REVIEW OF THE WORLD SITUATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP67-00059A000500080008-0
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 9, 2016
• Document Release Date: October 10, 2000
• Sequence Number: 8
• Publication Date: June 15, 1949
• Content Type: REPORT

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FOR THE C1iI~'F,CIA LIBRARY
REVIEW OF THE WORLD
SITUATION
Published 15 June 1949
CENTRAL INTELLIGENCE AGENCY
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office who require the information for the performance of their official duties. Further
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the Department of State
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REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE
SECURITY OF THE UNITED STATES
1. The basic security interests of the US
and the UK are practically identical. A tacit
understanding has tended to grow up by
which a common strategic position is main-
tained. The ability of the UK to play its part
is considered to be directly related to the
strength of its national economy. It is con-
sidered that the UK has, with respect to the
reorganization of its national economy, com-
pleted the first phase of its postwar history.
Its success in doing so appears to have come
from a tremendous productive effort which
created a surplus for export. It is now con-
sidered that the peak of this effort may have
been passed and that, even though produc-
tion remains high, the capacity of the world
market to absorb the exportable surplus may
be diminishing. If so, it will be increasingly
difficult for the UK to maintain the economic
strength needed to support its own policies
and to carry out its responsibilities in the pat-
tern of US-UK security. An unfavorable eco-
nomic condition will lead to the problem of
shifting more and more of the responsibility
for maintaining a common strategic position
from the UK to the US.
2. The position of the USSR in the Council
of Foreign Ministers suggests that the origi-
nal decision to convene a meeting may pos-
sibly have been based on estimates which
were vitiated by events, and that the apparent
lack of result to date in the CFM may be the
consequence.
3. The ratification of the Atlantic Pact is
proceeding more or less as planned, except
possibly in the case of Italy. Delay in the
US discussion of a supporting Military Aid
Program is beginning to produce official
alarms and public criticism in Western.
Europe.
4. In Greece, "peace feelers" are still being
put out. The main intent still appears to be
an effort to shift Communist pressures from
the military to the political field.
5. Israel continues to be uncompromising
in conference. The government is having
practical and political difficulties with its im-
migration policy.
6. In the Far East: the US position in Japan
is showing signs of becoming difficult; the
Chinese Communists, moving into South
China, are scattering the remnants of the Na-
tionalist Government, creating a threat to
Hong Kong, and coming closer to the point
where their intentions toward Southeast Asia
will begin to show; in Korea, the Republic has
become somewhat hysterical about the with-
drawal of US troops; in Indonesia, negotia-
tions are developing in a good atmosphere but
have not reached the crucially irreconcilable
issues; in Burma, the Commonwealth has got
into a position where it may be able to exert
some effective pressure in favor of law and
order.
7. There are no significant changes in Latin
America to report. The degree of stability of
particular governments continues to fluctuate.
Note: This review has not been coordinated with the intelligence organizations of the
Departments of State, Army, Navy, and the Air Force. The information contained
herein is as of 10 June 1949.
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REVIEW OF THE WORLD SITUATION AS IT RELATES TO THE
SECURITY OF THE UNITED STATES
1. The United Kingdom
It is so frequently stated that the United
Kingdom is the most powerful and important
ally of the US, that the ability of the UK to
fill the place assigned to it in the over-all de-
sign of US security tends to be assumed. An
examination of this assumption is very much
to the point in view of the fact that the pres-
ent Council of Foreign Ministers-whatever
may be its outcome-will inevitably initiate a
new stage in the process of stabilizing the dis-
tribution of US and Soviet power. The stra-
tegic requirements of the US and the UK in
respect to this process are nearly identical.
The common factor in their security problems
is the estimate that Soviet policy and action
are a primary threat. From this follows the
understanding that no concessions can be
made that would materially improve the stra-
tegic position of the USSR with respect to
either. Both parties are beyond question
committed for the present to the maintenance
and strengthening of this common position.
A discussion of this relationship must keep
in mind three features of the postwar inter-
national scene:
(1) The fact that the US and the USSR
rose to a degree of power greater than the
UK could hope to attain.
(2) The UK, the Commonwealth, and the
Empire, though the third strongest complex
of power in the world, were loosely organized
in comparison with the geographic concentra-
tion of US and USSR power, and were conse-
quently susceptible to piecemeal disintegra-
tion.
(3) The balance of power in continental
Europe was no longer of major significance.
The rise of the US and the USSR made the
orientation of continental Europe as a whole
important, not its internal balance.
These changes forced a revision of one of
the cardinal principles of British foreign pol-
icy-the support of an imperial position by
maintaining a balance of power in Europe.
The new situation called for separate short
and long-term treatment. Short-term policy
required the containment of the USSR (iden-
tity of strategic interest with the US) and the
recovery of an economic viability that had
been destroyed by the war. The long-term
had as its objective the reorganization of
Western Europe and its colonial and asso-
ciated territories under British leadership as
a genuinely balancing element between the
US and the USSR. These objectives involve
no considerations that are fundamentally
antagonistic to US security interests. Policy
directed toward them cannot be developed,
however, except in conjunction with the US.
The British need for US economic support is,
consequently, basic and comprehensive.
The US need to maintain the strategic posi-
tions of the UK, Commonwealth, and Empire
is correspondingly basic if the process of
bringing potential power to bear in restraint
of Soviet expansion is to be quickly effective.
The US security position, while this process is
going forward, is linked with that of the UK
in three vital regions:
(1) In Western Europe, where much de-
pends upon the influence that the UK can
exert,
(2) In the Near and Middle East,
(3) In South and Southeast Asia, where the
combined UK-Commonwealth influence is still
paramount.
The real measuring rod of UK-Common-
wealth influence in these regions is not mili-
tary capabilities but economic strength. The
UK defense establishment, though the third
best in the world, is plainly inadequate to its
numerous and widespread commitments. Its
operational readiness is low. It has virtually
no combat-ready strategic reserve. Further-
more, claims on British economy are such that
there is virtually no surplus of plant or man-
power that can be allocated for its expansion.
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Military research and development alone have
been shielded from retrenchment.
The limitations imposed by these consider-
ations have already impeded the UK in its
policy of assuming leadership in Western
Europe and have forced diplomatic compro-
mises in the Near East and in South Asia.
In Western Europe, while the UK took the
lead in organizing joint defense and also sup-
plied important military equipment, economic
factors quickly set limits that could not be
passed except in terms of US support and sup-
ply. However, political leadership, at which
UK policy also aims, was not simultaneously
abandoned as economic and military respon-
sibility shifted to the US. The US does not
aspire to such leadership, but its security does
require that Western Europe should be firmly
oriented in the right direction. The UK is a
proper free agent for this purpose provided
it is capable of exerting adequate influence;
but economic factors are again interfering.
The British need to impose sharp trade terms
out of regard for its own recovery has already
been costly to this influence. Although the
UK is firmly committed to a cooperative pro-
gram for the economic recovery of Europe, it
is clear that the Labor Government considers
its national recovery program is both more
successful and more reputable than the meth-
ods of continental nations. The fact is that
the UK does not possess the necessary margin
for making economic concessions in order to
secure possible political advantages.
In the Near and Middle East, adjustments
between the US and the UK have been made.
Strategic interests in the area are completely
identified. Policies and actions are being in-
creasingly coordinated. A common objective
has been defined: to retain the area in the
western orbit by means of US-UK economic
and cultural investments. Here again, eco-
nomic capacity will limit the UK contribu-
tion. The weakness which transferred to the
US the responsibility in Greece, Turkey, and
Iran, may make still further transfers-of
cost if of nothing else-necessary. Such
transfers will probably have to be accepted by
the US in the interest of maintaining the com-
bined position.
In India and the Far East, the UK has
sought since 1946 to develop ways of main-
taining its interests while reducing direct
charges on the national economy. Primary
strategic interests have been centered in
Malaya. The Pacific sector has been relin-
quished to the US, and Australia and New
Zealand have been encouraged to develop
Commonwealth interests in relation to the US.
A changed status for India was encouraged
because the means did not exist for imposing
any other solution on the nationalistic fervor
of the country, and economic and strategic
ties have been maintained by diplomatic
rather than imperial methods. The greatest
political triumph of the UK since the end of
the war has been the extent to which a posi-
tive decline in global power has been com-
pensated for by a readjustment of relations
within the Commonwealth and Empire. The
process has consisted, especially in Asia, of
converting unwilling parts of an Empire to
willing members of a Commonwealth. In
consequence, while members of the Common-
wealth are absolutely free to develop their
own foreign policies, Commonwealth solidar-
ity on essential questions-of which resistance
to Soviet-Communist influence is a major
one-has been actually increased.
India, Pakistan, and Ceylon are now assum-
ing a growing share of the task of maintain-
ing the stability of the South Asiatic region.
The hope naturally is that the protection of
UK-Commonwealth interests in Southeast
Asia will more and more devolve upon these
members, and that the over-all position of
the UK power complex will be protected with
less expenditure of declining UK resources.
This development is favorable to US security
interests. Since there is a reasonable expec-
tation that it will not be affected by sudden
changes in the economic position of the UK, it
provides a more favorable climate for US se-
curity than could have been anticipated
twelve months ago.
The US-UK security relationship contains,
however, a major element of uncertainty: the
capacity of the UK to maintain the economic
strength required to support, not only the
commitments it has on its own policy ac-
count, but the position it occupies in the over-
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all pattern of US security. The relative weak-
ness of the UK at the end of the war, instead
of being merely a condition caused by the war
and corrected by the recovery of 1947-48, may
be the result of long-term trends that were
only momentarily halted. If so, the weakness
which, at the start of 1947, made Greece and
Turkey a US responsibility, may develop pro-
gressively and call for progressively major ad-
justments on the part of the US.
It is now reasonably certain that the UK is
approaching the end of the first phase of its
postwar history. This phase can be described
in retrospect as a period of reorganizing the
national economy in relation to the concept
of a welfare state and the national potential
in relation to profound changes in the inter-
national sphere. The adjustments called for
were essentially political and economic. A
large measure of democratic socialism has
quietly revolutionized the national life of
Great Britain. The Commonwealth and the
Empire have undergone major political alter-
ations of a realistic kind without any sug-
gestion of collapse. The national economy
has, with tremendous effort, been momentar-
ily adapted to the demands of a welfare state.
The speed and success of these adjustments
have been an undeniable factor in the de-
velopment of the more favorable security posi-
tion in which the US now stands.
But it is also reasonably certain the UK is
now moving into the second phase of its post-
war history. The basic problems that will be
encountered in this phase, though different in
character, will be perhaps even more critical
for the long run than those that have already
been dealt with. They will, in any event, re-
quire more comprehensive solutions than any
yet devised. The central problem can be
stated as follows:
a. The maintenance of foreign trade at the
high level required to sustain the demands
upon the national economy of the standards
of British life, the welfare commitments of
democratic socialism, and the international
commitments of UK, Commonwealth, and
Imperial policy.
b. If this proves impossible, as it may very
well do in view of developing trends in world
economy, the development of alternative ways
(other than by a reduction of population) of
sustaining the national economy.
Since income from British overseas invest-
ments is no longer an important item, the UK
international account can be balanced only
by the production and sale of an exportable
surplus. A sense of crisis, in conjunction
with government controls over domestic con-
sumption and a full use of man-power, gradu-
ally pushed up the volume of exports until
in March 1949 they reached 162 percent of
1938 and resulted in a momentary balancing
of payments. But, even this unprecedented
volume provided no cushion against the
future.
Signs are now accumulating which strongly
suggest that the peak of the British success
in this respect may have been reached and
that, from this point on, it may not only be
impossible to increase the volume of exports,
but even to maintain them at the required
level. The signs are as follows:
a. Overseas markets are being increasingly
satisfied by restored domestic industries and
by competitors.
b. Japanese industry, revived to reduce US
occupation costs, implies future serious com-
petition.
c. German industry, similarly revived, but
with its prewar outlets in Eastern Europe still
blocked, implies an even severer competition.
d. Demand in the US has perceptibly re-
ceded and there is no evidence of its early
revival.
The approach of these difficulties has been
recognized. Proposals for meeting them have
been under consideration for some time. The
proposals consist of: a devaluation of sterling;
a reduction of production costs; the adjust-
ment of sources of imports to avoid dollar
costs; the development of new economic re-
sources, particularly in the dependent Empire.
Some of these proposals call for time and
capital investment on a scale now unavail-
able. Others would create new problems for
the old ones solved. It is highly improbable
that a complete solution can be found along
these lines.
In Africa, south of the Sahara, for example,
the UK is developing long-term plans for
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meeting its economic difficulties by the crea-
tion of new resources. This dependent Em-
pire, with vast and largely untapped natural
resources, is being slowly reorganized for the
exploitation of its reserves of strategic raw
materials. The plans require, however, exten-
sive capital investment and can only produce
returns in the long run. They cannot pro-
vide an immediate cushion, and there is the
danger that their claims on limited resources
may divert for long-term ends capital needed
for short-term purposes and thus still further
weaken the immediate UK position.
The moment at which the first postwar
phase will give place to the second cannot be
specified, but it is believed close at hand.
Curves of production, exports, and national
income are already losing their upward trend.
When they flatten out, the UK will be in the
second phase. Whether or not they turn
downward depends mainly upon developments
over which the UK can exercise no control
and very little influence; but, if they turn
markedly downward, the trend will be of
fundamental importance to US security.
At this time, failing the continuance, or per-
haps even the expansion of US aid, the con-
sequences of being in the second phase will
begin to show in the form of gradually low-
ered wages, longer hours of work, declining
standards, and increased official controls.
Changes of this sort, developing in the con-
text of a welfare state, are virtually certain to
lower public morale and to create political
tensions. It is in the nature of the situation
that the British Government will experience
pressure to adjust its foreign commitments
to its reduced power potential. Spelt out in
terms of US security, this will mean cuts in
the UK military budget, gradual withdrawal
in outlying strategic areas, and a diminution
of effective UK support for US policy.
The essential conclusion that can be drawn
from this analysis is that, insofar as US se-
curity is linked with a UK ability to maintain
tacitly agreed positions and to develop gen-
erally accepted policies, a significant uncer-
tainty is created by the fact that this ability
seems to depend almost entirely upon the
maintenance of an unprecedented volume of
exports in an increasingly unfavorable world
market. The general type of problem likely
to arise from this uncertainty will be one
of how to transfer more and more of the costs
of maintaining a combined security position
from the UK to the US. This type of prob-
lem is most likely to arise in the near future
in Western Europe and the Near East; for, in
South and Southeast Asia, a greater share of
the immediate strain is in process of being
assumed by the Commonwealth.
The major device, not for preventing these
problems from arising but for checking their
sudden and unexpected appearance, will be
the coordination of US and UK economic pol-
icies in order to reduce the number of points
at which responsibility for maintaining a
common security interest will tend to shift
from the UK to the US. As far as the two
governments are officially concerned, the
method could probably be developed to a con-
siderable degree, except for the fact that both
governments may find themselves obliged to
respond to public pressures of a kind which
would make the reconciliation of their eco-
nomic objectives extremely difficult: in the
UK, the demands of a welfare state; in the
US, the group pressures generated by declin-
. ing prices and tighter markets.
2. Council of Foreign Ministers.
Little basis exists for profitable speculation
about Soviet tactics in the CFM, and no esti-
mate of Soviet intentions can be made that is
not subject to sudden upset. Whatever rea-
sons the USSR had for deciding to set about
convening a conference, they have become
more rather than less obscure as the confer-
ence has proceeded. The Soviet position in
the negotiations has essentially been to de-
mand a return to the status quo of 1945-47, a
position that is strangely unrealistic. The
USSR has made no use of the meeting for
propaganda purposes.
The following suggestion is offered in the
absence of any grounds for a firm interpre-
tation. It is that the USSR made its deci-
sion to reconvene the CFM on an estimate of
the situation which, though it may have ap-
peared valid at the time the machinery was
set in motion, turned out to be fundamentally
wrong when the moment arrived for the CFM
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to sit. The USSR may have estimated that
an approaching CFM meeting would halt, or
at least seriously delay, action by the Ger-
mans on a West German constitution. The
USSR may have estimated that it could de-
velop and then manipulate an overwhelming
German sentiment for unity. On this basis,
the USSR may have calculated that it could
force the West to negotiate under severe
pressure from the Western Germans and that
the end product would be a Germany unified
in a form that would facilitate the establish-
ment of ultimate Soviet control.
If such estimates were made, events did not
cooperate to confirm them. The prospect of
a CFM meeting led rapidly to the acceptance
of a West German constitution and to steps
for the formation of a government. Not only
did the West Germans fail to show enthusiasm
for a Germany unified on Soviet terms, but
the East Germans showed political resistance
to Soviet direction by turning in a consider-
able vote against a single list of candidates
running on a "unity and peace" ticket. In
addition, the speed with which the Western
Powers developed a unified and determined
position with respect to Germany was con-
trary to their previous practice. In short,
differences between previous estimates and
present facts may help to explain such curi-
osities as the stand-pat position which the
USSR has taken in the CFM and the apparent
Soviet inability to develop a propaganda cam-
paign for the German audience.
The present fact is that the USSR has
called for a return to the Potsdam Agreement
and the re-establishment of the principle of
unanimous Four-Power control, and that this
position has no appeal to German nationalism
and no relation to the developments of the
past year. The area of negotiation has nar-
rowed until it covers little more than possible
agreement on economic relations, though
what agreements can grow in the shadow of
the present Soviet position is not readily seen.
3. Western Europe.
The ratification of the Atlantic Pact is likely
to proceed with little delay except such as may
be occasioned by the intention of some states
to wait on US action. Political difficulties
may arise, however, in the case of Italy,
though ultimate approval is expected. Opin-
ion in Italy was clearly split on the question
of the Pact, and the Government, in advocat-
ing participation, linked the Pact in the pub-
lic mind with possible favorable developments
in respect to Italy's former colonies. The dis-
position of these colonies in a way satisfac-
tory to Italian opinion becomes steadily less
likely. The UK has probably blocked any
such development by its encouragement of
Cyrenaican independence. The Italian reac-
tion has left both De Gasperi and Sforza open
to attack. This reaction is very likely to find
a focus when the Atlantic Pact is presented
for ratification since it can be demonstrated
that none of its promised advantages have
materialized and that, on the contrary, Italy's
hands will be tied by participation.
The fate of the supplementary Military Aid
Program is, however, beginning to cause pub-
lic apprehension in Western Europe, and re-
marks are beginning to appear about the un-
certainties and lack of firmness in US policy.
Reference is made to CIA 3-49, where it was
estimated that a Military Aid Program was of
first importance in maintaining the initially
favorable psychological reaction to the Atlan-
tic Pact. Specifically, "Equipment and arma-
ment from this source . . . will be regarded
as a natural and legitimate quid pro quo for
the risks undertaken and the compromises ac-
cepted . . . . Strains will develop at all pos-
sible points in connection with the practical
implementing stage and a sense of insecurity
will probably reappear as a distorting factor."
It is possible that these strains may now start
to develop in connection with delays in au-
thorizing the supplementary Program.
4. Near East.
a. Greece.
The situation with respect to Soviet and
guerrilla "peace feelers" remains fluid. So-
viet suggestions on the matter were interest-
ing chiefly because they implied a Soviet
ability to control guerrilla operations, and
hinted at a possible desire to arrange a big-
power deal. Soviet strategists, reviewing the
situation in the Balkans generally may have
concluded that Greek national resistance and
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US aid were steadily reducing guerrilla capa-
bilities. Recent Communist propaganda had
paved the way for a shift from guerrilla war-
fare to political campaigning. The main aim
of the diplomatic maneuver-leaving aside
any connection it may have had with the
CFM-must have been to prepare the way for
the Greek Communists to come back into
Greek politics. Their minimum demands, if
this maneuver was to bear fruit, would have
to be the legalization of the Communist Party
and its free participation in subsequent elec-
tions. It was stated that the guerrillas were
ready to make peace; this readiness being pre-
sented as a lead from strength not weakness
since they would be willing to take part in
free elections. Whatever was intended was
thrown out of gear by the refusal of the US
and UK to negotiate with the USSR behind
the back of the Greek Government and out-
side the UN. It is noted that, in spite of this
elaborate peace strategy, no real evidence has
yet come to hand of any intention to end
guerrilla operations in Greece except on con-
ditions favorable to the maintenance of Com-
munist pressure on Greek internal affairs.
b. Palestine.
Israel has been uncompromising in the
three conferences that are simultaneously
going on-at Lausanne, with Syria, and with
the Kingdom of Jordan. The Israeli have
produced new demands and are apparently
prepared to have all three talks break down.
The possibility exists that Israel may be fore-
seeing advantages in having the issue of its
relations with the Arab States thrown back
to the Security Council whose inevitable de-
lays and problems of implementation might
open the way for further Israeli expansion.
It is becoming increasingly clear that the
Israeli Government is having great difficulty
in carrying out its promises to immigrants.
Its economy is unable to sustain the current
rate (over 15,000 a month), nor can such num-
bers be physically absorbed. A critical tri-
angle of housing, unemployment, and infla-
tion has developed. At the same time it is
out of the question politically for any Israeli
leader to suggest checking the influx even
temporarily. The stereotype of the "Prom-
ised Land," created by years of intensive
propaganda, cannot be easily altered.
c. Turkey and Iran.
The disappointment of Turkey at being ex-
cluded from the Atlantic Pact has been miti-
gated by reassuring conversations with the
Turkish Foreign Minister. These reassur-
ances of continued US interest, though only
verbal, have had weight in Turkey because
they have been supported by visible evidence
of material aid. However, similar verbal re-
assurances to Iran, since they lack at present
similar material support, are producing
stronger Iranian pressure for direct US aid.
The motives behind this pressure are mixed.
A desire to be as favorably placed with re-
spect to the USSR is the paramount one, but
jealousy of Turkey is also present.
5. The Far East.
a. Japan.
US efforts to gain for Japan a more favor-
able international position and concurrently
to revive Japanese economy, have run into
difficulties. Western European states, mem-
bers of the Far East Commission, turned down
US proposals that Japan should become a
recognized member of international bodies
and be granted most-favored-nation privi-
leges in trade arrangements. When, in addi-
tion, the US halted further removals of equip-
ment earmarked for reparations, there was
bitter criticism of the action as unilateral.
The action, however, naturally got wide ap-
proval in Japan. Whatever may be its long-
term economic value, its immediate psycholog-
ical value was outweighed by the inexpensive
Soviet proposal to discuss a Japanese peace
settlement. The effect on the Japanese,
whose enthusiasm for recovering national
sovereignty is increasing, forcefully under-
lined the influence which the USSR will be
able to command in any treaty negotiations.
b. China.
Communist military advances into South
China, though temporarily halted for re-
grouping, have launched developments which
will be intensified when the advance is re-
sumed. Nationalist officials are scattering,
some to Taiwan, some to Chungking, some
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abroad. A further stage has been reached in
the process by which the Nationalist Govern-
ment is falling apart. It has lost all its unity
and its contacts with foreign diplomats will
gradually disappear also. The implied threat
to Hong Kong has produced a quick reaction.
The UK has announced its intention of de-
fending its position and has dispatched rein-
forcements. It is unlikely that the Chinese
Communists will attempt to resolve the issue
by military means except as a last resort.
Hong Kong can be made a liability without a
military action. A more probable procedure
will be the use of psychological and economic
pressures in conjunction with negotiations
which may well expand to include recognition
of a Communist regime. Finally, the Com-
munist occupation of South China will prob-
ably lead to an early clarification of Com-
munist intentions toward the countries of
Southeast Asia.
c. Korea.
The scheduled start of US troop withdraw-
als produced so much official apprehension,
publicly communicated, that symptoms of
mass hysteria appeared. Unless the Repub-
lic assumes an air of confidence-justifiable
at least for the short run-hysteria can easily
grow into panic. Actually, since the Repub-
lic's armed forces are at the least equal in
number and superior in equipment to those
of North Korea, an immediate test of strength
is not likely. Popular panic, stimulated by
hysterical government publicity, has recently
done more to prepare the ground for the de-
struction of the Republic than have direct
acts of the Communists.
d. Indonesia.
The agreement reached at Batavia repre-
sents no more than the first step in the proc-
ess of permanently settling the Indonesian
problem. It depends on the ability of the Re-
publican leaders to maintain law and order in
their area of authority and to maintain politi-
cal unity among their followers. It depends
also on the doubtful cooperation of Dutch mil-
itary authorities. Both sides will eagerly
note deficiencies in these respects. Even as-
suming success at this stage, the Conference
at The Hague can only move toward a con-
sideration of fundamentally contradictory
positions. Dutch policy is predicated on neu-
tralizing the Republic in order to retain a
controlling influence in Indonesia. Republi-
can policy seeks to counteract this intent.
The position of the Federalists is not yet clear.
It is difficult to foresee a favorable end to the
Hague Conference unless one of the parties
makes basic concessions. All that can be said
at present is that the atmosphere is better
than could be expected. The real issues, how-
ever, have not yet been approached.
e. Burma.
The most important development has been
the decision of the Commonwealth to extend
military and financial aid to the Burmese Gov-
ernment. It was unanimously agreed that
the first objective of this program was the res-
toration of law and order. Extremely com-
plex issues enter into its execution. There is
continual danger that it may backfire to the
injury of Commonwealth prestige and in-
fluence. However, two favorable factors are
now present. The Burmese Government has
lost some of its "anti-capitalist-imperialist"
phobia and may be weighing the disadvan-
tages of impetuous secession from the Com-
monwealth against the relative prosperity and
peace that has accompanied the less doc-
trinaire courses of India, Pakistan, and Cey-
lon. Furthermore, the Commonwealth has a
foot in the door of Burmese affairs and is
finally in a position to exert pressure on their
conduct.
6. Latin America.
Developments affecting the stability of
Latin American governments are mixed. The
governments of Cuba, Paraguay, and Peru ap-
pear to have become stronger. Brazil and
Mexico continue on an even keel, and Vene-
zuela's government still demonstrates firm
control. In Bolivia, however, labor troubles-
aggravated by the activity of opposition
groups-have become increasingly serious re-
cently, and the weak government has been
forced to take extreme steps to insure its ten-
ure. In Argentina, too, the administration's
position has become increasingly serious.
Here grave economic problems remain un-
solved and there is increasing evidence of con-
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fusion within the government. Other coun-
tries which have experienced adverse develop-
ments include: Chile, whose government is
fearful of the political consequences of fall-
ing copper prices; Colombia, where the politi-
cal situation has been tense because of pre-
election partisan rivalry; and Ecuador, where
stability has become much less certain as new
political alignments have threatened to upset
the formerly balanced strength of the groups
opposed to the administration.
Communist strength in these countries, it
would appear, has declined during the month.
There is evidence to show that in Colombia
the Party has become relatively ineffective;
that in Uruguay it has lost ground among
labor; that popular disapproval of Commu-
nism seems to have increased in Mexico. In
Argentina, the government continues its anti-
Communist measures.
No new serious problems have arisen out of
relations between these countries during the
month, but several irritating points of dif-
ference remain. In the Caribbean area, even
though no new issues have arisen, the "de-
mocracies" and "dictatorships" continue to be
hostile, and there are some signs of renewed
activity on the part of the Caribbean Legion.
The thrgat by Uruguay to make an issue in
the UN of the Venezuelan treatment of po-
litical prisoners did not materialize. Uru-
guay has renewed diplomatic relations with
Paraguay, but Uruguay still has not recog-
nized either Venezuela or Peru.
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U. S. GOVERNMENT PRINTING OFFICE
3848-STATE-1949
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