THE PRESIDENT'S DAILY BRIEF 12 FEBRUARY 1975

• Document Type: FOIA
• Collection: President's Daily Brief 1969-1977
• Document Number (FOIA) /ESDN (CREST): 0006007940
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 15
• Document Creation Date: August 14, 2016
• Document Release Date: August 24, 2016
• Publication Date: February 12, 1975

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The President's Daily Brief
February 12, 1975
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Exempt from general
declassification schedule of E.O. 11652
exemption category 58(1),(2),(3/
declassified only on approval of
the Director of Central Intelligence
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February 12, 1975
Table of Contents
Industrial Production: Production in the major
countries has endropping at the sharpest
rate since World War II. (Page 1)
UK:
Syria-Israel:
Portugal: The Armed Forces Movement's weekly bul-
letin has announced formation of special "in-
ternal information and public relations teams."
(Page 5)
Panama: Negotiators are optimistic that the draft
of a new canal treaty will be completed this
summer. (Page 6)
Notes: Turkey-Greece; USSR-Tanzania (Page 7)
At Annex we present principal judgments of an in-
telligence memorandum, on Peru's Stalled Revo-
lution: Implications and Prospects.
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DEVELOPED COUNTRIES:
Trends in Industrial Production1
(seasonally adjusted)
125 ? Index: 1970 annual average =100
120
115
110
105
100
J FMAMJJASONDJ FMAMJ JASON
1973 1974
20
15
10
5
0
Percentage change
over previous month
at an annual rate
-10
-15
-20
-25
'Canada, Trance, Italy, Japan, United Kingdom,
United States and West Germany.
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INDUSTRIAL PRODUCTION
Industrial production in the major
countries has dropped in recent months
at the sharpest rate since World War II.
Production has been falling steadily since
last May, after marking time for five months at
reduced levels brought on by the oil embargo. The
annual rate of decline accelerated to 18 percent
in October and November; fragmentary information
points to an even steeper descent in December and
January.
--Japan: Production slipped throughout 1974,
with the annual rate of decline reaching 18
percent in June through November and 35 per-
cent in December.
--Italy: After rebounding to an all-time high
in June, production fell at an annual rate of
30 percent in the second half of 1974, to the
early 1973 level.
--France: Production climbed through August,
then declined at a 25-percent annual rate.
--West Germany: After stagnating for a year,
production declined at an annual rate of 10
percent in June through September and an es-
timated 20 percent in October and November;
mass industrial layoffs continued in December
and January.
--Canada: Since peaking in March, industrial
activity has slipped at an annual rate of 7
percent.
--UK: Production plummeted during last win-
ter's coal strike, rebounded to the prestrike
level by August, and then began to sag; output
is now roughly 3 percent below the prestrike
rate.
Most major industries have been caught in the
downward spiral. From June to November, automobile
production dropped precipitously in all countries
except France and Canada. West German output showed
(continued)
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the sharpest rate of decline, 25 percent. The de-
cline in the Japanese automotive industry amounted
to only 6 percent because a rapid buildup in inven-
tories offset much of the drop in sales. Chemical
production slumped in nearly all countries, with
the drop most pronounced in West Germany. Japan
led the falloff in textiles, machinery production,
and steel.
The short-term outlook for industrial produc-
tion is poor. Inventories remain high and will re-
tard recovery. Demand, domestic and foreign, is
expected to be weak, moreover, for several more
months. The decline in industrial activity probably
will bottom out before midyear, but production al-
most certainly will be lower in the first half of
1975 than in the second half of 1974.
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UK
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SYRIA?ISRAEL
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PORTUGAL
The Armed Forces Movement's weekly
bulletin yesterday announced the forma-
tion of special "internal information and
public relations teams" that will be em-
powered to interpret army directives and
accompany commanders to regional army
meetings.
The announcement acknowledges for the first
time that the Movement does not command unanimous
support within the military. It admits the army is
"not easily accepting" the consequences of the coup
last April.
Billed as an official order, the announcement
says the teams will be composed of "ordinary sol-
diers and possibly. civilians." While we believe it
is too early to make a firm judgment, this order
has the earmarks of the establishment of a political
commissar system. Responsibility for publication
of the bulletin, however, has been in the hands of
more radical elements of the Movement, and they may
have overstepped their authority. It is possible
that a majority of the membership of the Movement
may not favor this order.
In any case, command-rank officers will not
welcome the order. It is likely that if the order
is implemented, differences existing between some
members of the Movement and the majority of the
armed forces will widen.
Debate continues, meanwhile, within the mili-
tary over the future role of the Armed Forces Move-
ment in Portuguese politics. There are rumors that
the Movement will be reorganized to give it a formal
position within the government.
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PANAMA
Panamanian negotiators are optimistic
that the draft of a new Panama Canal treaty
will be completed this summer, and Pana-
manian leaders are trying to sell the treaty
to their people.
In a press interview last Friday, Foreign Min-
ister Juan Tack gave a broad accounting of the
progress that has been made since he and Secretary
Kissinger agreed on a treaty framework a year ago.
Throughout the interview, Tack stressed the spirit
of compromise exhibited by both sides. He noted
that the 1903 treaty had given the US the right to
operate, maintain, and protect the canal in perpe-
tuity. Thus, any change in these terms would bene-
fit Panama and contribute to its fundamental objec-
tive of taking control.
Tack said that probably the most important
concession the Panamanians will need to make is to
allow some US military bases to remain. He added
that Panama is prepared to grant the US a transi-
tion period to withdraw from the present Canal Zone,
and to give the US the use of certain facilities as
well as the right to operate and protect the canal
during the life of a new treaty. Panama would share
these responsibilities until the pact's expiration,
and then would exercise them exclusively.
Tack's statement is indicative of the growth
of the Torrijos government's commitment to a new
treaty. Torrijos and Tack are strong nationalists,
and compromise has not come easily to them. They
now are convinced that the treaty evolving from the
current negotiations is probably the best they can
get, and they have characterized it to the Panaman-
ian people as a "bridge" from present US management
to eventual Panamanian control of the canal.
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NOTES
Turkey is pushing forward with oil exploration
in the Aegean Sea, despite having agreed to submit
its territorial sea controversy with Greece to the
International Court of Justice.
The Turks have leased a vessel to conduct
seismic or geophysical research in their territorial
waters. Under the terms of the contract, no re-
search will be done in disputed areas.
In this somewhat tense situation,
there is always the possibility that the vessel
could stray off course and provoke an incident:
Soviet President Podgorny's visit to Tanzania
has apparently been postponed again.
the
visit was to have begun on February 21.
the trip would be
put off until later this year. Podgorny was scheduled
to go to Tanzania last December, but that visit also
was postponed at the last minute. No explanation
was offered either time.
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PERU
We present below the principal
judgments of an intelligence memorandum
on Peru's Stalled Revolution: Implica-
tions and Prospects, prepared by our
Office of Political Research.
For the past six years, the Peruvian military
government, spearheading a revolution from above,
has sought to bring radical social and economic
change to Peru--and to do it peacefully. For the
most part, the revolution has been genuine; in some
respects, it has been successful. The government
has:
--Carried out one of the most extensive agri-
cultural reforms in the history of Latin Amer-
ica and with far less disruption than the
agrarian reform in Chile under Allende.
--Initiated programs that will eventually give
industrial workers a significant share in com-
pany profits and a voice in management.
--Greatly expanded the role of the state in
industry and gained control of large segments
of the economy that had been foreign controlled.
Public Dissatisfaction
The government has failed, however, to engender
significant popular support for its revolutionary
programs. Throughout the country, skepticism per-
sists toward the revolution in general and toward
the military government in particular. Almost all
groups of Peruvians have been alienated. Growing
public dissatisfaction vented itself first in or-
ganized demonstrations, and recently in urban ter-
rorism.
The urban and rural poor are unhappy because
their expectations have outraced the accomplish-
ments of the revolution; the middle class is dis-
turbed because it holds the government responsible
for rising inflation and high taxes; private busi-
ness is fearful that the government means to de-
stroy private enterprise; and the wealthy families
are upset because the government has destroyed their
dominance in economic and political matters.
(continued)
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The military government has been in firm con-
trol of the country since it took power in 1968.
The populace has been relatively passive, the po-
litical opposition has lacked effective leadership,
and the military holds a monopoly on power. The
government has repeatedly vowed that it will remain
in power until its revolution has become irrever-
sible.
Peru's military leaders are acutely aware,
however, that their ability to govern the country
is threatened by an increasingly dissatisfied and
restive citizenry, as well as by divisions within
the junta over how best to cope with popular unrest.
For the short term, the government is likely
to just muddle along, trying to overcome internal
dissension and counteract growing opposition to
control by the military.
If factionalism within the military increases
and popular opposition to its rule grows, the
armed forces may be forced to change political
course. There seem to be several ways they might
turn.
Toward a More Radical Dictatorship
President Velasco might accelerate movement
toward a more authoritarian regime, attempting to
harden his revolution, which, from the outset,
has been neither violent nor severely repressive.
If the government now resorts to harsh, re-
pressive tactics to control the maturing but still
unorganized opposition, the outcome might be a
mutually destructive spiral of violence.
Toward an Alliance with Civilian Groups
The military government may decide that it
would be better to move toward some arrangement
to share power with civilians if it is to make
sure the revolution survives. Such a course would
be more likely if a moderate succeeds Velasco to
the presidency.
A power-sharing arrangement, however, is not
likely to come about easily, or soon. The mili-
tary would be reluctant to concede a significant
measure of its power. It would be wary of risking
a free election, and a civilian-military alliance
would be fragile at best.
(continued)
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The only political party sufficiently well
organized to help govern the country is the Ameri-
can Popular Revolutionary Alliance. Its leaders
once favored radical reforms, but in recent years
have grown relatively moderate.
They still share some of the military's goals
for Peru, but young radicals in the party are
pledged to topple the military from power. Clearly,
factional rivalries inside the party would have to
be resolved before any agreement could be reached
on sharing power with the military.
Toward Military Disengagement
The military might some day bow out of poli-
tics rather than face serious civil unrest. The
armed forces are so thoroughly committed to carry-
ing out the revolution, however, that it would
take a series of severe jolts to move them off the
political stage. Disengagement from politics seems
the least likely of the three alternatives facing
the military.
Whatever happens, the revolution brought by
the military has had a profound and probably a
lasting impact in Peru. Even though the revolu-
tion now appears to be stalled far short of its
ambitious goals, two of its major programs--na-
tionalization of major industries and national
economic independence--are not likely to be undone
by any successor government, military or civilian.
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