LATIN AMERICA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00289R000201080001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 27, 2016
• Document Release Date: July 28, 2011
• Sequence Number: 1
• Publication Date: April 25, 1986
• Content Type: REPORT

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OR MARK UN
Latin America
Review
25 April 1986
Secret
ALA LAR 86-010
25 April 1986
Copy 4 3 0
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Latin America
Review
Articles Peru-USSR: Warming Relations Under Garcia 25X1
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President Garcia, who evidently views the Soviet Bloc as a
counterweight to economic and political pressure from Western
governments and the IMF, has sought expanded Soviet military and
economic aid and has improved relations with Cuba, Nicaragua, and
North Korea.
Ecuador: Leftist Opposition Gaining Strength I 5 25X1
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Conservative President Febres-Cordero is facing mounting
opposition from the left that could lead to a more widespread
polarization of the political environment.
Haiti-Dominican Republic: Deteriorating Relations 9 25X1
Bolivia-Peru: Flood Damage
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Mexico: World Cup Security
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Private Businesses Financially Squeezed
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Protests Over High Utility Prices
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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,
Secret
ALA LAR 86-010
25 April 1986
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Review
Peru-USSR: Warming Relations
Under Garcia
Peru's President, Alan Garcia, has strengthened ties
to the Soviet Union and its allies since taking office
last July. He has sought expanded Soviet military and
economic assistance and has improved relations with
Cuba, Nicaragua, and North Korea. Despite Garcia's
declared intention to pursue a foreign policy path
"between the two imperialisms," Moscow views with
favor his defiant stance on foreign debt repayment,
anti-US rhetoric, and outspoken support for the
Sandinistas in the Central American conflict. Garcia Peru may receive as many as 100 additional Soviet
evidently views the Soviet Bloc as a counterweight to advisers-nearly double the present number-as part
economic and political pressure from Western of the new arrangements.
governments and the IMF, and Moscow has given
him assurance of substantial, though as yet
unspecified, support. Although Garcia and General
Secretary Gorbachev are still taking the measure of
one another, we expect the two governments to build
on the legacy of close bilateral ties begun by Peru's
leftist military government under General Velasco in
the early 1970s.
Military Ties Economic Ties
The extensive Soviet military sales and technical Following Garcia's inauguration, the Soviets
assistance program in Peru is the most conspicuous reiterated their desire to enhance existing militar
provided extensive training within the Soviet Union to
Peru's armed forces. We estimate that about 2,000
Peruvian military and intelligence personnel have
received training in the USSR since the early 1970s.
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aspect of the longstanding bilateral relationship. The and economic ties 25X1
Soviets have supplied roughly half of all Peru's 25X1
foreign military acquisitions since 1973, with
agreements totaling more than $1.5 billion. The Army
and the Air Force have received the entire amount;
the Navy has staunchly refused to accept Soviet
hardware and advisers. Despite efforts to reduce
dependence on the the USSR-for example, by
purchasing Mirage 2000 fighter-bombers from
France-the Peruvian military, faced with severe The level of Peruvian-Soviet bilateral trade, however,
budget restrictions, continues to be attracted to Soviet remains low relative to Lima's trade with the United
weaponry because of highly favorable financing States, other Latin American countries, and Western
terms, the relatively low price tags on Soviet arms,
and a lack of alternative sources for spare parts. F_~ 25X1
Secret
ALA LAR 86-010
25 April 1986
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Europe. In 1984, Peruvian exports to the Soviet Union
amounted to $39.3 million, compared with $751
million to the United States and $313 million to Latin
America. In all, trade with the Soviet Bloc in 1984
represented only 2.3 percent of Peru's exports and 0.4
percent of its imports. Although the absolute level is
small, Peruvian-Soviet trade did increase sharply in
relative terms in 1984 in large part because of a trade
agreement, formalized in 1983 under the Belaunde
administration, permitting the repayment of $125
million of Lima's $2 billion debt to Moscow in goods
over a five-year period.
USSR of violating restrictions on fishing in Peruvian
waters. In June, a judge impounded 10 Soviet fishing
boats for the alleged failure of El Pacifico, a private
intermediary, to pay required fees. Although the
vessels were released in late July, the fishing accords,
presently up for renewal, remain a controversial
bilateral issue.
Garcia, like his predecessor, is dissatisfied with
existing arrangements, which are governed by a 1971
protocol and several related contracts.
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Under a rescheduling agreement signed in December,
Moscow postponed approximately $38 million in
Lima's 1986 debt installments while accepting
repayment of the remaining $25 million in goods. The
US Embassy says that Peru had still not ratified this
agreement as of late January, however, and that Lima
owes about $38 million on its 1985 debt to Moscow.
Garcia evidently hopes to use Peru's countertrade deal
with the Soviets as a model for similar arrangements
with other Bloc creditors. In addition, Peru has
proposed paying off part of its debt to the Soviets
through multilateral trade arrangements involving
delivery of Peruvian goods to Nicaragua and others,
and Moscow reportedly has agreed.
The Garcia government's nationalistic policies have
made the question of tax liabilities for nonresident
foreign enterprises a major bone of contention. Even
so, Lima's need for revenue, the lack of its own deep
sea fishing fleet, and a desire not to jeopardize
relations with the Soviets in other areas will probably
compel Garcia to renew the accords-albeit with
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In contrast to relatively high levels of Soviet military
assistance since 1973, Moscow has provided paltry
economic aid. Nonetheless, the Soviets have made
some tentative moves in response to Garcia's request
for expanded development funds. They renewed their
offer to support the Olmos hydroelectric project-
approved for foreign bidding under the 1986 budget
law-and Garcia reportedly expects additional Soviet
subventions. Any such aid would be tied to specific
development projects and would probably not exceed
$200 million. Moscow may also offer to set up joint
enterprises with private Peruvian firms that would
produce items for export to fill specific Soviet Bloc
needs.
Fishing has long been an important area of economic
cooperation, but early last year it became a source of
friction when the Belaunde government accused the
some face-saving modifications.
Cultural Ties
The Soviets have also sought influence through media
and cultural instruments. They have promoted the use
of TASS and Novosti wire services by Peruvian
newspapers, and have used middlemen to purchase
shares in some of them.
The USSR's media strategy is evidently calculated to
avoid offending Garcia. Last August, Soviet press
agencies in Lima limited their contacts with a local
Communist Party newspaper because of its anti-
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The Soviet-Peruvian Cultural Association, with
centers in Lima and 17 of the country's 24
departments, sponsors cultural events, Russian-
language classes, and lectures on the USSR. It also
recruits Peruvian youths for Moscow's extensive
scholarship program, which offered 180 grants in
1985 in engineering, medicine, industrial relations,
international economics, electronics, communications,
culture, and art. This represented a significant
increase from the 137 scholarships awarded in 1984,
and the 86 granted in 1983. An estimated 450 to 500
Peruvian students are currently studying in the
USSR, according to the US Embassy. Other East
European states also offer scholarships, and, although
precise figures are not available, we estimate that
these collateral programs may involve another several
hundred students.
Moscow and the Far Left
The underside of Moscow's formal relations with the
Garcia government will be a continuation of
longstanding ties to the far-left opposition-the
United Left (IU) coalition-as well as the ruling
APRA party's left wing. The mainline Peruvian
Communist Party (PCP-U) receives a major portion of
its operating budget from Moscow, which exercises
substantial authority over party policy. Communist
Party membership is only 1,500, and Moscow realizes
that its near-term prospects are poor, at best.
Furthermore, Moscow's influence over the IU
coalition, to which the PCP-U belongs, is relatively
have avoided any public feuding, and the President's
populist policies have tended to mollify the party's far
left.
The Soviets also have close ties to key labor groups.
Only one-third of Peru's workers are unionized, but
Moscow has access, most notably to the Communist-
dominated General Confederation of Peruvian
Workers (CGTP), Peru's largest labor organization.
Moscow and Peru's Insurgency
We have no evidence that Moscow has any ties to
Peru's two major insurgent groups, the Sendero
Luminoso (SL) or the Tupac Amaru Revolutionary
Movement (MRTA). Nor do we have reliable
evidence that Cuba or the Sandinistas have ties to
Peruvian subversive groups. Lima has charged that
some MRTA leaders were trained in Cuba in the
1960s, and we do not rule out the possibility that
Havana and Managua maintain contact with them.
Moreover, the MRTA recently announced that some
of its guerrillas have joined M-19's America Battalion
in southern Colombia. M-19 reportedly has received
military training and other assistance from Cuba and
Nicaragua, and it is likely that MRTA would also
limited.
The Soviets probably hope to influence Garcia's
policies by using their leverage within his own party.
They have maintained close contacts with the APRA
weeks in Moscow, stopping over in Havana on his
Although Garcia and Villanueva are archrivals, they
accept such aid if offered.
Sendero Luminoso is Maoist and anti-Moscow in its
orientation. The organization, ideology, and strategy
of SL and MRTA contrast sharply, and, although
they have at times staged simultaneous attacks in
Lima, there is no firm evidence of formal links or
deliberate coordination between them. Nor is there
evidence of links between Peru's extreme left parties
and insurgent groups. Although the MRTA is pro-
Moscow, the Soviets believe that backing the legal far
left provides the best chance for bringing a Marxist
government to power.
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Other Soviet Bloc Countries
All the East European Bloc countries and Cuba have
embassies in Lima. Peru and Cuba have now
normalized diplomatic relations, which had been
restricted to the charge d'affaires level since 1980.
This move offers Havana-whose diplomatic mission
in Lima is already over 60-strong-new opportunities
to expand its activities. Havana can also build on
extensive, existing ties to prominent leaders of the
United Left coalition.
The highly publicized personal polemics between
Garcia and Castro during the first months of the
Peruvian President's term have faded. In addition,
Prime Minister Alva Castro visited Havana in late
1985, and Cuba has loaned Peru two fishing vessels, a
gesture hailed by Alva Castro as "the finest example
of our harmonious relations."
Nicaragua has a five-person embassy in Lima headed
by an ambassador. While less prominent than the
Cubans, Nicaraguan diplomats have contacts in
Peruvian media circles and with key United Left
leaders. Garcia has exhibited strong sympathy for the
Ortega regime, and, speaking before the Argentine
Congress in mid-March, he declared that Peru would
break diplomatic relations with any country that
invaded Nicaragua.
Prospects for Peruvian-Soviet Bloc Relations
The Soviets view Garcia's external orientation-
particularly his coolness toward the United States and
his defiance of the IMF-with favor, despite his
avowed intent to pursue an independent, nationalistic
foreign policy.
As relations with the USSR improve, Peru will
probably strengthen its ties to other Soviet Bloc
countries as well. Besides exchanging ambassadors
with Cuba, Garcia may seek closer economic relations
with Nicaragua. He reportedly received campaign
funds from P'yongyang and, in return, will eventually
extend full diplomatic recognition to North Korea.
Although he identifies primarily with the Third
World, Garcia will remain open to all Soviet Bloc
offers of friendship and assistance as a counterweight
to pressures from international financial institutions
and Western governments.
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Ecuador: Leftist Opposition
Gaining Strength
As Conservative President Leon Febres-Cordero looks
toward the last two years of his administration, he
faces mounting political opposition from the left. In
particular, the Popular Democratic Movement, which
forms the political wing of the Marxist Leninist
Communist Party of Ecuador and is the country's
most radical party, has emerged as the best organized
of the opposition parties and is likely to capture at
least five seats in the 1 June Congressional election.
The party's anticipated success at the polls raises the
potential for conflict between the President and the
legislature and could contribute to a more widespread
polarization of the political environment.
Febres-Cordero's Vulnerabilities
Until now, Febres-Cordero has tried to outmaneuver
the fragmented opposition by forming ad hoc alliances
and using his strong personality to override his
enemies. After initial wrangling with Congress, he
managed to form a congressional coalition-bringing
together the six small rightist and center-right parties
that had backed his presidential bid with the larger
populist party, the Concentration of Popular Forces.
This alliance gave the government a two-seat working
majority in a 71-seat Congress and enabled Febres-
Cordero to implement a large part of his legislative
agenda.
Both the US Embassy and foreign observers, however,
believe that the opposition, particularly the left, has
plenty of ammunition to use against Febres-Cordero
in the coming election. Economic problems resulting
from sharply falling oil prices provide the left with a
readymade issue. Leftists are blaming the downturn
on government mismanagement and attacking
Febres-Cordero's willingness to commit Ecuador to
debt refinancing and free market policies. They
charge that such policies result from Febres-Cordero's
association with the United States. The President is
also vulnerable to criticism of his failure to implement
the housing and employment program he promised in
the 1984 campaign, but which mounting budgetary
difficulties effectively preempted. Moreover, the
mutiny in March of Air Force General Vargas-who
charged the Defense Minister and the Army
Commander with misappropriation of military
funds-has tainted the administration and given its
leftist opponents another key issue to exploit.
Leftist Moves
Knowledgeable- US Embassy contacts indicate that
the Popular Democratic Movement is in the strongest
position to take advantage of widespread discontent.
The party has combined an effective campaign with a
well organized and ideologically committed cadre. By
exploiting these advantages and taking the most
extreme positions on every major issue, the party has
attracted growing support, especially from radical
students and both urban and rural poor. The press is
predicting that the movement will win congressional
seats in several provinces and should be in position to
exert influence in future legislative coalitions.
Sporadic university demonstrations-some violent-
during the past six months may have been led by the
Popular Democratic Movement, which has been
calling for frequent antigovernment protests.
Secret
ALA LAR 86-010
25 April 1986
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Right to Center: National Reconstruction
Front (FRN)
? Social Christian Party (PSC) ... led by
Febres-Cordero -Conservative Party (PC)
? Revolutionary Nationalist Party (PRN)
? Democratic Institutional Coalition (CID)
? Velasquista National Party (PNV)
? Radical Liberal Party (PL)
Centrist Parties
? Concentration of Popular Forces (CFP) ... major
centrist populist party ... has joined with the
National Reconstruction Front to provide the
government with a two-seat majority in Congress
since June 1985
? Alfarist Radical Front (FRA)
Center-Left Opposition Parties
? Revolutionary Popular Action Party (APRE)
? Ecuadorean Democratic Action (ADE)
? Democratic Party (PD)
? Ecuadorean Roldocist Party (PRE)
? People, Change, and Democracy (PCD)
? Popular Democracy (DP) party of former President
Osvaldo Hurtado
? Democratic Left (ID) party of defeated presidential
candidate Rodrigo Borja ... largest center-left
party ... many consider it a social democratic
party
Far-Left Parties
? Broad Leftist Front (FADI) ... takes a pro-Soviet
line ... strong labor support, but unable thus far to
translate this into votes
? Socialist Front (PSE/PSRE)
? Popular Democratic Movement (MPD) ... electoral
wing of Communist splinter group ... has strong
university backing ... best organized political
party in Ecuador
The head of the Popular Democratic Movement,
Jaime Hurtado Gonzalez, is a popular figure who
built his reputation in Congress as a confrontational
and flamboyant speaker. He was selected as the
party's presidential candidate in 1984 and, by running
a hard campaign, attracted wide press coverage and
came in fourth with 172,000 votes. Because of a legal
restriction, Hurtado cannot seek a congressional seat
until 1988, but he is running for municipal office in
Guayas Province.
Preemptive Moves by Febres-Cordero
Sensing the left's growing appeal, Febres-Cordero has
called for constitutional reforms to permit
independents to run without party sponsorship. Some
political figures have speculated that the President's
real intent is to control so-called independent
candidates through patronage and direct financial
backing. He has also introduced Constitutional
amendments to strengthen his authority and to
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remove legal constraints on security forces engaged in
counterinsurgency. Rejection of the proposals in a
special legislative session has led the President to
schedule a nationwide plebiscite, also on 1 June.
Strong gains by the radical left could eventually force
the President to rule by decree-a currently limited
emergency power that he hopes the plebiscite will
allow him to expand. At a minimum, the ascendancy
of the Popular Democratic Movement, which has
already called for violent opposition to the President,
heightens the possibility of more frequent
confrontations in Ecuadorean politics.
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Latin America
Briefs
Haiti-Dominican Deteriorating Relations
Republic
Growing anti-Dominican sentiments in Haiti, and Dominican pressure on Haitian
President Namphy, to reimburse Santo Domingo quickly for a large deposit paid
to the ousted Duvalier regime for migrant labor have led to a downturn in relations
Foremost among Dominican concerns are the safety of
their nationals in Haiti and quick recovery of the $2 million paid to Duvalier in an
unfulfilled accord for imported sugar worker
Longstanding mutual mistrust has traditionally kept relations fluctuating.
Although Santo Domingo tends to distance itself from Haitian events unless they
directly affect Dominican affairs, and the Haitian Government has been too
preoccupied with internal problems to devote much effort to improving external
relations, both governments want stable ties. Relations probably will not
deteriorate much further unless Dominican nationals in Haiti are harmed. The
popular perception in Haiti of Dominican pressure on an impoverished country to
repay a large debt inherited from Duvalier, however, could lead to increased anti-
Dominican sentiment and violence.
Flooding of Lake Titicaca and surrounding rivers during the past six months has
left 470,000 peasants homeless in Bolivia and Peru, according to the US Embassy.
Floodwater damaged nearly 50,000 dwellings as well as roads and railroads.
Although it affected over 150,000 hectares of farmland, it will not have a
significant effect on the coca crop or agricultural production in either country
because anticipated losses will be small in comparison with total yield.
La Paz and Lima have declared states of emergency in several departments to
address the effects of the disaster, but both governments lack adequate financial
resources to relocate flood victims. Political stability could be affected if food
shortages in the affected regions-because of transportation blockages or high
prices-incite peasant riots. Bolivia has publicly asked for more US aid, and
Peruvian President Garcia has appealed for international assistance. In the
meantime, civil defense officials are airlifting emergency food supplies and
medicine to relief centers, and Catholic services are also providing food and
humanitarian assistance.
Secret
ALA LAR 86-010
25 April 1986
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Mexico World Cup Security
Mexico City's security preparations to prevent terrorist incidents at the coming
World Cup soccer games will not greatly enhance the government's antiterrorist
capabilities, in our judgment. Although a major international terrorist incident is
unlikely, in our view, Mexican authorities probably fear a repetition of the violence
that occurred shortly before the 1968 Olympic Games held in Mexico City.
Despite a flurry of activity, including equipment purchases, training programs, and
a request for unspecified US assistance, planning for security at the games-to be
played in May and June-is still in the rudimentary stages. In addition, much of
the equipment is inappropriate, and Mexican trainees have described a French
training program as pointless and ineffective, according to the US Embassy.
Bureaucratic turf battles also are hampering the security program. The Ministry
of the Interior has been authorized umbrella responsibility for security at the
games, causing resentment within the military establishment.
Private Businesses Financially Squeezed
Declining oil revenues are causing Mexican state corporations to suspend
payments to private domestic suppliers, aggravating businessmen's already severe
financial problems. Heavy government borrowing to cover public-sector operating
expenses has caused a domestic credit shortage, with virtually no bank lending to
the private sector, according to the US Embassy. Moreover, the economic
downturn during the past several quarters has caused domestic demand to slacken
significantly, leaving businessmen with large inventories and reduced profits.
National business groups, concerned about the impact of the payment suspension
on already weakened commercial enterprises, are threatening a moratorium on
taxes and loan payments to government banks unless public enterprise payments
Protests Over High Utility Prices
Protests against hikes last December in government-controlled prices for gas and
electricity in Monterrey have been going on for a month and have caused the
government to announce a rollback in gas costs by up to 40 percent, according to
the US Embassy. More demonstrations are likely and may intensify, according to
the Embassy. The prospect of further protests in Mexico's second-largest city over
reduced government subsidies for utilities and other basic consumer goods is likely
to make the de la Madrid administration more reluctant to make spending cuts in
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