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Central Intelligence Bulletin
Secret
N2 042
6 July 1973
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No. 0161/73
6 July 1973
Central Intelligence Bulletin
CHILE: Allende appoints new cabinet. (Page 1)
INTERNATIONAL MONETARY DEVELOPMENTS: Assessment of
pressures on the dollar. (Page 3)
YUGOSLAVIA: Tito announces he will concentrate on
foreign affairs, implying a decreasing role in do-
mestic matters. (Page 5)
PHILIPPINES: Severe rice and corn shortages. (Page 6)
RWANDA: The army claims it seized power to avert
civ^il war. (Page 7)
WEST GERMANY: High investment rate will maintain
pace of boom. (Page 8)
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CCHILE: President Allende's new cabinet reflects
the political composition of his Popular Unity coali-
tion. Seven new ministers were appointed and eight
were retained from the previous cabinet.
In a speech prior to the swearing in, Allende
was hardly conciliatory; he did not meet the concerns
of the opposition or the armed forces. He called on
his new ministers to redouble their efforts to carry
out the Popular Unity program,'and in particular to
implement a plan to reverse the political and economic
deterioration of the country. Despite the President's
apparent reasonableness and determination, the new
plan emphasizes a further extension of state enter-
prises as well as state distribution of foodstuffs
and other essential consumer goods.
Perhaps in an effort to mollify the military,
who made certain demands on him recently, Allende
did not reappoint any previously impeached ministers,
as he had earlier pledged to do.
6 Jul 73 Central Intelligence Bulletin
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change Rate Changes Relative to the Dollar Since
theuropean Joint Float was Introduced on 19 M ch
(Figures in Percent)
Mark
Guilder
French franc
Sterling
Swiss franc
7 May* 1 June
- +5.6
28 Jung' 5 July
+1.3 1-4,,6 \ +5.0
Yen -0.3 / +0.1 +0.2 \ 0.0
*at strongest levels in recent months
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INTERNATIONAL MONETARY DEVELOPMENTS: The dollar
cant Hues to weaken, primarily because international
money managers believe that in the short term other
currencies, particularly the German mark, are more
likely to appreciate than the dollar. To the extent
that the money managers act on this belief, it is a
self-fulfilling prophecy.
The existence of the narrow European currency
band is an inviting target for corporate and finan-
cial money managers and speculators. The relatively
fixed intra-band rates provide the same opportunity
for low-risk profit or avoidance of loss evident
under the earlier world-wide system of fixed ex-
change rates, as demonstrated by the recent revalua-
tion of the mark. Because a high proportion of
liquid international assets are in dollars, specula-
tive movements generally result in dollar sales.
The German mark is the currency favored by
traders, primarily because of its remarkable per-
formance in the last few years. Since December
1966, the mark appreciation has been extraordinary--
over 60 percent. West Germany's exceptional export
earnings--likely to be enhanced in the short term
by the most recent appreciation--and the government's
aggressive anti-inflationary program suggest to money
managers and speculators that the mark will probably
soon again be a candidate for revaluation.
Although the dollar may show temporary strength
when traders take profits or repay dollars that
they borrowed to exchange for other currencies,
there is little chance for a sustained recovery in
1973. The near-term burdens on the dollar--infla-
tion, the psychological impact of continuing domes-
tic political uncertainty, the potential damage to
the US balance of payments by agricultural export
controls--clearly far outweigh in traders' minds
the longer-term prospects for balance of payments
improvement resulting from the already substantial
dollar devaluation
(continued)
Central Intelligence Bulletin 3
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The next pressure point in the European joint
float may be the Danish crown,which has firmly en-
trenched itself at the bottom of the band amid
rumors--officially denied--of impending devaluation.
The weakness of the crown is largely due to a i ing
trade deficit.
Central Intelligence Bulletin 4
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YUGOSLAVIA: President Tito's announcement
that he will Intensively concentrate" on foreign
.policy is an attempt to reassure the Yugoslavs that
he is still in charge despite recent limitations on
his activities.
In his first major speech in, more than two
months, Tito on Wednesday warned his people "not
to.be surprised" that he must devote his time to
foreign policy, implying that he will be less ac-
tive in domestic matters. He noted that three of
the four founders of the international nonaligned
movement--Nehru, Nasir, and Sukarno--are dead and
said that he, as the sole survivor and "main ini-
tiator" of nonalignment,has great responsibility
for the movement's future.
assume his protocol tasks.
The 81-year-old President has frequently ex-
pressed a desire to limit his role in domestic af-
fairs, and in the fall of 1970 ordered the creation
of a collective'state presidency to ease his bur-
dens. He began.to withdraw from internal political
discussions earlier this year and has only attended
two party meetings since late April.
Although he has hosted a series of foreign
dignitaries in recent months--and is due to receive
several more this month--Tito is slowing down.
A new protocol in Yugoslavia has relieved him of
ceremonial responsibilities during state visits.
Tito's subordinates--Stane Dolanc, his heir apparent
in the party and Vice President Rato Dugonjic--will
6 Jul 7 3 Central Intelligence Bulletin
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PHILIPPINES: A severe rice and corn shortage
in `fwo central provinces may result in serious prob-
lems for the Marcos administration. 11
Philippine officials
believe the shortage stems in part from the un-
willingness of wholesale and retail dealers to sell
rice at the government-imposed price ceiling. Local
warehouses are empty, and there is speculation that
dealers have hidden their stocks in outlying areas.
Meanwhile, the government is seeking to import
at least 400,000 tons of rice to meet domestic re-
quirements between now and November, when the next
rice crop is harvested. Manila has not been able
to procure rice from the US on PL-480 terms, and
talks with Peking and Bangkok have not resulted in
any contracts to date. Supplies are tight in China,
and Thailand has not yet determined.how much rice
it will have available for export from its summer
harvest. Manila may be forced to import wheat as
a substi ute. most likely from th e on commercial
terms.
Central Intelligence Bulletin 6
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RWANDA: The National Guard seized control of
the government on 4 July, claiming that it did so
to head off a civil war. President Kayibanda ap-
parently remains in office, although his future
role is unclear. The cabinet and national assembly
were dismissed and all political activity was sus-
pended. A National Committee for Peace and Unity
will take over administration of the government.
The committee is headed by Minister of National
Guard Habyarimana who.led the coup.
There is no evidence to suggest that Rwanda
was on the brink of civil war. The military move
may have been prompted by the personal rivalries
and factional disputes that have been intensifying
since early 1973. Central to the factionalism
within Rwanda's Hutu-dominated government is a
north-south split over policy toward the country's
Tutsi minority, with northerners urging strong re-
pressive measures. Over the years, the Tutsis
have assumed a commercial and intellectual impor-
tance far greater than their share of the population.
Although a northerner, Habyarimana is a long-
time supporter of the President and a moderate on
the Tutsi issue. However, the 3,000-member National
Guard--Rwanda's army--is dominated by northerners,
some of whom may take advantage of the coup to push
for Tutsi repression. This group would like to re-
taliate for the events of last summer when the Tutsi-
dominated government in neighboring Burundi purged
its Hutu majority, killing as many as 200,000.
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WEST GERMANY: Orders placed with investment
goods industries in May rose 17 percent above the
April level, a much larger increase than is usually
registered during that month. This probably will
maintain the rapid pace of economic activity and
postpone the effects of the government's anti-infla-
tionary program. The high level of new orders re-
flects heavy buying prior to the imposition of an
11-percent investment tax on 9 May. It is unlikely
that the new tax will dampen activity in this very
expansionary sector in the short run.
6 Jul 73 Central Intelligence Bulletin
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