WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A004200120001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 36
• Document Creation Date: December 20, 2016
• Sequence Number: 1
• Content Type: SUMMARY

22. November 1963
OCI No 0307/63
Copy No.
WEEKLY SUMMARY
On file Department of Commerce and Department of Agriculture release instructions
apply.
CENTRAL. INTELLIGENCE AGENC
OFFICE OF CURRENT 1NT.LLIGEIVCE
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completed
ARMY review(s)
completed.
State Dept. review
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(Information as of 1200 EST, 21 November 1963)
CUBA Page
CUBA'S NEW COMPULSORY MILITARY SERVICE LAW
This law, explained in a broadcast by Raul Castro
on 12 November, will be an important instrument of
control over the population and a means of "re-edu-
cating" those still unadjusted to the Castro regime.
TRAINING OF CUBAN MILITARY PERSONNEL
Raul Castro also stated in his broadcast that some
7,000 Cubans had volunteered to train in special
weapons and that "antiaircraft missile troops" had
completed their first phase of instruction.
THE BARGHOORN CASE
Moscow's handling of this affair suggests an ini-
tial miscalculation of the repercussions in the US,
followed by efforts to minimize the damage to Soviet-
American relations.
USSR REJECTS ALLIED STATEMENT ON BERLIN ACCESS
Moscow's rejection of the Allied statement on har-
monized access procedures maintains the deadlock
on the question of "control" and is another tacti-
cal maneuver to draw the West into formal talks.
PEIPING RENEWS ATTACK ON MOSCOW
The Chinese apparently regard Khrushchev's latest
request for a cessation of polemics as a sign of
weakness and as a good time to press the attack.
INDICATIONS OF ECONOMIC REAPPRAISAL IN THE USSR
Scheduling of a central committee plenum early next
month indicates that the 1964-65 economic plan now
is ready for presentation after a delay apparently
occasioned by a reappraisal of the economy in light
of the poor agricultural situation.
RUMANIA OPENS DOORS FOR COOPERATION WITH YUGOSLAVIA 7
A visit to Belgrade this week by Rumania's Gheor-
ghiu-Dej will complete the process of re-establish-
ing contacts at a high level between Yugoslavia and
all the members of the Soviet bloc.
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THE COMMUNIST WORLD (continued) Page
SATELLITES UNDERMINE GDR'S POSITION ON BERLIN
Clauses in Rumanian and Hungarian trade pacts with
Bonn acknowledging their applicability to West Ber-
lin and giving semidiplomatic status to West German
trade missions undercut basic East German positions.
COMMUNIST CHINA'S LEGISLATURE CONVENES IN SECRET
The National People's Congress, which used to be a
major annual forum for public boasting, was also
held behind closed doors last year.
PEIPING SEEKS LARGER FOOTHOLD IN LATIN AMERICA
Lacking diplomatic recognition in any Latin Amer-
ican country except Cuba, Peiping must depend on
its news offices and unofficial commercial missions
to support political and subversive efforts.
SOUTH KOREAN NATIONAL ASSEMBLY ELECTIONS
The governing junta's party is running scared, but,
even if it falls short of a majority, should be able
to dominate the government.
PROBLEMS MOUNT FOR NEW SOUTH VIETNAMESE REGIME
Some military officers are showing signs of person-
al political ambitions, and internal disagreements
are already apparent on such matters as the role of
the prospective advisory "council of sages."
CAMBODIA RENOUNCES AMERICAN AID
Sihanouk's action follows weeks of charges that
the US supports dissident Cambodian broadcasts
from Thailand and South Vietnam.
TENUOUS "CEASE-FIRE" IN LAOS
The Communist faction may be seeking a temporary
detente to gain time for broader military ventures,
or to undermine the neutralist-rightist alliance
by minor concessions to the neutralist faction.
ARMY TAKES OVER IN IRAQ
The new regime retains some Baathist coloration.
While Iraqi-Syrian union now seems a dead issue,
Syria's Baathist leaders may expect to reach some
accommodation with Baghdad.
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ASIA-AFRICA (continued) Page
AFRICANS DEAL WITH ALGERIAN-MOROCCAN DISPUTE
While the conciliation commission selected by the
Organization of African Unity pursues its delib-
erations, Morocco and Algeria will quietly improve
their military positions.
EUROPE
NEGOTIATIONS FOR A CABINET IN ITALY
Disagreements over the prospective government pro-
gram are retarding the negotiations for a center-
left coalition.
MANSHOLT PLAN FOR SETTLING EEC GRAIN CONTROVERSY
EEC Commissioner Mansholt's proposals for unify-
ing Common Market grain prices appear to offer
some hope for solution of the Community's most
vexing problem.
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WESTERN HEMISPHERE Page
AREA NOTE 20
On Canada
ARGENTINA ANNULS OIL CONTRACTS
The foreign companies nevertheless continue to op-
erate pending court determination of their financial
position vis-a-vis the government and negotiation
of new contracts.
THE OIL CONTROVERSY IN PERU
President Belaunde appears to be adopting a more
conciliatory position on the controversy over taxes
to be paid by the US-owned International Petroleum
Company.
VENEZUELAN PRESIDENTIAL ELECTION ON 1 DECEMBER
Communist-inspired violence aimed at disrupting the
election continues, and there remains a tacit threat
of intervention by military leaders if they find the
winning candidate unacceptable.
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N*' SECRET Iwo,
Cuba's draft law on compul-
sory military service, explained
in detail by Raul Castro in a
nationwide broadcast on 12 No-
vember, has far-reaching social
and political ramifications.
It is to be an important new
instrument of control over the
population and a means of "re-
educating" Cubans who have not
yet become adjusted to living
and working in a "socialist"
country.
When Fidel Castro first
announced last July that such a
law would be forthcoming, it was
in the context of a bitter at-
tack on the remnants of the
Cuban middle class. He said the
law would make Cuba a nation
"more and more of workers and
less and less of parasites" and
ensure that the "sons of today's
parasites do not become tomorrow's
potential lumpen" (his word for
recalcitrants and dissidents,
whatever their class origin.)
In a talk to representatives
of Cuba's central labor organi-
zation on 15 November, Raul
Castro indicated that politically
unreliable Cubans will be im-
pressed into labor battalions
rather than inducted into regular
military units. He expressed
confidence that many "lumpen"
so impressed will be rehabil-
itated.
Raul Castro declared that
the law will not be officially
promulgated for another two or
three weeks. In the interim,
the "people" are to discuss
and "approve" it in meetings
of their "mass organizations."
17 and 45 liable to three years
of active military service.
Women between 17 and 35 who
volunteer will be accepted for
two-year terms. The law states
that an individual may fulfill
his obligations either by serv-
ing full time for three years
or, at the discretion of the
state, as a member of the re-
serves. Students and others
whose civilian duties are judged
to be of 'sufficient importance
may be assigned to the reserves,
but will nevertheless be re-
quired to take military train-
ing during certain periods of
the year.
The pay for draftees on
active duty is to be a token
"allowance" of only seven pesos
per month--as compared with
the 60 to 80 pesos that the
lowest ranking Cuban soldiers
now receive. Castro justified
this by indicating that all
the draftee's personal needs,
as well as those of any de-
pendents he might have, would
be taken care of by the state.
All eligible Cubans are
to register during the month
of December. Castro estimated
that some 1.5 million Cuban
males will participate in
the initial registration.
His calculations indicate
that approximately 28,000
are to be called to active
service each year. Thus,
after the program has been
in effect for three years,
there will be about 84,000
men on active duty under this
program.
The draft law makes all
Cuban males between the ages of
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In his 12 November speech,
Raul Castro stated that some
7,000 Cuban students had joined
the armed forces when Fidel Cas-
tro asked for volunteers to
train in the handling of special
weapons. He added that he had
recently attended the graduation
of Cuban students completing
the first phase of instruction
for "antiaircraft missile
troops."
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The release of Professor
Barghoorn on 16 November, two
days after President Kennedy's
public condemnation of Soviet
behavior, apparently reflected
a decision by the Soviet leaders
to disengage as quickly as pos-
sible from this episode and to
try to minimize the damage to
Soviet-US relations.
Ambassador Kohler believes
the Soviet authorities failed to
anticipate the US reaction to
Barghoorn's arrest and that they
were bewildered and genuinely
alarmed by the volume and in-
tensity of US protests and ac-
tions. Moscow's terse announce-
ment of Barghoorn's release stated
that in view of the "concern
of high US officials," the So-
viet Government had decided
"merely to expel him from the
Soviet Union" rather than bring
him to trial on espionage charges.
Gromyko informed Kohler privately
that this decision was the result
of Khrushchev's personal inter-
vention and requested that this
be brought to the attention of
President Kennedy.
Soviet propaganda has played
down the incident, deplored the
"hue and cry" raised in the US,
and expressed the pious hope that
Washington "will correctly evalu-
ate the good will of the. Soviet
Government" in releasing Barghoam.
In Ambassador Kohler's
view, this episode does not
reflect a deliberate decision
to worsen relations with the US
or to jettison the peaceful co-
existence policy and move closer
to Chinese Communist positions.
Although the ambassador acknowl-
edges that Soviet authorities
regard an occasional espionage
case as a useful device for warn-
ing the Soviet people against
unmonitored contacts with West-
erners, he feels the primary
motive in the Barghoorn affair
was the desire to secure a hos-
tage for I. A. Ivanov, an em-
ployee of the Soviet "Amtorg"
trade organization in New York
who was arrested on 29 October.
Gromyko told Kohler on 16 No-
vember that the USSR expects
that the US Government "will
take the necessary measures"
to release Ivanov.
Moscow's apparent desire
to avoid further damaging pub-
lic exchanges over this case
was evident in Gromyko's "con-
fidential" warning to Kohler
that if any US official pub-
licly attempts to justify Barg-
hoorn's behavior, thus casting
doubt on the legitimacy of So-
viet actions, the USSR "will
reserve the right to publish
materials of the investiga-
tion, including the deposition
of F. Barghoorn himself."
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ALLIED VERSUS SOVIET PROCEDURES FOR BERLIN
AUTOBAHN
TEXT OF SUMMARY OF ALLIED PROCEDURES TRANSMITTED
SOVIET PROCEDURES AS COMMUNICATED TO
HARMONIZED ALLIED PROCEDURES
TO SOVIETS ON 29 OCTOBER 1963
THE ALLIES ON 16 NOVEMBER 1963
ADVANCE NOTIFICATION
1 . Advance notification will be given for convoys of eight or more
1. Not mentioned
1 . Advance notice must be given in accordance with established
vehicles.
practice. Convoys of less than five vehicles are processed through
without advance notice.
2. Prior notification will be given orally not later than 15 minutes
2. Not mentioned
2. Not mentioned
before arrival of convoy at Soviet checkpoint. Allies also agreed
that this provision would not alter existing self-imposed restraints
on sending convoys containing six or seven vehicles.
DISMOUNTING
1. Drivers, co-drivers, and crew members do not dismount for
1. (See 4 below.)
1. Drivers are not counted in determining whether a convoy should
headcount.
dismount.
2. Passengers in buses, whether the buses are traveling singly or
2. Passengers in buses, whether the buses are traveling singly or
2. Troops traveling in buses are checked without a lineup.
as part of a convoy, wilI not dismount.
as part of a convoy, will not dismount.
3. Passengers in other single vehicles will not dismount, except
3. Not mentioned
3. Troops traveling in single vehicles are checked without a lineup.
that those in vehicles carrying 10 or more passengers will be
prepared to dismount.
4. Passengers in any convoy with more than 30 passengers (not
4. In any convoy with more than 30 passengers (i.e., exclusive
4. Allied troops traveling in convoys dismount and line up for verifi-
counting bus passengers) will be prepared to dismount.
of drivers, assistant driven, and, in the case of specialized vehicles,
cation. Two men may be left with each vehicle as guards,
other crew members), the passengers will be prepared to dismount for
headcount.
5. Passengers in convoys with 30 passengers or less (not count-
5. Convoys with 30 passengers or less will not dismount for headcount,
5. Verification of personnel is allowed in the vehicles if the sum
ing bus passengers) will not dismount, except that those in
except that individual vehicles with 10 or more passengers, in the
total does not exceed an average of two or three men per vehicle,
individual vehicles carrying 10 or more passengers, within the
convoy, will be prepared to do so.
not including driven.
convoy, will be prepared to dismount.
6. Dismounting for headcount (if requested by a Soviet check-
6. Dismounting for headcount will be carried out under the following
6. Not mentioned
point officer) will be carried out under the following conditions:
conditions,
a) Not mentioned
a) Dismounting will be executed on order of the Allied
a) Dismount will be executed on order of the Allied convoy
convoy commander and not of a Soviet officer.
commander.
b) Allied convoy commander will determine where the
b) The Allied convoy commander will determine where the
b) Not mentioned
troops should form for headcount, taking into account
troops should form for headcount.
considerations of the danger of excessive public displays.
c) In event troops dismounted for headcount are photo-
c) In the event troops dismounted for headcount are photo-
c) Not mentioned
graphed or exposed to propaganda broadcasts, distribution
graphed or exposed to propaganda broadcasts, distribution of
of propaganda pamphlets, or other forms of propaganda, or
propaganda pamphlets, or other forms of propaganda, or are
are otherwise harassed, they will promptly remount.
otherwise harassed, they will promptly remount.
d) Headcount in no case will exceed 15 minutes in
d) Headcount will be performed expeditiously. Otherwise
d) Not mentioned
duration. Otherwise troops will remount.
the troops will remount.
e) Dismounting will not be performed in inclement
e) Dismounting will not be performed in inclement weather.
e) A check of personnel will be made in the vehicles in case of
weather (extreme cold, rain, snow, etc.)
bad weather, i.e., snow or rain, with the permission of the Soviet
commander, as is the present practice.
INSPECTION
1 . On vehicles carrying passengers, tailgates the tops of which are
1 . On vehicles carrying passengers, the Allied convoy commander will
1. Verification can be made with tailgates down or with tailgates up if
over six feet from the ground will be lowered at Soviet request. No
be prepared to lower tailgates the tops of which are over six feet from
a count is then possible.
tailgates six feet or lower will be lowered.
the ground. No tailgates six feet or lower will be lowered.
2. Only convoy commander's identity card will be presented to the
2. Not mentioned
2. Allied convoys are processed by presenting established documents.
Soviets together with freight documents.
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USSR REJECTS ALLIED STATEMENT ON BERLIN ACCESS
Moscow's rejection of the
Allied statement on harmonized
procedures on the Berlin auto-
bahn maintains the deadlock on
the question of "control" over
procedures and is another tacti-
cal maneuver to draw the West
into a formal discussion of the
whole question of access to
Berlin.
The USSR's reply of 16 No-
vember dismissed the Allied
statement as representing merely
"internal instructions" and
again emphasized its own claim
to control the passage of per-
sons and goods of Allied forces
through Soviet checkpoints.
The Soviet response, de-
livered to representatives of
the Allied military liaison
missions, reiterated earlier
remarks of Foreign Minister
Gromyko in insisting that a 29
June 1945 meeting of Allied
PEIPING RENEWS ATTACK ON MOSCOW
The Chinese Communist lead-
ers apparently regard Khru-
shchev's 25 October request for
a cessation of polemics as an
expression of Soviet weakness.
They certainly view it, not as
genuine, but as a tactical
move aimed at gaining a needed
respite. The Chinese have
no intention of giving Khru,-
shchev this respite.
Moscow's recent effort to
arrange a stage-managed inter-
commanders in chief "exactly
established" that Soviet author-
ities "take care of protection,
control and traffic regulation"
for access routes used by the
Allied military forces.
The ambiguous presentation
of Soviet procedures by the
chief of the Soviet military
liaison mission deliberately
preserved wide latitude of So-
viet checkpoint commanders in
processing Allied convoys.
In a further attempt to
demonstrate Moscow's firmness
on this issue, Gromyko told
the Danish foreign minister
that the USSR would not give in
on the question of autobahn pro-
cedures. He also told the UK 25X1
ambassador on 14 November that
the 1945 agreement "could not
be changed one iota."
national Communist meeting to
condemn the Chinese was appar-
ently resisted by other Com-
munist parties. The Chinese
probably believe that this
was a significant setback to
Khrushchev's attempts to iso-
late them. They therefore
feel, as they did when he
called for a cessation of polem-
ics last February, that this is
a good time to press the attack.
This emerges clearly from a
19 November combined Red Flag -
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People's Daily article--the fifth
in Peiping s urrent series of
attacks on the positions outlined
in the Soviet Union's 14 July
open letter. A long commentary
on the "questions of war and
peace," the article advanced no
new ideas of this oft-debated
issue but concentrated on heavy
personal abuse of Khrushchev.
Just before the Soviet October
Revolution celebrations on 7 No-
vember, when the Chinese were un-
certain whether they would be
faced with an extreme challenge
from the USSR, their war of words
with Moscow had taken on a more
ambiguous tone. The fourth com-
mentary, published on 21 October,
did not attack Khrushchev with
the customary vigor.
The flavor of the current
article, however, is contained
in the comment that the US im-
perialists have not become
"beautiful angels in spite of
Khrushchev's bible-reading and
psalm-singing; they have not
turned into compassionate Bud-
dhas in spite of Khrushchev's
prayers and incense-burning."
The Barghoorn affair gives
the Chinese a ready-made example.
of how the Soviet leadership has
abandoned principle and knuckled
under to US pressure while gain-
ing nothing in return. Peiping
has lost no time interpreting
it this way. Although there has
been no editorial comment as yet,
selective reporting in the Chi-
nese press makes the point clearly.
Using Western news stories, Pei-
ping details the forms of pres-
sure the US applied to gain Barg-
hoorn's release and then depicts
Khrushchev's personal interven-
tion as a hasty and complete sur-
render.
The Chinese realize that
Khrushchev's requests for a
tempering of the dispute are
welcome among other Communist
parties which find the constant
cross f ire difficult to escape.
To counter this, Peiping has
periodically cited the number
of anti-Chinese articles which
continue to appear in the So-
viet press. In preparation for
their renewed assault, the Chi-
nese on 15 November printed a
hasty and "incomplete" count
which showed that more than 80
articles with anti-Chinese com-
mentary had appeared in the So-
viet press in one two-week period
following Khrushchev's 25 Octo-
ber request for a pause.
Moscow, unless stung to a
quick response by the fury of the
Chinese attack on Khrushchev, will
probably maintain its self-imposed
ban on its polemics while it seeks
a way to convince other Communist
parties to join in the isolation
of Peiping. The Soviets now have
begun to hint that, instead of an
international gathering, another
bilateral meeting might be held.
Moscow probably believes that the
almost inevitable failure of bi-
lateral talks would show that its
constant attempts to be reason-
able produce no change in Chinese
behavior.
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The scheduling of a Soviet
central committee plenum on the
chemical industry for 9 December
indicates that the 1964-65 eco-
nomic plan now is ready for pres-
entation. Completion of the
plan was delayed apparently to
reappraise the economy in light
of the unusually poor 1963 har-
vest and the extraordinary pur-
chases of Western grain.
Judging from the press dis-
cussion, the plan is predicated
on the rules set out by Khru-
shchev last summer--greater con-
centration of investment to speed
construction, a sharp boost in
chemical output to support agri-
culture and industry, and stepped-
up investment in irrigation.
While Khrushchev continues to7
tell some Westerners that the
program will involve cutbacks
in military expenditures, he
has told others that both agri-
cultural and military needs can
be met simultaneously. There
are many signs in the press
that Soviet industry is already
being redirected to support the
new program.
Khrushchev recently told
that
the crash fertilizer program
would rapidly boost agricultural
output. His statement that farm
output depends neither on the
capitalist nor the socialist sys-
tem but on investment is in sharp
contrast with the organizational
manipulations which characterized
his approach to the farm program
for several years. His boast
that the new program will enable
the USSR to match US agricultural
productivity overlooks production
and allocational problems in-
herent in the undertaking and ig-
nores serious soil and climatic
handicaps.
Apparently there is concern
in some Soviet circles that these
problems are being underrated.
On 17 November, Pravda published
a letter from several-prominent
scientists who cautioned that
agriculture does not have enough
storage facilities and machinery
to utilize additional fertilizer,
that the country now is wasting
virtually half the fertilizer al-
ready being produced, and that
some of the plans put forth by
the Ministry of Agriculture are
unrealistic. The scientists sug-
gest that some of the increased
investment for new fertilizer
capacity be used for more ur-
gent farming needs. The re-
gime's purpose in permitting
this letter to appear was
perhaps to underscore the
need to effect a wide range
of resource shifts in favor
of agriculture, but also to
indicate that certain elements
in the program are still open
for debate.
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Rumania's Gheorghiu-Dej
is visiting Yugoslavia..
... to sign an agreement for develop-
ment of the "Iron Gate" of the Danube.
He was preceded in Yugoslavia ... and Hungary's Kadar
by Khrushchev in August ..... in September.
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Rumanian party First Secre-
tary Gheorghiu-Dej arrived in
Belgrade on 22 November as
leader of the highest ranking
group from the Soviet bloc to
visit Yugoslavia since its
rapprochement with the bloc be-
gan nearly two years ago. Al-
though ostensibly for the pur-
pose of signing an agreement
for construction of an ambitious
hydroelectric and navigation
project on the Danube border
--the so-called Iron Gate-
the eight-day visit will un-
doubtedly be the occasion for
party and governmental talks on
a wide variety of subjects.
For Yugoslavia, Dej's visit
will complete the process of re-
establishing contacts at a high
level with all the states of the
Soviet bloc. During the past
year, Khrushchev, Bulgarian
party chief Zhivkov, and Hun-
garian party First Secretary
Kadar have visited Yugoslavia.
Tito has been to the USSR and
Hungary and is expected to
visit Poland in the spring.
Visits by delegations at the
politboro level have already
been exchanged with Czechoslo-
vakia and Poland, and Belgrade
sent an important delegation to
East Germany's party congress
last January.
While Rumania did not par-
ticipate in the last anti-Yugo-
slav campaign as heartily as
most bloc states, it has lagged
behind these states in recent
months in improving its relations
with Yugoslavia. This demonstra-
tion of reserve toward Belgrade
has complemented Bucharest's
failure to attack the Chinese
directly in the Sino-Soviet dis-
pute and has apparently been
intended in part to demonstrate
Rumanian independence from the
USSR.
Before accepting Tito's in-
vitation Dej reportedly insisted
on certain economic preconditions,
the Iron Gate agreement being
the most significant. The con-
trast between Bucharest's tough
internal orthodoxy and Belgrade's
relatively liberal domestic
policies has apparently also
been an impediment to closer Yugo-
slav-Rumanian relations.
Now, the fact that both coun-
tries, Yugoslavia more so than
Rumania, refuse to subordinate
their national economic programs
to Soviet bloc interests pro-
vides a basis on which their re-
lations could be rapidly improved.
Both countries obviously attach
considerable importance to the
visit. The Rumanian delegation
includes four key regime figures
in addition to Dej, and there
has been an enthusiastic press
build-u in both states.
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,,, .SLG'KL~il The Communist World
The terms of trade agreements
concluded between several East
European countries and West Ger-
many undercut basic East German
positions on the Berlin and Ger-
man questions. This development
reflects the greater willingness
of the East European countries
to put their national interests
ahead of those of the Soviet bloc
and has the effect--whether in-
tentional or not--of isolating
the GDR from its Eastern neighbors
on the Berlin issue.
Both the Rumanian trade pro-
tocol with West Germany--initialed
on 17 October--and the Hungarian
agreement signed on 9 November
contain a "Berlin clause"--i.e.,
a declaration that the agreement
is applicable to the currency
area of the Deutsche Mark West,
which includes West Berlin. They
resemble the Polish - West Ger-
man agreement signed last March
which included a secret protocol
to this effect.
Any public acknowledgment
of West Berlin's ties with the
Federal Republic is anathema
to the East German regime, which
maintains that West Berlin is an
entity separate from the Federal
Republic. The USSR also has
pressed Bonn hard to avoid any
reference--any written one, at
least---to this subject in con-
nection with the Soviet - West
German trade agreement.
In addition, the opening of
West German trade missions in
Eastern Europe will detract from
the GDR's claim to be the sole
representation of Germany in the
satellite capitals. The situation
is aggravated from the GDR's point
of view by the fact that the new
West German offices will have a
semidiplomatic status.
Walter Ulbricht displayed
his annoyance in a speech on 11
November to the GDR State Council
in which he commented on Bonn's
"more flexible tactics" toward
Eastern Europe. "The reduction
in tensions is being exploited
by imperialist forces in Bonn,"
he said, "to penetrate into the
GDR and the people's democratic
countries by changed methods."
While the East German leader did
not expressly refer to the recent
West German trade pacts, this is
the one area where the more elas-
tic policies forecast by West Ger-
man Foreign Minister Schroeder in
August 1962 have shown results for 25X1
Bonn.
Meanwhile, Czech party leader
Novotny has also made a bid to ne-
gotiate an exchange of trade mis-
sions with Bonn. Bulgaria, too,
has shown a willingness for talks
and may have begun negotiations
this week. Berthold Beitz, Krupp's
effective and ubiquitous general
manager, was in Sofia in September
as a guest of the Bulgarian premier
and has been invited to visit Czech-
oslovakia in December. Negotiations
for the renewal of the Sovi.:t - West
German trade agreement are tenta-
tively scheduled for January.
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NUNN, SECRET MMO/ The Communist World
COMMUNIST CHINA'S LEGISLATURE CONVENES IN SECRET
With little to brag about,
the Chinese Communists again
this year are holding their rub-
ber-stamp legislature, the Na-
tional People's Congress (NPC),
behind closed doors. It convened
in Peiping on 17 November, at-
tended by Mao, other top leaders,
and more than 1,000 delegates
including some Overseas Chinese.
Past NPC meetings have lasted from
11 to 25 days.
Before the collapse of the
Leap Forward in 1960, the NPC
had been a major annual forum for
publicly boasting about achieve-
ments and for presenting national
policy. It did not meet at all in
1961, however, and the 1962 session
was held in secret. This year's
session, originally scheduled for
the second quarter, was postponed,
partly because it would have inter-
fered with preparations for the 5
July confrontation with the So-
viets in Moscow.
The opening of the session
was preceded by secret meetings
on 15 and 16 November of the
Supreme State Conference, a se-
lect forum often used by the
chief of state to publicize ma-
jor policy pronouncements. This
time, however, Peiping merely
announced that Liu Shao-chi., in
his capacity as chief of state,
and Premier Chou En-lai had made
"important speeches on the pres-
ent international and domestic
situation and future tasks."
The agenda of the NPC has
not been announced, but Foreign
Minister Chen Yi told
on
October that the meeting would
deal chiefly with economic ques-
tions. These include a "new na-
tional. economic program," which,
according to Chen, may involve
a stretch-out of the existing
Five-Year Plan (1963-67) schedule
to a seven- or ten-year period.
The leadership probably sees bene-
fits in setting goals far enough
in the future to relieve the re-
gime of pressure to show immedi-
ate results.
One of the few surprises of
the NPC thus far has been the an-
nouncement that Vice Premier Li
Fu-chun presented the keynote
speech. He had been out of pub-
lic view for four and one-half
months.
Li's report,describing the eco-
nomic situation in 1963 and the 1964
plan, was followed by a financial
report by Vice Premier Li Hsien-
nien. Their reports probably were
cast in highly somber terms to
condition delegates for a con-
tinuation of hard times. Late-
season floods reduced the food-
grain harvest probably to a level
slightly less than the mediocre
harvest of 1962.
The prospect of a decline in
the already meager food rations
has made regime pronouncements
understandably more cautious since
mid-September. For example, Chou
En-lai on 1 October spoke only of
a 'trend of general improvement"
since the disaster years of 1959-
61, made no comparison between 1963
and 1962, and admitted that "there
is no lack of shortcomings and mis-
takes in our work." Chen Yi re-
cently said that 1964 will be an-
other year of economic "readjust-
ment," a euphemism the Chinese 25X1
have been using in the past three
years to describe the severe re=
trenchment.
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SECRET
PEIPING SEEKS LARGER FOOTHOLD IN LATIN AMERICA
The Chinese Communists
have recently stepped up efforts
to develop more press and trade
representation in Latin America.
Lacking diplomatic recognition
by any Latin American country
except Cuba, Peiping has been
forced to depend on its New China
News Agency (NCNA) offices and
unofficial commercial missions
to support political and sub-
versive. efforts.
Mexico
is currently
the target for renewed Chinese
approaches. A Chinese trade
fair is scheduled to open there
in December. A delegation
headed by Kuo Mo-jo, a high-
ranking cultural propaganda
specialist, will be in Mexico
City to open the exhibit. Kuo
is the most important Chinese
official ever to visit Latin
America--except for Cuba. The
fair is the largest such venture
on the mainland to date.
This year China has signed
agreements to purchase 300,000
metric tons of wheat and 16,000
bales of cotton from Mexico.
These transactions, although
comparatively small, are a dra-
matic increase over the negligi-
ble Sino-Mexican exchange in
1962 and would provide a talk-
ing point in attempts to estab-
lish permanent Chinese trade
representatives in Mexico. Two
NCNA correspondents who arrived
in Mexico City last July on tem-
porary visas are still there and
may be trying to set up a perma-
nent office.
The Chinese trade fair may
move on to Brazil after its
Mexican engagement. Last July
a Chinese delegation met with
officials in Brasilia to dis-
cuss the possibility of a cul-
tural and trade exhibit in Sao
Paulo and. other large Brazilian
cities.
Peiping's commercial mis-
sion in Chile--established in
1961--has apparently had ample
time for activities other than
trade. Its recent offer to
purchase 10,000 tons of Chilean
copper--worth about $6 million
--is the first significant
Chinese trade overture there
since 1959. Officials from
this office visited Uruguay
during July and August this year
to explore the possibility of
setting up a new trade post in
Montevideo.
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.. SECRET
SOUTH KOREAN NATIONAL ASSEMBLY ELECTIONS
The governing junta's Demo-
cratic Republican Party (DRP)
is running scared in the cam-
paign for the 26 November elec-
tions to the South Korean Na-
tional Assembly. Opposition
forces are likely to obtain a
nominal majority and secure a
forum for harassing President
Pak Chong-hui's regime. Never-
theless, the junta should be
able to dominate the new assembly
through bribes and coercion and
by making the most of the strong
powers vested in the executive.
The assembly will be the
first to meet since the present
regime seized power in May 1961.
Nearly 1,000 candidates repre-
senting five major and seven
minor parties are competing for
the seats of the 131 single-
member districts; an additional
44 seats are to be apportioned
according to the over-all popular
vote.
The four main opposition
parties are trying to exploit
widespread public concern over
deteriorating economic conditions
and disenchantment with the re-
gime's authoritarianism. Their
candidates are generally better
known than the DRP's and have
stronger local ties. Neverthe-
less, these parties are hampered
by a lack of financial support
and by an excessive number of
candidates competing against
one another. Already divided
by long-standing personal and
factional differences, they are
also reluctant to make any deals
involving withdrawal of candi-
dates because this would reduce
party chances of gaining seats
under the second-stage apportion-
ment. ~
Shaken by Pak's narrow
margin in winning last month's
presidential race, the DRP claims
that only a victory for its
candidates can assure the country
political stability. The cam-
paigns of regime candidates are
being supported by the govern-
ment administrative apparatus
and are lavishly financed. The
police are being used to a
greater extent than last month
to put pressure on the electorate
and harass the opposition.
Both the DRP and the opposi-
tion have generally indicated
their support for continued co-
operation with the United States.
The major exception is former
security chief Kim Chang-il.
In
the course of a highly national-
istic address to college students
on 4 November, he delivered a
diatribe against "Yankeeism"--
a protest which he claimed was
distinct from anti-Americanism.
The generally favorable reaction
suggests that Kim may be able
to use this theme in the future
to whip up support from among
the volatile Korean students.
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SECRET
PROBLEMS MOUNT FOR NEW SOUTH VIETNAMESE REGIME
Problems are increasing for the scheme of some officers on
the new regime in Saigon as it the junta's political staff to
begins to grapple with the task make the council a vehicle for
of governing South Vietnam. setting up a manipulated two-
General Ton That Dinh may
be using his position as security
minister to build up an independ-
ent political base. After the
coup, he portrayed himself to
the press as its real instigator,
and has put himself further in
the limelight by a tour of sev-
eral provincial cities where
he held rallies to drum up public
support.
The regime faces potential
difficulties in its efforts to
garner support from traditional
opponents of the Diem regime.
Various remnants of the once-
powerful politico-religious sects
are being encouraged to rally.
but ma.y attempt to set conditions
for active support of the regime.
Their factional activities were
a weakening element in South Viet-
nam before they were forcibly
suppressed by Diem in 1954-55.
Disagreements over the role
of the prospective civilian
"council of sages," which is to
advise on the transition to a
permanent government, may en-
courage some politicians to re-
main aloof. Phan Huy Quat--a
leader in the Dai Viet party,
which wants the council to be
an embryonic national assembly
responsible only to the military
junta--asserts that he is becom-
ing disillusioned. He objects
to Premier Tho's plans to have
a small council subordinated to
his provisional cabinet and to
party system.
The intensified Viet Cong
military drive appears to have
slackened after reaching an
all-time high in the week of
5-11 November with over 1,000
incidents including 233 armed
attacks. The attacks, how-
ever, were primarily small
scale and apparently designed
as much for psychological im-
pact as for actual military
gain.
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SECRET
Cambodia's renunciation of
US aid and demand for withdrawal
of American military advisers
marks a new departure in Prince
Sihanouk's strategy for main-
taining his country's independ-
ence and neutrality. Sihanouk
announced the moves before a
mass rally in Phnom Penh on 19
November, and the next day gave
formal notice to the US Embassy.
His actions followed weeks
of fulminations against alleged
US support of dissident Khmer
Serei (Free Cambodia) elements
who have been beaming anti-
Sihanouk broadcasts into Cam-
bodia from mobile transmitters
in South Vietnam and Thailand.
Even though this ragtag group
does not threaten his firm con-
trol over Cambodia, Sihanouk
has always reacted violently
whenever Khmer Serei activities
have flared up. He believes,
moreover, that the US played a
major role in the overthrow of
the Diem-Nhu regime in Saigon,
and so considers the current
Khmer Serei operations more omi-
nous than usual. His emotional
speeches earlier this month con-
tained frequent references to
the possibility of his assassina-
tion, and he even designated a
successor--his 13-year-old son
Naradipo, now studying in Pei-
ping.
Sihanouk had long wished
to revise the terms of US aid
to Cambodia. He was already
moving in the direction of
breaking the West's monoply
on military assistance, having
recently accepted a few jet
fighters and antiaircraft guns
from the USSR as a "personal
gift." Sihanouk also partly
blamed US aid operations for
Cambodia's economic stagna-
tion. He thus criticized the
Commodity Import Program for
allocating foreign exchange
to the private sector of the
economy, and has announced
plans to nationalize Cambodia's
import-export firms as of 1
January.
Sihanouk's actions have
already disrupted business
activity, led to a currency
devaluation, and dismayed
his conservative advisers
and others in the royal fam-
ily. These repercussions
may yet lead him to moderate
his course and seek to re-
negotiate the terms of US
aid.
SECRET
22 Nov 63 CURRENT INTELLIGENCE WEEKLY SUMMARY
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*ftmw -mow
SECRET
Kong Le and Pathet Lao military
chief Singkapo on 16 November
agreed to a cease-fire on the
Plaine des Jarres. Subsequent
meetings were set to work out
details, and "to create a favor-
able atmosphere" for an eventual
meeting of Premier Souvanna
Phouma and Pathet Lao leader
Souphannouvong. In a meeting on
19 November, however, the mili-
tary leaders made no significant
progress, agreeing only to
another conference on 26 Novem-
ber.
The reasons behind the
Pathet Lao's willingness to en-
ter into negotiations are un-
clear. They may be seeking a
temporary detente to gain time
for broader military ventures,
or they may be hoping to under-
mine the neutralist-rightist al-
liance by offering minor con-
cessions to the neutralist fac-
tion.
While fighting on the plain
has slackened, the cease-fire is
unlikely to end all fighting
there. Occasional shellings"in
violation of the agreement have
been reported.
In other areas, there are
reports of continued military
activity. Near Xieng Khouang
town rightist units have taken
commanding positions in nearby
hills, while to the north they
are persisting in their efforts
to recapture a key mountain post
at Tha Lin Noi. In the Vang
Vieng area, neutralist forces
are pressing their efforts to
drive the Pathet Lao troops
from the town. Farther south,
near Nhommarath, Pathet Lao
and neutralist forces continue
to jockey for position.
I II ANGIPR A Y- SNG ~ "4M NFIIA
Luang
Prabang
~' / .513 KHOU0.NG ~~
Tha Lin Noi
Plaine des
t~JarresKhouan"
Vang? -' -
Vieng
viFNri-1
..VIENTIANE
THAILAND
SECRET
22 Nov 63 CURRENT INTELLIGENCE WEEKLY SUMMARY
VIETNAM
ilt~/AMOUANF
Page 14
SOUTH
VIETNAM
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Nowe, SECRET -WIWW
Following a week of maneu-
vering among factions of the
ruling Baathists, the army took
control of Iraq on 18 November.
The political complexion of the
new regime is still not clear,
however.
President Arif, a non-
Baathist "Arab nationalist" with
past ties to Cairo, was evidently
able to achieve united army ac-
tion against the former govern-
ment by playing on almost uni-
versal army disgust with the
role of the national guard--the
paramilitary organ of the Baath
Party--in the events of the pre-
ceding week. Arif has himself
assumed most of the executive
power of the state. The mili-
tary governor general, also a
non-Baathist, remains at his
post and has taken over the
Interior Ministry.
Arif has issued appeals of
friendship to both Egypt and
Syria, and Baghdad radio has
broadcast songs praising Nasir.
Egyptian spokesmen have welcomed
the coup.
However, the new regime
still retains some Baathist
coloration. There appear to
have been no changes in command
in the army, and Baathist offi-
cers continue to hold positions
of considerable importance in
the military. The regime's
second in command is General
Hardan Tikriti, a Baathist of
long standing who played a major
part in last February's coup.
Former Premier Bakr has been
appointed vice president in the
new government, and the new
premier cooperated closely with
the Baath during its period of
ascendancy. It is not certain,
however, if these elements con-
sider themselves bound by the
decisions of the Baath Party
international command.
The new cabinet is a coa-
lition of Arab nationalist ele-
ments and is dominated by the
military. Arif probably expects
to play off contending elements
in the coalition to maintain
his present powerful position.
The army takeover appears
to have made a dead issue of
any meaningful union between
Iraq and Syria. However,
Syrian leaders may expect to
reach some accommodation with
the new regime. Syrian Premier
Hafiz and other members of the
Baath Party international command
caught in Baghdad by the coup
have flown to Damascus, where
talks on the Iraqi situation
are under way.
A modus vivendi with the
Iraqis would reduce the Syrian
regime's present isolation and
probably improve its short-term
chances for survival. However,
Cairo is calling for a "nation-
alist revolution" in Syria,
similar to what occurred in Iraq.
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SECRET
The territorial dispute be-
tween Morocco and Algeria has
been temporarily shelved fol-
lowing the selection of a con-
ciliation comet: scion by the
Organization of African Unity
(OAU)--meeting in Addis Ababa
from 15 to 18 November. The
respite will allow both antag-
onists to improve their military
positions.
The seven-nation commission
--Ethiopia, Mali, Senegal, Ivory
Coast, Sudan, Tanganyika, and
Nigeria--will seek to fix re-
sponsibility for the outbreak of
hostilities on 8 October and
make recommendations for a solu-
tion of the territorial dispute.
It will attempt to win agreement
from the disputants to an out-
line of a bilateral accord. The
commission will meet initially
in Ivory Coast on 2 December and
may be prepared to report its
findings in February to the next
meeting of OAU foreign ministers
in Nigeria.
Ethiopian Acting Foreign
Minister Ketema, who played a
leading role at the conference,
has informed the American ambas-
sador that a "kind of understand-
ing" was reached on a limitation
of arms during the cooling-off
period. The intervening months
nevertheless will provide time
for Egyptian and other foreign
instructors now in Algeria to
train Algerian forces in the
use of equipment supplied in
the past six weeks by Egypt,
Cuba, and the USSR, and for
Morocco to pursue its own train-
ing programs.
At the conclusion of the
Addis meeting the prevailing
mood among most of the 32 OAU
members was one of general self-
satisfaction over what they re-
garded as a demonstration of
the organization's ability to
function in a crisis. As for
the future, the delegates prob-
ably widely shared Ketema's
view that the commission's rec-
ommendations, while not legally
binding, would in fact become
mandatory because of the Africa-
wide moral pressure which would
be behind them.
The conference pushed the
soaring prestige of Ethiopia's
Haile Selassie still higher.
Ghana's frenetic Nkrumah, on
the other hand, once again found
his spokesman's efforts to pre-
empt a prominent role for Ghana
thwarted.
Meanwhile, the four-power
commission--Mali, Ethiopia,
Algeria, and Morocco--set up at
Bamako last month to establish
a demilitarized zone along the
border is just getting organized.
In the face of Morocco's adamant
refusal to pull back its forces
from Hassi Beida and Tinjoub,
and Algeria's insistence that
it do so, prospects are not
bright that it can be effective.
Nevertheless, no new border in-
cidents have occurred.
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-MEW
SECRET
NEGOTIATIONS FOR A CABINET IN ITALY
Disagreements over the pro-
spective government program are
retarding the negotiations in
Italy for a center-left coali-
tion. Several of the current dif-
ficulties seem to relate to the
proposals for decentralizing
Italy's administrative structure.
The most important problem
is that of decentralizing the
large organization which controls
the bulk of the nation's agricul-
ture. This organization is
dominated by the confederation
of small farmers which is power-
ful in the Christian Democratic
Party. Secondly, a compromise
previously reachea on setting
up regional administrations
been complicated by an accord
reached a few days ago in the
Aosta Valley region, where So-
cialists and Communists have
agreed to continue their cooper-
ation in'the government at this
local. level. A third difficulty
centers on the urban redevelopment
program.
The negotiations are being
conducted in an atmosphere of
rising tension as powerful oppo-
nents of a center-left regime
on both right and left continue
to maneuver to block its forma-
tion. The Communists sparked
two more strikes this weep: and
can be counted on to miss no
opportunity to embitter rela-
tions between the Socialists
and Christian Democrats, even to
the point of provoking violence.
Right-wing Christian Demo-
crats have been no less assiduous
in trying to prevent a rapproche-
ment with the Socialists. To
this end, they are attempting
to exploit the Socialists'unwill-
ingness for the government to 25X1
undertake further MLF commit-
ments during its first few months.
Premier-designate Moro also
is under direct pressure from
rightist elements in his party.
These are suggesting that he
is bargaining away too much of
the Christian Democratic posi-
tion and that, in so doing, he
could turn the country over to
the Communists. Thus, even if
a center-left government is
eventually installed in office,
it is bound to be in for rough
sledding during its shakedown
period.
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THE MANSHOLT PROPOSALS
The Mansholt proposals are designed to pave the way for free trade
in grains and derivative products within the European Economic Community
by harmonizing the support-price levels for grains in the six member countries.
Price levels now vary from about $82 per metric ton for wheat-in France to
about $108 in West Germany. Commissioner Mansholt proposes to effect the
adjustment in one step to a level which, in 1964, would be roughly 11-15
percent below the German price, but 8-16 percent above the French price.
The single Community price would be subject to annual adjustments, taking
into account agricultural incomes, production costs, consumer prices, and
supply and demand.
To :assist,producers hit by the proposed price reductions (i.e., farmers in
West Germany, Italy, and Luxembourg) the Mansholt plan provides for various
kinds ofF_compesatory payments totaling $206 million in the first year, but
declining somewhat in subsequent years. These payments would be financed
initially from the Community budget--presumablyout of receipts from the
variable levies on imports of agricultural products. Mansholt also proposes
that the -Community assume from the member states the costs ofxsubsidizing
exports of grain, flour, poultry, eggs, and pork to nonmember: countries.
rW
As.a leading supplier of grains to the EEC, the United States is:-concerned
primarily about the. plan's expected impact on proluction in France, where
the expansion potential is greatest. US experts believe that total returns to
the French producer under the plan are likely fio exceed considerably the
specific increase in French prices and that a sharp increase in production is
therefore: probable. While part of this Increase will be absorbed by the expand-
ing introEEC'market, one official US estimate suggests that net annual EEC
imports of grains from all sources are likely to decline from the =10 d million
metric tons of the recent past to 8.5 million metric tons by 1970
This particular stud-notes however, that continuation of the present
rate of inflation in France:might.well produce about the same price production=
pattern in 1970 even without the Mansholt plan.. oreover, with or,without
the plan, the modernization of European agriculture is expected sooner or lafer
to mean considerable adjustments in the EEC'srrade relat`~ons with its presenfi
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w SECRET Europe
MANSHOLT PLAN FOR SETTLING EEC GRAIN CCNTROVERSY
EEC Commissioner Mansholt's
proposals for early unification
of grain prices in the Common
Market appear to hold increasing
promise of averting a crisis over
agriculture, but perhaps at the
expense of causing one in the EEC's
relations with the US and other
major agricultural producers.
The member states have begun
an intensive study of the complex
proposals in preparation for for-
mal discussion scheduled for mid-
December. Whatever comes o it,
there is general recognition that
Mansholt, a former Dutch minister
of agriculture, has been ingenious
in his efforts to find a solution
to the Community's most vexing
problem.
From Manslolt's point of view,
Bonn's mildly favorable initial re-
sponse--aespite the vigorous and
continuing opposition from West
German farm groups--has been par-
ticularly gratifying. This posi-
tive reaction appears due, at
least in part, to effective lobbying
by EEC President Hallstein, who has
warned Chancellor Erhard that
Bonn is certain to be outvoted in
the EEC in 1966 when the majority
rule comes into effect on the grain
price question. Under these cir-
cumstances Erhard's Christian Demo-
cratic Union could not expect to
deliver on any promises it might
make in the 1965 elections not to
reduce support prices.
The Mansholt initiative is
potentially of great importance to
the broader question of European
union. Under his proposals a
degree of agricultural integration
would be achieved in the next year
or so which the EEC treaty had not
envisaged before 1970. Such a
rapid advance would probably
necessitate acceleration in other
fields. The prospect of an EEC
bureaucracy spending several
hundred millions annually on a
farm program would,for example,
make more imperative than ever
the establishment of an effective
European Parliament.
These wider implications
deepen the dilemma for outsiders
who are committed to support
progress toward European union,
but who may stand to lose in the
way of trade. The US is concerned
that increases in EEC production
consequent to the rise in French
grain prices will reduce EEC
grain purchases from the US. More-
over, US trade officials seriously
question whether the Mansholt
scheme will be the subject of
bargaining in the Kennedy Round,
or whether it is the EEC intention
merely to offer not to increase
the new and higher level of pro-
tection the plan is believed to
involve.
The immediate tactical and
substantive problems these pos-
sibilities raise are difficult ones
indeed. Past experience has
shown that the EEC would
find it extremely hard to make
any major adjustments in the plan
once it has been negotiated through
the complex EEC machinery. It is
almost equally doubtful, however,
that the Kennedy Round can go ahead
at all unless some more or less 25X1
final settlement of the EEC's
agricultural policy is reached.
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Western Hemisphere
Canada: The Pearson govern-
ment continues to stress its inten-
tion of lessening US "domination"
of Canadian industry and stemming
Canada's balance-of-payments
deficit with the US. In the opin-
ion of Ambassador Butterworth,
Ottawa's concern with the "domina-
tion" question has reached the
point of obsession, and only vig-
orous countermeasures are likely to
forestall increasing intervention
in the operations of American-
owned subsidiaries.
The government on 1 November
instituted a tariff rebate scheme
designed to encourage some $200
million in sales abroad of auto-
motive products manufactured in
American-owned subsidiaries.
This plan calls for Canada to
remit import duties on parts im-
ported from the US if exports of
the finished product exceed a cer-
tain level, thus avoiding the
need to raise tariffs and risk US
retaliation. While the profits
of such increased sales would ac-
crue to the US parent companies
the sales would at the same time
bring more US dollars into the
Canadian treasury.
The Department of Industry
is reportedly being flooded with
requests from other manufacturers
to be included under this kind
of rebate scheme. Despite offi-
cial assurances that this specific
plan would not be extended to other
products, the US Embassy is con-
vinced the government is attempting
to devise other forms of inter-
vention to produce similar effects
on other industries.
,Nov 03
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;"'+-. SECRET `ow
Western Hemisphere
President Illia's annul-
ment of Argentina's petroleum
contracts with nine foreign
and two Argentine companies
fulfilled one of his party's
chief electoral campaign commit-
ments, and thus came as no sur-
prise. Illia, however, acted
in haste out of deference to
his more nationalistic advisers.
The explanatory clauses
of the annulment decrees under-
score the Illia administration's
contention that the Frondizi
government used inappropriate
procedures in negotiating the
contracts and assert that
Frondizi had no legal right to
approve them by executive action.
They also state that there is
ample legal precedent for annul-
ling an executive decree by
simply issuing another.
The State Oil Company (YPF)
is authorized to take any
measures necessary to maintain
normal output of petroleum.
The foreign companies continue
to operate, and some are reported
to have worked out temporary
arrangements with the YPF.
One of the most trouble-
some aspects of the annulment
action is the call for a de-
tailed report by the Treasury's
attorney general on tie companies'
operations and financial jcotnmts.
This report is to provide a
basis for determining compen-
sation due the companies, but
could also be used as a bargain-
ing weapon in negotiations for
new contracts.
The report is to include
a rundown on such imprecise
matters as "economic damage"
caused by "inefficient" manage-
ment and the amount of taxes that
had been excused by the Frondizi
regime. In accordance with
Illia's decrees, the attorney
general filed a petition in
federal court on 18 November
asking the court to determine
the financial position of the
companies vis-a-vis the govern-
ment. YPF President Suarez
said that three drilling con-
tractors were excluded from this
petition, since their work was
completed. Presumably these
would be the Italian state oil
company and two US firms mentioned
in the second decree.
While leftist groups have
hailed the annulment action,
there has been strong criticism
from other elements over the
way Illia went about it, partic-
ularly his failure to seek a
prior court decision on the
contracts' validity. The in-
fluential independent press
points out that the action re-
flects adversely on Argentina,
and might result in a reduction
of foreign investment and of
US aid, not only in Argentina,
but in all of Latin America.
Army and air force officers
are worried about the disruptive
effect the oil controversy
may have on US-Argentine re-
lations, but indicate an
intention to try to stay out
of the matter.
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Peru's President Fernando
Belaunde Terry appears to be
adopting a more conciliatory
positiori in his handling of the
controversy which has arisen with
the US-owned International Petro-
leum Company (IPC).
On 29 October, Belaunde
sent a bill to congress calling
for a new, much higher tax sched-
ule for the company. IPC offi-
cials claim that the proposed
schedule would result in "eco-
nomic confiscation" since the
taxes would amount to more than
100 percent of the company's
gross profits. Belaunde countered
by threatening to turn over the
company's entire $190 million
worth of assets to the state pe-
troleum corporation should Con-
gress pass the bill and the com-
pany refuse to abide by its terms.
Congress was quick to act
on a part of the President's bill.
It passed, almost immediately,
that portion nullifying a 1922
internationally arbitrated deci-
sion which has permitted the IPC
to operate under relatively len-
ient tax schedules. This fulfilled
a Belaunde election pledge to "do
something" about a matter which
has been a Peruvian political is-
sue for over 40 years. The IPC
continues to operate under the
1922 tax schedules pending the
establishment of new ones.
Congress, however, has been
much slower to act on the admin-
istration's proposed tax schedules.
This is because the APRA party--
which controls the largest bloc of
congressional seats--opposes the
measure, fearing the international
repercussions which could result
from the President's stringent tax
revision program. Thus, the pros-
pects are that the bill will lan-
guish in various legislative com-
mittees for weeks and perhaps months.
APRA congressmen hope that in the
interim the government and IPC will
negotiate a compromise which will
obviate the need for congressional
action.
Belaunde, in recent days, has
indicated a tendency to back away
from taking precipitous action
against IPC, also largely because
of the adverse international reac-
tion it would provoke. He now seems
to be acutely aware that such reac-
tion might spoil Peru's prospects
for new and badly needed foreign
private investments. It might, for
example. upset current negotiations
with automobile firms for
the establishment of assembly plants
in Peru, or jeopardize talks with
two other US oil companies which
have expressed an interest in in-
vesting in the country. Belaunde
also may be concerned that a move
against IPC could disrupt pro-
posed US aid programs.
For the moment, the Presi-
dent appears to be satisfied to
allow his bill to be subjected
to prolonged congressional re-
view, and has said he expects no
legislative action until after
the municipal elections which
are to be held in mid-December.
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MOVIMIENTO INDEPENDIENTE PRO-CANDIDATUR,.
EONI
PRESIDENTE
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SE CRET
More than 3 million Venezue-
lan voters will go to the polls on
1 December to elect a successor to
President Betancourt from among
seven candidates. The main issues
in the campaign are national pe-
troleum policy, acceleration of
reform programs, and unemployment.
Casting a pall over what other-
wise promises to be a colorful
event--for the benefit of the il-
literate, each party has sought to
associate its ticket with a dis-
tinctive color combination--is the
rising tempo of Communist-inspired
violence aimed at disrupting the
elections. There also remains the
tacit threat by military leaders
to intervene if the electorate
choses an unacceptable candidate.
The front-running candidate
is still Raul Leoni of Betancourt's
Democratic Action (AD) party. Leo-
ni's chances of victory are based
more on the AD's excellent party
organization than on his lackluster
personality. As president, Leoni
probably would continue existing
policies, but without Betancourt's
imagination or skill.
Leoni's chief rival is Jovito
Villalba of the Republican Demo-
Western Hemisphere
cratic Union (URD), the AD's erst-
while coalition partner. Villalba
is a popular candidate of moderate
socialist tinge, who is backed by
a party machine second only to
that of AD. URD leaders have at-
tempted unsuccessfully to induce
other opposition candidates to pull
out of the race in his favor. Al-
though the Communists have vowed
to boycott the elections, they
might vote for Villalba should
they come to believe that their
support would turn the tide against
Leoni.
Independent Arturo Uslar Pie-
tri is in third place, thanks to
an unexpectedly effective campaign.
He is considered a rightist be-
cause he does not favor nationaliza-
tion of the oil industry. He may
carry Caracas, but he has little
hope elsewhere.
Regardless of who wins the
presidency, no party will have
a majority in the new congress.
Thus, the viability of the new
government will depend primarily
on the future president's skill
in creating and maintaining a
working coalition.
1958 Presidential Elections 1958 1963
Candidate Votes Percent Congressional Presidential
Democratic Action (AD) Romulo Betancourt
Republican Democratic Union (URD) Wolfgang Larrazabal **
Social Christian Party (COPEI) Rafael Caldera***
Venezuelan Communist Party (PCV) - - - -
National Unification Front (FUN) **** - - - -
Popular Democratic Force - - - -
AD - Opposition (AD-ARS) - - - -
National Action Movement (MAN) - - - -
Seats
Candidate
1,284,092
49.2
105*
Raul Leoni
903,479
34.6
45
Jovito Villalba Gutierrez
423,262
16.2
25
Rafael Caldera
- -
- - -
9
(Disenfranchised)
- - -
- - -
0
Arturo Uslar Pietri
- - -
- - -
0
Wolfgang Larrazabal
- - -
- - -
0
Ramos Glmenez
- - -
- - -
0
German Borregales
*Before the 1960 split into AD - Government and AD - Opposition.
**Also supported by the National Independent Electoral Movement (MENI) and the Venezuelan Communist Party (PCV).
***Also supported by the Socialist Workers Party (PST) and the Republican Integration Party (IR).
****A coalition of nine minor parties. The leaders hope that other groups will join the FUN and back Uslar.
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"EMP N"10,
C, 7;' Ti I rr
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