NIC CONTRIBUTION TO DCI S UPCOMING ANNUAL REPORT TO THE CONGRESS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00759R000100200014-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 22, 2016
• Document Release Date: November 16, 2010
• Sequence Number: 14
• Publication Date: November 5, 1984
• Content Type: MEMO

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CONFIDENTIAL
LDC Debt: A Perspective on 1984 and Some Thoughts on the Future
Last year was a watershed in the LDC debt crisis. Discussions were
held with several large debtors which resulted in programs for
refinancing coupled with tough austerity measures to get foreign and
domestic accounts in order. For some debtors, Mexico for example, the
crisis reached a new state; import growth showed modest gains after a
steep decline in 1983 indicating that recovery, albeit modest, was
underway. In these countries, the battle has shifted to implementing
domestic austerity measures, fighting inflation, and holding together
the political fabric in the face of these tough new measures. Overall,
I think we can say that the case by case approach to dealing with the
crisis has worked and, given proper conditions, can bring the crisis to
a successful resolution.
Continued success of this approach depends heavily on developed
country economic recovery, however. A pause in the recovery would put a
severe strain on those agreements already reached and make new
agreements even more difficult. Even if we avoid a pause in the
economic upturn, recovery from the debt crisis will be a slow process.
A rapid expansion of exports would be necessary to relieve economic
conditions in many LDC debtors and global economic trends are not
favorable to bring this about. Thus the drastically lower levels of
imports, economic activity, and per capita expenditures in these
countries will remain for some time.
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CONFIDENTIAL
The key intelligence challenge for the future will be to monitor the
domestic situations in those countries that have undertaken
rescheduling. Political dissatisfaction with severe and continuing
austerity is growing in the debtor countries, as is resistance to
IMF-sponsored programs designed to aid also in longer-term
restructuring. These reactions vary greatly among countries and are
likely to become even stronger in the future, even as the economies
begin to improve.
The willingness of the key institutions in the creditor
countries--including banks, governments, and regulatory agencies--to
provide or support continuing assistance to the debtor countries, is
being linked increasingly to the implementation of IMF-sponsored
austerity programs. Although these linkages provide a certain policy
coherence, they also impose a great burden on the IMF and tend to reduce
its flexibility in dealing with countries with vastly different economic
and political circumstances. While specific countries' problems call
for great flexibility, the IMF must be concerned about its credibility
because of the impact on all its other programs. So far the IMF has
done an excellent job steering a difficult course between competing
objectives.
If ways are not found to ease pressure on the IMF, there is high
risk that likely future confrontations between debtors and creditors
(--with the most likely near-term confrontation being with Argentina--)
cannot be satisfactorily resolved.
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CONFIDENTIAL
NIC Work on the Debt Crisis in 1984
The NIC worked closely with OGI and the regional offices to help put
the debt crisis in political/economic perspective. In addition to
producing several ad hoc memoranda such as "The Debt Problem Revisited"
which was prepared by the NIO/Econ for senior policy officials, the NIC
oversaw production of a major Estimate "The Political Repercussions of
the Debt Crisis in Major LDCs." The Estimate reviewed the current
situation and the potential
for a successful resolution of the debt crisis in major debtor countries.
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5 November 1984
NOTE FOR: All National Intelligence Officers
FROM: Hal Ford, NIO/AL
SUBJECT: NIC Contribution to DCI's Upcoming Annual
Report to the Congress
1. Each year about this time the NIC assists the IC Staff in
preparing the DCI's (all-source) Annual Report to the Congress. So, as
outlined below, we are tasked once again. The Report (for 1984) will be
published 1 February 1985. The project officer is ICS).
2. The Report's purpose is to provide an accounting of the
Intelligence Community's support to US policy objectives in order to
provide Congress with an appreciation of how the Community's enhanced
capabilities have been utilized. The particular focus of the Report this
time, is to be "the substantive and operational
accomplishments of 1984, presented in the context of the major
substantive issues of the year."
3. The NIC is on the hook to provide drafts on the following:
a. The Substantive context into which specific examples of
analytical and collection contributions (to IC Staff) will be
integrated. This means that the NIC is to prepare contributions
which set out 1984's substantive contextual picture for each of the
issue items in the Report's following outline:
--Priority Issues of Crisis Avoidance/Crisis Management
o Lebanon/Syria/Israel
o El Salvador/Nicaragua
o Pakistan/Afghanistan/India
o Greece/Turkey/Cyprus
o Other principal crises in 1984.
l CL BY SIGNER
SECRET DECL: OADR
Sanitized Copy Approved for Release 2010/11/16: CIA-RDP87T00759R000100200014-0