TRENDS IN THE PHILIPPINES*

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP61-00549R000200030022-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 9, 2016
• Document Release Date: March 26, 1999
• Sequence Number: 22
• Publication Date: January 23, 1959
• Content Type: MEMO

Approved For Release 60/08/26 : CIA-RDP61-00549R00020022-7
SECRET
C E N T R A L I N T E L L I G E N C E A G E N C Y
23 January 1959
MEMORANDUM FOR THE DIRECTOR
SUBJECT: TRENDS IN THE PHILIPPINES*
1. Developments in recent months have generally borne out the
rather gloomy assessment of the Philippines situation contained in
our most recent estimate, SNIE 66-58,
Republic," approved 27 May 1958. This
phere
Garcia administration and the
the government. The estimate
sentiment in the country, the
"The Outlook for the Philippine
estimate emphasized the atmos-
under the
consequent loss of public confidence in
also highlighted the growing nationalist
likelihood of increased pressures for a
more independent foreign policy, and the possibility that Philippine
nationalism might take on an increasingly anti-L.merican coloration
if outstanding US-Philippine issues were not successfully settled.
2. The political situation has continued to degenerate. The
government., under Garcia+s administration, has declined in efficiency
This memorandum has been coordinated with the USIB Representatives.
SECRET
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7
 Approved For ReleaseV600/08/26 : CIA-RDP61-00549R000200 0022-7
and has failed to establish a rapport with the general public. The
trust and confidence which Magsaysay had generated among the common
people are now largely replaced by cynicism and drift. The Garcia
administration is now generally discredited in the public mind.
3. The economic situation has failed to improve, and in some
respects has worsened. During 1956, the rate of growth in both the
agricultural and industrial sectors of the economy appears to have
declined to a level barely exceeding the rapid rate of population
growth of about 2.9 percent. The rise in world metals prices and
the favorable outlook for crop yields in 1959 forecast an improvement
in this situations However,. the administration has yet to resolve
the fundamental balance of payments problems created by the difference
between its stated economic expansion goals and the ability of the
Philippines to finance from internal or external sources the level
of capital goods.and raw materials necessary to implement these goals.
The Philippine economy suffers from an immediate shortage of foreign
exchange reserves and mounting inflationary pressures. The Garcia
administration has taken some steps to out the budget deficit, curtail
imports, and control credit. However, it has lacked the political
strength and determination to press this "austerity" program. Economic
controls, and the general inefficiency of the government's administration
of them, have increased the incentive for corruption, raised the
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7
 Approved For Release 0/08/26 : CIA-RDP61-00549R0002000 22-7
SCI z:ET
profitability of imports and attracted investment to import
ventures rather than to foreign-exchange earning export industries.
The Garcia administration continues to oppose general programs of
devaluation and decontrol. Instead, it has indicated its intention
to propose to the forthcoming session of the Philippine Congress a
foreign exchange tax (which amounts to partial devaluation) to
discourage imports and raise revenues.
1, The political opposition to the Garcia. administration is
still badly fragmented, However, the Liberal and Progressive Parties.,
led by Vice President Magapagal and by Manahan,, are actively
negotiating for a merger or a coalition4 Some members of Garcia's
Nacionalista Party, conscious of the weakness of the governments have
shown interest in associating themselves with the opposition parties.
If these negotiations are successful, opposition prospects for the
Senatorial and local elections scheduled for the fall of 1959 and
for the Presidential elections in 1961 will be greatly improved.
5. Faced with growing opposition and a lack of public support,
Garcia and his followers have become increasingly sensitive to real
or imagined threats to their positions. In the fall of 1958,, various
political groups capitalized on this sensitivity to advance their own
- 3 -
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7
 Approved For Release `20OO/08/26 : CIA-RDP61-00549R000200*022-7
SECRET
positions by spreading rumors of a military coup to be led by
Secretary of National Defense, General Vargas, who seemed, at least
to some Philippine politicians, to be attempting to follow in the
footsteps of Magsaysay. The coup rumors undoubtedly weakened the
position and influence of Vargas. Although recent reports have stated
that Garcia is now convinced that the rumors were false and that he
would like to retain Vargas, the pressures that have already been
generated for this removal may prevail. Furthermore, the affair
daia.ged the prestige of the military in general and enhanced the
possibility that the Department of Defense and the armed forces may
become subject to political manipulation.
6. There is evidence of increased covert political activity
on the part of the Philippine Communist Party to foster dissatisfaction
with existing ties between the Philippines and the United States..
Although it remains organizationally and numerically weak, the
Philippine Communist Party, through astute exploitation of Philippine
nationalist sentiment, appears to have increased its influence in
intellectual, student, and labor circles. An alarming indication
of Communist ability to exploit issues in their own interest are
reports of a significant Communist role in spreading the military coup
rumors which weakened the position of the anti-Communist military leaders.
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7
 Approved For Release 0/08/26 : CIA-RDP61-00549R0002000` 22-7
SECRET
7. In seeking issues to strengthen its position and to gain
public support the Garcia administration has turned increasingly
to growing Philippine nationalism and to US-Philippine relations,
Administration spokesmen, and others as well, have become increasingly
vocal and insistent in publicly expounding real and imagined Philippine
grievances against the US. Although many of these grievances are based
upon genuine nationalist convictions, they are being inflated for
domestic political purposes.
8. There is a general feeling in the Philippines that the
country has not received as generous economic aid as it deserves as a
loyal friend and ally of the US. Garcia undoubtedly hoped to obtain
large-scale financial assistance during his visit to the US in June 1958.
Although he was promised favorable consideration of development loans
and credits of $125 million, this amount was considerably less than he
had believed he would get and less than the administration had led the
Philippine people to expects Moreover., these credits., some of which
are still being negotiated, will not provide the exchange assistance
necessary to afford immediate relief to the critical balance of payments
situation. The Philippine Government has requested that an IMF' survey
be made in order to lay the ground-work for further external assistance
in the form of stabilization loans.
.5
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7
 Approved For Release 2W/08/26: CIA-RDP61-00549R0002000 22-7
9. Another grievance concerns the amount and type of US
military assistance, which the Philippines believes does not meet
its minimum security needs. Both military and civilian leaders
have publicly expressed their disappointment that their demands
for greatly increased military assistance following the Taiwan Strait
crisis have not been met.
10. Important Philippine political and commercial leaders feel that
the provisions of the 1955 Pevised Trade ,.Agreement, particularly
those granting US citizens equal rights with Philippine citizens in
the development of the country's natural resources? fail to protect
the paramount economic interests of Philippine nationals. In part
this is a logical consequence of increaoingly vocal economic
nationalism and the growing desire, especially on the part of business
and industrial leaders, to maximize Philippine ownership and manage-
ment of the economy.
11. Another grievance stems from an increasing concern that
certain provisions of the Military Bases Agreement, particularly
those concerning criminal jurisdiction, are an infringement of
Philippine sovereignty. Philippine leaders argue that the existing
agreement is, in important respects, less favorable than provisions
in US similar arrangements with other countries. The present
-6
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7
 Approved For Release 0/08/26 : CIA-RDP61-00549R0002000022-7
preliminary talks, which began in November 1958, are stalemated on the
question of criminal jurisdiction, which caused the breakdown of the
1956 negotiations. Although the US has indicated its willingness
to revise the Agreement in order accord the Philippines equality
of treatment with other US allies, Philippine demands have now been
raised to include additional concessions on the basis of the trspecial
relationship" between the two countries.
l2o The Garcia administration has deliberately magnified
these grievances in hopes of exploiting nationalistic emotions.
Because of its declining political strength,, the administration is
now unwilling or unable to take a strong stand against pressures for
further agitation of these issues,
13. The outlook for the Philippine Government over the next
year or so is for continuing
ineffectiveness under the Garcia administrations Public dissatisfaction
will probably continue to grow, but we believe it will not lead to
social disorder or widespread antiadministration demonstrations.
The political situation will probably become increasingly unstable as
individuals and groups within the Nacionalista Party, as well as the
opposition parties, maneuver for position. The Liberal and Progressive
-7-
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7
 'Approved For Release O/08/26: CIA-RDP61-00549R000200 022-7
Parties will probably agree to some form of cooperation before
the Senatorial and local elections next fall, with the possible
adherence of some Nacionalista politicians. Such a combination
would probably win a sufficient number of key elections to greatly
enhance the prestige and momentum of the opposition. Although the
economic situation may improve in some respects, the shortage of
foreign exchange and rising living costs will probably continue
as major problems. We do not believe that the Garcia administration
will have the determination or the political power to take effective
corrective measures.
14. Given this generally dismal outlook on the domestic scene,
we believe that the present clamor over Philippine grievances
against the US will probably increase. It is likely that, the Garcia
administration may feel forced to make formal and public representations
to the US (bvernment for redress of these grievances. The government
will probably expand its contacts with other non-Communist nations
with the intent of improving its general international status and
demonstrating a more independent foreign policy and decreased dependence
upon the US.
15. There will undoubtedly be increasing public discussion
of neutralism and of the hazards and problems of mutual security.
-8-
SEMT
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7
 Approved For Release 2"b/08/26 : CIA-RDP61-00549R0002000 22-7
SECRET
Although much of the present and recent conduct of the Philippine
Government and of special interest groups can be explained as a
maneuver to put pressure on the US for increased financial support,
there is the possibility that the maneuver may get out of hand,
forcing the government to take a more adament position than it had
intended, because of the emotional tendencies of many Philippine
leaders and the growth of Philippine nationalism, especially in the
urban centers and among intellectuals, youth, businessmen, and labor.
Communist activity will probably increase and be directed primarily
toward stimulating the growth of are:iuoulauiall and anti-American
ingredients in Philippine nationalism.
16. Although we believe that the course of US-Philippine
relations over the next year or so will be rough indeed, we do not
believe that the Philippines will leave, or alter the basic frame-
work of, the over-all alliance with the US. Economic, political,
military, and historic ties are still strong. Moreover, there is still
considerable confidence and trust in the US in the Philippine countryside an(
and among the general voting public. We continue to believe it un-
likely that the Philippines will take action which would. seriously
jeopardize the current status and operations of US military bases
over the next year or soQ However, the bases will continue to be used
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7
 Approved For Release 20/08/26 : CIA-RDP61-00549R000200022-7
as a lever in negotiating other issues with the US, If over a
period of time, there is no satisfactory resolution of the Philippine
grievances, it is possible that some steps may be taken detrimental
to effective US use of the bases,
FOR THE BOARD OF NATIONliL ESTIMATES
Acting Assistant Director
National Estimates
-10.,
SECRET
Approved For Release 2000/08/26 : CIA-RDP61-00549R000200030022-7