
? The sugar industry in Jamaica?as in many
Caribbean countries?will have to streamline
production and processing to be viable in the long
run.
? Rejuvenated growth in the tourist industry will
depend on the strength of the US economy and
Kingston's ability to curb the recent upsurge in
domestic crime, violence, and harassment of tourists
by drug peddlers. Equipment shortages and growing
morale problems in the security forces stemming
from recent budget cuts, and the increasingly
entrenched drug network operating on the island
work against much, if any, improvement on this
front.
We believe that the best prospects for rapid gains are
in nontraditional agriculture?particularly in high-
value winter vegetables, spices, and cut flowers?and
light manufacturing. The exports of both sectors are
eligible for preferential entry into the US market
under the Caribbean Basin Initiative and other US
trade arrangements. In addition, if the Jamaican
dollar continues to weaken?as it probably would if
allowed to float freely?these exports would become
even more price competitive.
The overall trends provide little hope that the
economy will stem its decline before 1987 at the
earliest. Seaga is not likely to make any real headway
in slashing unemployment or inflation. As a result,
Kingston almost certainly will make increasingly
urgent appeals for additional US aid, especially if?as
we expect?the existing Fund program is scuttled. We
believe Seaga will request help such as additional
bauxite purchases, support for the country's security
forces, and highly concessional aid. We also judge
that, despite steady US pressure, continued economic
distress will further weaken Seaga's willingness and
ability to pursue drug producers and traffickers.
Many Jamaican farmers will continue to view
marijuana as a far more lucrative alternative than
such domestic crops as manioc, yams, or beans.
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Seaga's term of office lasts until 1988, but if he is
forced to call early elections?a distinct possibility?
Manley would stand a reasonable chance of winning.
We would expect a Manley government to depart
from Seaga's economic policies in several key
respects. Based partly on statements made at a recent
PNP convention, we believe Manley's economic
program would include a return to a fixed foreign
exchange rate and import licensing. The PNP also
would not advocate divestitures of state-owned
enterprises and cuts in government payrolls. Although
PNP leaders have not ruled out pursuit of IMF
support, enactment of nonmarket policies probably
would preclude a Fund program. The chances of
Jamaica declaring a moratorium on its external
debt?of which $700 million, or more than one-
fourth is owed to the United States?would increase.
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Cuba: Seeking New Trade Ties
to Latin America
Cuba recently has stepped up efforts?through
increased trade ties?to build its regional influence,
renew diplomatic ties to some of its neighboring
countries, and open the doors to new markets in Latin
America. While Havana has had some success
politically, its principal economic links will remain
with the Soviet Bloc. Cuba is unlikely to achieve a
significant trading presence in the region because of
the need to reduce imports to save scarce hard
currency, a limited export menu of mineral and
agricultural products, and commitments to supply
CEMA with a large proportion of the country's
exports.
Cuba's Motives
In our view, President Castro's attempts to renew or
increase commercial ties in Latin America are
motivated by a desire to reintegrate Cuba into
regional political affairs as well as to alleviate
domestic economic problems. Castro probably views
the new, more broadly based civilian governments in
Latin America as presenting an opportunity to reduce
Cuba's regional isolation. Havana probably believes
that an improved image would reduce the concerns of
its neighbors that upgraded ties might jeopardize
their relations with the United States. Concurrent
with its efforts to strengthen its official political and
commercial influence in the region, Havana is also
expanding front company operations in the area to
acquire technology and earn some hard currency, as
well as to provide cover and funding for intelligence
activities.
Renewing Trade Ties
After President Sanguinetti repealed a 21-year-old
decree prohibiting negotiations with Cuba, Uruguay
and Cuba signed a bilateral trade agreement in July
and resumed diplomatic relations on 17 October. In
addition, Cuba reportedly received a $5 million line of
credit, most likely from a Spanish bank
probably, in part, to
finance Uruguayan agricultural exports to Cuba,
These renewed trade
ties, however, probably will not produce any major
increase in bilateral trade?to date, only one sale to
Havana has been arranged. Montevideo's exports
compete with goods that Cuba imports from the
USSR and China.
Colombia and Cuba have agreed in principle to open
official commercial representations
Castro presumably hopes that
commercial ties will lead to official diplomatic
relations, but President Betancur is reluctant,
Betancur's
doubts are based on past Cuban interference in
Colombia's affairs and the low level of trade and
cultural relations that existed before the 1981 break.
17
Brazil and Cuba have not traded bilaterally, but are
expected to resume diplomatic relations early next
year, perhaps leading to a change in their trade
relationship. Thus far, trade between Brazil and Cuba
has occurred indirectly through third countries, such
as Panama, Mexico, Venezuela, Spain, and Portugal.
This trade has gradually increased over the past two
years to $1 million. According to press reports,
Brazil's two major trading companies believe there is
a potential for a major increase in trade.
Increasing Existing Trade
Argentina's exports to Cuba last year rose by nearly
75 percent over 1983 levels to $165 million as a result
of a $200 million annual line of credit extended by
Argentina to Cuba for 1984-86. Cuban state agencies
recently purchased Argentine telecommunications
and railway equipment, as well as medical supplies,
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Cuban exports to
Argentina, however, are negligible, in part because
Argentina is a sugar exporter.
Mexico and Cuba are trying to expand bilateral trade
and have set a short-term annual trade goal of $300
million in goods and services, according to the US
Embassy in Mexico City. While Cuba's imports from
Mexico have been on the rise, its exports to Mexico
have been declining since 1980.' Limited demand for
Cuba's exports?Mexico is largely self-sufficient in
sugar?a modest cooling in political relations,
consistent with President de la Madrid's generally
moderate foreign policy, and both countries' need to
restrain import spending are likely to thwart their
ambitious goal of tripling bilateral trade this year.
Mexico and Cuba, nonetheless, have taken some steps
to boost commercial ties. Havana and Mexico City
recently agreed to grant each other most-favored-
nation status, lowering respective import duties by 25
to 75 percent. Mexico and Cuba also opened lines of
credit amounting to $150 million and $20 million,
respectively, to finance their bilateral trade. Agro-
industrial, sugar, metal-mechanical, and
pharmaceutical trade agreements have recently been
signed.
Ecuador's President Febres-Cordero signed a
bilateral trade agreement and discussed the potential
for trade in agricultural goods during his April visit to
Cuba. Although Febres-Cordero tried to play down
the significance of the trip, Castro's image in
Latin America probably was improved by the visit.
Ecuador's Ambassador at Large, who led a business
delegation to Cuba in March, signed a reciprocal line
of credit agreement, amounting to an initial $3.6
million.
Quito and Havana agreed to a barter deal in April
that provides for the exchange of Ecuadorean grain
for Cuban meat
Ecuador
' Cuba's exports to Mexico fell by over 95 percent to $12 million
between 1980 and 1984 and continued to decline in the first half of
1985. Havana's imports from Mexico grew by over two and one-
half times between 1980 and 1984 to $82 million and are still
rising.
Secret
Cuba: Foreign Trade, 1984
Imports and Exports
Billion US S
I
Imports, (c.i.f.)
11111 Exports; (f.o.b.)
0
Total
USSR
Other
Argentina
Mexico
2
4 6 8 10
Exports by Community Group
Percent
Sugar products 75.5
Other 4.5
Mineral products 5.5
Agricultural products 5.6
Fuel re-exports to USSR 8.9
C3074013 11435
may sell crude oil, Havana's interest in Ecuadorean
oil has declined over the summer,
Bolivia and Cuba created a commission to increase
bilateral trade in May,
Currently, minimal bilateral trade consists
largely of an exchange of Cuban pharmaceutical
products for Bolivian tin. Cuba is also assisting
Bolivia, one of Latin America's poorer countries, in
technical training, health, mining, and agro-industry.
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Bolivia established an Embassy at the Charge level in
Havana in the final weeks of the leftist Siles
administration. New President Paz Estenssoro,
however, distrusts the Castro regime and probably
will rebuff any overtures to normalize relations with
Cuba further.
Outlook and Implications for the United States
Although Cuba has been successful in improving
trade ties to several Latin American countries, we
believe that trade levels are not likely to increase
substantially in the near future. Havana's ability to
export is constrained by its reliance on a few
commodities?sugar, minerals, and citrus products?
most of which are obligated for Communist countries
and face limited demand in Latin America. At the
same time, with continued tight finances, Havana
would find it difficult to boost imports from these
countries.I
Despite the limitations Cuba faces in becoming a
major Latin American trader, Castro may believe
that it is important to establish a commercial presence
in these nations. This presence will probably be used
as a base to lobby for renewal of diplomatic relations
or to exert influence in the future.
We believe that Castro's efforts to increase ties to its
Latin American neighbors will not change their
attitudes toward Havana. Most regional leaders will
continue to remain suspicious of Cuban interference
in domestic affairs and support of insurgents.
Nonetheless, Cuba's neighbors would welcome any
increased hard currency earnings from trade with
Havana and are being pushed by leftist interests to
reestablish or increase ties to Cuba. Improving
relations with Havana also provides a means for Latin
American governments to assert their independence
from the United States. We believe, however, that
these countries will limit commercial or diplomatic
ties to Cuba to avoid serious damage to their relations
with the United States.
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Brazil: Labor Tests the
Sarney Administration
Labor unions?operating with greater freedom under
civilian rule?have begun to confront the Sarney
government directly with general strikes and
increasingly tough and inflationary wage demands. In
an effort to preempt this challenge, President Sarney
has exploited the movement's internal splits?
rewarding moderate groups while cracking down on
militants?proposed major labor reforms, and
substantially increased the minimum wage. Infighting
among union leaders for control of the movement will
weaken labor's ability to challenge the government,
but the interunion rivalries will spawn numerous
strikes as leaders vie for influence over the rank and
file. As workers feel the crunch of rising prices, we
believe there is some potential for the Workers Party
to play a more influential role in Brazilian politics. On
balance, we judge that Brazilian unions will remain a
thorn in Sarney's side, but they will not pose a serious
threat to his authority next year.
Brazilian Labor Reawakens
Through the late 1970s, Brazil's authoritarian
military rulers kept tight restraints on labor,
employing a "corporatist" system to prevent its
emergence as a unified political force. Labor was
excluded by decree from exercising a direct role in the
political process, while strikes were outlawed and local
disputes were quickly settled by government
intervention. To control the union leadership, the
government collected dues from the workers and
redistributed the funds to the various unions.
Moreover, Brasilia dictated semiannual minimum
wage adjustments, constraining the labor movement's
ability to achieve real wage hikes on its own. Unable
to act autonomously as a pressure group or to
influence government policies substantially, Brazilian
labor remained docile.
Since 1978, however, unions have pushed the
government gradually to liberalize its policies,
availing themselves of Brazil's freer political climate.
In 1979 and 1980, for example, numerous unions
walked out over demands for more generous labor
settlements despite the fact that strikes remained
21
legally banned. Subsequently, union delegates from
across the country assembled in 1981 to organize a
single national labor confederation. Despite their
hopes, the first National Conference of the Working
Classes (CONCLAT) brought out the differences
between labor moderates and militants allied with the
far-left Workers Party, based in the Sao Paulo
industrial area. Simultaneously, the recession severely
dampened enthusiasm for labor activism, except
among more militant unionists who broke away to
form the rival Unified Labor Central (CUT). In the
waning days of the military regime, militant labor
leaders increased their criticism of government
"corporatist" labor policies, staged strikes to promote
their economic interests, and cooperated with the
Catholic Church and political parties in an effort to
gain a role as an important interest group.
The Unions Pounce on Sarney
The economic recovery under way since mid-1984 and
the return in early 1985 of a civilian government seen
by workers as more sympathetic to their demands has
emboldened Brazilian unions. US Embassy reports
indicate the two main labor federations went on the
offensive with a series of nationwide strikes in April.
The press reported walkouts by the metalworkers and
railroad workers in Sao Paulo and Rio de Janeiro and
by airline workers and government employees in many
states.
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According to the US Consulate in Sao Paulo, popular
support for worker demands evaporated as strikes
coincided with a national tragedy?the death of
President-elect Neves. CUT President Meneguelli's
public statement that the cost of labor's demands
would be directly passed onto consumers also eroded 25X1
middle-class sympathy for the strikers. According to
the US Embassy, strikers took 300 hostages at a
General Motors plant during the June metalworkers
strike, further undercutting labor's public image.
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Union Ties to Political Parties
Approximately half of the 8,000 unions in Brazil
have developed ties to political parties. Based on US
Embassy and press reports, personal ties and ideolog-
ical affinity are the key factors determining union-
party alliances. For example, the leaders of
CONCLAT, the largest labor confederation, have
maintained strong personal links to the Brazilian
Democratic Movement Party?the umbrella group
that was the legal moderate opposition to the mili-
tary regime. Although the Movement embraces a
variety of political groups, it is sympathetic to labor
moderates' aspirations for reform of the corporatist
labor law and improved wage settlements. In con-
trast, the political arm of the more militant CUT is
the Workers Party of longtime labor activist Lula da
Silva. This party is a more outspoken champion of
worker rights and increased government spending on
social services. The Workers Party receives support
from the Catholic Church and labor unions in West-
ern Europe,
leftist Rio de
Janeiro Governor Brizola?leader of the Democratic
Workers Party?has begun to court some CONCLAT
leaders in hopes of furthering his presidential ambi-
tions. Some of Brazil's civilian leaders are beginning
to recognize the potential for unions to
increasingly important role in elections.
Press reports indicate that Lula and Brizola have
also discussed a joint campaign for early presidential
elections next year. Should such an effort material-
ize, the CUT probably would play a key role in
galvanizing worker support for the campaign.
At the same time, the Sarney administration moved
adroitly to assuage labor unrest by using a mix of
incentives to entice moderate leaders to restore labor
peace. Labor Minister Pazzianotto?a young, reform-
minded labor lawyer with ties to the Workers Party?
proposed legislative measures, such as curtailing the
government's direct role in settling strikes by
providing for courts of arbitration to mediate labor-
management impasses. The administration also
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publicly renounced the right to remove labor leaders
during strikes, and the 100 unions previously
controlled by the government were permitted to hold
elections for the first time, according to the US
Embassy. Sarney doubled the minimum wage, placing
it 12 percent above the rate of inflation by November,
according to press reports. Finally, he turned a blind
eye to the growing practice by many Brazilian
companies of paying "salary advances" several times
a year, according to the US Embassy.
Militancy Gains Ground
Despite Sarney's efforts to bolster moderate labor
forces through these actions, the CUT still represents
a growing challenge to the CONCLAT for leadership
of the Brazilian labor movement
. Its leaders calculated correctly that they
could recruit from the CONCLAT's rank and file
with appeals for militant strike action?a call which
CONCLAT's leaders were reluctant to make. The
CUT, as a result, gained recruits at the expense of
CONCLAT, increasing its membership to over 300
unions, according to the US Embassy. To bolster its
credentials among militant workers, the CUT has
attacked its longstanding adversary, the Brazilian
Democratic Movement, which is the largest party in
the Sarney government's coalition. The US Embassy
reports that one of the CUT's objectives is to increase
the political standing of the Workers Party by
expanding its influence outside the Sao Paulo region
in preparation for elections to Congress next year.
In the face of these losses, the CONCLAT's leaders
became mired in an internal debate over the tactics
that should be used to press worker demands and
whether to compete with the CUT for political
influence. CONCLAT reformers have been urging
greater militancy and competition with the CUT for
leadership of the labor movement. Meanwhile, the
CONCLAT old guard clings to the strategy of
accommodation with the political and economic
establishment. For example, the president of the
CONCLAT national directorate?a member of the
old guard?has opposed competition with the CUT,
fearing it
would almost certainly entail widespread strike
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activity that would damage his close relationship with
Labor Minister Pazzianotto. Nevertheless,
CONCLAT leaders agreed last summer to overrule
the national president and form a temporary alliance
with the CUT to give the federation a new militant
look.
Sarney's Tough Response Aggravates Labor Splits
The alliance was tested this fall when the CONCLAT
and the CUT launched a series of strikes, including a
nationwide bankers' strike, a walkout by the Rio de
Janeiro metalworkers, and a subsequent industr
wide strike by the Sao Paulo metalworkers.
in response,
Sarney asked the labor courts to declare the bank-
workers' strike illegal as a warning that his
government would take forceful action when
necessary. Sarney
ordered the military to prepare contingency plans to
provide essential services in the event of a nationwide
general strike.
the
Communists within the CONCLAT, afraid that such
militant strike activity will place the federation at
odds with the government, are considering a
withdrawal from the CONCLAT early next year to
protest the alliance with the CUT. Conservative
unionists, also unhappy with the CONCLAT-CUT
alliance, have formed a new labor group, the
Association of Independent Unions in Sao Paulo. The
new group prefers a conciliatory path in labor-
management relations, according to the US Consulate
in Sao Paulo, and may well attract many moderate
CONCLAT members. Moreover, the Sao Paulo
metalworkers' success in negotiating a generous
settlement to their latest strike may serve to persuade
other unions that they have more to gain by
maintaining close ties to the political and industrial
establishment.
In view of these strains, we believe that ideological
and tactical differences probably will end
CONCLAT-CUT cooperation early next year. The
ties of both federations to political parties that are
perpetual opponents will work against the alliance.
We believe it likely that the CONCLAT will decide
23
to steer a middle course by maintaining its ties to the
Brazilian Democratic Movement while giving lip-
service to militancy. In contrast, the CUT is likely to
continue its strident demands for wage adjustments
and instigate a number of strikes, especially as press
reports indicate that over 500 union contracts will be
up for renegotiation in the November I985?January
1986 period.
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program. Demands for higher wage increases
probably will undermine efforts to combat inflation,
already in excess of 200 percent. We also expect 25X1
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a serious threat to civil order in the coming year. This 25X1
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Politically, we believe Brazilian labor will remain
divided, without national leadership, and unlikely to
pose a direct threat to Sarney's authority.
Nonetheless, as workers feel the crunch of rapidly
rising inflation, we expect a modest increase in
support for Workers Party candidates for Congress
next year. The Workers Party candidate in the Sao
Paulo mayoral election in November showed
surprising strength, finishing in third place. Moreover,
the party demonstrated its ability to attract support
outside the Sao Paulo industrial area by winning the
mayoralty in Fortaleza, an important city in the
northeast. Consequently, we expect labor
representatives will exercise some influence in
drafting the provisions of Brazil's new constitution in
early 1987
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Costa Rica:
Labor's Political Role
The lackluster performance of the economy in recent
years has sparked increased labor agitation involving
several prolonged strikes and numerous protests.
Economic stabilization efforts by President Monge
have strained relations with labor, while continued
austerity measures?which both major presidential
candidates support?augur for further labor unrest
next year. Organized labor's limited membership,
disunity, and weak party ties most likely will prevent
it from exercising much influence on national politics
over the near term. Labor might become a more
important actor in politics, however, if pending
legislation allowing public-sector employees to strike
should pass the legislature.
The cultural penchant of Costa Ricans for
compromise and consensus has applied to labor-
management relations and has worked to curb the
growth of a strong labor movement, according to
many observers. Embassy reporting indicates that
only a small portion of the work force?about
900,000?is organized. The union movement consists
of three main sectors. The independent unions, strong
among agricultural producers and the national airline,
are the most numerous. The democratic
confederations, which include many railway, social
security, and communications workers unions, as well
as street vendors, bank employees, and textile
workers, rank second. Communist confederations, a
third major force, are most significant in the highly
labor-intensive banana industry and among port
workers and public employees,
The independent unions claim 46 percent of
organized labor, while the democratic confederations
account for 32 percent and the Communists 22
percent.
Limited Influence
Labor's influence in the political arena is largely
circumscribed by its failure to attract more members,
fragmentation in both Communist and non-
Communist-dominated confederations, and a failure
to align itself in recent years with the strong political
party system. Less than 20 percent of Costa Rican
25
workers are affiliated with unions, and the major
democratic and Communist labor unions are failing to
attract a significant number of new members,
according to academicians.
Part of organized labor's slow growth is attributable
to its poor public image. For example, the 1984
Communist-led strike against United Brands, a major
banana grower, contributed to a prevailing public
skepticism of organized labor, reducing its already
limited influence, according to the US Embassy. The
Embassy also indicates that the corruption and
mismanagement within the Costa Rican
Confederation of Democratic Workers (CCTD) that
led to its 1983 split?and birth of the rival National
Workers Confederation (CNT)?also contributed to
the overall poor public image of organized labor
today. Moreover, a recent legislative initiative that
would overturn the existing law against strikes by
public service workers?which is favored by most
Costa Ricans?focused further negative attention on
the labor cause.
A second factor limiting labor's impact is its inability
to unite to achieve its objectives. Both the democratic
and Communist labor movements are suffering from
internal factionalism
The US Embassy reports that mistrust and
bitterness between the democratic labor
confederations have persisted since the 1983 split and
the relationship continues to be characterized by an
ongoing rivalry. The two main democratic unions, the
CNT and the CCTD, have not attempted to work
together this year and, in fact, the CNT has raided
the membership of the CCTD.
the Communist-
affiliated labor movement exerts more influence on
national politics than its democratic counterpart?due
to its numerical advantage in the agricultural sector
and its control over a variety of public-sector unions?
it is also divided, limiting its impact.
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Major Costa Rican Labor Groups
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Membership
Ideology
Tactics
National Association of Educators (ANDE)
26,000
Social Democratic
Protests; strikes
National Confederation of Workers (CNT)
12,000-14,000
Social Democratic
Protests; strikes
Costa Rican Confederation of Democratic
Workers (CCTD)
9,000-10,000
Social Democratic
Protests; strikes
Marched in May Day parade
Social Christian Authentic Confederation of
Democratic Workers (CATD)
8,000
Social Democratic
Protests strikes
Marched in May Day parade
Christian Democratic Costa Rican Workers
Central (CTC)
2,500
Social Democratic
Protests; strikes
Costa Rican Confederation of Workers (CTCR)
22,000
Communist
Protests; strikes
Confederated Union of Workers (CUT)
17,000
Communist
Protests; strikes
Solidarista Union (SURSAM)
35,000-40,000
Nonconfrontational
No strikes or protests; gave up collective
bargaining in return for low-interest loans
from credit union, subsidized commissar-
ies, advising role in management
Claudia Solano faction of Solidarismo
8,000-10,000
Nonconfrontational;
democratic
Same as above
for example, a faction
of the Confederated Union of Workers (CUT) did not
support CUT's tactics in the strike against United
Brands last year and split off to form the rival Costa
Rican Confederation of Workers (CTCR).
Finally, organized labor has failed to develop a
platform and identify itself closely with Costa Rica's
political parties, which would give it a voice in the
political process. In fact, another large
confederation?which is neither democratic nor
Communist?the Solidarity Movement, is based on a
concept of labor-management harmony that precludes
it from using a political party as a vehicle for
achieving workers' demands, according to
academicians. Meanwhile,
while the Communist-led unions have succeeded in
organizing banana workers and public employees,
they have not been able to convert members into
political activists. Also, while the democratic CCTD
traditionally enjoyed a close relationship with the
Secret
ruling National Liberation Party, relations with the
government have become strained since the 1983
labor split, according to US Embassy reporting.
Increased Agitation
Despite the underdevelopment of organized labor,
worker unrest has been on the rise, in large part due,
in our view, to the declining standards of living for
many Costa Ricans. For example, the 1984 walkout
against United Brands proved the longest and costliest
strike in the country's history, resulting in the deaths
of two workers, $31 million in losses for San Jose and
the company, and significant dislocations on the
Pacific coast,
US Embassy reporting indicates four smaller strikes
have plagued the economically depressed Atlantic
coast region, including one by banana workers against
the Standard Fruit Company that lasted 53 days. In
addition, press sources reveal that in July some 3,000
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Costa Rica: Real Per Capita Gross Domestic Product
1985 U.S. DOLLARS
1450-
1400-
1350-
1300-
1250-
1200-
1150
1979
1980 1981
1982 1983
YEARS
railway workers?most belonging to a democratic
labor confederation?went on strike for higher wages
and industry improvements.
Government Response
Increased labor agitation during President Monge's
term?which ends in February?has not, however,
yielded significant government concessions primarily
due to the administration's scarcity of resources. For
example, despite civil disturbances in San Jose's
suburbs protesting increased utility rates, rates were
not lowered, according to press sources. In addition,
although the resolution of the railroad strike included
27
1984
1985*
*ESTIMATE
a loan of $608,000 to settle overdue salaries, it did not
provide a wage increase, according to press reports.
Monge has relied on reprisals?in the form of legal
action?to cope with unrest, heightening labor's
concern, according to US Embassy reporting. The
Embassy also reports that, in addition, two labor
reform initiatives have languished in the Legislative
Assembly due in large part to opposition by business
interests. The Economic Labor Sector Bill would
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Costa Rica:
Real Wages and Real Per Capita Gross Domestic Product
100
INDEX 1979=100
95-
90-
85-
80-
75-
70
Imm????
110..
*ESTIMATE
Legend
WAGES
PER CAPITA GDP
1979
1980 1981 1982
YEARS
1983 1984
provide severance pay, not currently among worker
benefits, and another bill would reform the outmoded
1943 Labor Code to include protection from arbitrary
dismissal for private-sector workers, and the right to
strike for public-sector workers, among other wide-
ranging reforms. If such a labor code became law, the
overwhelming number of organized workers in the
public sector-13 percent of the total organized?
could create economic havoc, especially since the
public sector has kept effective control over critical
economic spheres?including banking, utilities, the
petroleum industry, and public health.
Prospects
Given little prospect for significant economic
improvement in the near term and increased labor
concerns, worker unrest is likely to continue next year.
Secret
1985*
Even with an estimated 3-percent growth rate in
1985, we estimate that living standards are unlikely to
return to 1979 levels before the end of the decade.
The economy is unlikely to be able to generate enough
new jobs to absorb the unemployed, now at 12
percent. In particular, with the closing of United
Brands, no growth in jobs is expected in the
Communist-dominated agricultural sector, which will
probably lead to renewed leftist attempts to press for
concessions.
We foresee little growth in labor ranks or movement
toward unity even within the various confederations.
The democratic labor movement's reputation for
corruption and ineptitude must be overcome before a
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significant growth in the ranks will occur. Meanwhile,
the militant tactics of some Communist labor factions
are incompatible with Costa Rican culture and are
unlikely to draw many new adherents.
Despite its increasing willingness to flex its muscles,
the labor movement's influence on national politics is
likely to remain limited in the near future. The Costa
Rican press reveals that, while the presidential
campaign has served to magnify the volume of worker
complaints, labor's concerns have not become a major
issue. Labor code reform, needed to strengthen
organized labor's hand, probably will be reintroduced
during the next legislative session but, given the
strength of business interests, passage probably will be
blocked again.
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Latin America
Briefs
Cuba Hurricane Damage
Hurricane Kate cut a swath across central and western Cuba last month causing
extensive damage in seven of Cuba's 14 provinces. Although loss of life was
minimal, Havana estimates that total damages will exceed $1 billion. Cuban
officials described the hurricane damage as a devastating seven- to eight-year
setback for the Castro regime
Cuba's sugar crop?already reeling from a drought last summer? was hardest
hit, with over 50 percent of the island's canefields either flooded or damaged by
high winds. the 1985-86 sugar harvest is
expected to yield only 5.7 million tons?the lowest since 1973. Other economic
sectors damaged by the storm include transportation, factories and warehouses,
livestock, and the citrus and banana crops.
The damage is likely to have a far-reaching impact on the economy, and may have
some political ramifications as well. Production shortfalls, compounded by the
country's damaged distribution system, will make it more difficult?if not
impossible?for Cuba to satisfy export quotas to the USSR or boost its hard
currency earnings next year. This undoubtedly will aggravate Havana's economic
problems and impair its ability to repay Western creditors or purchase Western
inputs to production. Moreover, the costs of this natural disaster will be an
additional burden on the already beleaguered Cuban consumer. President Castro
may attempt to deflect popular criticism by using the hurricane as a scapegoat for
the country's economic plight, as he has done with previous disasters.
Cuba-Bahamas Discussing Expanded Contacts
Havana is trying to expand official and commercial contacts with The Bahamas,
probably in an effort to alleviate a hard currency
shortage and gain access to embargoed goods.
We doubt that Nassau will be receptive to Cuban overtures because of its close
economic ties to the United States?nearly two-thirds of Bahamian exports are
geared to the US market and US visitors constitute nearly 80 percent of The
Bahamas key tourist sector. Nassau also may have lingering resentment over the
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"Flamingo" incident of 1980, when Cuban jet fighters erroneously sank a
Bahamian patrol vessel, killing its four crewmembers. The Bahamians probably
prefer to keep diplomatic relations at a low level?currently the two countries are
represented through their UN ambassadors and there is no official presence?
while maintaining some bilateral contacts through cultural and limited
commercial exchange. Moreover, sensitive to US concerns, Nassau probably will
continue to disallow Cubana passenger flights between the two countries
Peru Local Elections
Peru's ruling American Popular Revolutionary Alliance (APRA) party has
unofficially won over 70 percent of the vote in mayoral byelections held on 24
November in 22 rural provinces, according to the US Embassy. These are the
provinces where Sendero Luminoso guerrillas prevented elections in 1983.
Insurgents attempted to disrupt voting in Ayacucho by calling a 72-hour strike,
intimidating voters, and blocking roads, but were largely unsuccessful.
The November balloting was the first formal test of APRA's strength since the
general elections last April. Although APRA may use the results to claim that its
popularity has not declined, the political significance of the local contests is
limited: eligible voters in the provinces involved constitute less than 2 percent of
the population; null and blank votes in some areas exceeded APRA's total; in
many voting districts the Peruvian Communist Party (PCP) provided the only
opposition and in some, fear of terrorists prevented any candidates from running.
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Cuba Chronology
November 1985
1 November
2 November
4 November
Jose Ramon Machado Ventura and Division General Sixto Batista greet Legesse
Asfaw, member of the Politburo and Secretariat of the Central Committee of the
Workers Party of Ethiopia, on his arrival in Havana.
The Washington Times reports a US SR-71 plane that flew over Cuba on 31
October confirmed that Soviet and Bulgarian freighters at Mariel have been
transferring war materiel to Nicaragua.
Fidel Castro meets with Lesotho Foreign Minister Vincent Montsi Makhele to
exchange opinions on the situation in southern Africa and discuss lateral relations.
About 10,000 Cubans waving anti-US banners and chanting revolutionary slogans
demonstrate outside the US Interests Section in Havana protesting the SR-71
overflight on 31 October.
Many of the protesters tell Reuters they had been called from their workplaces to
protest the SR-71 overflight.
Carlos Rafael Rodriguez meets with North Korea's Foreign Trade Minister Ch'oe
Chong-kun in Havana to discuss economic development in their respective
countries.
Foreign Trade Minister Ricardo Cabrisas and Ch'oe Chong-kun sign a trade
agreement for 1986-90 and the 1986 trade protocol.
Paris press reports that the office of the Committee for Human Rights in Cuba,
based in Madrid and headed by Armando Valladares, was robbed last weekend by
unidentified individuals.
Havana press announces that Hector Rodriguez Llompart and Erich Schmidt
signed a trade agreement.
5 November Legesse Asfaw and his delegation tour the Isle of Youth, where over 1,000
Ethiopian students are being trained at the Mengistu Haile-Mariam school.
According to an Austrian press summary, Erich Schmidt, Secretary of State for
Commerce, Trade and Industry, is in Havana for a meeting of the Austrian-Cuban
economic commission.
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6 November
The Council of State appoints Hector Rodriguez Llompart as President of the
National Bank of Cuba, and Ernesto Melendez Bachs is appointed President of the
State Committee for Economic Cooperation.
Granma reports on the Cuban Government's strong protest against the recent
decision by US authorities to declare credits derived from the Peruvian foreign
debt as value impaired.
7 November Fidel Castro sends a message of greetings to Mikhail Gorbachev on the occasion of
the 68th anniversary of the October Revolution in the USSR.
Communist Party member Jose Ramon Balaguer, speaking at a ceremony
commemorating the 68th anniversary of the October Revolution, says that
friendship between Cuba and the USSR will become stronger.
Soviet Ambassador Katushev, also speaking at the ceremony, notes the friendly
relations between Gorbachev and Castro.
8 November Fidel Castro meets with Legesse Asfaw. Asfaw conveys greetings from President
Mengistu Haile-Mariam.
Fidel Castro meets with a US antiwar delegation headed by Rev. Paul Meyer,
director of an organization called Religious Task Force Mobilization for Survival,
to discuss international peace.
9 November In Havana, AALAPSO Secretary General Rene Anillo reiterates AALAPSO
support for Angola and condemns the United States for supporting South Africa.
Prensa Latina reports that Fidel Castro met with nine US priests to discuss the
international situation and the world's hope for peace.
11 November France Claixto Morales Hernandez presents his credentials as Ambassador to
President Albert Rene of Seychelles.
12 November
Havana press reports that a leading US church group has invited Jose Carneado,
Cuba's top religious affairs spokesman to a meeting in New York, despite a US
Government ban on visits by Cuban Communist Party officials.
At an Angolan independence day ceremony in Havana, Sergio del Valle says
Cuban forces will remain in Angola until the Angolan Government decides that
aggressions against it have ceased.
Fidel Castro holds formal talks with the Episcopal Conference of Cuba. Secretary
of the Conference de Cespedes describes the meeting as warm and positive.
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13 November
Adrianaribone Jean Bemananjara, Madagascar Minister of Foreign Affairs,
arrives in Havana and is greeted by Isidoro Malmierca. Bemananjara will preside
over the joint Cuban-Malagasy Intergovernmental Committee.
Malmierca and Bemananjara discuss widening and strengthening bilateral
relations and exchange views on the international situation and the Nonaligned
Movement.
The international labor workshop on the foreign debt, organized by the Central
Organization of Cuban Trade Unions, meets in Havana. Roberto Veiga notes the
urgency of canceling the foreign debt.
14 November Cuba's six-month sugar harvest begins against a somber backdrop of record low
world prices and a nationwide drought, which appears certain to reduce output.
15 November
The Cuban Foreign Ministry denies that Cuban citizens were involved in the
attempted coup d'etat against Liberian President Samuel K. Doe on 12 November.
Before the UN Security Council, alternate ambassador Alberto Velazco criticizes
the United States' revoking the Clark Amendment and its decision to increase aid
to UNITA.
They sign a protocol on the fourth session of the joint intergovernment commission
for 1987 scientific and technical cooperation.
Bemananjara also signs a cooperation agreement with the Sugar Industry
Ministry.
Construction Minister Raul Cabrera delivers a message from Fidel Castro to
Mexican President de la Madrid with a $2.5 million donation to help in
reconstruction of damage by the recent earthquake.
16 November Peruvian Foreign Minister Allan Wagner announces that diplomatic relations with
Cuba will be increased to embassy level, describing the relations as normal.
17 November Cuban Foreign Ministry officials, Charge d'Affaires Jose Francisco Piedra and
Jose Rivero Acosta arrive in Montevideo to reopen Cuba's diplomatic office.
Cuban Catholics issue a document favoring dialogue between the church and Fidel
Castro's government.
18 November Peruvian Foreign Minister Allan Wagner tells Vision magazine that Cuba plays
an important role in Peru's Latin American foreign policy.
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19 November
20 November
21 November
22 November
Caracas press reports that one Cuban was shot dead and another detained after
trying to force their way into the Venezuelan Embassy in Havana.
Cuba and the USSR sign a bilateral cooperation protocol in Moscow for
developing science and technology in the five-year plan for 1986-90.
Cuba unveils a draft of its next five-year economic plan, stressing the need to earn
more hard currency, cut oil imports, improve efficiency and profitability, and
eliminate shoddy workmanship.
Madagascar Foreign Minister Bemananjara says that relations between his
country and Cuba are excellent in matters relating to politics, economics, and
scientific-technical cooperation.
Peruvian Foreign Minister Allan Wagner announces that the Peruvian
Government will raise its ties to Cuba from charge d'affaires to ambassadorial
level.
Tribuna da Imprensa reports that a Brazilian official was assured by President
Sarney that the government has decided to resume diplomatic relations with Cuba
and will make an official announcement soon.
Carlos Rafael Rodriguez meets in Havana with Martin Malvy, French Secretary
of State for Energy. Malvy and Ernesto Melendez sign agreements to increase
trade and technical cooperation.
23 November The British newspaper Observer says Fidel Castro is seeking Soviet approval for a
formal declaration of war on South Africa.
24 November
Fidel Castro bestows the Solidarity Order on Konstantin Katuchev who ends his
diplomatic tour in Cuba. Carlos Rafael Rodriguez praises Katuchev's fruitful
work.
A Cuban Foreign Ministry spokesman reports that the rumor that Cuba is
planning to declare war on South Africa to put an end to apartheid and its military
adventures is baseless and is sheer fantasy.
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Declassified in Part - Sanitized Copy Approved for Release 2012/03/02 : CIA-RDP87T00289R000200960001-2
Secret
25 November Granma announces that Joaquin Mas Martinez will be the new Cuban
Ambassador to Uruguay.
26 November
27 November
29 November
30 November
An Iranian parliamentary delegation headed by Ahmad Azizi arrives in Havana to
discuss political and economic matters and expanding relations with Flavio Bravo.
Raul Sendic, founder of the Tupamaros, National Liberation Movement of
Uruguay, arrives in Havana to receive medical care to recover from health
problems caused during his imprisonment in Uruguay.
Fidel Castro tours seven provinces hit by Hurricane Kate. There are nearly 60,000
damaged houses and more than 5,000 houses totally destroyed. Estimated
damages in the seven provinces is $1.2 billion.
Returning from his tour of flooded sugar fields, Castro calls Hurricane Kate the
"worst natural catastrophe" to strike the island nation's economy this century.
Castro orders the mobilization of thousands of workers in a bid to save the sugar
cane crop damaged by Hurricane Kate.
Zimbabwean Minister of Education, Dzingai Mutumbuka, arrives in Cuba to
discuss bilateral cooperation. He and his Cuban counterpart, Jose Ramon
Fernandez, tour the Isle of Youth.
In his book "Fidel Castro and Religion," Fidel says there are many common things
between the doctrines of the church and the revolution. The book was published in
Brazil.
Vice President of the Council of State Juan Almeida arrives in Vientiane to
participate in activities commemorating the 10th anniversary of the Lao People's
Democratic Republic.
37 Secret
Declassified in Part - Sanitized Copy Approved for Release 2012/03/02 : CIA-RDP87T00289R000200960001-2
Declassified in Part - Sanitized Copy Approved for Release 2012/03/02 : CIA-RDP87T00289R000200960001-2
Declassified in Part - Sanitized Copy Approved for Release 2012/03/02 : CIA-RDP87T00289R000200960001-2
Declassified in Part - Sanitized Copy Approved for Release 2012/03/02 : CIA-RDP87T00289R000200960001-2
Declassified in Part - Sanitized Copy Approved for Release 2012/03/02 : CIA-RDP87T00289R000200960001-2 _
Declassified in Part - Sanitized Copy Approved for Release 2012/03/02 : CIA-RDP87T00289R000200960001-2
Secret
Secret
Declassified in Part - Sanitized Copy Approved for Release 2012/03/02 : CIA-RDP87T00289R000200960001-2