THIRD WORLD MILITARY AND ECONOMIC AUSTERITY: IMPLICATIONS FOR POLITICAL STABILITY - 1984/11/01

• Document Type: SPECIALCOLLECTION
• Collection: Argentina Declassification Project - The "Dirty War" (1976-83)
• Document Number (FOIA) /ESDN (CREST): 05508330
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 93
• Document Creation Date: April 3, 2019
• Document Release Date: April 12, 2019
• Publication Date: November 1, 1984

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Directorate of
Sk,ei<
Intelligence
3.5(c)
EO 13526 3
3(b)(1)>25Yrs
EO
13526
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Third World Military
and Economic
Austerity: Implications
for Political Stability
A Research Paper
(I)
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Third World Military
and Economic
Austerity: Implications
for Political Stability
3.5(c)
3.5(c)
3.5(c)
Many military establishments in debt-troubled Third World countries face
financial constraints. In many instances, military-expansion programs have
been cut back or postponed, and planned equipment purchases have been
cchica,
In general, Third World countries ruled or tightly controlled by the
military are witnessing military budget austerity as often as those under
civilian governments. A rough indication of how the military is faring is the
ratio of military spending to total government outlays. From 1980 to 1983,
the military share of government spending declined in Argentina,\
Although military concerns about morale and readiness are growing, the
defense-spending cutbacks thus far have not resulted in regime-threatening
instability. We have not observed much, if any, connection between
military austerity measures and coup attempts or coup plotting.
This is not to say that recent budget cuts have not concerned the military in
key Third World countries:
� In Argentina, budget issues have heightened military criticism of the
administration, especially among middle- and lower-ranking officers.
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It is not possible to determine whether or when this kind of military
disgruntlement would lead to military actions against existing government
authorities. We believe that the military by and large has been willing to
accept austerity measures as part of a broader program aimed at economic
stabilization. In our view, the military cuts most likely to trigger political
instability would be those to military salaries and perquisites�moves that
so far have been avoided or kept to a minimum.
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Contents
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.Seeref
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Argentina
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3.5(c)
Third World Democracy
Economic crisis is not good for democracy in the
Third World. States that maintain democratic institu-
tions in good times may bypass these institutions when
times are hard. Labor unions or local governments
may be intervened by the central government. Martial
law or a state of siege may be declared. Elections may
be postponed. Real or imagined "economic criminals"
may be punished with little regard for human rights
or legal niceties. Strikes, demonstrations, and food
riots may be put down brutally. If an elected govern-
ment appears unable to cope with the crisis, there may
be a public demand that the military take over. This
has happened repeatedly in Argentina as well as in
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Brazil in 1964. Inability to solve economic problems
Sometimes, however, severe economic problems may
push a country toward democracy. Military or au-
thoritarian regimes may find themselves so over-
whelmed with economic problems that they will insti-
tute elections to rid themselves of the problems of
government. Economically inept military governments
have repeatedly used this tactic in Argentina
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The Argentine
Military: Impact
of the Economic Crisis
The Argentine military, traditionally insulated from
fluctuations in economic performance, faces severe
budget cuts over the next several years as President
Alfonsin tries to reorder the country's shattered econ-
omy and bring the military under closer civilian
supervision. As a result, after considerable hesita-
tion�inspired partly by concerns over the military's
reaction�Alfonsin has reduced armed forces expen-
ditures to about 60 percent of 1983 levels. In this way
he hopes to increase the funds for economic reactiva-
tion and social programs while making his economic
policies more palatable to foreign creditors. In addi-
tion, Alfonsin has implemented other reforms to
3.5(c) promote interservice cooperation, which he believes
will lead to further economies and make the services
more responsive to civilian authority.
3.3(b)(1)
During the first four months of 1984, the cuts ap-
peared to have little impact on military operations.
Since then, however, constraints have exacerbated
interservice rivalries, reduced morale, and diminished
military capabilities.
3.5(c)
Moreover, the budget cuts have been a major cause of
growing military dissatisfaction with the government.
Disgruntled noncommissioned officers have formed
organizations on several military bases, and
officers from all three services have done so as
well, despite ongoing interservice rivalries. Such oppo-
sition, however, is still relatively isolated and no clear
figure has emerged around whom dissident command-
ers are likely to rally.
3.5(c)
We estimate that any major near-term confrontation
between the government and the armed forces would
be preceded by a sharp deterioration in the economy,
which would generate widespread social unrest and
renewed terrorism. Executive or legislative policies
that appear to threaten the military, especially in the
area of human rights investigations, could also spark a
showdown. Even then, in our view, divisions between
and within each of the services and the current lack of
broad popular support would make a successful coup
difficult.
3.5(c)
Political and Economic Backdrop
Argentine military officers tend to be fiercely nation-
alistic and in general share a deep distrust of civilian
government. The armed forces have moved against
elected officials, however, only when civilians, them-
selves concerned about economic political instability,
have convinced the military that the majority of
Argentines backed intervention. Thus, with civilian
connivance, the military has overthrown elected gov-
ernments six times since 1930, most recently in 1976.
3.5(c)
Until the 1976 intervention, military officers played
the role of arbiter, holding power only long enough to
assure a smooth return to civilian rule. Following the
1976 coup, however, the armed forces were not only
guarantors of peace, but became reformers bent on
rooting out what they saw as the source of Argentina's
chronic instability-leftist subversion, a corrupt labor
and political leadership, and economic mismanage-
3.5(c)
ment.
3.5(c)
The military assumed office in 1976 amid 400-percent
inflation and widespread terrorism. The regime adopt-
ed measures to stabilize the economy and restore
international investor confidence. Exports increased,
the public deficit as a share of the GDP dropped, and
soaring inflation was slowed dramatically. The eco-
nomic measures, however, were at a high cost to
workers, who saw their living standards drop sharply.
At the same time, the security forces defeated the
leftist guerrillas in the so-called dirty war, during
which thousands of suspects were detained and subse-
quently killed.
3.5(c)
By 1981, pressure for a return to civilian rule had
started to build. Economic mismanagement and rap-
idly accumulating foreign debt, combined with the
onset of the worldwide recession, led to an economic
downturn. This, combined with the growing realiza-
tion of the widespread abuses of human rights, had all
3.5(c)
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but discredited the military. The 1982 Falklands war
further damaged the economy and convinced many
senior commanders that they should return to the
barracks and focus on correcting the serious military
deficiencies highlighted during the conflict. Left with-
out civilian support, the armed forces scheduled elec-
tions for October 1983. By mid-1983, the inflation
rate had surpassed 300 percent, and an IMF program,
negotiated only months earlier to stave off default on
the foreign debt, unraveled.
Spending Spree
3.5(c)
Following the 1976 coup, the military undertook a
major weapons modernization program that was
largely unaffected by variations in overall economic
performance. The share of the national budget
claimed by defense and internal security climbed
steadily between 1976 and the onset of worldwide
recessIon in 1982. At its peak in 1981, military
expenditures were 22 percent of the budget, slightly
less than the combined outlays for health, education,
and social welfare. Moreover, these figures exclude
the massive expenditures by the vast network of
military-owned industries that expanded during this
period and include such diverse businesses as steel
mills, arms factories, nuclear research facilities, lum-
ber mills, resort hotels, and gambling casinos. Some
academics and other observers estimate that the
military's holdings may produce nearly half of GDP.
3.5(c)
The massive purchases of weapons began after the
Argentines narrowly averted war with Chile in 1978
over the disputed Beagle Channel. Buenos Aires was
� determined to maintain a large margin of strength
over Santiago in preparation for any confrontation.
The US Defense Department estimates that during
1978-81 the Argentine armed forces contracted for
slightly more than $3 billion in arms. (s NF)
The Military and Alfonsin
Raul Alfonsin captured the presidency last October
largely because of his antimilitary campaign plat-
form. Although reaffirming his commitment to a
strong defense establishment during the campaign, he
called for an end to the political role of the military
and vowed to slash defense spending to provide more
funds for social programs and public works. Alfonsin
argued that savings could be achieved without dimin-
ishing capabilities by improving interservice coopera-
tion, ending redundancy in purchasing, and reducing
manpower levels. He also hinted publicly and private-
ly that reducing tensions with Chile over the Beagle
Channel and with the United Kingdom over the
Falklands would diminish the need for additional
arms purchases.
3.5(c)
The new President moved quickly in the weeks follow-
ing his inauguration to subordinate the military to
civilian authority. He decreed changes in the high-
command structure that placed the three service
chiefs under the civilian defense minister and created
a joint-chiefs system to centralize control. Moreover,
he moved the intelligence and internal security serv-
ices and many of the military-owned industries under
civilian control.
3.5(c)
Shifting Policy on Military Spending
Despite his campaign promises to cut deeply into
defense spending this year, Alfonsin was reluctant to
make massive reductions during the first few months
of his administration. Evidence suggests he realized
that military leaders, though weak and divided, posed
the most serious long-term threat to his government.
3.5(c)
Moreover, Argentine officials told US Embassy per-
sonnel that they saw little room for significant sav-
ings, given the large portion of the military budget
that went for fixed items�personnel costs and the
completion of outstanding contracts. Other evidence
indicates that the administration lacked the expertise
and staff to dissect defense-related expenditures.
Some $3 billion in foreign debt incurred by the
military, for example, went undiscovered until late
February.
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Argentina: Selected Deliveries of or Contracts Signed
for Major Equipment, 1978-83
Quantity
Approximate
Value
(million US $)
Quantity
Approximate
Value
(million US $)
France
587.2
United Kingdom
187.0
Exocet missiles
13
7.0
Type-42 destroyers a
2
70.0
Mirage III fighters
6
70.0
Blowpipe SAMs
Unknown
4.0
Antisubmarine warfare frigates
3
120.0
Unspecified equipment
Unknown
107.0
Panhard armored vehicles
127
112.0
Lynx helicopters
2
6.0
Super Etendard naval jets
14
160.0
Austria
58.0
Roland I SAMs
12
50.0
PJK self-propelled antitank guns
58
58.0
Exocet missile system
Unknown
8.2
PJK self-propelled antitank guns
57
Unknown
Crotale SAM unit
1
10.0
(including ammunition)
Mirage V fighters
14
50.0
Israel
270.3
Italy
115.9
Patrol boats
7
5.3
Mamba antitank missiles
500
0.5
Mirage V fighters (with air-to-
surface missiles)
37
265.0
105-mm towed howitzers
10
1.2
Peru
50.0
A-109 helicopter gunships
9
30.0
Mirage V fighters
10
50.0
105-mm howitzers
Unknown
1.2
Brazil
75.0
MB-339 jet aircraft
10
30.0
Xavante jets
19
75.0
Albatross missile system (with
4
3.0
Netherlands
6.6
Aspide missiles)
35-mm antiaircraft guns (with
associated fire-control radars)
18
50.0
Flycatcher antiaircraft defense
system
4
6.6
West Germany
1,872.2
Switzerland
Unknown
Submarines
6
464.0
Skyguard air defense system
1
Unknown
MEKO destroyers/escorts
10
1,286.0
Skybat air defense system
6
Unknown
Cobra antitank missiles
780
1.0
Patrol boats
20
110.0
20-mm antiaircraft artillery guns
40
11.2
a Ordered in 1970, delivered in 1981.
3.5(c)
As a result, Alfonsin decided to implement cuts
gradually-relying on attrition, for example, to re-
duce manpower costs. The Defense Minister in Febru-
ary openly admitted that attacking the military bud-
get was akin to moving a mountain and controlling
the process would take years.
3.5(c)
By April, however, it had become apparent that
Alfonsin's efforts to curb soaring inflation were not
succeeding. Crucial negotiations with the IMF were
stalled on, among other issues, the size of the public
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deficit. Alfonsin, loath to make politically sensitive
cuts in social spending, reexamined the military bud-
get and decided to proceed with much larger reduc-
tions to reduce the deficit. The decision reportedly
followed intense debates within the government be-
tween the Defense Minister, who was intent on as-
suaging officers' concerns about Alfonsin's attitude
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toward the military, and the Minister of Economy,
who was equally intent on using the cuts as a central
part of his formula for meeting Western bankers'
lending criteria without reducing social expenditures
or slowing economic reactivation. Ultimately, Alfon-
sin opted for reduction of about 40 percent in military
expenditures below 1983 levels.
The Military's Response
3.5(c)
The budget cuts have aggravated traditional rivalries
between the services as competition for scarce funds
has intensified. In March, for example, a senior Air
Force officer was retired and then arrested for criti-
cizing the new command structure, which he claimed
gave the Army and Navy too much of the budget.
More recently, the Navy and Air Force have been
squabbling over control of a squadron of A-4 fighter
aircraft purchased from the Israelis but not yet
delivered because of US arms sales restrictions.
Moreover, the cutbacks have driven sizable segments
3.3(bw "Ithe officer corps firmly into the antigovernment
"..Amp. Reporting
sources mounting concerns
among officers over a range of government policies. In
3.3(b)(1 )Lrly September
nearly 100 active duty and retired officers from
all three services had set aside their differences to
3.3(b)(i ym a grouping to discuss the internal situation,
including the impact of the economic crisis on the
military. Noncommissioned officers, severely affected
by the cuts, have organized on several military bases.
They have carried out printed propaganda campaigns
against government and have criticized their officers
for not presenting their case more forcefully to the
administration.
3.5(c)
A range of sources indicates that Alfonsin is keenly
aware of the economic difficulties facing the services
and has tried to assuage their concerns. He has, for
example, assured officers that the military is not
being singled out for cutbacks and that funds will be
restored as the overall economic situation improves.
To demonstrate good will he has granted special wage
increases to officers, especially in the lower ranks.
Further, according to press reports, he has agreed to
continue funding the Air Force's costly advanced
z
missile research program, and he has allowed the
military to maintain direct control over a number of
key defense industries. Indeed, a variety of evidence
suggests that he is encouraging arms exports from
these plants to reduce their drain on the treasury.
Impact on Capabilities
3.5(c)
The reductions have seriously affected morale and
manpower levels. Reporting over the past several
months has underscored steadily eroding morale in all
the services and consequent increases in discipline
problems, including absenteeism and poor perform-
ance. By June, largely as a result of the services'
growing economic difficulties, nearly 10 percent of
the Army's NCOs had requested retirement. The
Navy was losing petty officers and technicians at a
similar rate. Many officers have been compelled to
take extended leave to reduce operating expenses,
resulting in what one senior commander called a
"nine-month military." Applicants for the Argentine
Air Force and Naval academies have significantly
slackened. Conscription has been sharply reduced,
with draftees, who have accounted for nearly 50
percent of the Navy's and 80 percent of the Army's
manpower, serving only abbreviated portions of their
normal one-year requirement.
3.5(c)
Training has also been affected. The US defense
attache reports that schedules have been cut back and
that a shortage of basic equipment, including uni-
forms, has further slowed training. In the Navy, fuel
shortages have arisen, forcing reductions in time at
sea, and naval pilots are having difficulty maintaining
proficiency. Many of those who have left the Navy
were instructors, thus slowing the integration of new
manpower. Most recently, the Argentines almost had
to postpone naval joint maneuvers with Brazil because
of shortages of funds. Air Force pilots and trainees
face similar difficulties.
3.5(c)
There are mounting indications that the funding
cutbacks are taking their toll on operational capabili-
ties. The US defense attache reports that shortages of
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Making Improvements Since the Falklands
The three services have tried to learn from the 1982
Falklands defeat. The Navy, shocked by the sinking
of the cruiser Belgrano and its inability to counter the
British exclusion zone around the islands, has
worked the hardest to improve capabilities. The
addition of eight previously ordered ships will en-
hance antisubmarine warfare capabilities, and deliv-
ery of the last of the Super Etendards will improve
the Argentines' ability to challenge war vessels. Other
Navy measures include: expanding air refueling capa-
bilities, reconfiguring commercial aircraft for mari-
time patrol missions, and more frequent and realistic
exercises to enhance operational readiness.
3.5(c)
Air Force commanders have made no major aircraft
purchases other than the $110 million worth of
Mirages acquired from the Israelis and Peruvians in
1982. Last year the Air Force publicly announced it
would not buy any advanced fighter aircraft, ostensi-
bly because of the national financial crisis. Neverthe-
less, they have requested A-4 fighter aircraft from the
United States�now that the arms embargo has been
lifted�to replace those lost during the fighting. Like
their naval counterparts, commanders have focused
on upgrading the capabilities of aircraft already in
inventories, including expanding air refueling capa-
bilities, enhancing onboard avionics, improving weap-
onry, and giving pilots more realistic training.
Although the Army's Falklands war performance was
the worst of the three services, commanders have been
embroiled in the transition to civilian rule and have
taken only tentative steps to address shortcomings.
An enhanced air defense capability has been identi-
fied as a major need and has been partially fulfilled
with the purchase of several Skyguard and Skybat
fire-control units and French-made Roland antiair-
craft missiles.
3.5(c)
The inability to obtain needed armaments during and
after the war reinforced the military's determination
to produce domestically some essential equipment.
Senior officers hope to improve in-country manufac-
turing capabilities and to move forward with current
and new coproduction and development agreements
with West European firms. The military believes
enhanced manufacturing capabilities are critical to
increasing export sales that would help offset capital
investment, research, and development costs.
technicians, and spare parts have considerably re-
duced the readiness of Air Force and Navy combat
aircraft. The Air Force is unable to purchase more
advanced fighter aircraft to replace its rapidly aging
inventory. For its part, the Navy has sharply reduced
flight time in its Super Etendard strike aircraft
because of the cost�$40,000 per hour�of operating
them. The Navy reportedly is also considering selling
most of its new surface combatants and submarines
because it cannot provide adequately trained crews or
afford maintenance. All three services, while continu-
ing their post-Falklands equipment upgrading, have
been forced to stretch out the programs, and there
have been reports of difficulties in meeting deadlines
for payments to suppliers.
3.5(c)
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Outlook
We expect the new economic realities to continue to
cause near-term difficulties for the services. As the
impact of funding cutbacks spreads, interservice rival-
ries are likely to continue and may intensify, dimin-
ishing prospects for implementing more cost-effective
administrative and procurement practices. Maintain-
ing manpower levels is also likely to be difficult as
ongoing cutbacks in funds discourage enlistments and
prompt more key personnel to retire. Foreign ex-
change restrictions will continue to complicate pur-
chases of spare parts, reducing maintenance opera-
tional capabilities.
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There are some signs of efforts by military leaders to
adjust to the cutbacks. Many recently appointed
senior commanders are sympathetic to Argentina's
financial plight and appear willing to make sacrifices.
Moreover, most commanders agree that considerable
room exists for eliminating waste. Recent reporting
indicates that the services are making cuts in nones-
sential areas to devote more funds to maintaining
capabilities. As a result, key programs to upgrade
equipment started after the Falklands war are likely
to continue. Other reporting indicates that the Army,
at least, is assuming that similar budget constraints
will persist next year, and commanders are planning
accordingly. Further, the government's arms exports
drive could help compensate for planned cutbacks.
We do not believe that budget cuts alone will prompt
a coup. Nevertheless, they will continue to serve as a
useful rallying point for military opponents of Alfon-
sin. The greater threat to the Alfonsin government by
the military, both this year and over the longer term,
in our view would be a further sharp decline in the
domestic economy that sparked widespread labor
unrest and rekindled terrorism. Alfonsin has commit-
ted himself to preventing a revival of mass worker
unrest and insurgency. Should the military believe
him incapable of maintaining order, officers could
begin to reassert themselves to force the President to
quell the unrest or face removal from office
Implications for the United States
Argentina's current economic difficulties will have
little impact on potential arms transfers from the
United States. Buenos Aires had been unable to make
purchases from the late 1970s until late last year
because of restrictions imposed for human rights
violations. Certification on human rights last Decem-
ber did not significantly change our military relation-
ship with Buenos Aires. US support for the United
Kingdom during the Falklands war only reinforced
Argentine beliefs that Washington could not be
counted on to fulfill arms contracts. Instead, the
military found what it believes are more reliable
suppliers in France, West Germany, Italy, and Israel.
Should Alfonsin be overthrown as a result of the
economic crisis, we believe a successor military gov-
ernment will be far more nationalistic. Such a govern-
ment�whether of the right or left�is likely to blame
the United States and other Western countries for
failing to provide Argentina with sufficient support
and will be difficult to deal with on bilateral issues.
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