WEEKLY SUMMARY SPECIAL REPORT THE ECONOMIC ROLE OF THE ARGENTINE MILITARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A007300010003-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 20, 2016
• Document Release Date: April 28, 2006
• Sequence Number: 3
• Publication Date: August 22, 1969
• Content Type: SUMMARY

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Secrt
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
The Economic Role of the Argentine Military
Secret
Ng 38
22 August 1969
No. 0384169B
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F__ I
THE ECONOMIC ROLE OF THE ARGENTINE MILITARY
In the last century the Argentine armed forces have developed an important
role in the economic life of the country. Military officers were among the- first
promoters of the doctrine'that the nation could achieve greatness through industrial
expansion. Through the early 1950s, a commitment to develop heavy industry, a
preference for state intervention in the economy, and a suspicion of foreign capital
were important tenets of military thinking. The military moved into top positions in
,a number ,of state-controlled enterprises and autonomous agencies-that-were created
to promote national growth and provide public services.
A strong nationalistic current still pervades the armed forces, although the
ultranationalists lost sorne,of their previously strcng influence among the military as
a result of an economic decline and the fall of dictator Juan Peron in 1955. The
officers' -present economic doctrine, to the extent that a consensus exists, is directed
toward broad,long-term goals such as "modernization" and "national transforma-
tion." Although the direction of the economy has remained in the hands of civilian
technicians since the Origania administration came to power in 1966, the military
view their continued important role in industry as contributing to-national security
through economic development.
BACKGROUND
The military have played an economic role
in Argentina since approximately the last quarter
of the 19th century. During the early period the
army was engaged in expanding the nation's fron-
tiers and contributing to the creation of the infra-
structure that made possible Argentina's very
rapid growth up until World War ',I. The army
carried out extensive campaigns to drive the
Indians off vast areas of land in the far south and
west, making 100 million acres available for agri-
culture and pasture land. Their desire to see rapid
development for Argentina placed. most military
officers strongly on the side of those! civilians who
advocated technological change. Many military
men were in the forefront of national groups that
promoted the development of modern communi-
cations media-especially the telegraph-and
transportation systems.
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The wealth provided by Argentina's remark-
able economic expansion made possible the acqui-
sition of a considerable quantity of modern arms
for an increasingly well trained and professional
military. By the turn of the century Argentina
had built up a substantial naval force and was
moving to modernize its army. Arms purchases
were justified as necessary to maintain parity with
the armed forces of Brazil and of Chile, with
which Argentina had long-standing border dis-
putes. Moreover, by World War I the country's
armed forces had reached a level of training,
equipment, and morale attesting its international
stature.
EARLY INDUSTRIALIZATION EFFORTS
It was not until World War I, however, when
Argentina was cut off from its primary European
sources of arms and other necessities such as
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fuels, that the military established their first
domestic arms production capability-a small
arms factory. Many officers. as a result of their
wartime experience in munitions manufacture
and the widespread propagation of the newly
fashionable doctrine of economic nationalism,
became ardent exponents of industrial develop-
ment, especially with respect to the heavier indus-
tries. In contrast with the landowning oligarchy,
who favored laissez-faire capitalism, free trade,
and economic development stimulated by the
influx of foreign capital. the armed forces showed
an increasing preference for state-operated enter-
prise developed by domestic capital.
The military sought for themselves an impor-
tant role in the pursuit of these economic aims by
expanding technical and engineering education
for officers. The most significant step in this
direction was the establishment in 1930 of the
Superior Technical School (EST) to meet the
need for technically trained officers, a need that
was not being filled by the existing military
schools. The EST was founded primarily to fur-
nish officers to direct the operations of the arma-
ments plants. At the same time it provided a
center to study technical problems related to the
development of basic industries that could en-
hance national defense.
The first director (1931-34). Lt. Col. (later
General) Manuel Savio, was a strong supporter of
the military position on the need for heavy indus-
tries. Both as director and professor of industrial
labor organization, Savio shaped the thinking of
many young officers trained in the EST, which
remains the primary supplier of military engi-
neers. Another outstanding military proponent of
industrialization was General Carlos Mosconi,
who was largely responsible for the founding of
the State Oilfields Company in 1922 and served
as its first director.
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The work of these and other technically
oriented officers paved the way for the emergence
of the military as a significant force in the devel-
opment of and the growing state administration
of the Argentine economy.
During the period from the late 1920s
through the early 1940s, the armed forces saw
some of their plans for industrialization material-
ize. The government made earnest efforts to
manufacture military equipment locally. A mili-
tary aircraft factory was established in Cordoba in
1927; this plant became the nucleus of the air
force's National Directorate of Aeronautical
Manufacture and Research (DINFIA). Between
1935 and 1938, the navy constructed eight mine-
sweepers and two corvettes-the first naval craft
to be built in Argentine yards. The onset of World
War II saw the enactment of legislation creating
the General Directorate of Military Factories.
This agency subsequently exercised broad respon-
sibility for the exploration and exploitation of
industrial ores and for the development of heavy
industries either on its own or in partnership with
private enterprises. By the end of the war the
military factories had produced a prototype
32-ton tank and a series of wooden training air-
craft.
POSTWAR DEVELOPMENT
Following Peron's accession to power in
1946, the several military factories and installa-
tions grew to employ large numbers of civilians
and to command important natural resources and
financial assets. These factories supplied civilian
as well as military users with industrial materials
such as iron, steel, chemicals, and some consumer
goods.
Under Peron, the navy's State Shipyards and
Naval Factories, located at the Rio Santiago base
near La Plata, were greatly expanded. Aside from
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building two patrol frigates in the early 1950s,
these yards have been used almost entirely for
commercial production of tankers, cargo ships,
and similar craft. The navy currently wants to
obtain new destroyer escorts or frigates and to
assemble at least one of them at :Rio Santiago.
The naval repair yards at the main naval base at
Puerto Belgrano handle all types of repairs and
overhauls, both for the navy and for private ship-
ping lines, because there are no commercial facili-
ties for this type of work.
A considerable number of the navy's ships
are used primarily for carrying coastal trade, in-
stalling and maintaining navigational aids, and
carrying out hydrographic research. The navy also
provides sea transportation to all ports south of
Bahia Blanca where use of commercial carriers
would be uneconomic. The navy mans the port
captain administration, which has made some
progress in reorganizing Argentina's notoriously
inefficient ports.
Argentina has one of Latin America's two
major aircraft industries. From 1927 through
1967, some 929 aircraft and 360 aircraft engines
"Guarani II" Aircraft Produced
by Argentine Air Force Factory
were produced, primarily at the DINFIA plant in
Cordoba. Some were prototype jet combat air-
craft of original design, but most were'trainer and
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general purpose units, including types assembled
from imported components under license. In
early 1968 DINFIA was replaced by the Research
and Development Command of the air force. The
Cordoba plant became the Military Aircraft Fac-
tory under the Research and Development Com-
mand. With a labor force of around 7,000, it now
produces civilian and military aircraft, parts, and
rockets..
The National Directorate of Civil Aviation,
under a retired air force general, supervises and
regulates the activities of Argentine private and
commercial aviation. Through the directorate, the
government operates two major civil aviation
training schools and nine regional schools; these
provide almost all pilots for the country's airlines.
The air force operates a civil transport service
which provides regularly scheduled passenger and
mail service to 14 domestic points. Many of
Argentina's airfields are operated jointly by the
military and civilian airlines.
The most important of the military indus-
trial complexes is the army's General Directorate
of Military Factories. In the past, the directorate
produced railroad rolling stock, oilfield equip-
ment, and other types of heavy machinery. Cur-
rently, it has made Argentina almost self-suffi-
cient in the production of small arms, associated
ammunition, and explosives for army use and for
the civilian market. In recent years the army has
turned increasing attention to establishing a
capacity for the production of major combat
items. This is one of the principal goals of the
"European Plan" adopted under Ongania in 1966.
One move toward implementing this plan was the
signing of a contract with France in 1968 for 60
AMX-13 tanks, with a stipulation that some of
them would be assembled in Argentina. A private
firm that has retired military officers among its
directors is currently engaged in this project.
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French AMX-13 Tank
Being Assembled in Argentina
In 1947, the army undertook its most gran-
diose and ambitious enterprise-the construction
of the "General Manuel Savio" integrated steel
mill at San Nicolas on the Parana River between
Buenos Aires and Rosario. In the mid-1940s the
General Directorate of Military Factories had
begun operating a small steel mill at Zapla, in
Jujuy Province, using the iron deposits located
there. The San Nicolas plant, however, was envi-
sioned as one of the largest in Latin America.
The plant is operated by the Argentine
Mixed Siderurgical Company (SOMISA) in which
a retired army general serves as president and the
military dominate its management. The govern-
nient controls most of the stock, but SOMISA is
authorized to obtain from private sources capital
up to 90 percent of the enterprise's total sub-
scribed capital.
Iron ore for the mill was to be obtained
from a deposit operated by the General Direc-
torate of Military Factories at Sierra Grande, Rio
Negro Province, and coal from the field at El
Turbio. Santa Cruz Province. Some imports of
iron ore and coal were planned to supplement the
domestic sources. The plant has been expanded
substantially since its inauguration in 1960, and
an annual production target of 2.2 million tons of
steel has been set for 1974.
Large portions of western and southern
Argentina have never been systematically ex-
plored for commercial mineral deposits. The first
large-scale photographic exploration program-the
Plan Cordillerana-has recently been carried out
along the Andean chain. This program is financed
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jointly by the General Directorate of Military
Factories, the National Geological and Mining
Institute, and the United Nations. Some deposits
of copper and other minerals have been located
that may be commercially exploitable.
OUTLOOK
Since the mid 1950s, there appears to have
been some decline in the military's preference for
state-operated industry as opposed to private
enterprise and in its aversion to foreign capital.
One factor leading to this change has been the
inability of the economy to generate sufficient
capital to finance the desired industrial expan-
sion. Officers also recognize that the military fac-
tories generally operate at a higher cost than
equivalent civilian enterprises, and that their real
cost is disguised by the fact that they receive
government subsidies and provide services at arti-
ficially low rates.
One sign of this somewhat altered attitude
came during the last years of the Peron govern-
ment, when the military accepted the transfer of
state-owned motor vehicle production installa-
tions to foreign-financed private firms. Later, dur-
ing the Arturo Frondizi administration, the mili-
tary reversed its former ultranationalistic position
and went along with the government's decision to
invite foreign oil companies to participate in the
expansion of the petroleum industry.
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The Ongania administration's economic poli-
cies have stressed economic liberalism, private
enterprise, and foreign investment. Military sup-
port for this program is essentially based on prag-
matic grounds and will probably continue as long
as it is directed toward the achievement of such
long-terns goals as "national transformation" and
"modernization." The military have left .control
of most sectors of the economy in civilian hands,
although an active duty general does head the
nationalized railroads, probably because of their
strategic importance.
Despite the military's shift away from the
extremes of state intervention and from the ultra-
nationalistic justification of their role in eco
nomic development, military leaders are still in-
clined to view industrial power as the necessary
foundation for national and military power and
to see themselves as pioneers in the development
of basic industry and strategic resources. There is
no sign that they would willingly relinquish the
special position they have acquired through com-
plexes such as the General Directorate of Military
Factories, the State Shipyards and Naval Factor-
ies, and the air force Research and Development
Command. The military now hope to use these
facilities to produce equipment to be sold to
other Latin American countries. During recent
years the armed forces have expanded their activi-
ties into the new and challenging fields of nuclear
energy and rocketry. 25X1
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