CURRENT INTELLIGENCE WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A003700020001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 37
• Document Creation Date: December 21, 2016
• Document Release Date: June 4, 2008
• Sequence Number: 1
• Publication Date: July 6, 1962
• Content Type: SUMMARY

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CURRENT
INTELLIGENCE
WEEKLY
SUMMARY
COPY NO.
OCI NO. 0424/62
6 July 1962
CENTRAL INTELLIGENCE AGENCY
State Dept. review completed
L--
ARMY review(s) completed.
OFFICE OF CURRENT INTELLIGENCE
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 July 1962
T H E W E 'E 'K I N B R I E F
(Information as of 1.200 EDT 5 July)
Ben Khedda and nine other members of the provisional Al-
gerian government (PAG) arrived in Algiers on 3 July. Units
of the Algerian National Army (ALN) favoring Vice Premier
Ben Bella are~'opposing the apparent intention of Premier
Ben Khedda and his colleagues to assume governmental authority
within Algeria. The ALN's leaders have admitted that it can-
not exert its full political force unless Ben Bella open-
ly proclaims outright opposition to the PAG as presently con-
stituted, but Ben Bella, who has been staying in Cairo, has
not yet announced such open opposition. There'has been no
indication that he would ask ALN units to fire on other
Algerian troops.
CHINA .
Page 1
. Page
No additional military movements into the Chinese Commu-
nist coastal area opposite the Taiwan Strait have been reported,
although Peiping has reportedly strengthened its military
position to the north and south of this area. This reinforce-
ment suggests preparations against the possibility of a Chinese
Nationalist attack. There is still no hint in Communist propa-
ganda that Peiping is planning a military initiative against
Taipei, but plans for Communist reaction to any Nationalist
attack might include a move against the offshore islands.
SOVIET FOREIGN POLICY DEVELOPMENTS . . . . . . . . . . . . . Page 3
Khrushchev's 2 July warning that the USSR and the en-
tire socialist camp would support the Chinese Communists in
defeating any Chinese Nationalist attack on the mainland
suggests that Moscow is not seriously concerned that Peiping
intends major offensive action against the larger offshore
islands. He apparently views present tensions in the area
as an opportunity, at little or no risk for the USSR, to
display bloc solidarity and underscore Soviet readiness to
support Peiping's "legitimate" national interests. A Soviet
Foreign Ministry official has indicated privately that Mos-
cow has no intention of encouraging or supporting aggressive
Chinese Communist moves.
Bloc spokesmen continue to express interest in further
negotiations-6n Berlin, and Khrushchev has reaffirmed that
a German settlement should be reached in the near future.
The Soviet leaders appear to anticipate an early and success-
ful conclusion of the Geneva conference on Laos. Prior to
the resumption of the conference, the Soviet delegate in-
dicated to British officials that he would not introduce
any'new issues and did not expect any serious problems in
.reaching agreement, but said that the most difficult' question
would be that of the integration of rival Laotian military
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 July 1962
LAOS . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6
Working relations between Deputy Premiers Phoumi and
Souphannouvong have started smoothly, as both move cautious-
ly toward integration of their political and military organ-
izations. The coalition government has announced its in-
tention to establish diplomatic relations with East Germany,
Communist China, and North Vietnam. Saigon may make its
signature of Geneva accords conditional on Laotian refusal
to grant Hanoi full recognition. At the Geneva conference,
a large measure of accord has been reached ?but there are
indications that problems may develop over still outstanding
issues. The North Vietnamese may be planning to withdraw
their troops soon.
SOUTH VIETNAM . . . . . . . . . . . . . . . . . . . . . . Page
Armed attacks by the Communists declined during late
June to their lowest point in a year. This may be partly
because of bad weather and improved government mobility,
but it could also be explained by reports that Viet Cong
units are reorganizing in order to absorb new infiltrations
from North Vietnam. Rail sabotage increased last month,
and there are recent indications that the Viet Cong may
plan to increase their firepower with heavier weapons.
. . . . Page
Indonesia continues to prepare for stepped-up military
operations in West New Guinea despite President Sukarno's
public announcement on 3 July of his readiness to resume
preliminary talks with the Dutch early this month. Foreign
Minister Subandrio stated in mid-June that if negotiations
should collapse, Indonesia would declare war on the Nether-
lands;the present preparations may be'for that eventuality.
Subandrio has assured the US ambassador that no major at-
tack would occur while talks are in progress but has stated,
in effect, that infiltration operathns will continue even
if discussions are resumed. The Indonesian military moves
apparently have not lessened Dutch readiness to negotiate.
SOVIET ARMS AID TO INDONESIA . . . . . . . . . . . . . .... Page 10
As a result of recent deliveries from the USSR, Indonesia
now has 12 medium-range W-class submarines and 26 Badger (TU-16)
medium bombers, 12 of which are equipped for air-to-surface
missiles. Less than two months elapsed between the opening
of negotiations on these items and their actual arrival.
No other nonbloc country has ever received such complex
equipment so quickly. This rapid action bespeaks a strong
Soviet desire to strengthen Sukarno's hand in negotiations
for Dutch withdrawal from West New Guinea. It means also
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 July 1962
that Soviet crews will probably remain in Indonesia for six
months to provide training, since trained Indonesian per-
sonnel are not available in sufficient numbers to man the
new equipment.
KHRUSHCHEV ON SOVIET AGRICULTURAL PROSPECTS . . . . . . . . Page 11
Khrushchev's forecast of 27 June that the Soviet grain
crop this year will reach a record 148-164 million metric
tons "if there is no worsening of conditions" is unrealistic.
The claim seems to be intended to vindicate steps taken this
spring for the improvement of agricultural production. It
is also designed to win greater public acceptance of
Khrushchev's new agricultural policies. The recent rise
in retail prices of meat and butter evidently shook public
confidence in the regime's ability to produce a steady
improvement in the living standard. 25X1
COMMUNIST CHINA AND NORTH KOREA PUBLICIZE CLOSE TIES . . .
. Page 12
The North Korean parliamentary delegation which visited
Communist China between 15 and 30 June was received with
hospitality which exceeded the demands of protocol. Although
speakers on both sides described their relations in the
context of socialist unity, the impression left was that
their friendship for one another went beyond their ties
with the rest of the Communist bloc.
ECONOMIC CONFERENCE OF DEVELOPING STATES . . . . . . . . . . Page 13
A ten-day conference of economic specialists from about
30 underdeveloped countries begins in Cairo on 9 July. The
meeting promises to be less a forum for political propaganda
and more a technical economic convocation than Nasir and
Tito had in mind when they started arrangements four months
ago. UAR officials insist that they will not permit the
Cuban delegation to use the sessions for propaganda speeches.
Some anti-Western overtones are expected, however, because
many of the delegates fear that the European Common Market
will hurt their nations' economies. 25X1
FRENCH LABOR DEVELOPMENTS . . . . . . . . . . . . . . . ... Page 14
French civil servants and workers in the nationalized
industries have undertaken sporadic strikes to reinforce
their demands on the Pompidou government for higher wages,
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 July 1962
shorter hours, and other work benefits. The labor unions
involved seek immediate action, partly because of recent
price rises, partly to cash in on the bargaining power
of a labor shortage which may be'eased later in the year.
The government has made some effort to satisfy worker
demands but wants to postpone major adjustments pending
extensive negotiations to take place with labor'and
industry this fall.
CUBAN IMPORTS FROM CANADA AND MEXICO . . . . . . . . . . . Page 15
Havana relies on free world sources for machinery
to keep key enterprises in operation.. Following the US
embargo on such commerce in October 1960, Cuba last year
more than doubled its purchases in Canada and Mexico,
including some items of US origin. This year, however,
Cuban imports from both countries have declined sharply,
lar ely as a result of Havana's growin dollar shortage
DOMINICAN REPUBLIC
. Page 16
The Dominican Government fears that the deflation of
public expectations for a greatly increased US sugar quota
will cause its overthrow. New US sugar legislation offers
the Dominican Republic little more than one third of the
quota it had been expecting. Low wages which made sugar
profitable for the Trujillo family have had to be increased
by successor regimes to a level which could bring a net
loss at the proposed level of imports by the US. The
ruling Council of State has linked cooperation.in the Al-
liance for Progress to substantial sugar earnings.
BRAZIL . . . . . . . . . . . . . . . . . . . . . . . . . . Page
Brazil's first cabinet crisis under the parliamentary
system adopted last September continues as a reeault of the
resignation on 4 July of Prime Minister Moura Andrade after
one day in office. Andrade's resignation in a dispute over
certain cabinet appointments reflects a basic power struggle
between the executive and the legislature. The Brazilian
Communist party is supporting President Goulart against the
conservative majority of congress.
PERU . . .
. . . . . . . . Page 18
The Peruvian armed forces have issued an ultimatum
demanding that Victor Raul Haya de la Torre renounce his
presidential candidacy and leave the country. The
alternative is the overthrow of President Prado''s
conservative government and the installation of Fernando
Belaunde Terry as president by a military junta.
ARGENTINA . , . . . . . . , 4 . , . . . , , ,
Page 19
Argentina's political difficulties are being compounded
by an acute financial crisis involving a drastic drop: in
value of the peso and a shortage of peso credit as well as
foreign exchange. The government's failure to pay civilian
and military salaries is increasing labor unrest and
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CURRENT INTELLIGENCE WEEKLY SUMMARY
6 July 1962
accelerating business contraction. Economy Minister
Alsogaray privately says the situation is "on the brink
of catastrophe" leading to dictatorship. The military
command continues efforts to persuade dissatisfied
officers that a coup would set off counteraction by
the left.
SPECIAL ARTICLES
SOVIET ATTITUDE TOWARD ALGERIA .
Page 1
Soviet policy toward an independent Algeria probably
will be governed, as was, the USSR's attitude toward the
seven-year rebellion against France, by the demands of Mos-
cow's European policy rather than by ideological considera-
tions. The Soviet leaders' desire to encourage France to
serve as a counterweight to West Germany in European affairs
led them to adopt a cautious attitude toward the Algerian
rebel movement. In so doing they opened themselves to
Chinese Communist charges that the USSR had let down a
national liberation movement.
AFGHANISTAN'S TIES WITH THE USSR . . . . . .
Prime Minister Daud's concern over the
Page 4
Pushtoonistan dispute with Pakistan has led him, despite
his awareness of the dangers involved, to rely increasingly
on the USSR for economic aid and other forms of assistance.
Soviet influence in Afghanistan's military forces and
economic development programs is growing, and Kabul's long-
standing policy of maintaining a balance between Soviet
and Western interests in the country is being undercut.
Daud thus has sacrificed. some of his freedom of action in
maintaining internal security and in promoting an
independent foreign policy.
PERON AND PERONISM . . . . . . . . . . . . . . . . . . . .
Peron's loss of personal support and his frequent
changes in line since the 1955 revolution have contributed
to the disunity among the numerous pro-Peronist parties,
which range from the right to the extreme left. As he
did during his 12-year dictatorship, Peron in exile today
switches his instructions and the "party line" from
peace to violence from right to, left to suit himself,
whether it be for personal profit, to undercut a would-be
rival or to maneuver among competing .Factions.
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WEEKLY REVIEW
ALGER]'A
Premier Ben Khedda and nine
members of the provisional Algeri-
an government (PAG) arrived in Al-
giers to a triumphant welcome on
3 July to assume governmental au-
thority within Algeria, but units
of the Algerian National Army (ALN)
favoring Vice Premier Ben Bella are
opposing this move. Ben Bella's
support within the ALN appears to
be increasing. ALN leaders have
admitted, however, that the ALN
cannot exert political force un-
less Ben Bella openly declares
himself opposed to the PAG. Ben
Bella has not yet proclaimed out-
right opposition, although he has
stated that the PAG's 30 June "dis-
missal" of the ALN chief of staff
and two other officers was "illegal:'
There is no indication that he would
ask ALN units to fire on other Al-
geriantroops.
The Algiers region, along with
Constantine and most of the moun-
tainous country in between, is re-
portedly favorable to Ben Khedda.
However, the desertion of at least
2,700 members of the security
forces, presumably to ALN units
supporting Ben Bella, has reduced
the PAG's ability to maintain its
position. The 25,000-man ALN
force in Tunisia began to move in-
to Algeria on 4 July. The 10,000
ALN troops in Morocco have also
declared in favor of Ben Bella,
The US consul general in Al-
giers estimated on 3 July that the
pro - Ben Khedda forces have the
better prospects of winning a
power struggle, at least in the
short term. There are indications
that the French are supporting Ben
Khedda, and that the French Army
has not yet entirely withdrawn
from the electrified barriers
along the frontiers. Tunisian
President Bourguiba has publicly
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declared support for the PAG.
According to press reports,UAR
President Nasir has been urging
Ben Bella to compromise with
Ben Khedda, in the interests
of Algerian--and Arab--unity.
The consul general also
reported that there is consider-
able speculation in Algiers that
Ferhat Abbas, the moderate former
premier of the PAG, may come for-
ward as a neutral head of the gov-
ernment to permit at least an out-
ward reconciliation between Ben
Khedda and Ben Bella. Press re-
ports of 5 July that ALN units
are demanding another meeting of
the Algerian National Revolution-
ary Council suggest that some
compromise solution may still be
possible.
Meanwhile the relationship
of the PAG to the Provisional Ex-
ecutive headed by Abderrahmane
Fares, to which France transferred
sovereignty on 3 July, remains un-
clear, although a PAG spokesman
told Ambassador Walmsley in Tunis
on 29 June that the Provisional
Executive would delegate au-
thority to the PAG shortly after
the formal announcement of inde-
pendence.
The Secret Army Organization
(OAS) made no effort to interfere
with either the referendum or
transfer of sovereignty
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No additional military move-
ments into the Chinese Communist
coastal area opposite the Taiwan
Strait have been reported, al-
though Peiping has reportedly
strengthened its military posi-
tion to the north and south of
this area. This suggests that
the buildup was motivated prima-
rily by defensive considerations.
Peiping has continued to hint,
however, that it is prepared not
only to conduct a static defense
against the Nationalists, but
that it might respond to an
assault on the mainland by mili-
tary countermeasures against
Nationalist-held territory.
Chinese Communist propaganda
continues to stress primarily
defensive themes in referring
to the alleged invasion threat,
and there has been no discernible
effort to generate domestic senti-
ment in favor of military action
against Taipei. There are some
indications that Peiping may have
decided to soft-pedal its claims
than an invasion of the mainland
is imminent. Communist propa-
ganda dealing with Peiping's
ability to repel an attack has
been qualified during the past
week with such phrases as if
and when" and "should the enemies
dare to invade us." Mainland
propaganda is also laying stress
on the "history" of Communist
warfare with the Nationalists,
claiming that victory was achieved
by successful Communist
"counteroffensives.','
Peiping is continuing to
use the alleged threat of an
attack to extract greater eco-
nomic effort from its apathetic
and disillusioned populace.
It is possible that this objec-
tive figured in the Chinese Com-
munist decision to raise the
specter on an invasion at
this time. Increased efforts
at production in Canton area
factories have been reported as
a response by factory workers to
the threat of an attack.
It is probable that Peiping
is still uncertain over current
US intentions in the Taiwan
Strait area despite repeated
American assertions that US
objectives are peaceful and
defensive. A 29 June Chinese
Communist commentary claimed
that President Kennedy had
avoided a direct denial that
Taipei was planning to attack
the mainland.
All Chinese Nationalist
newspapers welcomed the reitera-
tion by President Kennedy of US
determination to defend Taiwan
and the Pescadores, and some in-
terpreted it as a declaration
of a definite US intention to
assist in the defense of the
offshore islands. The Taipei
press has expressed the hope
that, US Ambassador Kirk, who
arrived on 2 July, will support
Chiang Kai-shek's return to the
mainland.
The Nationalist press and
top Kuomintang and Foreign
Ministry officials are inclined
to believe that the purpose of
the Communist buildup in the
Taiwan Strait area is to bring
political pressure to bear on
Taipei. The Nationalists are
especially concerned over Pei-
ping's propaganda efforts to label
them aggressors.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
SOVIET FOREIGN POLICY DEVELOPMENTS
Far East
In the first authoritative
Soviet comment on the situation
in the Taiwan Strait, Khrushchev
warned in a speech on 2 July
that the "peoples of the Soviet
Union and the entire socialist
camp" would support the Chinese
Communists in administering
a "crushing rebuff" to any
Chinese Nationalist attack on
the mainland. He endorsed Pei-
ping's allegations that the US
is actively encouraging Taipei's
aggressive ambitions, charging
that "American imperialists"
are seeking to kindle a "new
hotbed of war" in the Far East.
Khrushchev's speech and
earlier preliminary Soviet re-
action to the Chinese Communist
buildup did not convey any
sense of apprehension that Pei-
ping intends to take major of-
fensive action against the
larger offshore islands. Khru-
shchev's references to Soviet
statements supporting Peiping
during the 1958 Taiwan Strait
crisis and to the "invincible
force" of Sino-Soviet friend-
ship suggest that he sees an
opportunity at small risk to
display bloc solidarity and to
underscore Moscow's readiness
to support Peiping in pursuit
of its "legitimate" national
interests.
In sharp contrast to the
USSR's cool and even hostile
treatment of Peiping in recent
months, Khrushchev expansively
declared that China is connected
by "close ties of brotherhood
in arms and comradely solidarity
with the Soviet people" and
all the peoples of the "socialist
camp." He added that their
united forces, in accordance
with the 1960 Moscow Declara-
tion of the 81 Communist parties,
"reliably guarantee each social-
ist country from encroachments
by imperialist reaction" and
recalled Soviet statements dur-
ing the 1958 Taiwan Strait
crisis that the USSR was "com-
pletely on the side of fraternal
China."
This was an allusion
to Khrushchev's two messages
to President Eisenhower in
September 1958 in which he warned
that an "attack" on Communist
Chjna would be considered an
attack on the USSR, cited the
Sino-Soviet treaty of 1950, and
threatened retaliation in kind
if nuclear weapons were used in
such an attack. Khrushchev's
present vague warning, however,
omitted any reference to the
1950 treaty and fell far short
of his unequivocal support for
Peiping in 1958.
In remarks probably cal-
culated to reach US leaders,
a soviet Foreign Ministry of-
ficial implied to a Japanese
diplomat on 29 June that Moscow
has no intention of encouraging
or supporting aggressive Chi-
nese Communist moves. He ex-
pressed the view that Chiang
Kai--shek would try to take ad-
vantage of the "bad situation
resulting from the food short-
age" in China to invade the
mainland, but said the U33R is
counting on US influence in
Taiwan to prevent this from
happening.
The Soviet official pointed
out that, unlike the Warsaw
Pact and the Soviet - North
Korean treaty of 1961--which
commit the USSR to act if any
third power attacked the
countries concerned--the Sino-
Soviet alliance of 1950 is
directed only against Japan
or an ally of Japan. This
careful distinction between
Soviet security commitments
would enable Moscow to preserve
a free hand in the event of a
resumption of the Chinese civil
war in which US forces were not
involved.
Khrushchev's speech also
carried forward the bloc's prop-
aganda campaign against the
presence of US forces in Asia.
He charged that American troops
"wherever they appear" inten-
sify the threat to peace and
security and cited South Korea
as an example. Khrushchev
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CURRENT INTELLIGENCE WEEKLY SUMMARY
declared Soviet support
for North Korea's proposal
for negotiations with South
Korea on the withdrawal of US
forces and the conclusion of a
treaty prohibiting the use of
South and North Korean forces
against each other.
Soviet propaganda on the
Taiwan Strait situation is
stressing some of the same
themes which were prominent
during the 1958 crisis--US re-
sponsibility for the tense sit-
uation because of its "occupa-
tion" of Taiwan, American
"provocations" in military
and naval movements in the
area, and the necessity for US
forces to withdraw before Far
Eastern tensions can be eased.
The Soviet leaders appear
to anticipate an early and suc-
cessful conclusion of the
Geneva conference on Laos which
reconvened on 2 July. In his
speech that day and again on 4
July, Khrushchev cited the Laos
coalition agreement as evi-
dence that "mutually accept-
able solutions" can be found
for other questions provided
there is good will on all sides.
Berlin and Germany
At a 4 July reception for
Austrian Chancellor Gorbach,
Khrushchev reaffirmed that agree-
ment on a German settlement can
and should be reached in the
near future. He warned of the
dangers in postponing this is-
sue and said, "There is no
getting away from the overdue
problems of a German peace set-
tlement and a German peace
treaty." In his 4 July con-
gratulatory message to Presi-
dent Kennedy, Khrushchev ex-
pressed hope that joint US-So-
viet efforts will eventually suc-
ceed in ensuring peace and
eliminating the danger of war.
Ulbricht's 27 June speech
to an East German Communist
central committee plenum pro-
vided further evidence that
bloc leaders wish to continue
the bilateral discussions with
the US. Ulbricht attacked Ade-
nauer and other West German
"revanchists" for launching a
"batter struggle" against an
understanding between the US
and the Soviet Union on a German
peace settlement. He claimed
that Adenauer not only is intent
on disturbing the bilateral
talks between the US and the
Soviet Union but actually "sup-
ports the opponents of Presi-
dent Kennedy." Ulbricht also
rejected the idea of a four-
power conference to deal with
the recent border incidents in
Berlin, as set forth in the
Western notes to the USSR of
25 June.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
Pravda on 2 July carried
a TAS report from Warsaw on
Gomulka's interview with Life
magazine last November. TTh s
interview, which was never
published by Life, appeared in
the Polish Communist party paper
Trybuna Ludu on 1 July. Gomulka
urged closer relations between
the US and the Soviet Union and
maintained that only through
a Soviet-American agreement
can outstanding international
issues be solved and war
averted. The Polish party boss
concluded his review of the
major East-West problems with
the comment that the "time is
indeed ripe" for a "construc-
tive solution" of the German
question.
However, Gomulka noted
that the Socialist countries,
anxious to conclude a peace
treaty with both East and West
Germany, are being forced to
choose a "worse alternative"--
a separate peace treaty with
East Germany. Gomulka repeated
the standard Communist position
on the Berlin "free city" con-
cept and claimed that the
"right of access" to West Ber-
lin ought to be fully guaranteed
to all countries.
In this connection, Go-
mulka remarked that "should
the Western powers insist on
keeping their troops in West
Berlin, nothing will hinder it."
The timing of the publication
of Gomulka's remarks on this
question reflects Moscow's de-
sire to assure the West that
some compromise on the issue
of Western troop presence in
West Berlin is possible.
In his 27 June call on the
UK commandant in Berlin, So-
viet Commandant General Solovyev
described relations between
himself and the US commandant
as "abnormal" but repeated his
previous position that civilian
advisers accompanying the US
Berlin commandant on visits
to East Berlin would have to
show their identification in
accordance with East German
regulations. Toward the end
of the conversation, which was
described by the British as
"particularly cordial," Solovyev
commented that the four Berlin
commandants should get together
more often and that they could
do much to minimize tension and
prevent incidents.
Gorbach Visit to Moscow
Khrushchev used the occa-
sion of Austrian Chancellor
Gorbach's visit to the Soviet
Union to launch into another at-
tack on the Common Market, claim-
ing that "it is the economic
base in Western Europe of the
aggressive NATO bloc." At a
29 June luncheon for Gorbach,
Khrushchev emphasized that
Austria's neutrality was re-
sponsible for the country's
friendly relations with both
East and West. Implicitly warn-
ing Austria that entry into
the Common Market would conflict
with its neutrality and the
Austrian state treaty of 1955,
the Soviet leader asserted that
the Common Market "undermines"
the neutrality and sovereignty
of the small states connected
with it. At the 4 July recep-
tion for Gorbach, Khrushchev
took note of the chancellor's
assurances that Austria would
not depart from its neutral
policy.
President Kennedy's Visit
to Mexico
Soviet propaganda gave only
moderate attention to President
Kennedy's trip to Mexico, em-
phasizing that the country's
traditional policy of "noninter-
vention" in the internal af-
fairs of other states obviously
displeased the US. Moscow at-
tempted to brand the trip a
failure because of the Mexican
Government's refusal to endorse
US policy toward Cuba. TASS
alleged that Mexico refused to
join the US in preparing for
a new invasion of Cuba under
the "flag of collective action"
of Latin American countries-
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Ifte SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
Working relations in Laos'
coalition cabinet between Dep-
uty Premiers Phoumi and Sou-
phannouvong have been generally
smooth thus far. Each is tak-
ing a cautious approach toward
integration with a view to pro-
tecting his separate political
and military structure. Sou-
vanna's neutralist group, on
the other hand, wishes to
establish its authority through-
out the country as soon as
possible. Phoumi says he is
more than ever convinced that
the Communists are trying to
use Souvanna as a Trojan horse.
He notes that high-level Pathet
Lao leaders who function as
Souphannouvong's mentors and
advisers are remaining in Sam
Neua or Hanoi.
Road
Trail
Route number
Road under
construction
50 loo
MILES
Mah says
Phag Tchepone
Sa nnakhet
SAVANNAKH MU
U
~Ou Neu
Tay"4k
r 1 r
....4VPhung Saly)
,,Noun eua
HONG
Wong ,snl,
'Vien Tha rya Mo --r /'' '
,
~Fn PN AM hH? ~Muong .r
HHoueirSai / Saif
J L UAXG
~?r -" ; PRABA
Pak "
.Beng"Muon ,Houry'
Huang
Pr bang
5ayabouryyl Phou
Khau
Muo
K,,s
Ban Hin
Hwin
The new government, with
Souphannouvong as acting pre-
mier, has moved to set up a
cease-fire committee and com-
mittees for military and ad-
ministrative unification. In
accordance with the "troika"
formula adopted at the Plaine
des Jarres, the committees are
composed of representatives of
the three factions.
Geneva Conference
At Geneva, key figures have
expressed the hope that the
conference on Laotian neutrality,
reconvened on 2 July, will
reach an early conclusion.
Soviet cochairman Pushkin said
on 1. July that he was not
planning to introduce any new
f kOUI Jarres Xr ?
3..~XIEN G KHO
j Pa Dong
ang.
Vieng
VIENTIANE
L A O S
Royal Army base area
Q Meo base area
10 Kong Le/Pathet Lao/North
Vietnamese areas
SECRET
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CURRENT INTELLIGENCE WEEKLY SUMMARY
issues and that the USSR was
prepared to conclude the con-
ference in 'eight to ten days.
Souvanna has mentioned the pos-
sibility of a "mid-July" con-
clusion.
There are indications,
however, that Communist dele-
gations to the conference will
strongly oppose any reference
in the final agreements to the
integration and demobilization
of the rival forces. The bloc
delegations at the opening ses-
sion on 2 July expressed ada-
mant opposition to any Laotian
commitment, claiming that these
were internal matters. On the
same day, a Chinese Communist
journalist, presumably speaking
with the knowledge of the dele-
gation, stated that Peiping
would not accept any discussion
of internal problems and specif-
ically mentioned armed forces
integration.
On the question of SEATO,
Souvanna told Pushkin and Brit-
ish cochairman MacDonald on 4
July that a specific denuncia-
tion of the "umbrella clause"
could be eliminated from the
neutrality declaration if the
member nations took formal no-
tice of the Laotian Government's
desire to renounce the protec-
tion of military alliances.
The coalition government,
in implementing its declared
policy of extending recognition
to all countries, has once
again brought into question the
international legal status of
the divided nations. It an-
nounced its intention to es-
tablish diplomatic relations
with East Germany, Communist
China, and North Vietnam; Laos
already has ties with their non-
Communist counterparts.
Laotian recognition would
constitute a major step in East
Germany's campaign to achieve
international standing. Laos
would be the second nonbloc--
but first non-Communist--nation
to enter into full diplomatic
relations; Yugoslavia took this
step in 1957. This would prob-
ably encourage party boss U1-
bricht to intensify pressure on
other neutralist nations to
adopt the "Laos formula." West
Germany, adhering to the "Hall-
stein doctrine," would in all
likelihood withdraw its repre-
sentation should East Germany and
Laos establish full diplomatic
relations.
A similar situation obtains
with regard to Chinese represen-
tation in Vientiane. Both,Pei-
ping and Taipei have refused to
accept concurrent diplomatic
representation, each regime
being strongly opposed to any
"two China" concept.
The recognition of North
Vietnam may give rise to prob-
lems which could directly affect
the settlement of the Laotian
question. It is possible that
South Vietnam--adamantly opposed
to equality of representation--
may make its signature of the
Geneva accords conditional
upon Laotian refusal to grant
full diplomatic recognition to
the Hanoi regime.
North Vietnamese Troops
The chief of the US Mili-
tary Assistance Advisory Group
has received unconfirmed reports
that North Vietnamese troops may
have begun leaving Laos. Ac-
cording to these reports, four
North Vietnamese battalions
withdrew from the Mahaxay area
on 28 May and additional North
Vietnamese were flown out of
Nam Tha on 12 June. The reports
did not indicate destinations.
While the North Vietnamese
now may be planning a withdrawal,
there is no firm evidence that
any troops have actually left.
The first few weeks after the
signing of the new Geneva agree-25X1
ment on Laos would probably be
the period chosen for such a
movement.
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1%W aLtINZI %0
CURRENT INTELLIGENCE WEEKLY SUMMARY
SOUTH VIETNAM
During late June, armed
Viet Cong attacks declined in
number and scale to the lowest
point--60 during the week ending
on 25 June--in over a year. Bad
weather and improved government
mobility may account in part
for this lull. Persistent re-
ports of heavy infiltration
during May and June suggest that
the Viet Cong also may be in a
period of reassessment and re-
organization, possibly forming
new battalions from existing
regional companies and platoons
and absorbing infiltrators.
Acts of sabotage increased
during June, however, with some
18 reported incidents of sabo-
tage or ambush against the
north-south coastal railroad.
Minor explosions in fuel depots
near two major airfields on 25
and 27 June may reflect new
ground tactics in the Communist
effort to counter the govern-
ment's air capabilities.
The Viet Cong may be
planning to increase their fire-
power with the use of heavier
weapons. This is suggested by
Fthe pres-
ence in various Viet Con units
of 120-mm. mortars
A1thoug there as een no re-
ported use of artillery by the
Viet Cong documents found on
the body of a Viet Cong officer
killed northeast of Saigon in-
cluded firing tables and trans-
lations of a US training manual
on 75-mm. pack howitzers. Dis-
assembled heavier weapons could
be brought in from North Viet-
nary over Laotian trails or
by junk.
Hanoi Radio has announced
that a delegation from the Na-
tional Front for the Liberation
of South Vietnam--the Viet Cong
political arm--arrived in Prague
on 26 June in the course of a
friendship mission to "a number
of countries." The group plans
to attend "conferences of world
organizations," possibly in-
cluding such Communist-sponsored
gatherings as the World Peace
Congress in Moscow opening on 9
July and the youth festival in
Helsinki opening on 26 July. It
presumably would use such forums
to denounce US "aggression" in
South Vietnam, and may try to
gain entry to some neutral as
well as Communist capitals in
an effort to broaden support
for its claim to represent the
South Vietnamese people.
SECRET
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.) L,%.J l I
CURRENT INTELLIGENCE WEEKLY SUMMARY
WEST IEW GUINEA
President Sukarno announced
publicly on 3 July his readiness
to resume preliminary talks with
the Dutch on the West New Guinea
dispute. Foreign Minister Suban-
drio earlier had assured the US
ambassador in Djakarta that the
Indonesian delegate, Adam Malik,
could be in Washington for such
discussions by 9 July. In line
with Sukarno's demand for the
transfer of West New Guinea's ad-
ministration to Indonesia during
1962, Subandrio said he hoped the
transfer could be accomplished in
less than the two-year period en-
visaged in the Bunker proposals.
Subandrio also said he hoped the
Dutch would not request a "cease-
fire" in New Guinea while the talks
are in progress and stressed that
the discussions could break down
on this issue.
\while
preparing to resume talks, Indo-
NO RTN-~ -'T
EORNE01_ -__~--
Manodo. Bit,ng
B 0 R N E 0 Amurang'
ILI
~ R
AtambuaPORTUGUESE
ocussl 1 \:~`!+ TIMOR
C E R A M
GURU G Amahai
MORO1A1
'Pitu
Djailolo
TB-re' a MAHERA
'
.wed
CEBE
Subandrio stated in mid-June
that if negotiations should collapse,
Indonesia would declare war on ti
Netherlands. Present larger scale
preparations may be premised on
that eventuality. He assured Am-
bassador Jones that no major activ-
ity would occur while talks are
in progress but stated, in effect,
that infiltration operations will
continue even if discussions are
resumed. First Minister Djuanda
told Jones on 26 June he thought
the West New Guinea situation
would not be solved by either
peaceful or military means but 25X1
SL mixture of both.
Sarong
.-Tomindboean
NEPULAUAN MIS-
oRl
Eak(ak
N~
Kandari AME0INA Ambo na GfSER
? (AMBONI (Ambon)
I N D 0 N E S 1n A
N
I- PUTAU EWAB WARIEAU G_,, IstAHOS
(MI ISUND.).cLnDobO. ?. U\
PUTAU N
NARAREEONO N
nesia is continuing preparations
for expanded military operations in
?Zest New Guinea .
I UTAU
S fARU
the rapid Indonesian military
build-up and increasing capabil-
ities have given the government
little ground for considering a
prolonged resistance. Public
opinion in the Netherlands con-
tinues to support the government's
efforts toward a peaceful solu-25X1
Lion and is unlikely to endorse
the prospect of a last-ditch mili-
I Lary stand.
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WEST
NEW GUINEA
NEW GUINE
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
The recent transfer of
additional Soviet submarines
and missile-equipped jet bombers
to Indonesia is probably intend-
ed to strengthen Sukarno's hand
in negotiations with the Dutch
for their withdrawal from West
New Guinea. The new deliveries
raise Indonesian holdings of
medium-range W-class submarines
to 12 and Badger (TU-16) medium
bombers to 26, of which 12 are
equipped for air-to-surface
missiles.
These units apparently were
contracted for only in early May,
during Foreign Minister Suban-
drio's visit to the USSR--mak-
ing the deliveries the quickest
ever noted for such complex
equipment under a Soviet arms
deal with a nonbloc country.
It is unlikely, therefore,
that sufficient trained Indo-
nesian personnel are available
to operate it. For this rea-
son, the Soviet crews probably
will stay on for at least the
next six months to provide
training. Moreover, it seems
apparent that a significant
portion of both the bombers and
submarines, if used operation-
ally within that period, would
have to be manned by Soviet
crews.
The six TU-16 bombers which
arrived at Djakarta on 29 June
presumably will be followed in
the near future by another four,
since the Indonesian Air Force
operates on the basis of ten
aircraft to a squadron. There
have been no good indications
that Indonesian personnel have
been sent to the Soviet Union
for training on TU-16s--a nor-
mal procedure in transactions
of this sort between the USSR
and nonbloc countries.
The four W-class submarines
which arrived at Surabaja on 29
June, less than a month after
two others had been supplied,
undoubtedly were contracted for
by Subandrio in Ma
Soviet military aid com-
mi ments to Indonesia now amount
to more than $700 million and
total arms assistance from the
bloc as a whole to more than
$900 million--making Indonesia
the largest nonbloc recipient
of such aid.
The USSR's willingness to
provide still more arms, when
delivery of much of the materi-
al under earlier agreements is
yet to be made and while Indo-
nesian personnel have not yet
been adequately trained on the
equipment they now possess or
are soon to receive, reflects
Moscow's desire to strengthen
Djakarta's position vis-a-vis
the Dutch in the negotiations
over the status of West New
Guinea. In addition, Moscow's
recent increased arms aid will
open the way for the develop-
ment, of still closer relations
through increased trade neces-
sitated by Djakarta's repayment
of its indebtedness.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
KHRUSHCHEV ON SOVIET AGRICULTURAL PROSPECTS
Khrushchev's claims of
a substantial improvement in
Soviet agricultural prospects,
made at a Russian Republic agri-
cultural conference on 27 June,
seem intended to justify steps
taken this spring to improve
agricultural production. His
forecast of a record grain harvest
of between 148 and 164 million
metric tons "if there is no
worsening of conditions" is
entirely unrealistic and was
probably made solely for its
propaganda effect. Some of the
recent measures--particularly
the price rise in meat and but-
ter--have been unpopular. By
claiming a sharp improvement in
agriculture Khrushchev may hope
to raise morale and to secure
greater public acceptance of
his new agricultural policies.
The dominant reaction among
the Soviet people to the in-
crease in retail prices of meat
and butter, announced on 1 June,
was apathy and resignation.
Although many citizens accepted
the government's explanation
for the rise and expressed the
hope that production of live-
stock products would quickly
improve and prices return to
normal, it has become increasing-
ly clear that public confidence
in the regime's ability to make
good on its promises of a steadi-
ly improving standard of living
has been shaken.
The Soviet people now have
forebodings of further measures
limiting their access to the
fruits of their planned econ-
omy. Rumors of additional price
rises and other steps to take
money out of circulation find
a receptive audience. The more
extreme of the rumors now going
around concern a resumption
of compulsory bond purchases
which had been abolished in
1958. Such purchases would
draw off considerable amounts
of disposable income and would
contribute greatly to public
disgruntlement.
Khrushchev's crop fore-
cast is well above the record-
breaking 141.2 million metric
tons claimed for 1958. The crop
this year may be somewhat bet-
ter than last year's, but it
seems unlikely to reach even the
19513 figure and is certain to
fall far short of Khrushchev's
prediction. Although grain
acreage has been expanded and
weather conditions have generally
stayed about average in most
of the USSR, conditions in
the New Lands region, where
over one third of all Soviet
grain is produced, have not
been favorable. This region,
where disappointing crops
in 1960 and 1961 were largely
responsible for the mediocre
Soviet total, has again been
suffering from drought. While
there was some relief in the
latter part of May, the region
is still short of moisture, and
a prolonged dry spell later
in the season could do much
damage.
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SECRET ~Wo
COMMUNIST CHINA AND NORTH KOREA PUBLICIZE CLOSE TIES
The North Korean parlia-
mentary delegation which visited
Communist China from 15 to 30
June was accorded exceptional
hospitality and was introduced
to the entire Chinese leader-
ship. A dignitary of polit-
buro rank accompanied the dele-
gation on a tour of the country.
Speakers on both sides
stressed their unity against a
common enemy, the US. Although
the toasts to their friendship
included the standard bromides
about unity of the socialist
camp, the impression left was
that Sino-Korean friendship
went beyond ties each maintains
with the rest of the Communist
bloc. Korean politburo member
Pak Kum-chol, who headed the
Korean group, referred to the
Chinese as the Koreans' "closest
friends," and China's Chu Teh
spoke of their sharing the
"bitter and sweet" against the
common adversary.
Chinese speakers attempted
to portray an exclusiveness in
Sino-Korean relations, picturing
their countries' economic de-
velopment as a mutual. under-
taking, with no reference to
Soviet aid. The stress on
their exchange of economic ex-
periences perhaps reflected a
feeling of mutual isolation in
the face of their exclusion,
along with North Vietnam, from
CEMA, the bloc's economic or-
ganization--a feeling heightened
by CEMA's recent admission of
Mongolia. Korean speakers,
perhaps more mindful of their
continuing need for Soviet aid,
expressed thanks to the USSR
as well as to Communist China
for "fraternal" aid.
Korean speeches were re-
plete with laudatory references
to China's leap forward and com-
mune programs, describing them
as the inspiration for Korea's
own attempt at accelerated eco-
nomic development. Congratulat-
ing the Chinese on their com-
munes, which have been sharply
criticized by Moscow, Pak prom-
ised to adopt more features of
Chinese economic practices.
Pyongyang since last fall
has become increasingly outspo-
ken in identifying itself with
Peiping's hard-line foreign
policy, and its delegates reit-
erated its opposition to any
slackening of the anti-imperial-
ist struggle and implicitly to
any Soviet attempt to seek an
accommodation with the West
through negotiations. In Pak's
words, "Peace cannot be realized
only by craving for it; it must
be won through struggle."
In return for North Korea's
support, the Chinese praised
Kim I1-sung in terms almost as
adulatory as those used by his
own party. This was no doubt
gratifying to Kim, who has shown
discomfort over the contrast be-
tween the de-Stalinization cam-
paign in the Soviet Union and
the Korean party's praise for him.
In addition, the Chinese but-
tressed Kim's pretensions as an
ideologist by crediting him with
creative application of Marxism-
Leninism to Korean conditions.
The visit provided an oc-
casion for furthering the de-
velcoping bloc campaign focused
on the charge that US forces in
Korea, Japan, Taiwan, and South-
east Asia constitute a threat
to peace in the entire area.
Each side issued affirmations
of special support for the other's
goals in South Korea and Taiwan.
The Korean visitors backed Chi-
nese Communist allegations of a
Chinese Nationalist buildup for
a mainland invasion to take ad-
vantage of China's "temporary
difficulties." Although pre-
dicting the certain failure of any
Nationalist venture, the Koreans
stopped short of invoking a threat
of joint counteraction under the
Sino-Korean mutual assistance
treaty signed a year ago.
For their part, the Chinese
supported the call issued by
the Korean Supreme People's As-
sembly on 20 June for the with-
drawal of US troops from Korea, 25X1
expressing confidence in the suc-
cess of a "country-saving" struggle
against the US presence.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
on 9 July, economics minis-
ters and other technicians from
about 30 nations will begin a
10-day conference in Cairo on
the special problems of countries
in the early stages of economic
development. The UAR's Minister
of Economic Affairs, Dr. Abd
al-Munim al-Qaysuni, will pre-
side. The UAR Government has
stressed, in drawing up the
tentative agenda and in issuing
invitations, that it intends
to keep the conference sessions
focused on strictly economic
matters. Anti-Western political
overtones seem certain to emerge,
however, since a number of
countries are sending delegations
chiefly because of fear that
the European Common Market will
have adverse repercussions for
them.
As for participants and
agenda, the conference will be
far different from what Nasir
and Tito had in mind when they
initiated the arrangements four
months ago. Their original
idea--which dates back to the
summit conference of "nonaligned"
states in Belgrade last Septem-
ber and which has since been dog-
gedly pushed by Tito--was for
an economic meeting of non-
aligned states which would con-
centrate almost entirely on the
"threat" posed by the Common
Market.
became clear. The Indian Govern-
ment was perhaps the most in-
fluential with Cairo in urging
a major change in concept. The
final result is a meeting which
includes some countries with
close Western ties and which lists
the Common Market on its agenda
as merely one of many key economic
problems facing developing coun-
tries.
Cuba was not among the
ten Latin American countries
initially approached. Havana
pressed hard for an invitation,
and received it only after the
UAR had ascertained that most
other governments intending
to send delegates would not
seriously object to Cuba's in-
clusion. Cairo insists that
it will not permit the Cuban
delegation to make political
speeches. Bolivia, Brazil, and
Mexico are also sending dele-
gates; Chile, Ecuador, Uruguay,
and Venezuela are participating
in observer status.
Nine African and Asian coun-
trles have agreed to be listed
as sponsors, along with the UAR
and Yugoslavia: Ceylon, Ethiopia,
Ghana, Guinea, India, Indonesia,
Libya, Mali, and the Sudan. Twelve
others are sending delegates:
Afghanistan, Algeria, Burma, Cam-
bodia, Congo (Leopoldville),
Cyprus, Lebanon, Morocco, Pakistan,
Somalia, Tanganyika, and Tunisia.
During March, April, and May
of this year, however, as the
UAR sounded out some 50 countries
--including such unlikely can-
didates as Austria, Ireland,
Sweden, Switzerland, Japan, and
New Zealand--the lack of enthu-
siasm for that sort of conference
The UAR will pay the expenses of
some of these. A few additional
nations
may decide at the last
moment
to
send delegates or
ob-
25X1
servers.
UN acting
Cairo also invited
secretary general
the
to
send an observer.
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Nwile SECRET *.i
CURRENT INTELLIGENCE WEEKLY SUMMARY
French civil servants and
workers in the nationalized in-
dustries have undertaken sporadic
strikes to reinforce their de-
mands on the Pompidou govern-
ment for higher wages, shorter
hours, and other work benefits.
The Debr6 government gave
nationalized industries a sub-
stantial wage increase in the
spring. The Pompidou govern-
ment, seeking to forestall
further strikes, moved another
increase proposed for October
up to July, but has refused to
discuss other union demands
until the fall, when joint
labor-industry-government con-
sultations are to be held to
establish an agreed national
price and wage policy.
The unions, which view the
consultations with suspicion
as a stalling device to bring
about a "wage pause," have re-
newed their strike activity.
They want immediate action,
partly to make up for re-
cent price rises, partly to
cash in on the bargaining
leverage of an existing labor
shortage which should be eased
later this year by a number of
factors. These include the
transfer of workers from agri-
culture, reduction of the armed
forces, the influx of workers
from other European countries
and from Algeria, and the in-
crease in total manpower as a
result of the upswing in the
birth rate following World War
II. The National Confederal
Committee of the Socialist-
oriented Workers' Force (FO)
recently approved a resolution
not to participate in the fall
consultations.
Free union efforts to bring
strong pressure on the government
have been hindered by apathy on
the part of many workers and by
disagreements with the Communist-
dominated General Labor Con-
federatiOn (CGT) on strike
tactics and duration. The CGT's
support for short, harassing
strikes as opposed to the long,
nationwide strikes advocated by
the free unions is possibly ex-
plained by a recent high-level
Communist party directive that
general strikes should be staged
only when important political
objectives can be obtained. Com-
munist party leaders apparently
believe the CGT had emphasized
"pure trade union" concerns at
the expense of political goals.
There are also indications that
the CGT's top leaders may think
that unity-of-action campaigns
have achieved success at the
price of diluting CGT initiative
and influence.
Average French wages are
rising faster than productivity,
but prices are rising even faster,
so that labor's purchasing power
is actually lower than it was a
year ago. The economy is rela-
tively strong at present, but
the growing interplay of wage
demands and price increases can
subject the economy to serious
inflationary pressures. 7 25X1
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*Awl 3LUK 1I ~id
CUBAN IMPORTS FROM CANADA AND MEXICO
Since October 1960, when
the US embargoed shipments of
strategic goods to Cuba, Havana
has had to get industrial and
agricultural equipment from
Canada, Mexico, and other West-
ern countries to keep its key
industries in operation. Ac-
cording to an estimate of last
December, Canada was supplying
half of Cuba's imports of such
equipment from nonbloc sources,
and Mexico 15 percent. While
Cuba now is receiving or is
slated to acquire considerable
quantities of new equipment
from the Sino-Soviet bloc, re-
placements and spare parts for
factory machinery predating the
Castro regime must generally be
obtained from the free world.
Canadian exports to Cuba
during 1961 were officially
valued at $32,100,000--more
than double the 1960 figure--
and included steel plate and
sheet, heat exchangers, plastics,
synthetic rubber, medicines,
transformers and other electri-
cal apparatus, aircraft and
automotive engines and parts,
special lubricants, ball bear-
ings, explosives, and industrial
chemicals.
Cuba has been able
to sustain its nickel produc-
tion largely through import
from Canada of such parts as
temperature gauges, meters,
thermocouple leads, and thermom-
eters.. F
Mexican exports to Cuba
have included airplane and
automotive parts, centrifugal
pumps, motor pistons, rubber
tires, scientific instruments,
storage battery components, in-
dustrial specialties, lead and
zinc oxides, iron and steel
wire, aluminum goods, refrac-
tory brick, and glass bottles.
During 1961 Mexico sent domestic
products worth $3,460,000 to Cuba
--again a figure more than double
that of 1960. Mexican statistics
do not include goods transshipped
through Mexican free ports, so
that the value of in-transit goods
and contraband shipments cannot
be estimated. The former Cuban
commercial attache to Mexico who
defected in mid-June was quoted
in the press as stating that he
had paid an average of $125,-
000 per month to Mexican and US
firms in Mexico in illicit sales
of US-made equipment.
Although there are fairly
frequent reports of transship-
ment of US goods to Cuba through
both countries, US origin has
often been difficult to ascer-
tain because a number of fac-
tories in both countries turn
out products basically identical
with those of their US counter-
parts. When it has been proven
that a given consignment of
goods has originated in the
United States, both the Canadian
and Mexican governments have taken
steps to prevent delivery to
Cuba. Neither government per-
mits export to Cuba of arms
or military equipment.
Mexican and Canadian ex-
ports to Cuba in the first
quarter of 1962 have fallen off
as sharply as they rose during
1961, The downward trend is
expected to persist through
the remainder of 1962 as Cuba's
dollar shortage worsens. Busi-
nessmen in most free world
countries, including many to
whom Cuba is already heavily
indebted, now generally refuse
to consider any but cash pur-
chasEes by Havana. 25X1
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CURRENT INTELLIGENCE WEEKLY SUMMARY
DOMINICAN REPUBLIC
Leaders of the government
of the Dominican Republic doubt
their ability to remain in
power as a result of new US
legislation on quotas and premi-
ums for US sugar imports.
Foreign exchange earnings of
the sugar industry are the
dominant factor in the Domini-
can economy, and observers have
calculated that under the new
legislation the Dominican sugar
industry will operate at a
net loss.
Despite repeated warnings
by US officials, the ruling
seven-man Council of State in
Santo Domingo clung to the last
minute to expectations of a
sugar quota--at -mium prices--
almost three times as large as
the amount it probably will
receive. As a result it did
little to prepare the public
for the US legislation, and
the sudden disillusionment will
pose a major threat to stability.
The Trujillo family made
sugar profitable by keeping
wages down. Successor regimes
had to raise wages to capture
public support, and thereby made
the viability of the economy
dependent not only on a contin-
uing US premium above the world
market price, but on quotas well
in excess of the former Domini-
can quota of some 130,000 tons
a year.
The Dominican Republic had
in fact been assigned a "wind-
fall" of more'than 320,000 tons
from suspended Cuban quotas,
but this was repeatedly labeled
as temporary. The new legis-
lation raises the basic Domini-
can quota to 190,000 tons, and
the pending redistribution of
the former Cuban allotment
probably will not bring total
US premium imports from the
Dominican Republic to much more
than 300,000 tons. Santo Domin-
go had been hoping for a quota
of 900,000 tons. The Council
of State has linked cooperation
in the Alliance for Progress to
these inflated expectations,
arguing that substantial sugar
earnings will be needed over the
next few years to keep the
economy viable while the coun-
try diversifies and undertakes
other developmental programs
under the Alliance.
Earnings from the other
major Dominican exports--coffee
and cacao--have been low and
declining for several years.
The Council has accordingly been
relying almost wholly on sugar
to finance Alliance programs
because of public aversion to
foreign indebtedness. Unpaid
debts were among the important
factors leading to the occupa-
tion of the country by US forces
from 1916 to 1924. Fear of
indebtedness was the major factor
behind the Dominican Government's
recent suspension of US develop-
mental projects. President
Bonnelly recently told Ambas-
sador Martin that in the present
atmosphere the Council would
fall if it accepted further
US loans to plug the gap left
by the reduced quota.
If the Councilturned its
back on the Alliance and adopt
a program of austerity, initial
public support would probably
be forthcoming. However, it is
unlikely that such support would
continue in the face of growing
unemployment and worsening busi-
ness conditions aggravated by
expected cutbacks in sugar
production. The pro-Castro 14
of June party has welcomed the
US. action, saying the "whole affair
has taught the Dominican people
a hard but necessary lesson in
the ways of Yankee imperialism."
Wage cuts would probably mean the
destruction of the newly organized
and pro-US labor movements, and
a new opportunity for the 14 of
June party to capture a signifi-
ca,nt popular following, which it
has lost in the last few months.
The party's leaders have recently
threatened to turn to guerrilla
warfare.
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CURRENT INTELLIGENCE WEEKLY SUMMARY
In the atmosphere of po-
litical turmoil in reaction to
the sugar legislation, the
Council now may postpone the
election of a constituent
assembly in August--a date it
had not in any event regarded
with enthusiasm. Its attention
will also probably be diverted
from steps it had begun to take
to gain greater control over
the armed forces. On the
other hand, officers who
had been slated for removal--
along with Council members Luis
Amiama and Antonio Imbert, who
have already advocated return
to more authoritarian govern-
ment--may find it easier to
obtain support for a coup
attempt.
Brazil's first cabinet
crisis under the parliamentary
system adopted last September
continues as a result of the
resignation on 4 July of Prime
Minister Moura Andrade after
one day in office. Andrade's
resignation was prompted by a
dispute with President Goulart
over certain cabinet appoint-
ments. The constitution pro-
vides that the cabinet is "des-
ignated" by the prime minister
and "nominated" by the Presi-
dent. The dispute reflects a
basic power struggle between
the executive and the legislature.
Goulart has been fighting
to retain powers which full
compliance with last September's
constitutional revision would
transfer from the presidency
to a prime minister responsive
to parliament. Over the past
ten months he has had the coop-
eration of his first prime min-
ister, Tancredo Neves. There
are indications that the presi-
dential system is considerably
more popular throughout Brazil
than the parliamentary system.
The latter is preferred, how-
ever, by the legislature, which
has experienced an increase in
puwer and hopes for a further
increase through full implemen-
tation of the September law.
Conservatives predominate in
both houses of the Brazilian
congress.
The Brazilian Communist
party--which was favorable to
Goulart during his years as la-
bor minister (1952-53) and vice
president (1955-61)--has been
critical of some of the Presi-
dent's conciliatory gestures in
recent months toward moderate
and conservative elements.
Goulart's nomination of leftist
San Thiago Dantas as his first
choice for the Prime Ministry
reawakened Communist enthusiasm
for the President, however,
despite some indications that
Goulart did little to forestall
parliamentary rejection of Dantas
on 28 June. Luis Carlos Pres-
tos, secretary general of the
Brazilian Communist party which
now is petitioning for legali-
zation, went to Brasilia on 4
July. He apparently is offering
his party' s support to Goulart 25X1
in the executive-legislative
dispute over a new government.
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WW SECRET liew
CURRENT INTELLIGENCE V'TEEKLY SUMMARY
The reformist, anti-Com-
munist APRA party faces an im-
mediate decision on the ques-
tion of resorting to strikes,
riots, and civil war in defense
of constitutional processes, or
submitting to dictation by the
Peruvian armed forces.
The APRA presidential can-
didate, Victor Raul Haya de la
Torre, won a plurality in the
10 June elections, but fell
short of the percentage of the
total vote required for elec-
tion. APRA also won the largest
bloc of seats, barely missing
a clear majority, in the new
Congress. Because no candidate
received one third of the popu-
lar vote, Congress has the con-
stitutional right to choose a
president among the top three
candidates when it meets on 28
July.
The armed forces, however,
through the reluctant agency of
outgoing conservative President
Prado, have delivered an ulti-
matum demanding that Haya step
down in favor of Fernando Be-
launde Terry, candidate of the
Communist-infiltrated Accion
Popular. The alternative is
the eventual installation of
Belaunde as president by a mili-
tary junta.
Although Haya personally
is willing to accede to the
armed forces' demands, primarily
to avoid bloodshed, his followers
in Lima seemed adamant in their de-
sire to reject the ultimatum and
force the military leaders to act 25X1
or lose face.
It now seems inevitable that
the armed forces will carry out
their threat, first made three
months ago, to stage a coup if
necessary to prevent Haya's suc-
cession to the presidency. In
spite of their well-earned repu-
tation as a significant anti-
Communist force in Latin America,
the :Peruvian armed forces' hatred
of Haya and APRA has led them to
support Belaunde,who also has
the ;support of Peru's Communists.
Having rejected all appeals to
respect the constitutional
processes, it is hardly likely
that the armed forces will be
intimidated by any show of force
by APRA.
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
Economic and political
difficulties in Argentina are
interacting in a spiral of con-
tinued deterioration, heighten-
ing military fears for internal
security. The acute financial
crisis, involving shortage of
peso credit as well as foreign
exchange, is affecting both
government and business. The
government's failure to pay
civilian and military salaries
is increasing labor unrest and
adding to business contraction;
unemployment is growing. Ar-
rears on government salaries
amounted to over $90,000,000
at the end of June.
The cost of living rose
6 percent in May alone and al-
most 30 percent for the 12-
month period. The rise in June
was probably higher as a result
of fluctuation in the exchange
rate between 111 pesos to the
dollar to a high of 134.50 on
29 June, brought on by specula-
tion, panic buying by the public
and heavy commercial purchases
to cover semester-end commit-
ments. By 3 July, however, the
market closed at 120.5. Trade
union leaders representing all
sectors charge that the govern-
ment's policy calls for all
sacrifices to be borne by the
workers, and have promised their
followers that they will con-
tinue to resist this policy with
strikes and slowdowns.
Business suffered a record
number of bankruptcies in May,
and there were new closures by
the major appliance manufacturers
in June. The large cutback in
industry, where Peronist strength
is centered, affects internal
security and is an important fac-
tor in military opposition to
Economy Minister Alsogaray. Al-
sogaray himself, while more op-
timistic in public statements,
commented to Ambassador McClin-
tock on 2 July that Argentina
was on the "brink of catastrophe"
because of its financial crisis.
These difficulties are being
exploited by opposition political
elements. Some seek to overthrow
the government; others are press-
ing; the government to change its
political plans for the March 1963
general elections and are competing
for the Peronist vote. Part of 25X1
Frondizi's Intransigent Radical
party is still demanding his
return as president
The hitherto progovern-
ment newspaper Democracia--now
controlled by Roge o Frigerio,
Frondizi's former adviser--has
switched to an anti-Guido, anti-
US line and offered its services
to the Peronists.
over.
Military dissatisfaction
with these developments has re-
sulted izi plotting by influential
retired officers. The majority
of the armed forces want to
promote constitutional government
and believe that a coup would
prompt a countercoup from the
left, but further deterioration 25X1
in the situation could diminish
resistance to a military take-
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CURRENT INTELLIGENCE WEEKLY SUMMARY
SPECIAL ARTICLES
SOVIET ATTITUDE TOWARD ALGERIA
Soviet policy toward an
independent Algeria probably
will be governed, as was the
USSR's attitude toward the
seven-year rebellion against
France, by the demands of Mos-
cow's European policy rather
than by ideological consider-
ations. The Soviet leaders'
desire to encourage France to
serve as a counterweight to
West Germany in European af-
fairs led them to adopt a
cautious attitude toward the
Algerian rebel movement. In
so doing they opened them-
selves to Chinese Communist
charges that the USSR had let
down a national liberation
movement.
Although the Soviet Union
throughout the first six years
of the rebellion had repeated
the standard slogans regarding
the justness of "wars of na-
tional liberation," Moscow
carefully withheld any signif-
icant diplomatic support for
the Algerians until October
1960, Only then did Khrushchev
announce de facto recognition
of the Provisional Algerian
Government (PAG); Peiping had
granted full recognition two
years earlier. The USSR did
not extend de jure recognition
of the PAG or indicate its
readiness to establish formal
diplomatic relations until
after the Evian accords were
signed in March 1962 and a cease-
fire was declared in Algeria.
Moscow did not take even this
juridically premature step,
designed to win favor with the
Algerian leaders, until it was
reasonably confident that there
would be no strong French
reaction, such as a break in
diplomatic relations.
Throughout most of the re-
bellion, the Soviet Union re-
mained circumspect in its aid
to the Algerians. Prior to
Moscow's de facto recognition
of the PAG, Soviet arms aid
to the rebels--largely in the
form of World War II light
infantry weapons of German
origin--was provided via Egypt
and Syria. Subsequent to Com-
munist China's agreement to
give assistance to the Algerians,
however, Moscow began in late
1960 shipping clearly identifiable
Soviet arms, including artillery25X1
For their part, the
Algerians appear to have had
very little interest in
permitting a thoroughgoing
Soviet or Communist involve-
ment in their rebellion. The
Algerian Communist party, out-
lawed in 1955 and consisting
largely of Europeans, was a
particularly ineffectual force.
After an unsuccessful attempt
at independent terrorism,
it sought to merge with the
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National Liberation Front (FLN)
in 1956, but was unwilling to
accept the FLN's conditions
for merger: the dissolution of
the party as an autonomous
force. Further, the Algerian
Communist party was rebuffed
in its efforts to dominate
the Algerian labor movement.
Thus, unable to exploit the
control of an indigenous move-
ment in the traditional Com-
munist manner, Moscow probably
saw little reason to move too
fast in its support of the
rebellion.
In discussing the Algerian
rebellion, Soviet propaganda--
while maintaining a cautious
criticism of French policies
in Algeria--consistently
encouraged a settlement based
both on the wishes of the
Algerians and on the "historic
interests" of France. Only
rarely, as on the occasion of
Nasir's visit to Moscow in 1958,
did the propaganda theme of
wars of national liberation
receive more than passing lip-
service.
The first public test of
Soviet intentions toward Algeria
was the proclamation of the
Provisional Algerian Govern-
ment in September 1958. Moscow
withheld recognition then,
having little interest in en-
couraging the recognition of
governments-in-exile and even
less desire to destroy what it
regarded as a potentially
fruitful relationship with the
new De Gaulle government at
the time when the Soviet Union
was about to reopen the Berlin
question.
Khrushchev, following his
visit to the US in the fall of
1959, was confident he would
soon achieve his goal of a
summit conference, and his
endorsement of De Gaulle's
tentative offer of Algerian
self-determination and the
subsequent moderation of Soviet
UN speeches on the subject
were undoubtedly calculated to
facilitate De Gaulle's partici-
pation.
The collapse of the summit
in May 1960 and the momentary
failure of his Berlin policies
left Khrushchev in an exposed
position, particularly with
regard to intrabloc relations.
While Moscow had encouraged
the first efforts at French-
Algerian talks at Melun in
Jane 1960, the breakup of these
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1958 that "the more France
displays its independence as
a great power, the easier it
will be, by joint effort, to
achieve a settlement of many
questions concerning both
Europe and the world, which
long ago demanded their solu-
tion."
talks brought intensified So-
viet criticism of French Al-
gerian policy and--in October
1960--de facto recognition of
the PAG and pledges of "every
kind of assistance to the
Algerian people."
In his 6 January 1961
speech on the November-December
1960 meeting of the 81 Com-
munist parties in Moscow, Khru-,
shchev cited the Algerian
rebellion as an example of a
just and "sacred" war of na-
tional liberation, and one
which should be supported by
Communists. Having temporarily
lost his opening to the West,
Khrushchev was free to take
action to undercut Peiping's
criticism of Soviet coolness
to national liberation move-
ments and bring the Soviet
and Chinese positions on Al-
geria at least somewhat closer
together.
Despite this temporary
effort at ideological rec-
onciliation within the Com-
munist movement, Moscow does
not appear to have lost sight
of European political considera-
tions.
In the past few years Mos-
cow has sought in a number of
ways to encourage France in its
ambitions to regain its former
leading role in European affairs.
Khrushchev declared in an
interview in Figaro in early
Despite the lack of French
support at the time of the
abortive summit in 1960, and
despite De Gaulle's constant
efforts to align French and West
German European policies, Mos-
cow has clearly not abandoned
its conviction that the post-
war French-German reconcilia-
tion eventually will break down
and that France will then be
more favorably disposed toward
Soviet policies aimed at block-
ing the resurgence of West Ger-
man military and political
predominance within Western
Europe.
France has made it
abundantly clear that it re-
gards its former territories
in North Africa as lying with-
i:a its immediate sphere of
influence. While the strug-
gle for power within the Algerian
leadership may lead to the emer-
gence of the more radical ele-
ments, it is highly unlikely that
in the near future any Algerian
government would consciously jeop-
ardize its status as the recip-
iiant of aid in the quantities
planned by France. For this
reason Moscow will treat with
circumspection any Algerian gov-25X1
ernment which maintains French
ties. Diplomatic relations,
assistance programs
will probably be 25X1
maintained on a relatively re-
strained level similar to those
in Morocco and Tunisia.
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
Afghan Prime Minister Daud's
concern over the Pushtoonistan
dispute with Pakistan has led
him, despite his awareness of
the dangers involved, to rely
increasingly on the USSR for
economic aid and other forms of
assistance. Soviet influence
in Afghanistan's military forces
and economic development programs
is growing, and Kabul's long-
standing policy of maintaining
a balance between Soviet and
Western interests in the coun-
try is being undercut.
The Pushtoonistan Campaign
Daud has in the past been
tough-minded about serving
Afghan national interests,
developing the country's mili-
tary strength and economy by
securing as much aid as could
be absorbed from both East and
West. On the Pushtoonistan
question, however, he has shown
himself to be
devoting badly nee e
energies and resources to a
cause that has only scattered
tribal support.
USSR
AFGHANISTAN- PAKISTAN
PUSHTOON TRIBAL AREA
SECRET
The Afghan Government's
prestige among the tribes on
both sides of the border was
seriously damaged in 1960 and
196:1 as a result of defeats suf-
fered by the irregular forces it
sent into Pakistan in an attempt
to develop a strong Pushtoon
resistance movement. When
Pakistan closed Afghanistan's
consulates and trade offices
servicing Afghan transit trade
in August 1961, Kabul responded
the following month by breaking
diplomatic relations and closing
the border. This move has hurt
Afghanistan far more than
Pakistan and has further com-
plicated Daud's problem. He
now must recognize that he lacks
the assets to wage an effective
campaign against Pakistan.
Nonetheless, Daud almost
certainly has no intention of
abandoning the Pusbtoonistan
campaign.
He thus
seems to e long or new
methods to keep the dispute
RA NAtPIND
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CURRENT INTELLIGENCE WEEKLY SUMMARY
alive, although in a lower key,
while he engages in a long-term
effort to strengthen Afghanistan's
regular and irregular military
forces along the border.
Neutralism and Independence
As Daud's frustrations over
Pushtoonistan have mounted, he
has allowed the demands of this
problem to undercut his long-
Standing policy of maintaining
a balance between Western and
Soviet interests in Afghanistan,
By closing the border to ship-
ments through Pakistan, the
Afghan leaders greatly reduced
their traditional contacts with
the free world. At the same
time, a high-level Soviet mili-
tary mission headed by Marshal
Sokolovsky was welcomed in
Kabul. On Sokolovsky's recom-
mendation, Afghanistan accepted
a large Soviet military advisory
group to assist in reorganizing
Afghan military forces and their
training program.
During the last three years
the Afghan Army has been re-
equipped and increased in size
from 54,000 to 105,000 men.
Daud now is counting on training
programs with Soviet instructors
to help raise the army's low
standards of proficiency in
handling its Soviet-supplied
equipment. In addition, moun-
tain units more suitable for
fighting in tribal terrain are
being organized and military
roads are being built in the
border area.
While Daud and his security-
conscious associates are prob-
ably concerned about the dangers
of increasing Soviet influence in
the army, the Afghans are grow-
ing accustomed to working with
Soviet advisers, instructors,
and technicians.
Moreover, Daud himself
now accepts some kinds of assist-
ance from the USSR which, in the
mid-1950s, he considered poten-
tially dangerous to Afghan
security. He recently agreed,
for example, that the USSR
should build and staff a techni-
cal training school, which will
give the Russians a firm foot-
hold in Afghanistan's formal
educational system. The gov-
ernment is also searching for 25X1
qualified Afghan students to
study in the USSR for extended
periods.
In the cultural field the
Afghans are removing one of the
most effective obstacles to un-
controlled contacts between
Soviet personnel and Afghan
nationals--the language barrier.
Russian language broadcasts now
are scheduled daily by the
government-controlled Kabul
radio, and Russian classes are be-
ing offered at Kabul University.
Afghan military officers are be-
ing encouraged to take official-
ly sponsored courses.
In the light of these
developments, many Afghans seem
to be adjusting their attitudes
toward the USSR, anticipating that
Soviet influence will grow in
the next few years. Those Afghan
Asir Force officers trained in the
USSR regard the few Western-trained
officers with suspicion and hostil-
ity, and the latter have become
increasingly demoralized.
Afghan newspapers, which
are controlled by the govern-
ment, also seem to be growing
more responsive to the Soviet
lane, although this is partly
due to efforts to avoid offense
to Moscow. Occasional bows,
however, are still made to US
assistance projects in Afghan-
istan.
The Soviet presence in the
economic field meanwhile contin-
ues to expand. The progress
achieved in recent years with
both Soviet and American help
is increasing Afghanistan's
desire for and ability to absorb
larger amounts of aid. In
closing its border with Pakistan
and blocking Western shipments
at such a time, the government
has also increased Afghanistan's
dependence on the USSR for an
a'ternate trade route and for the
bulk of development assistance.
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SECRET
Said ig
Pa:.s
Hagram
JAMMU '
AND'
~AUR
mP ff'fKASHMIR
L Peshawar S ..-. .
IRAN
INDIA
Salang Pass Road
Irrigation project
Area of oil discovery
Hydroelectric project
Internal Stability
The ruling family's inter-
nal position is likely to be
increasingly affected by these
trends in Kabul's forei re-
lations.
.new people from out-
side the established ruling
groups have been given some
responsibility. There seems,
however, to be little interest
in real political reform.
For the present, the Daud
government remains in firm con-
trol of the country despite its
recent reverses in the Push-
toonLstan campaign and the dis-
content among some merchant groups
hurt by the border closing. Daud's
leadership is still generally
respected, because since 1953
he has made impressive strides
in economic development with
foreign assistance and because
he controls the army, which is
more than adequate to put down
any unrest short of an unlikely
general tribal uprising. The
significant change is that these
basic! sources of strength are
increasingly dependent on Soviet
support and that Daud thus has
less leeway both in maintaining
internal security and in preserv-
ing an independent foreign policy.
A reversal of this trend is un-
likely as long as he remains
committed to the Pushtoonistan
campaign.
SECRET
SELECTED FOREIGN PROJECTS
US
Road paving Airfield
USSR
Airfield Metalworking laclory
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CURRENT INTELLIGENCE WEEKLY SUMMARY
PERON AND PERONISM
Peron's loss of personal
support and frequent changes
in line since the 1955 revo-
lution have contributed to the
disunity among the numerous
pro-Peronist parties, which
range from the right to the
extreme left. As he did dur-
ing his 12-year dictatorship,
Peron in exile today switches
his instructions to his followers
and the Peronist line from
orderly cooperation to violence
or from right to left to suit
his whims and his personal
convenience, whether it be for
personal profit to undercut a
would-be rival, or to encourage
continued support from compet-
ing Peronist factions. Peron's
protestations to some audiences
that he seeks only peaceful
democratic rule for the Peronists
contrasts sharply with his per-
formance during 1946 - 1955.
Peron's Tactics
For many of today's Peron--
ist leaders, Peron's dictator-
ship was their training school,
and the methods by which he
gained and held power their
course of study. Peron rose
to power in the mid-1940s by
exploiting the near-feudal
conditions of Argentine labor.
A minor member of the
"colonels clique" which over-
threw the unpopular and pro-
Nazi Castillo regime on 4 June
1943, Peron was assigned the
unimportant subcabinet post of
secretary of labor. Drawing
on Mussolini's corporate state
system, which he had studied
earlier as military attache
in Rome, Peron wooed labor
with spectacular wage increases,
and used Communist leaders to
crush the small democratic trade
unions and build an expanded move-
ment loyal to him personally.
Peron's success was so
impressive that in early 1945
his military rivals imprisoned
him on Martin Garcia Island--
where Frondizi is held now. By
17 October--now the major Peron-
ist holiday--he got back to
Buenos Aires by feigning illness,
and was greated by a massive
labor demonsration that was
tantamount to a unamimous primary
nomination. His violent campaign
in the presidential election of
February 1946 made extensive use
of the slogan "Braden or Peron,"
based on widespread publicity
that US Ambassador Braden was
aiding the opposition democratic
coalition.
Until late 1952 Peron's
championing of labor amounted
to virtual espousal of class
warfare. The instruments he
used to build his political.
organization--based on labor--
were control of the military,
the press, and congress, the
friendly disposition of the
church, and a gradual tightening
of control over economic activity.
He brooked no opposition di free
campaigning by opposition polit-
ical parties. He coined the
name "descamisados" (the shirt-
less ones)for labor, and made
a great show of removing his
jacket to address crowds--a
gesture with special significance
in formal Buenos Aires where
the law required all men to
wear coats in public places.
One of his first pieces
of legislation was the "Statute
of the Peon" which required
landowners to give their laborers
two meals a day and at least
a mud-floored hut with a roof.
Extensive social welfare measures
followed this legislation. In
addition, Eva Peron, Peron's
glamorous wife and former mis-
tress, carried out her own
charity and welfare program
with both public funds and with
"donations" from blackmailed
business interests which were
wiped out if they did not co-
operate. Her popularity and
political power grew to equal
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CURRENT INTELLIGENCE WEEKLY SUMMARY
that of Peron, and the date of
her death from cancer on 26
July 1952 is the second most
important Peronist holiday.
Evita's driving hatred of
the "oligarchy"--based on being
snubbed by high society--made
her a willing listener to ex-
tremist advice, including that
of the "dissident" Communists.
Peron started subsidizing the
dissident Communists in 1951
to draw support away from the
official Communist party (PCA)
and from the Socialists some of
whom became Peronist supporters.
The head of the dissident Com-
munists was Rodolfo Puiggros,
who never disavowed Moscow but
maintained that the PCA leader-,
ship was stupid in not openly
promoting national front tactics
--the policy now featured by
most Latin American parties in-
cluding the PCA. At the time,
Puiggros maintained contact
With Luis Carlos Prestos,
secretary general of the Brazil-
ian Communist party who was
recognized by Moscow as out-
standing among Latin American
Communists.
Peron's extensive public
works programs were geared to
please labor, but frequently
contributed little to the in-
dustrial expansion he was trying
to force at the expense of
agriculture, which provides 95
percent of all foreign exchange
earnings. He emphasized parks,
swimming pools, hospitals--
often without adequate staffs--
and halls and sports centers
for the trade unions. There
were only token housing programs
to meet the long-standing
shortage. Labor unwittingly
paid for many of these projects
through heavy contributions to
social security funds and various
excise taxes.
Labor's new feeling of status
and political participation,
along with Peron's social and
public works programs, prolonged
the loyal of the majority of
labor for a few years beyond
1951, when the decline in real
wages and Pe:ron's major economic
difficulties began. By this time,
organized labor had gained
sufficient political experience
to resist any return to its
depressed status of the past,
regardless of national leader-
ship.
Labor dissatisfaction with
Peron began to appear as early
as 1953 as a result of Peron's
rightward turn, including his
overtures to business and to
the US for cooperation in easing
economic difficulties. Leaders
of the General Confederation of
Labor which had become the most
important single political force,
objected to Peron's formation of
the General Economic Confederation,
a counterpart for business, as
an implied threat to the favored
position of labor. Further
strains were added by Peron's
crackdown on Communist labor
activity in mid-1954, and by
his fight with the church which
erupted in November 1954.
The church-state fight was
the vehicle chosen by combined
opposition groups to bring down
Peron. It caused many Peron-
ists to leave the party. In
his eleventh-hour salvage at-
tempt before the successful
September 1955 revolution,
Peron turned over the presidency
of the Peronist party to John
William Cooke--then Peron's
heir-apparent--and urged that
each Peronist get a length of
wire to hang the opposition for
any harm done to any Peronist.
Peron's ouster removed a
major irritant in inter-American
relations, since he was generally
despised throughout the hemisphere
and feared by Argentina's smaller
neighbors.
SECT
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SECRET
CURRENT INTELLIGENCE WEEKLY SUMMARY
Because Peron had never
permitted subordinates to share
the spotlight his departure left
the Peronist movement without
any nationally influential
leader capable of maintaining
unity. The result has been a
fragmentation, of the Peronist
movement favorable to minority
extremist elements, who have
replied with violence to con-
ciliatory gestures by the
Lonardi, Aramburu, and Frondizi
governments which preceded
President Guido.
The Peronists have been
unable to organize an effective
political organization or to
recapture their former domina-
tion of the General Confedera-
tion of Labor (CGT) since the
September 1955 revolution. This
organizational weakness stems
more from divisions among the
Peronists themselves than from
repressive measures inspired
by the military, who insist
Peron will not be permitted to
reinstitute his dictatorship
in Argentina.
The CGT was taken over by
the government and the Peronist
party outlawed on 30 November
1955 only after the Peronists
had attempted revolutionary
action. Labor union dues have
been a principal source of
Peronist funds for political
and subversive uses.
In March 1961 the CGT was
returned to complete union con-
trol. Power is shared by 10
representatives of the "independ-
ent," prodemocratic bloc and
10 representatives of the pro-
Peronist "62" bloc. All CGT
policies and decisions require
a two-thirds vote of the 20.
This arrangement is provisional
pending the convocation of a
CGT cong3ress, which has been
delayed by the Peronists' in-
sistence that they dominate the
CGT.
The CGT now represents
slightly more than 2,000,000
dues-paying members--compared
with the 6,000,000 claimed during
the Peron era. About 50 per-
cent are members of unions which
are Peronist-controlled; about
45 percent belong to non-Peronist
unions, with the remainder
divided between diehard anti-
Peronist and Communist control.
The Communists are not
presently strong enough to win
national union elections, but
they have made impressive gains
in electing hundreds of union
shop stewards and shop committee-
men, mostly in industrial unions
controlled by Peronist leaders.
These gains, in combination
with their discipline, training
program, and financial resources,
place the Communists in a good
position to exploit weakness
among Peronist unions, which
suffer from the same disunity
that afflicts the political
parties.
While most Peronists are
more interested in the economic
and political aspects of Peronism
than, they are in Peron himself,
they have not found a strong alter-
native leader. Several leaders,
such as Juan Bramuglia, have
tentatively suggested from time
to time that their neo-Peronist
parties promote Peronism without
Peron, but in the final showdown
have backed away from the idea
as politically impractical.
Even with his reduced personal
following, Peron remains the
most influential single leader
because of the numerous competing
factions.
Peronist victories in
the 18 March congressional anci
provincial elections and the
economic squeeze on labor--which
influenced the elections--will
serve to increase cooperation
among; Peronists and Peron's in-
fluence in the movement. Pro-
Peronist candidates, cooperating
in some cases with other small
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parties, won one third of the
total vote, 9 of 12 governor-
ships, and 47 of 94 seats at
stake in the Chamber of Deputies.
Even though the results of tho
elections were canceled, the
Peronists are benefiting in-
directly from the international
criticism of Frondizi's ouster
which their victories precipi-
tated.
After the elections Peron
reorganized his command in
Argentina which is formally
known as the Peronist Supervi-
sory and Coordinating Council.
He named Dr. Raul Matera, a
respected surgeon and formerly
little known Peronist, head of
the council but chose Augusto
Vandor, a leftist labor leader,
for the key position in charge
of trade union activities.
Peron was considering naming
Vandor to the top post but
apparently decided that naming
a moderate would make the coun-
cil seem more respectable. This
split, which is reflected in the
other two top appointees on the
council, stems from Peron's
efforts to retain the support
of both moderate and extremist
elements in the movement and
facilitate his rapid switch in
line.
The Peronists who advocate
insurrection to regain power
appear largely linked with the
dissident Communist or Trotskyite
Peronist factions and reportedly
have encouraged cooperation
with the Argentine Communist
party. Chief among these is
John Cooke, who heads a militia
unit in Cuba. He has lived
there since 1956 when he escaped
from an Argentine prison along 25X1
with a group of five others,
including Jorge Antonio, who
"financed" the escape.
Peron--who before the elec-
tions threatened to create chaos
in Argentina--has more to gain
by playing a moderate line for
the next few weeks
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