THE ECONOMIC SITUATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08C01297R000400260012-9
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 22, 2016
• Document Release Date: September 21, 2012
• Sequence Number: 12
• Publication Date: January 13, 1948
• Content Type: MISC

41,
Declassified and Approved For Release 2012/09/21: CIA-RDP08C01297R000400260012-9
Tho Economic Situation
peoples, and particularly the establishment of the Dominions of India and Paki-
stan as independent states, have brought to the fore the Portuguese colonial
problem. As a colonial power Portugal fears for the future of its empire
in general and for its possessions in India in particular,,
US facials Only-
pe)
After the labor unrest of last March and AprilI Portugal9s economic
situation improved considerably during the summer, until other countries'
exchange shortages began to out off the foreign markets of Portuguese tra-
ditional exports. While the Portuguese fiscal and monetary situation is
sound and the country still has considerable dollar assets, its foreign ex-
change is decreasing faster than it can be replenishedo
Although the economic situation is unlikely to deteriorate in the fore.
seeable future to a point where it could cause the downfall of the regimoa
it is already evident that Portugal must find a market for its accumulating
surpluses in order to maintain even the present standard of living* So
much depends on the ability of Portugal to find foreign markets for its sur-
pluses in order to pay for essential imports that the solution of. its preset*_''.
economic difficulties lies less in the hands of the Portuguese Goverment
than in those of its trading partnerso
Fully recognizing the nature of the present economic situation, the
Portuguese Government accepted the invitation to participate in the Con-
ferenoo on European Economic Cooperation, not with the intention of getting
foreign credits that it does not need but chiefly as a moans of finding
markets for its surpluseso While the government has publicly accepted the
European Recovery Program with enthusiasm,2 Salazar has privately expressed
saw doubt as to its full success because* he says, the political basis for
effective cooperation among the various countries does not yet exist.3
Nevertheless the solution to Portugal?s economic ills is a successful
:Po The alternative would have to be severe retrenobment at home until such
time as the situation abroad improved sufficiently to absorb the country's
surpluses. The resultant further lowering of the standard of living would
not represent a state of affairs to which the Portuguese people are unaocusm
tnr+d, but neither would it be conducive to political stability.
The Colonial Question
The present worldwide movement toward the self-government of colonial
or Unrest In or;aal," April 21, 1947, pp. 18'24?
20 0IR.1121o170, "Portuguese Reaction to the European Recovery Program,"
November 21, 1947, pp. 11.$5, RESTRICTED,
3o Sueamary of Interview given by Dr. Salazar on October 9, 1947 to
members of Smith-Mundt Conareavionaai Group, enclosure to Dn209, Lisbong
October 14, 1947,9 SECRETQ
CONFIDENTIAL,
r" 14 L f c1sd 75D!7j
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SECRET
-Orficiiai On3y
Portugal?s deep conoer;n over the present colonial movement for self-
government has been shown on numerous occasions during the past year,l
Some of the general measures the government has taken with.the aim of pro.
venting or arresting this movement have been (1) the encouragement of emi.
gration to the coloniea,2 (2) a law to protect the prospective Portuguese
emigrant against exploitation,3 (3) loans to the various colonies for public
improvements,4 (4) conferences with other colonial powers looking toward
improved health oonditions,s and (5) publicity omnoerning the degree of self
government, democracy, and other benefits the colonies allegedly enjoy
under Portuguese rule, 6
Portugal has been particularly anxious about the fate of Portuguese
India.? Although Salazar sent Pandit Nehru a message of good wishes on the
occasion of the inauguration of the new Dominion of India and received in
reply a brief mesa" of thanks,8 only the present unsettled situation in
India is postponing a.demand for the release of Portuguese India from
Portuguese rule. At present the Portuguese Government is continuing to
send troops to Goa, the capital of 'its Indian possessions, a stop that anti-
government Goan Youth League circles in Bombay have claimed is directed
against a revival of the movement inside Goa against Portuguese rule.9 But
that Salazar saes the inevitability of some change is indicated by the fact
that in a speech he made to the National Assembly on November 24 he showed
a somewhat moderated attitude that is the more striking in comparison with
the previously inflexible manner of Portuguese officials toward Goa. In
referring to the importance of the Portuguese port of Mormugno to In.lia,
Salazar said that there would be no great difficulty in finding a solution
compatible with the interests of both Portugal and the Dominion of India.
He referred indirectly to the need for alterations in the administration
of Portuguese India required under the new circumstances, and to the people+a
aspirations to increase their reeponaibilitiea 10
Two events occurred before Salazar's speech which may, respeotively,
hrvo influenced the Portuguese attitude toward.India and be an indication.
c3` an already changed policy. One is Franoe?s policy in granting a pertain
degree of autonomy to the French Establishments in India;-the other was.the
recall of the unpopular governor general of Portuguese India,'Dr. Jos; Bossa,
in September12 Dr. Bossa?a name had been associated with repressive measures
17 0 , o f oa an s in Portuguese and French India," January
27, 1947, pp. 21.25, SECRET.
2, REF-325.24691787, bnig ation and Iimaigration, July 8, 1947, UNCLASSIFIED.
3, Press Memorandum, ?~rrre-ron assy, son, October 8, 1947,
4, Review of Events in the Portuguese Colonies During September 1947, en-
olosurs to Dm199, Lisbon, October 7, 1947, CO1`llFI ,'NTIAL.
5a D448, Lisbon, September 5, 1&.7, UNCLASSIFIED,
6a Dm31, Lisbon, July 5, 1947, CONFIDENTIAL,
7o OIR, Intelligence Digest, July 10, 1947, pp. 203, SECRET.
80 A-228, son, ugus , 1947, UNCLASSIFIED.
9, Dm579, Bombay, November 5 1947, UNCLASSIFIED.
10, FBIB Daily Report (i~urope5, November 26, 1947, pp, FFF.4, UNCLASSIFIED.
11. R-151, Madras, October 17, 1947,, UNCLASSIFIED.
12, R view o in the Portuguese Colonies During
celosure to o Lisbon, October 7, 1947, CONFIDEPTSILL September , 19478 cm
SECRGTArs nrri..i ai_ n .,._
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'US M oia s 0 y
against the Goan Nationalists. The Portuguese press has been allowed to
report on the attitude of the French toward their colonies in India,l a
fact that may mear.a gradual preparation of the Portuguese people for a
change of policy on the Portugusse'India question, In short,'instead of
remaining adamant in its attitude toward the colonial problem in India,
the Portuguese Government now seems likely to follow a more conciliatory
policy in order to try to maintain its possessions as long as possible
rather than adopt an intransigent attitude that would have no chance of
ultimate success.
The other two colonies that are apt to give the Portuguese Government
cause for anxiety in the future are Maoao and Timor. For the present,
however, there is no danger of an immediate secession of either colony.
Concerning the deynd by certain Chinese nationalist elements for the return
of Macao to China, Chiang Kai-shek has recently made the statement that
China does not wish the return of Macao and has ordered the cessation of any
"movement of opinion" advocating the return of that Portuguese colony.3 As
for Timor, the greatest danger of trouble there is its proximity to the Indo-
nesian Republic. This proximity may at some distant date draw that colony
under Indonesian rule, but at the present time there is no movement afoot
that would indicate an immediate danger of Portugal losing Timor,
International Situation
At present, perhaps. Portugal enjoys greater esteem internationally than
at any time since before 'the downfall of the monarchy. Yeith the exception
of the USSR and its satellites, most countries have friendly relations with
Portugal, and the foreign press has carried numerous articles praising the
Portuguese regime and the country's political stability and relatively favor-
able economic situation,
In his speech before the opening of the National Assembly on November
25, Salazar made a statement to the effect that while he did not place too
much faith in the cure of the world's ills through international conferences
and the like, he followed the policy-of encouraging his government to partici-
pate in them so that it might not be thought that Portugal was an obstacle
to world :-W ace . . Salazar! s statement comes st. the and of _% year in which
Portugal not only has aooeptec all invi'"tions by the h{estern world to par.
tioipate in international conferences and organizations but has made serious
efforts to mike its contribution a real one. In line with this policy
Portugal did not withdraw its request for admission into the UN despite the
fact that it believed that the USSR would again use its veto, as it did, to
keep Portugal out.4
1. A_858, Lisbon, November 25, 1947, CONFIDENTIAL.
2. OIRa1121.155, "Political Changes in Portuguese and French India
27, 1947, pp. 21-25, SECRET.
3. D-211, Lisbon, October 15, 1947, UNCLASSIFIED.
4. Press Memorandum, Ame rioan Embassy, Lisbon, November 26, 1947.
& CRET
US Officials Only
" January
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89CM
o s only
While Portugal contines its close collaboration with its old ally.
Gnat Britain, postwrur conditions have cads the US more important to
Portugal's foreign trade. Gnat Britain, unable to pay for its imports
from Portugal, his sought and received further credits from the latter.1
The Portuguese for their part are willing to facilitate credits to the UK
in order to maintain 'as such as possible of their previous markets in that
country. Mvever, it is the US that is able to furnish Portugal such
essential goods as coal, wheat, machinery, and tin plats for the canning
of sardiaes.2
Furthermore, with the dwindling of British poor, the Portuguese appear
to be looking toward the US as the only world power capable of protecting
their colonies and as the most effective bahrrier against the spread of
Communism from the USSR. In 1967 Portuguese-Amarioma ties have been come.
solidated through closer collaboration in several firelds, including the
continued use of an Azores air base by the US Air Transport Command and
negotiation of an extension of this privilege.
At the score time the ideological gulf separating Portugal from the
Cammmnist world continued in evidence throughout the year. At the time
of the Lisbon dockworkers" "slowdown" last April, the Portuguese government
charged that the labor unrest had been instigated by Commandsts. The In-
ternational Police asserted that three different leaders and instigators
were operating in Portugal on orders from the Yugoslav Legation in Lisbon.3
The, Portuguese Government was so convinced of the veracity of this charge,
that after the departure. in Uay of the Yugoslav Charge d"Affaires, who was
accused of being involved in the "slowdown," it has refused to,grint visas
to any proposed Yugoslav oharg d9affaires.4
Conclusion
The most significant fact of 1947 in Portuguese affairs has been the
goverment"s ability to deal effectively with the military opposition
without causing a split in either the armed forces or the cabinet. This
show of strength enhances the position of Salasar as presidential elections
approach and will.give him a freer hand in steering his government amid the
political repercussion, that the advent of a new President may cause.
Portugal enters 1948 with a government which, whatever its shortcomings from
the democratic point of view, has proved capable of improving the country"s
economic situation during a critical time, of directing its colonial policy
along a more enlightened path, and of managing its international relations
so as to remain on friendly terms with the great powers most likely to fur-
ther Portuguese interests.
son, r`2E,197, WHUCTED.
2. A?334, Lisbon. November 6, 1947, -RESTRICTED.
3. OIR-1121.160, "Labor Unrest in Portugal," April 92, 1947, pp. 18-24,
COJIPfl I9TIAL.
4o D-222, Lisbon, October 17, 19470 SECRTT.
SECRET
US Officialu only
Declassified and Approved For Release 2012/09/21: CIA-RDP08C01297R000400260012-9