LATIN AMERICA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00792R000100020023-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 27, 2016
• Document Release Date: December 20, 2013
• Sequence Number: 23
• Publication Date: April 10, 1987
• Content Type: REPORT

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Latin America
Review
10 April 1987
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ALA LAR 87-009
10 April 1987
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Latin America
Review
10 April 1987
Articles Nicaragua: Managing Consumer Shortages
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The Sandinistas are trying to limit the political impact of frequent
shortages of consumer goods by giving peasants?especially those
who live in combat areas?and regime supporters preferential
treatment.
Cuba-Bolivia: Havana Pressing for Inroads
Havana has been largely frustrated in its efforts to build Cuban
influence in Bolivia, gain trade opportunities, and attain full
diplomatic relations with La Paz. Progress to date appears to be
limited to new penetrations of Bolivian labor, leftist, and dissident
movements.
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DA I
Cuba-Guinea: Declining Relations
Relations between the two countries are at their lowest point since
diplomatic ties were established in 1960. Cuban personnel in Guinea
totaled as many as 600 in 1975?a presence second only to
Angola?but currently number no more than 35.
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Ecuador: Grim Economic Prospects
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Ecuador faces severe financial constraints for the rest of 1987 as a
result of recent earthquakes and their devastating impact on the key
oil sector. Febres-Cordero's new austerity measures and inability to
respond quickly with relief for the earthquake zones have 'spurred a
renewal of public protests, and continuing confrontations with the
leftist-controlled congress can be expected.
Guyana-Venezuela: Progress on Essequibo Dispute
The highly successful state visit of Guyanese President Hoyte to
Venezuela in March has brightened prospects for settling the
longstanding territorial dispute over Venezuela's claim to the
Essequibo region, an area comprising two-thirds of Guyana.
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Briefs
Bolivia: Curbing Labor Unrest
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Venezuela: 1987 Inflation Watch
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Cuba-Uruguay: Trade Agreements
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Panama: Labor Party President Ousted
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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 Chie
Production Staff Office of African and I atin
American Analysis,
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Latin America
Review
Articles
Nicaragua: Managing
Consumer Shortages
The Sandinistas are trying to limit the political
impact of frequent shortages of consumer goods by
giving peasants?especially those who live in combat
areas?and regime supporters preferential treatment.
The regime is giving the lowest priority to urban
consumers who must rely largely on expensive black-
market goods to meet basic needs. The city dwellers
are being pinched by decreasing domestic production
and a growing reliance on uncertain supplies of
imported food. The regime's plan to control internal
distribution by eradicating the black market may
deny urban consumers their most reliable source of
foods and could lead to civil disturbances in the cities
this spring.
The Ministry of Internal Commerce (MICOIN)
controls the legal distribution of basic foods and
consumer goods. According to the US Embassy,
MICOIN uses state wholesale enterprises to purchase
domestic food crops and receive imports of donated
food and other consumer items. These goods are then
distributed to a MICOIN-controlled system of retail
outlets, including supermarkets reserved for
government employees and neighborhood stores where
consumers must use Sandinista-issued ration cards.
To ensure its legal commercial monopoly, MICOIN
controls merchant licenses, sets prices, and uses
uniformed and undercover inspectors to monitor
markets.
Consumer Caste System
The regime uses its control over food and basic
consumer goods to rank consumers according to their
value to the revolution. According to a 1987 MICOIN
planning document, the needs of the military and the
rural population must be met first. Other groups
whose political loyalty the regime considers critical,
such as bureaucrats and workers affiliated with
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Sandinista unions, are afforded access to basic goods
at subsidized prices at MICOIN-controlled
supermarkets. As a result, these favored groups can
obtain items such as clothes, shoes, toiletry articles,
and kerosene lamps that are in short supply and not
available through legal channels to most urban
consumers. US Embassy officials touring the rural
north recently confirmed government reports that the
standard of living for many peasants in the war zones
has improved since 1985.
The losers in the regime's consumer hierarchy are
private merchants, industrialists, professionals, and
urban workers not associated with Sandinista unions.
The Embassy reports these groups, which represent
the majority of the urban population, have long faced
smaller monthly quotas of most rationed goods.
Government stores in Managua have been reducing
rice rations to these customers since June. Some
urban consumers reportedly receive only 1 pound of
rice per month, down from 4 pounds a year ago. In
February, MICOIN publicly announced that rice and
vegetable oil rations again will be cut for nonpreferred
consumers. Press reports say that even with reduced
rations many goods often are either unavailable or are
of insufficient quantities to fill the meager quotas.
These consumers are increasingly forced to rely on
high-priced black-market items.
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Supply Vulnerabilities
The squeeze on nonpreferred consumers has largely
been the result of declining domestic production.
Nicaraguan private-sector statistics show that per
capita grain production has fallen by one-third since
1979. government 25X1
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ALA LAR 87-009
10 April 1987
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policies on pricing, land redistribution, and credit
primarily are to blame. For example, rice farmers in
the south refused to sell their crops to the government
last summer because the official price did not cover
production costs. Press reports indicate that
productive private farms are routinely denied access
to credit and foreign exchange. The US Embassy
reports that a lack of herbicides and fertilizers, caused
by the country's hard currency crisis and aggravated
by US trade sanctions, also is responsible for declining
production.
To compensate for lower food production, the
Sandinistas have steadily increased food imports in
recent years and plan to continue that trend in 1987.
MICOIN documents indicate that Managua expects
to import more than $100 million in donated food this
year?largely from Western Europe?but as of
December only one-fourth of that amount had been
firmly committed. Last year, scheduled food
donations did not meet the regime's needs, and the
Sandinistas had to turn to the Soviet Union for
emergency rice and wheat shipments.
Reining In the Black Market
To strengthen its control over consumer goods,
MICOIN recently escalated the war against black-
market vendors. According to the Embassy, the
government's campaign against illegal commerce has
dominated the Nicaraguan media in recent weeks.
Police attacks on vendors selling goods above official
prices are increasing and becoming more violent.
Nicaraguan press reports say that, in mid-January,
some 400 Sandinista police and MICOIN inspectors
conducted a series of raids on two illegal markets and
nearby neighborhoods suspected of supplying the
markets.
a two-hour battle with the merchants resulted in 20
arrests, numerous injuries, and the deaths of two
policemen. The raids followed an earlier press report
that MICOIN inspectors had been chased from the
same markets by vendors threatening them with
machetes.
The Months Ahead
In our view, the recent cutbacks in rations and high-
visibility attacks on illegal markets probably signal
worse shortages to come. The Sandinistas' heightened
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Sandinistas' 1987 Consumer Hierarchy
Military personnel and mobilized militia
Sandinista salaried personnel:
? Agriculture workers and employees in high-priority
state industries
? Armed services professionals
? Employees in lower-priority state industries
Peasant families
Private industry
Urban population
Private-sector institutions:
? Small business
? Restaurants
Independent merchants
campaign against the black market also may deny
many urban consumers their most reliable source of
foodstuffs. Moreover, food production?which
traditionally is low in the spring?may be even worse
this year because Managua's 1987 economic plan
gives production of export crops priority over food for
domestic consumption.
We believe that domestic food stocks and scheduled
foreign donations will be adequate to supply
consumers protected by the regime's preferential
system for at least the next six months. The outlook
for the rest of the population this spring is bleak,
however, and serious food shortages may spark
spontaneous disturbances in urban areas. If so, the
regime will rely increasingly on its powerful security
forces and emergency food shipments from the Soviet
Bloc td maintain control.
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Cuba-Bolivia: Havana
Pressing for Inroads
Havana has been largely frustrated in its efforts to
build Cuban influence in Bolivia, gain trade
opportunities, and attain full diplomatic relations with
La Paz. Progress so far appears to be limited to new
penetrations of Bolivian labor, leftist, and dissident
movements, and Cuban medical assistance is giving
Havana a good name in Bolivia. Havana has found an
ally in Bolivian Foreign Minister Bedregal, but
President Paz Estenssoro remains wary of the
Cubans. He is likely to keep them at arm's len th b
limiting ties to commercial and cultural areas.
Exchange Programs Building Havana's Influence
The Cuban Embassy in La Paz has only some 20
officials, but US Embassy reporting indicates that
Havana is working actively to build its influence and
image through a wide range of educational and
cultural activities. According to an Embassy source,
Havana annually offers some 30 long-term university
scholarships to Bolivians for study in Cuba. The
source says Cuba sponsors short courses and seminars
in Cuba for some 270 others. Havana is showing
special interest in Bolivian labor. For example, many
of the university scholarships reportedly are given to
the children of labor leaders, especially miners, and
about 15 labor leaders and workers go to Cuba every
three months for classes in Marxist-Leninist ideology
and other political training
Havana is using medical assistance programs to gain
influence. According to the US Embassy in La Paz,
Cuba offers free treatment to Bolivians, supports an
intensive care unit at a Bolivian hospital, and invites
Bolivians to Cuba for medical training. These
programs are paying off for Havana in terms of good
will. The Embassy reports that Cuban medical
training has a positive image in Bolivia, and in
January the Bolivian Health Minister publicly
expressed appreciation for Cuban medical assistance
and said that President Paz was "very satisfied" with
Cuba's efforts.
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Havana Pursuing Upgraded Diplomatic
and Trade Relations
Bolivia and Cuba have diplomatic relations and
maintain embassies and diplomatic staffs in each
other's capitals, but they do not exchange
ambassadors. President Castro saw Cuba's?and his
own?prestige rise in Latin America in 1985 and
1986, when first Uruguay and then Brazil sent
ambassadors to Havana after reestablishing full
diplomatic relations with Cuba. We believe Castro
hopes that Bolivia will follow suit
The Embassy believes that the Cubans are improving
their access to the Bolivian Government, and that this
could lead to closer commercial and economic
relations. The Embassy also reports that the Cubans
are pressing Bolivia to grant landing rights to Cubana
de Aviacion, Havana's national airline.
the Cubans want the rights so they can
establish a cargo route to Brazil. The prospects for
Havana to find lucrative trade opportunities in Bolivia
appear scant, but the Cubans are likely to welcome
barter or other largely symbolic agreements, as they
have with a number of other countries.
Havana's Ally in La Paz?Foreign Minister Bedregal
Bolivian Foreign Minister Guillermo Bedregal, who
visited Cuba last October at Castro's invitation, has
become the major spokesman in La Paz for Havana's
interests. Bedregal has sought?with little success?to
improve relations with Cuba
As a result of the visit to
Havana, Bedregal has managed to revive a cultural
agreement signed by the Siles administration, but he
has made little headway in efforts to market Cuban
products in Bolivia or to persuade Paz to grant
landing rights to the Cubans.
His effort to ingratiate himself with
the Cubans is also aimed at gaining the support of the
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growing Bolivian left, according to US Embassy
reporting, possibly to advance his candidacy for the
1989 presidential election
President Paz Keeping Havana at Arm's Length
We believe that President Paz distrusts the Cubans,
largely because they took advantage of Bolivia's
unstable domestic situation to extend their influence
during the preceding Siles administration. Paz has
distanced himself from the pro-Soviet and pro-Cuban
leanings of top officials in the Siles government. He
may have decided to rein in Bedregal on Cuba, as
indicated by a recent US Embassy report that
Bedregal voiced approval of the US resolution at the
United Nation in February to condemn Cuban human
rights violations.
Outlook
We believe that Paz's profound distrust of Havana
makes it unlikely that Bolivia would upgrade
diplomatic relations with Cuba during his
administration. Havana, however, will continue its
long-term efforts to make inroads into Bolivian
society among discontented and leftist elements. The
Bolivian left may be vocal and expert at obtaining
front page press coverage, but remains politically
weak. Havana probably realizes this and thus will also
foster image-building efforts that lack an overtly
ideological dimension?such as medical assistance,
cultural and sports exchanges?that are targeted at
Bolivian public opinion in general.
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Cuba-Guinea:
Declining Relations
Relations between Cuba and Guinea, which have
declined during the past year, are at their lowest point
since diplomatic ties were established 27 years ago.
Cuban personnel in Guinea totaled as many as 600 in
1975?second only to Angola?but currently number
no more than 35. Guinea's more moderate foreign
policy and openness to the West, combined with
increasingly intense competition between France and
the USSR for influence in Guinea, have contributed
to the decline in Havana's influence in Conakry.
Because Havana can offer relatively little of the
economic and military aid that Guinea needs, it
probably will be limited to token cultural and
economic contacts with Conakry in the near term.
Past Relationship
Havana and Conakry established diplomatic relations
in 1960, two years after Guinea attained its
independence from France. Under the one-party
regime of President Ahmed Sekou Toure, Guinea was
a radical socialist state with an anti-Western, and
especially anti-French, orientation. Economic,
technical, and military assistance from Communist
states, primarily the Soviet Union and Cuba, quickly
filled the void left by the departing French. Cuban aid
to Guinea grew throughout the 1960s, including
training in guerrilla warfare for Guinean-supported
insurgents fighting for the independence of
neighboring Portuguese Guinea. Throughout this
period the US Embassy in Conakry reported Cuban-
Guinean relations to be warm and close, with general
popular support for the Cuban presence and aid
programs
The Cuban presence peaked in the late 1970s, when
some 400 to 600 Cubans were providing economic and
military assistance in Guinea. By late 1977
more than 160 Cubans
provided military training and help with road
construction; about 30 others trained the Guinean
militia and President Toure's personal bodyguards.
Several hundred Cubans provided assistance in the
areas of animal husbandry, agriculture, fishing,
health, and education. In addition, during this period
several hundred Guineans studied in Cuba, primarily
in technical programs, education, medicine, and the
sciences.
Beginning of Decline
About the same time, Guinea's deteriorating
economic condition, accompanied by popular
demonstrations over food and consumer goods
shortages, led Toure to begin to reassess his socialist
policies and his dependence on Soviet and Cuban aid.
In early 1978,
the first strains in bilateral relations appeared as the
Cubans fell behind in completing several development
projects that Havana had agreed to carry out.
Havana was unable to
provide the necessary resources to complete the
projects?a failure that Conakry blamed on Soviet
Bloc indifference regarding economic development in
Guinea. Guinean
dissatisfaction led the government to order a small
reduction of Soviet military personnel and a signficant
drawdown of Cuban military advisers. In March
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1978,
Cuba ceased using the airport at Conakry as a
refueling stop on the way to Angola, in part because
of Cuban sensitivities over the close monitoring of the
flights by the Guineans. According to the US
Embassy, by late 1980 only about 10 Cuban military
advisers remained in Guinea?training the Guinean
militia?while 200 Cuban personnel continued to be
engaged in roadbuilding and agricultural projects.
In the last years of his rule, Toure continued to
maintain significant economic and military ties to the
USSR while gradually increasing economic contacts
with France and the West. While the Soviets faced
increased competition from the French, they
remained the largest military supplier to Guinea and
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ALA LAR 87-009
10 April 1987
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the largest purchaser of Guinean bauxite, according
to US Embassy reporting. The Cuban contingent in
Guinea, in contrast, continued to shrink, due to
Cuba's much smaller economic presence, increasing
levels of aid from the West, and the moderating
political climate in Guinea. After Toure's death in
March 1984, the decline accelerated, and by early
1986 only about 35 Cuban advisers remained in
Guinea, according to US Embassy information.
Recent Relations
Under the leadership of President Lansana Conte,
who took power in a military coup after Toure's death
in 1984, economic relations with the West have
further increased, counterbalancing entrenched Soviet
economic and military interests.
the Cubans have repeatedly
expressed frustration and confusion over their
inability to maintain even a token economic presence
in Guinea, given the Soviet Union's firm position and
Guinea's push for economic development.
Annual bilateral meetings between Cuba and Guinea
have produced no new military or economic
agreements. For example, the US Embassy in
Conakry reports that no new Cuban projects in
Guinea were agreed to in 1986. The role of the 10
Cuban military advisers remaining in Guinea is
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unclear, as the Guinean militia they were training
reportedly has been disbanded and integrated into the
regular army. Cuba recently completed what the US
Embassy terms its last road construction project in
Guinea
Outlook
Havana feels it
can improve and maintain its relations with Conakry
mainly because many of the Guineans who trained in
Cuba currently occupy important positions.
Notwithstanding Cuba's optimism, we believe
Havana probably will be able to maintain only limited
cultural and economic contacts with Conakry in the
next few years:
? The change in the Guinean Government from a
stridently anti-Western to a more moderate outlook
welcoming Western investment has left the Cubans
with few opportunities to reestablish their presence.
? Havana appears to be unable to interest the
Guineans in new projects regardless of the favorable
terms proposed, because, in our view, Conakry
probably does not consider Havana a reliable
investment partner.
? Cuba's more pressing concerns in Angola, Ethiopia,
and Mozambique, and limited financial resources
make it unlikely that Havana will be able to offer
the substantial aid programs that Conakry is
seeking.
Barring a sudden change of regime and a radical
redirection of Guinea's economic and foreign policies,
relations between the two countries are likely to
decline even further. Most or all of the remaining -
Cuban advisers probably will depart, leaving only a
small Cuban diplomatic presence in Conakry.
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Ecuador: Grim
Economic Prospects
Ecuador faces severe financial constraints for the rest
of this year as a result of recent earthquakes and their
devastating impact on the key oil sector. The country
will probably lose more than $700 million in
anticipated oil revenues this year because of damage
to its major oil pipeline. To counter this, President
Febres-Cordero has announced suspension of debt
service payments and imposed austerity measures.
The ultimate revenue shortfall will depend largely on
how soon Ecuador can restore its oil production?
September is the most likely date?and whether
Quito can subsequently recoup some of its lost
petroleum exports through production levels above its
OPEC quota. Febres-Cordero's new austerity
measures and inability to respond quickly with relief
for the earthquake zones have spurred a renewal of
public protests, and continuing confrontations with
the leftist-controlled congress can be expected
Oil Market and Earthquake Undo Gains
When Febres-Cordero took office in 1984, he moved
quickly to eliminate the cumbersome and inefficient
policies of his statist predecessors and begin a free
market experiment that by 1985 had reinvigorated
the economy. Within the first year, GDP grew by 3.8
percent, direct foreign investment increased by 18
percent, and inflation was cut in half to 25 percent.
Confident in Quito's new economic direction, the
Paris Club and commercial banks rescheduled
Ecuador's $8 billion foreign debt.
Economic progress halted, however, when oil prices
declined by nearly 50 percent in early 1986, cutting
oil revenues by $1 billion. Febres-Cordero then sought
to stimulate nonoil exports by freeing the exchange
rate, which helped boost agricultural exports by 70
percent, but increases in nonoil exports failed to
compensate the loss in oil earnings. Ecuador finished
the year with a current account deficit of nearly $700
million and only about $145 million in foreign
exchange reserves. In addition, GDP fell by 2
percentage points.
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Quito was deadlocked in efforts to persuade its
commercial creditors to reduce debt service payments
due in 1987 when the earthquakes hit in early March.
Damage to the country's main oil pipeline and several
pumping stations has forced a shutdown of major
oilfields for at least six months, costing Quito at least
$1 billion in repairs and lost export revenues,
according to our estimates. Febres-Cordero has
suspended all service payments on commercial bank
debt for 1987, claiming that Ecuador simply cannot
pay the $920 million owed.
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Response to the Crisis
On 13 March, the President announced several belt-
tightening measures to help offset increases in the
budget deficit:
? Gasoline and fuel price increases of 38 to 186
percent. The price of regular gasoline increased 80 25X1
percent to 60 cents per gallon.
? Suspension of public-sector imports for five months.
? Reduction of 5 percent in government expenditures
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In addition, the government froze prices for 20
consumer basics, cut salaries of top officials, including
the President, by 15 percent and imposed a
governmentwide hiring freeze.
The international financial response to Ecuador's
economic disaster has been positive, but limited
largely to repairing earthquake damage. The World
Bank, IBRD, and other multilateral institutions have
offered emergency loans to rebuild the pipeline,
houses, roads, and bridges destroyed by the
earthquakes. Government officials estimate that the
cost of repairing the pipeline and related
infrastructure may exceed $350 million. Quito's
economic team and its Bank Advisory Committee are
meeting soon to discuss Ecuador's financial needs. US
Embassy sources indicate that Ecuador may ask for
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Oil Facilities Damaged By Earthquakes
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Esmeraldas
Damaged
oil pumping stations
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'Lap Agri?
Destroyed
pipeline segment
Ecuador
Peru
Boundary representation is
not necessardy authoritative.
Peru
OP Oilfield
Oil pipeline
a Refinery
Tanker terminal
0
100 Kilometers
100 Miles
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Table 1
Ecuador: Current Account Balance
Million US $ Tallying the Oil Loss
1984
1985
1986
Current account balance
?248
126
?693
Trade balance
1,055
1,294
504
Exports, f.o.b.
2,622
2,905
2,181
Cfil
1,835
1,927
971
Nonoil
787
978
1,210
Imports, f.o.b.
1,567
1,611
1,677
Net services and
transfers
?1,303
?1,168
?1,197
Interest payments
836
762
703
$300 million in new loans for 1987 as well as interest
rate and payments concessions on its commercial
bank debt.
Quito expects, optimistically in our view, to offset
most of the lost oil tax revenues with its new tax
increases and improved tax collection. Government
officials expect the public-sector deficit to increase to
$240 million?approximately 2.3 percent of GDP?
and real GDP to decline by 7 percent in 1987,
according to US Embassy sources. We believe that
the combined public-sector deficit will grow by at
least 3.2 percent of GDP this year, an increase of
nearly 1 percent over government projections.
The Central Bank plans to finance the budget
shortfall primarily by reducing debt service payments
and through new lending from foreign creditors. This
would depend on foreign commercial bank and Paris
Club creditors to acquiesce in rescheduling of
payments due this year?an outcome that is far from
certain. US Embasssy officials believe, and we
concur, that Ecuador is requesting more debt relief
than is necessary to fill its projected budget gap,
probably to shore up depleted reserves and to avoid
implementing additional austerity measures that
could spark further public protests and confrontations
with congress.
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We estimate that Ecuador will suffer a net loss of
nearly $740 million as a result of the six-month
suspension of oil production. Quito plans to minimize
the impact of lost oil production through oil loans
from fellow OPEC members, a temporary linkup to
the Colombian pipeline, and higher production levels
when the pipeline is repaired. So far, Venezuela and
Nigeria have offered to supply a total of 45,000 b/d to
help Quito with long-term export commitments.
Venezuela is also providing two months of domestic
oil needs. Colombia is allowing Quito to build an
emergency link to the trans-Colombian pipeline
through which 20,000 bld will flow beginning in May.
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to increase the pipeline's pumping capacity to resume
oil production at a rate of 400,000 bid, compared
with the former capacity of about 310,000 bid.
Political Reaction
The government's austerity measures have provoked
strong public protests and criticism from opposition
parties. The large increases in gasoline and
transportation prices, the first in two years, sparked
widespread demonstrations and a general strike last
week. The strike, the most effective in recent history,
has further consolidated opposition groups in their
drive to discredit Febres-Cordero's administration. A
political truce called immediately after the
earthquakes has broken down and leftist members of
Congress and labor groups are clamoring for Febres-
Cordero's impeachment. His confrontations with the
opposition could reach such a pitch that the military
may decide?with or without Febres-Cordero's
approval?to intervene, closing down congress.
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Outlook
We believe that Ecuador's domestic economy will
improve slightly later this year when the pipeline is
repaired, but the international payments situation will
remain bleak throughout the remainder of Febres-
Cordero's term, which ends in August 1988. Two
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Ecuador: Selected Economic
Indicators, 1984-87
Note scale change
Real GDP Growth'
Percent
-8
Agricultural Exports
Million US $
15
10
5
Consumer Price Inflation
Percent
30
20
10
Combined Public-Sector
Balance as a Share of GDP
Percent
4
o II
-8
Crude Oil Production Crude Oil Exports
Thousand b/d Thousand b/d
300
200
275
175
250
150
225
125
NA
NA
200
87" 100
1984 85 86 1984 85 86 87b
Central Bank projection for 1987.
h Projected.
312341 4-87
Table 2 Million US $
Multilateral Assistance
Institution
Amount Purpose
Total 415
World Bank 250 Disaster relief/
pipeline repair
Inter-American
Development Bank
100 Public-sector imports
IMF 45 Emergency loan
Andean Reserve Fund 20 Pipeline repair
consecutive years of oil revenue shortfalls have dealt
the economy a major setback, straining operations of
a public sector traditionally dependent on oil revenues
for nearly 50 percent of its budget. Relations with
foreign creditors, already strained before the
earthquakes, may deteriorate, and loans will be more
difficult to obtain as Quito is forced to continuously
reschedule its debt payments. If inflation surges
because of increased monetary emissions to finance
the budget deficit, Febres-Cordero may be forced to
institute more price controls and wage freezes.
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Guyana-Venezuela: Progress on
Essequibo Dispute
The widely publicized and highly successful four-day
state visit of Guyanese President Desmond Hoyte to
Venezuela in March highlights the warming trend in
bilateral relations. This trend, begun with Hoyte's
succession to the presidency following the death of
Forbes Burnham in August 1986, has been
encouraged by Venezuelan President Jaime Lusinchi.
The rapprochement gives substance to Hoyte's
movement away from the strict socialism of the
Burnham era and brightens prospects for settling the
longstanding territorial dispute over Venezuela's
claim to the Essequibo region, an area comprising
two-thirds of Guyana.
The two countries signed a narcotics control
agreement and established a joint commission for
economic, cultural, and technical cooperation. They
renewed an April 1986 agreement whereby Venezuela
gives Guyana oil in return for bauxite. In addition,
Venezuela will extend a $15 million credit to Guyana
for the purchase of Venezuelan goods and services and
Venezuelan and Guyanese private businesses will
form a joint enterprise to develop Guyanese bauxite.
Reverse Blank
11
An agreement to end the Essequibo territorial dispute,
which dates back to 1899, could serve as a capstone
for Venezuela's efforts to encourage Guyana's
movement toward the West. A successful outcome?
clearly in the interest of the United States?would
strengthen the domestic political positions of both
Presidents. Hoyte would benefit in his struggles with
old-guard "Burnhamites" who oppose his retreat from
the policies of his predecessor, and Lusinchi probably
would be strengthened in his struggle within the
Democratic Action party to fend off the presidential
candidacy bid of former President Carlos Andres
Perez.
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ALA LAR 87-009
10 April 1987
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Latin America
Briefs
Bolivia Curbing Labor Unrest
President Paz Estenssoro is considering imposing martial law to head off growing
labor protests in support of unemployed miners. According to press reports, some
3,900 miners and supporters have been on hunger strikes, and 10,000 participated
in a one-day antigovernment demonstration in La Paz this month, the largest
protest so far during this administration
Labor discontent is unlikely to threaten government stability,
and the state of siege would allow 90 days to deal with the situation. No solutions
are apparent, however, because La Paz has already given unemployed miners
severance pay and lacks the financial resources to make further payments.
Moreover, problems in the mining sector are growing because of depressed world
prices for tin and natural gas, and more mines are expected to close.
Venezuela 1987 Inflation Watch
Inflation, fueled by domestic shortages and a sharp currency devaluation, is
creating new economic and political problems for President Lusinchi's
government. Inflation rose to an annual rate of 14.3 percent in February, up from
12.7 percent in December. A current price freeze on basic commodities has
prompted a sharp increase in illegal exports of meat and poultry to neighboring
Colombia, where prices for food are higher. The new commercial exchange rate
created by the government late last year has doubled import costs, causing major
price increases on a wide range of goods. An informal survey of executives suggests
that most industries are ignoring government-imposed limits on price increases and
are passing on the higher import costs to consumers. Inflation could soar to a
record 30 percent, far exceeding the 15- to 20-percent government goal for 1987.
Labor is preparing to respond to the anticipated inflation. The head of the Labor
Confederation of Venezuela reportedly has widespread political support for his
plan to ask the government for a 15- to 20-percent general pay hike, according to
the US Embassy.
13
Secret
ALA LAR 87-009
10 April 1987
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Cuba-Uruguay Trade Agreements
Uruguay and Cuba have signed trade and cooperation agreements that are the
first between the two countries since they renewed diplomatic relations in 1985.
The agreements are part of Cuba's search for South American trading partners to
compensate for declining trade with Western Europe and Japan. The US Embassy
in Montevideo reports, however, that the Uruguayans believe that the potential for
expanded bilateral trade is severely limited by the lack of appealing Cuban exports
and Havana's shortage of hard currency. The Embassy also reports the
Uruguayans were primarily interested in securing assurances that the Castro
regime will try not to meddle in internal Uruguayan political affairs.
Panama Labor Party President Ousted
The removal in late March of Carlos Eleta, president of the Agrarian Labor Party
(PALA)?the second-largest party in the ruling coalition?illustrates Defense
Chief Noriega's continuing dominance of national politics. According to the US
Embassy, the real power behind new party president Justo Fidel Palacios is
Secretary General Ramon Sieiro, Noriega's brother-in-law. Eleta and Sieiro have
struggled for control of PALA since Sieiro was installed as party secretary general
by the Defense Chief following the presidential election in May 1984. Sieiro's
consolidation of control over the party clears the way for him to run on the
progovernment ticket?probably as a vice-presidential candidate?in the 1989
election. The Embassy reports that Eleta intends to challenge his removal, but the
new PALA leadership has already been recognized by the governing coalition's
majority party, the military-controlled Democratic Revolutionary Party. A
decision by Eleta and his faction to split from the party would weaken PALA but,
according to the Embassy, he has indicated his intention to remain in the
progovernment camp.
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