WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A008000030001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 54
• Document Creation Date: December 21, 2016
• Document Release Date: August 28, 2008
• Sequence Number: 1
• Publication Date: June 26, 1970
• Content Type: SUMMARY

Approved For Release 2008/08/28: CIA-RDP79-00927A008000030001-2
'tow Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Secret
State Dept. review completed
44
26 June 1970
No. 0376/70
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SECRET
(Information as of noon EDT, 25 June 1970)
Page
FAR EAST
Vietnam . . . . . . . . . . . . . . . . . . . . . . .
. . .
. 1
Laos . . . . . . . . . . . . . . . . . . . . . . . . . .
. . .
. 3
Cambodia: The Government Holds On . . . . . . . . . . . .
. .
. 4
EUROPE
France: Dialogue of the Left Shows Little Progress . . . . . .
European Communities: A New Executive . . . . . . . . . .
Finland: In Search of a Government . . . . . . . . . . . . .
. . .
. . .
. .
7
9
10
World Youth: UN Headquarters Meeting . . . . . . . . . . .
. .
12
A
rab Summit in Tripoli . . . . . . . . . . . . . . . . . .
. .
14
SECRET
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Yemen: Political Turmoil . . . . . . . . . . . . . . . . . . . 15
Two Congos Try Rapprochement . . . . . . . . . . . . . . . . 16
WESTERN HEMISPHERE
Argentina: Government Plans Emerge . . . . . . . . . . . 17
Venezuela-Guyana: Border Problem Swept Under the Rug . . . . . 19
Cuba: Sugar Harvest Has Little Economic Impact . . . . . . . . . 20
Ecuador: President Assumes Dictatorial Powers . . . . . . . . . . 21
THE NEW POLITICS: PANAMA STYLE
SECRET
Page ii WEEKLY SUMMARY 26 Jean 70
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SJ (iKt i
Vietnam
There are increasing reports that the Com- Against a background of mounting protests
munists may try to disrupt South Vietnam's by antigovernment agitators, the Thieu regime has
provincial and municipal council elections that
In Vinh Long Province, for example, the
Viet Cong reportedly have been ordered to
increase sabotage operations to prevent voters
from aoina to the r)olls.,F-
Saigon police recently uncovered a Com-
munist scheme to disrupt the election of the city
council on 28 June. They also recently rounded
up two Communist terrorist organizations, one of
which was responsible for smuggling weapons and
ammunition into the capital.
The Communists have called for similar ter-
rorist tactics in previous South Vietnamese elec-
tions, but their efforts had little impact. Their
main purpose may be to scare away would-be
voters, but this time they may also try physically
to harass candidates and block access to the polls.
Such activity would require little expenditure of
men or materiel and could be staged without
much preparation.
Page 1
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'%wool SECRET 'Valf
managed to overcome strong opposition within
the National Assembly to secure passage of some
of its priority legislation.
Thieu has signed into law a new version of
the austerity taxes announced by decree last Oc-
tober but subsequently ruled unconstitutional.
These taxes and the price increases that resulted
were the original cause of last winter's discontent,
and they are still a prime peg for antigovernment
agitation. Under these circumstances, consider-
able lobbying and some bribes by administration
officials were probably necessary to obtain this
legislation, which the government considered es-
sential for its economic reform program. Similar
politicking is now under way to get the assembly
to pass an enabling law giving Thieu decree
powers in the economic: field for a five-month
period; Thieu's lieutenants think the prospects of
success are good.
The government has also secured passage of
a new law giving the military field courts-
detested by the more militant opposition-juris-
diction over civilians charged with crimes against
national security. The government had brought
the politically sensitive cases of National Assem-
blyman Chau and of student leaders before a
military tribunal, and it would have suffered fur-
ther embarrassment if the tribunals' jurisdiction
in these cases had been nullified.
Although it is not clear to what extent gov-
ernment efforts have contributed to student diffi-
culties, the student movement in Saigon now
seems to have lost much of its following at the
university level. Over the past two months there
has been a major change in the complexion of
student agitators; more militant leaders are taking
over at the top and high school students are being
used more in street demonstrations. Although the
government has clearly failed to strengthen the
moderates in the student movement, if that was
its aim, it may find it easier to discredit the new
militanc of student agitators.
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~%w SJ LKL'i' VAW
Laos
The cabinet has decided to turn aside a bid
for negotiations made by Laotian Communist
leader Souphanouvong in a letter received on 16
June. The Pathet Lao note reiterated the Com-
munists' offer of 6 March 1970 to meet with the
government if all US bombing was stopped. It
made repeated references to US "escalation" in
Indochina and alleged that Thai and South Viet-
namese "mercenaries" had been introduced into
the Laotian conflict. It also contained a vague
threat-made more substantial by the recent fall
of Saravane-of increased military action if the
government did not agree to end US air strikes as
a precondition for negotiations.
Vientiane's response ignores this demand,
but makes clear its willingness to meet to discuss
any issue, including the bombing. The govern-
ment apparently is holding to its position that
there can be no cessation of US air operations
without a corresponding withdrawal of North
Vietnamese forces. Because it has no reason to
believe that the Communists are prepared to
strike such a bargain, the government probably
did not view the Souphanouvong note as a serious
effort to initiate talks at this time. Indeed, the
Pathet Lao overture appeared to be primarily a
device for justifying the Communists' recent
moves into territory held by the government
when the Geneva Accords were signed in 1962.
Nevertheless, Vientiane's response takes an
essentially forthcoming tone and leaves the door
open for further exchanges. Significantly, it speci-
fies a site in Communist-controlled territory at
SECRET
Co! ,, t conboIIed territory
Contested IenIImy
f Ne anal
~anlra~l nJulne IJ~l I
Page 3 WEEKLY SUMMARY 26 Jun 70
No major military actions have occurred in
northern Laos this week as Vang Pao's forces
continue to be frustrated in efforts to advance
out of the Long Tieng/Sam Thong sector. I n the
south, the Communists have ended the govern-
ment's hope of retaking Saravane in the near
future by systematically eliminating the outposts
in that area from which a counterattack might be
based. Despite the seeming adequacy of enemy
supply lines to Cambodia and South Vietnam,
there are increasing indications that the Commu-
nists are preparing for expanded military action
along the Route 13 and Mekong River transporta-
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Cambodia. The Government Holds On
The military situation in Kompong Thom
appears to have stablized, but Communist forces
are continuing to harass government positions and
lines of communication in other areas of the
country. Some government leaders in Phnom
Penh remain convinced that some sort of enemy
attack on the capital is in prospect, although
others, including the army chief of staff, dismiss
the possibility.
The arrival of substantial Cambodian Army
reinforcements has greatly improved the govern-
ment's prospects for holding Kompong Thom
city, which has been encircled and under attack
by enemy forces for almost a month. Air strikes,
some by US planes, also have contributed signifi-
cantly to the successful defense of the city.
The Communist i:hreat to Kompong Cham
was renewed briefly this week, when enemy
forces made some ground and artillery attacks on
that key Mekong River city, and on the town of
Tonle Bet, across the riiver from Kompong Cham.
Government units and Khmer Krom troops were
able to hold their positlions, however. Sharp fight-
ing has also been reported in the western part of
Kompong Cham Province, near the town of
Skoun, where enemy troops have been trying to
gain control over the Route 6-7 road junction
midway between Kompong Cham and Phnom
Penh.
Enemy action closest to the Cambodian cap-
ital during the week was at Prek Tameak, a town
on the Mekong some 15 miles northeast of
Phnom Penh. The Communists evidently moved
into the town following the withdrawal of overn-
ment troops
Elsewhere, the Communists have continued
their harassing attacks on main roads leading out
of Phnom Penh, primarily Route 1 to the South
Vietnamese border, and Route 4 to the seaport of
Kompong Som (Sihanoukville). Additionally,
enemy attacks in Kompong Chhnang Province
have resulted in the partial closure of the railway
between Phnom Penh and the Thai border.
Disturbing signs of friction between the Na-
tional Assembly and the Lon Nol regime have
appeared. Assembly deputies, who have been a
key source of support for the government since
its formation, are becoming increasingly critical
of the regime's political and military perform
ante. The assembly's dissatisfaction evidently
stems from a number of issues, including the
government's failure to crack down on corruption
and its determination to continue exercising its
emergency extraconstitutional powers. Some as-
sembly members have even begun agitating for
Lon Nol's removal, as well as for the replacement
of several cabinet ministers. Moderate members of
the legislature, however, apparently have con-
vinced the critics to pigeonhole such ideas in
order to preserve governmental stability. For its
part, the government has indicated it would not
approve any ministerial reshuffling at this time.
There are no firm indications that a serious split
has developed between the two leaders, who have
worked together harmoniously both before and
after Sihanouk's ouster.
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SECRET Nw
Cambodia: Current Situation
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INDONESIA: The respect and restraint with
which the government handled Sukarno's death
and funeral are in keeping with President Su-
harto's consistent awareness of both the ex-
president's place in Indonesia's brief history and
the emotional regard still accorded him in densely
populated Java. Suharto, who resisted demands
several years ago that Sukarno be tried for his
part in the 1965 abortive Communist coup,
apparently feels that national pride requires that
respect be shown the man who was the nation's
first president and who remains the symbol of
Indonesian independence for the average citizen.
In the fine tradition of Indonesian compromise,
however, Sukarno was honored merely as "one of
the proclaimers of Indonesia's independence."
Nevertheless, it seems likely that within the next
decade he will be largely rehabilitated at least as a
nationalist leader and wartime president. F ] 25X1
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SECRET NWO
France: Dialogue of the Left Shows Little Progress
The French Communist Party (PC F) and the
Socialist Party have made little progress in a re-
newed dialogue aimed at achieving unity of the
left in France. The outcome of these talks may
well determine whether the left over the long run
will again be able to play a major role in French
politics. Although presently in disarray, the leftist
parties still have considerable popular support.
Even in the Gaullist landslide victory of 1968, all
of them combined polled over 40 percent of the
vote.
Principal points discussed so far by repre-
sentatives of the two parties revolve around the
means of gaining power and the nature of the
political structure once power is obtained.
It has long been the policy of
seek unity of the left. The party has always been
hampered, however, by hard-line Stalinists within
its ranks and by elements of the non-Communist
left who oppose any cooperation with the Com-
munists. The PCF's dependence on Moscow-
exemplified by its conformist line following the
Soviet invasion of Czechoslovakia, its election of
Soviet-backed Georges Marchais as deputy secre-
tary general, and the ouster of liberal maverick
Roger Garaudy at the party's 19th congress-have
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I#mw SECRET Nao,
all served to inhibit rapprochement with the So-
cialists.
Elements of the Socialist Party are reported
planning to push for an early end to the current
dialogue. The strong faction represented by Guy
Mollet, however, argues that termination of the
talks would make the party vulnerable to the
charge that it had prevented left-wing unity. Mol-
let is also said to believe there is some chance that
internal democratic evolution within the PCF wil125X1
eventually make Socialist-Communist col-
laboration possible. With Mollet's sup ort, the
discussions are likely to continue.
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SECRJ 1'
European Communities: A NewExecutive
The nine-man Commission of the EC to take
office on 1 July shows considerable promise of
being stronger than the 14-man executive it re-
places. It will need to pull itself together quickly
for the period of intense activity ahead when the
negotiations on the enlargement of the EC are
beginning and further steps toward economic and
monetary union are contemplated.
As initiator of community policies and
mediator among the member states, the Commis-
sion has a key function in the workings of the
Communities. Effectiveness in this role depends
largely on the independence of the Commission,
but the manner of its appointment-by agreement
among the governments-deprives it of its own
political base. This consideration is a factor in the
reluctance of well qualified but politically minded
candidates to go to Brussels, and the new Com-
mission president, Franco Malfatti, was prevailed
upon to take the job only after several more
prominent men had turned it down.
The new commissioners will also carry the
burden of the erosion of the Commission's in-
fluence over the years. The outgoing Commission
seems never to have recovered completely from
the demoralizing consequences of De Gaulle's
opposition during Hallstein's tenure as president.
Moreover, the trend toward enhancing the role of
the Committee of Permanent Representatives-
national officials working together in Brussels-at
the expense of the Commission continued largely
unchecked during outgoing Commission President
Rey's tenure.
Nevertheless, the new Commission is gen-
erally regarded as a strong group. It is more
youthful, and the decidedly political outlook of
several of its members-notably Malfatti, and
Dahrendorf from Bonn-suggests that it may be
less "technocratic" in its orientation than its
predecessor. In appointing Altiero Spinelli, a
Page
leading and long-time European federalist, Italy
has in fact added to the Commission a fervent
critic of its technocratic tendencies and an
advocate of a more political approach to integra-
tion. Also, the reappointment of Mansholt would
seem to foreshadow continued outspokenness in
favor of agricultural reforms despite the political
difficulties these raise.
Malfatti, because of his personal interest in
science and technological development, may be
expected to give a push to this slow-moving area
of Community cooperation. Both he and Dah-
rendorf are well disposed toward the US. Dahren-
dorf's responsibilities for foreign trade and eco-
nomic policy in the new Commission will include
EC relations with the US, and he has said he will
work toward liberal trade policies. According to
Dahrendorf, Deniau (France) will handle the
The New Commission of the European Communities
President
Raymond Barre, Francet
Wilhelm Haferkamp, FRG (SPD)
Sicco Mansholt, Netherlands (Labor)
*Albert Borschette, Luxembourgt
Albert Coppe, Belgium (Flemish Social Ch
*Ralf Dahrendorf, FRG (Fan)
Jean-Francois Deniau, France (UDR)
*Altiera Spinelli,ltalyt
* Indicates new Commissioner
t No party affiliation indicated
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question of UK entry and of policy toward the
Associated African States.
The negotiations on EC membership for the
UK, Ireland, Denmark, and Norway, which begin
in June, will provide an early test of the new
Commission's political skill. Rey believes that the
negotiating arrangements, which give the Com-
Finland: In Search of a Government
Prime Minister-designate Karjalainen has en-
countered considerable difficulty in his efforts to
form a political government. He received a man-
date from President Kekkonen on 12 June after
the President surprised most observers by pulling
the rug out from under a caretaker, nonpolitical
government installed only four weeks before.
Karjalainen's efforts could succeed by early July,
but this is far from certain.
Following the mid-March elections in which
the governing parties were the big losers, attempts
to reconstitute the popular front coalition failed
because of the sentiment in some parties that
they would benefit from a period in opposition
and because they felt compelled to advance
inflated demands to make participation worth
their while. In mid-May, Kekkonen put an end to
this political drift by setting up a nonpartisan
government, indicating he intended to retain it
until the fall.
In early June, however, Kekkonen charged
an elder statesman with again sounding out the
political parties on forming a popular-front coali-
tion. On the basis of a generally favorable re-
sponse, Kekkonen named Ahti Karjalainen, the
former foreign minister, to form a cabinet. A plan
was apparently sketched out to give the non-
socialist parties roughly half the cabinet posts, a
mission a role subordinate to that of the Council
and the Permanent Representatives, will prove so
unwieldy that the Council will be forced to revise
them within three months. It seems likely that
the governments will continue jealously to guard
their role in the negotiations, but the Commission
may be able to increase its influence simply by its
ability to solve the problems that arise /----]25X1
partial response to the rightward swing of the
electorate. The President was probably motivated
by the failure of the trade unions to participate in
his caretaker government and by the unenthusi-
astic reaction of the parties in general. He may
also have been responding to a suggestion from
Moscow that it would be preferable to have a
majority government that could participate with
him in his visit to the USSR, and back up any
negotiations.
The effort to form a popular-front govern-
ment was bound to run into difficulties, if only
because the prime minister's post was to go to
one of the election's big losers (the Center Party),
while one of the winners (the Conservative Party)
was to be excluded from the cabinet altogether.
Another major stumbling block has been a dis-
pute between the Communists and the right-wing
Rural Party. Because of the Communists' strong
desire to participate in the next government, it
was expected that they would tone down their
antipathy toward the Rural Party, which, how-
ever, maneuvered them into a polemical
exchange, making cooperation between the two
parties extremely difficult. There is now some
suggestion that the Rural Party, believing its polit-
ical prospects will be best served by remaining in
the opposition, intends to withdraw from the
negotiations.
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V4W SEGKEl
World Youth: UN Headquarters Meeting
The World Youth Assembly (WYA), which
will convene in New York from 9 to 18 July, is a
novel attempt to interest young people in work-
ing through and supporting the "international
system." Proposed as a part of the UN's 25th
anniversary celebration, the ten-day session prob-
ably will not be harmonious, however, and its
verdict on the UN's performance to date is likely
to be negative.
The assembly's theme will be "peace, prog-
ress, and international cooperation," and the par-
ticipants-ranging in age from 16 to 25-will try
to assess the current world situation, define what
young people want for the 1970s, and propose a
strategy for joint youth action. A maximum of
five persons from each UN member state may
attend, along with a number of participants se-
lected by the WYA planning committee and a few
from selected non - self-governing territories.
Total attendance could reach about 600.
The head of the planning committee has said
he hopes the WYA will be a "serious" conference,
and the sessions have been planned to further that
goal. Large plenary meetings will be held only at
the beginning and the end of the WYA. In be-
tween, the participants-divided into four "com-
missions"-will look for new answers to the prob-
lems of world peace, development, education, and
environment.
These topics-combined with the likely pat-
tern of participation-should provide the WYA
ample opportunity to be "controversial," the
other aim set for it by the head of the planning
committee. Many of the delegates will be hand
picked by their governments, while others will be
more independent. Transportation to New York
for substantial blocs of participants will be pro-
vided by the US and the Soviet Union. Further-
more, representatives from a number of countries,
if they attend at all, may not be in a cooperative
mood. Many Latin American states, for example,
are unenthusiastic about the assembly, fearing
that an "extremist minority" will ram through
resolutions critical of Latin American regimes.
A somewhat similar attempt by the Euro-
pean Communities (EC) recently to interest Eu-
ropean youth in the problems of effective re-
gional organization may have provided an indica-
tion of the outcome of the WYA. The EC's
"youth colloqium" produced a number of resolu-
tions-both positive and negative-about the pres-
ent state of the Communities, but the proceedings
were marked from the beginning by a basic split
among the participants. One group, although criti-
cal of many aspects of the Communities and of
European society generally, seemed to wish to
preserve and improve existing institutions. The
other, somewhat larger group, although also in
favor of a united Europe, found the Communities
a wholly unacceptable expression of a social
system that could not be reformed. F 25X1
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Arab Summit in Tripoli
Preliminary reporting from the impromptu
meeting in Tripoli of the Arab confrontation
states indicates that discussions were concerned
primarily with strengthening Arab military
cooperation, particularly ways of reducing fric-
tions between governments and the Palestinian
guerrillas.
The gathering in Libya of some of the Arab
heads of state was occasioned by Tripoli's cele-
brations marking the evacuation of foreign troops
from the country. A three-day series of meetings
of the chiefs of state was held beginning on 20
June, but no final comrriunique was issued, and
the substance of the meetings was not officially
revealed.
Lebanese President Hilu was in Libya for the
occasion, but did not attend the main meetings of
the "confrontation" states. Hilu believes, how-
ever, that the meetings were primarily concerned
with improving the Arab military posture on the
eastern front, Radio reports from Cairo tend to
support this thesis, saying the Arab leaders ap-
proved a "joint action plan" for liberating
occupied Arab territory.
Nasir has often advocated closer and more
efficient Arab military cooperation, but long-
standing inter-Arab quarrels and animosities have
previously thwarted such action. It remains to be
seen if any really effective cooperative efforts will
come from this meeting. Nasir may hope that by
strengthening the eastern command some of the
Israeli military pressure on Egypt will be relieved.
The status of the Palestinian commando
movement was also discussed, and it was an-
nounced that a four-man committee would be
sent to Jordan to assist in reducing tensions in the
wake of the recent clash between the Jordanian
Government and the fedayeen. The same com-
mittee might also proceed to Lebanon to examine
similar problems there. Nasir, Husayn and some
other Arab leaders are clearly concerned about
the growing strength and autonomy of the
fedayeen, and they probably attempted to adopt
some form of common policy toward them at the
Libyan meetings. No prominent Palestinian repre-
sentative attended the meetings.
craft, to Israel.
Other topics covered possibly included the
status of efforts toward a political settlement and
the problem of a unified Arab response in the
event of further US military aid, particularly air-
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NOO,
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Yemen: Political Turmoil
President Iryani has again threatened to step
down, and a host of other problems has arisen to
plague the government.
Several important moves have been made in
recent reconciliation efforts designed to end the
eight-year-old civil war between royalist and re-
publican factions, but the stability of the govern-
ment is still threatened. President IryaniF-
seems determined to go.
The succession process has never been
clearly established in Yemen, but army chief
Hasan al-Amri presently appears to be the most
likely candidate to succeed Iryani. Al-Amri, a
strong and capable military leader, derives con-
siderable strength from the armed forces but is
opposed by leftist officers and assorted enemies
in and out of the army. Moreover, his ability as a
politician to gain the confidence of former roy-
alists is uncertain.
A number of other political problems are
also hindering the progress of national reconcili-
ation. Some powerful royalist tribal leaders re-
portedly are withholding their participation in the
new government until they are granted liberal
concessions by the republicans. Saudi Arabia has
not yet approved the new Yemeni Government,
and King Faysal continues to insist that a national
reconciliation conference be convened first.
Economic troubles, including a shortage of
food supplies, add further burdens. Inflation has
been rampant for some time and near-famine
conditions exist in some areas. Appeals to various
sources have resulted only in the receipt of
limited quantities of food. Moreover, Yemeni
officials allege that radical Arab states have cur-
tailed needed aid because of the recent republi-
can-royalist reconciliation.
Border troubles with Southern Yemen also
threaten to flare up. Troops from Aden recently
entered an area claimed by Yemen j 25X1
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Two Congos Try Rapprochement
The public reconciliation of the governments
of Brazzaville and Kinshasa worked out earlier
this month might not only be short-lived, but
could lead to serious internal problems for the
Ngouabi regime in Brazzaville.
Hostility between the two Congos extends
back into the colonial era. The latest period of
high tension and mutual recrimination began in
October 1968 when Brazzaville severed all rela-
tions with Kinshasa following Mobutu's execution
of a rebel leader handed over by Brazzaville under
"ironclad" guarantees of his safety. Relations
then steadily worsened, as Kinshasa harbored and
supported anti-Brazzaville exiles, and as the in-
creasingly dominant leftist-extremists in Brazza-
ville directed ever sharper propaganda attacks at
Kinshasa. Attempts by political leaders in neigh-
boring countries to mediate failed and the situa-
tion further deteriorated following an abortive
coup attempt in Brazzaville on 23 March, the
second such effort in four months by anti-
Ngouabi exiles armed and trained in Kinshasa.
In late May, however, President Ngouabi
took the initiative in seeking a rapprochement. He
appears to have viewed it as a means of under-
cutting leftist-extremists in his government, who
have used the tense relations for their own ends,
and as insurance against further Kinshasa support
for Brazzaville exiles. Mobutu responded some-
what positively and invited Central African
Republic President Bokassa to help the talks
along. Bokassa plunged into the talks with great
vigor, and seems mainly responsible for their
quick success. Mobutu seems to have been caught
up in Bokassa's enthusiastic efforts, and Ngouabi
apparently was willing from the start to go fairly
far toward real reconciliation, perhaps reflecting
an already strengthened position on his part vis-a-
vis his extremist allies.
The terms of the "Manifesto of Reconcilia-
tion" signed on 16 June in the presence of five
central African chiefs of state thus far have been
only partially fulfilled. Although both govern-
ments seem to agree on the provisions calling for
resumption of communications and other eco-
nomic relations, the agreement could easily
founder on the touchier security aspects and the
eventual resumption of full diplomatic ties. A
provision that calls for both sides to submit lists
of resident exiles and subversives seems certain
only to cause more problems.
Of more immediate concern, Ngouabi
appears to have negotiated the reconciliation
without the participation-and perhaps even the
foreknowledge-of local leftist-extremists, who
regard Kinshasa as an avowed enemy of their
attempts to carry out a "people's revolution" in
Brazzaville.
Mobutu deeply distrusts the
current crop of leaders in Brazzaville, and he is
not likely to cease supporting Brazzaville exiles
who wish to subvert the Ngouabi regime. F-
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Argentina: Government Plans Emerge
The military government is settling down to
the job of governing the country after appointing
a new cabinet and announcing its general policy
goals.
The cabinet installed on 18 June is more
nationalistic than its predecessor and represents a
wide range of political and economic views. It
contains a number of :strong and possibly conflict-
ing personalities that could pose trouble for the
new government or force changes in its member-
ship. Some of the new cabinet appointees are well
known in their fields, but others, such as Social
Welfare Minister Francisco Manrique, have no
background for their present assignments. There
are indications already that some air force and
army officers are unhappy with certain members
of the new government, particularly Manrique
and Foreign Minister DDe Pablo Pardo. Discontent
could increase if the new administration gets
bogged down in a dispute between the cabinet's
two leading economists, Minister of Economy
Moyano and Public Works Minister Ferrer.
For several years Ferrer has been one of
Argentina's leading spokesmen on the dangers of
foreign investment. Because his ministry accounts
for 33 percent of the budget expenditures and
controls key areas of economic activity, Ferrer is
in a strong position to influence policy toward
foreign investors. His presence in the cabinet
could become incompatible with that of Moyano,
who has a reputation for being an advocate of a
much more open and outwardly oriented econ-
omy.
The lengthy statement on policy goals re-
leased on 20 June provides a guideline to the
political and economic orientation of the new
government. The 160-point document renews the
junta's pledge to return the country to demo-
cratic, representative government, at some un-
specified future time, and shows concern over the
need to reshape economic policies to achieve so-
cial improvements and to increase agricultural
production. Most of the emphasis, however, is
placed on efforts to achieve greater industrial
growth and diversification based on domestic cap-
ital. The attitude toward private foreign invest-
ment is cool, and there are hints that the new
government will be suspicious toward multina-
tional companies whose interests might be incom-
patible with national policy.
Little is said in the document regarding the
government's attitude toward the reunification of
the Peronist-dominated trade union movement or
demands for wage hikes. After a meeting with
President Levingston on 17 June, however, union
leaders reported that the President hinted labor
would be given a 10-20 - percent wage increase. In
a nationwide speech on 23 June Levingston prom-
ised only that his government would seek an
increase in real wages as conditions permitted.
Thus far the Peronist unions have adopted a pol-
icy of avoiding any confrontation until the new
administration's economic, social, and labor poli-
cies are defined.
In the meantime, the junta's dominant role
in the government was formalized with the revi-
sion of the Statute of Revolution of 1966-the
basic law of the land. The three junta members
now are given the right to approve or disapprove
any law of national importance. The running of
the country is formally entrusted to the president
jointly with the three junta members and the
cabinet. The military chiefs are virtually assuming
the role of cabinet members.
It remains to be seen how long the collegial
form of government can last because it has several
built-in weaknesses. The more people involved in
decision making, the more points there will be on
which interested groups, especially the politicians,
can apply pressure to influence these decisions.
By assuming colegislative powers, the armed
forces are placing themselves in a position of
direct responsibility for the successes or failures
of the government-a position they scrupulously
tried to avoid during the Ongania administra-
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Venezuela-Guyana 'territorial Claims
TRINIDAD
AND
TOBAGO
GuiriaY/ POR-SPAIN
a
NKOKc fk 6
p'es lip1Amok, '.*A,
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umari
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SEC:RE'1'
Venezuela-Guyana: Border Problem Swept Under the Rug
Last week, Venezuela and Guyana signed a
protocol providing for a 12-year moratorium on
their long-standing border dispute. The move was
intended to put the problem on the shelf, but the
Venezuelan congress and military may not be
willing to let it stay there.
The border dispute originates in the 1899
Arbitral Award of the territory west of the
Essequibo River (about five eighths of what is now
Guyana) to Great Britain. Since 1962, the
Venezuelan Government has maintained that the
Award resulted from a "fraudulent deal" between
the British and Russian members of the tribunal,
and, therefore, is null and void. In 1966, im-
mediately before the UK granted independence to
British Guiana, Venezuela pressed for the reopen-
ing of the question of where the boundary should
lie. In February of that year the UK, British
Guiana, and Venezuela signed an agreement in
Geneva establishing a Mixed Commission to dis-
cuss the dispute. In February 1970, the Mixed
Commission's mandate expired after four years of
fruitless discussion.
The moratorium, which was written as a
protocol to the 1966 agreement, is in line with
President Caldera's desire for a peaceful settle-
ment of the dispute and with his policy of im-
proving relations with the English-speaking coun-
tries of the Caribbean. He may have difficulty
selling it to the opposition-dominated congress,
however, because it avoids specific issues such as
ownership of Arikoko Island and because
Venezuela had to make a number of concessions.
For example, Venezuela dropped its insistence on
only a five-year moratorium as well as joint eco-
nomic development of the region. Guyana made
no equivalent concessions.
The moratorium took Venezuelan politicians
and the public by surprise. As a result, there has
been little reaction to it, but there probably will
be widespread feeling that Caldera sacrificed
Venezuela's claim to the territory for his own
convenience. The issue is an emotional one, and
some politicians undoubtedly will try to capital-
ize on it. Moreover, it is likely to add to the
military's dissatisfaction with the Caldera admin-
istration. According to a press report, Venezuela's
ambassador to London has resigned in protest at
not being consulted on the protocol.
Whether the protocol is approved by con-
gress , which will be debating it for the next few
weeks, depends largely on the attitude of the
opposition Democratic Action (AD) party. The
AD has an interest in the claim to the Essequibo
region because it was an AD administration that
first raised the issue. At the same time, however,
AD may not wish to impair its informal working
agreement with the government party and it may
see no alternative to the protocol. So far, AD's
congressional leaders have been carefully non-
committal in their public statements, but some
AD leaders have indicated to embassy officers
that there are significant differences in AD over
the protocol.
Guyana's parliament quickly approved the
protocol on 22 June, and Minister of State Ram-
phal expressed the administration's hope that the
agreement would open a new era of peaceful
relations with Venezuela. Some government lead-
ers, nonetheless, are apprehensive that the Vene-
zuelan congress will reject the protocol. In gen-
eral, however, the Guyanese privately seem op-
timistic about the agreement because it will allow
that small country to devote less time and fewer
resources to the border problem. Public reaction,
however, has been restrained. Marxist opposition
leader Cheddi Jagan, predictably, has attacked the
protocol and has stated that if his party comes to
power the accord will not be respected. 25X1
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Cuba: Sugar Harvest Has Little Lcorwmic impact
Cuba's economy will be little affected by Last year Cuban sugar exports to the USSR were
failure to achieve the 10-million-ton sugar goal set
by the regime for the current harvest. Havana still
will use most of the increased production from its
disappointing, but nevertheless record-setting,
8.5-million-ton harvest to reduce its trade imbal-
ance with the USSR.
This year higher prices in the free-world mar-
ket will enable Cuba to increase its earnings of
convertible currency moderately. Contracts nego-
tiated thus far with free-world countries total 1.7
to 1.8 million tons-about the same as in 1969.
The prospective gain in free-world earnings will
Havana's ambitious plan to export 5 million
tons to the USSR will fall short, but additional
credits from Moscow will permit imports to be
maintained at the 1969 level as planned. At most,
sugar exports to the USSR, probably will amount
to little more than 4 million tons. Such deliveries,
however, would go a long way this year toward
eliminating the chronic trade imbalance, which in
1969 amounted to an estimated $400 million.
help sustain Cuba's foreign credit position.
There is no clear evidence that failure to
reach Castro's magical 10 million tons has created
a psychological reaction that could aggravate
Cuba's economic problems.
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few Cubans expected so large a crop,
25X1
and there probably is no deep disappointment
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Nww~ SECRET .,#,
Ecuador: President Assumes Dictatorial Powers
Constitutional government ended in Ecuador
early last Monday when President Jose Velasco
assumed dictatorial powers until his term expires
in 1972. He acted at the urging of the military
because of continuing student disorders and an
unfavorable decision by the Supreme Court on
the constitutionality of recent tax decrees.
After threats of resignation late last week
failed to sway the Supreme Court, Velasco moved
to protect his fiscall reforms by closing the Su-
preme Court and congress and abolishing the
1967 constitution. At the same time he dealt with
the problem of student agitators and other leftist
opposition. The President has been under pressure
from the military to bear down on law and order
and probably needed little persuading to take
precautionary measures against the protests that
might be expected from leftists in response to his
assumption of supreme power. An indication of
the President's serious intent to cripple leftist
agitation was his dismissal of Army Commander
Villagomez for releasing an imprisoned university
official without authority.
The educational system was shut down, the
campus of strife-torn Central University in Quito
was occupied by troops, and the extremist-
controlled secondary school students' federation
was dissolved. The list of those reportedly ar-
rested reads like a "Who's Who" of Ecuador's
extreme left. Orders have also been issued for the
arrest of leftist vice president Jorge Zavala. Some
of the business leaders who waged a campaign
against the new taxes as well as conservative poli-
Page 21
ticians were apprehended, but most have already
been released.
The leaders of the traditional Liberal and
Conservative parties as well as labor leaders have
condemned the coup, but public response has
bordered on indifference. Except for a clash with
students in Ambato, security forces so far have
met little resistance, and by mid-week the capital
had returned to a mood of business as usual.
Velasco has reappointed his cabinet, has
promised to abide by the 1946 constitution ex-
cept where it conflicts with current realities, and
has said he will relinquish power in September
1972 to his duly-elected successor. The fate of
the Supreme Court is in doubt, but congress,
which has not distinguished itself in the last two
years, appears to be a permanent casualty of the
coup.
The President is demonstrating his deter-
mination to deal with the country's economic
malaise. He has instituted changes in the govern-
ment's fiscal agencies and has taken over financial
control of dozens of autonomous agencies.
By breaking the constitutionality of his re-
gime, Velasco has knowingly lost whatever inde-
pendence of the military he may have enjoyed.25X1
When opposition elements regroup, as they are
sure to do, the military will be the sole arbiters of
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Iq
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Secret
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"w' Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Malaysia: One Year After
Secret
M2 44
26 June 1970
No. 0376/70A
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SECRET
In the year since the serious communal violence of May 1969, Kuala
Lumpur has failed to take any substantial steps toward reducing racial friction
and restoring parliamentary democracy. The leadership of the National Opera-
tions Council, a body organized to take over the government following the
rioting, has, if anything, only further alienated extremist factions in both the
Malay and Chinese communities. A nervous government has managed to keep
things under control by resorting to stringent security measures, but renewed
racial violence remains a constant threat. Meanwhile, Malaysia continues to drift,
and its future, largely determined by a small handful of indecisive
leaders, remains an open question.
Special Report
1 - 26 June 1970
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+' SECRET
The Breakdown of Communal Politics
Until May 1969, Malaysia had a functioning
but delicately balanced political system that re-
flected its racial make-up. In West Malaysia the
Malays constitute nearly half the population, the
Chinese almost two fifths, and Indians most of
the balance. The predominantly rural indigenous
Malay population looks on the more affluent and
urban Chinese as aggressive newcomers who are
out to reduce the original Malay citizenry to a
servile role. For their part, the Chinese regard the
Malays as generally indolent parasites feeding off
the economic prosperity created by Chinese
brains and energy. The two races have lived to-
gether at arm's length, but because of their
mutual antipathy, violence has always been close
to the surface.
Faced with this racial tinderbox, political
leaders of the two communities worked out a
compromise formula in the early 1950s in the
hope of achieving political and social stability.
The formula tacitly agreed to Malay political
domination and a privileged position in return for
which the Chinese would be allowed to dominate
the economy. The Malays were to retain their
privileged position until they could compete on
Ethnic Divisions
West Malaysia
(pop. 8.5 million)
98950
Special Report
Chinese -- 32%
Chinese -- 23%
Indigenous -- 38%
I
di
& o
13%
n
an
ther --
Indigenous -- 43%
/ Muslim -- 39%
Sarawak
Muslim -- 25%
(18% Malay and
Sabah
(largely indigenous-
Malay only 1 to 2%)
(Pop. 900000)
7% indigenous)
(pop. 600,000)
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SECRET two
an equal footing with the Chinese. The 1957
constitution legally recognized Malay privileges in
such areas as government jobs, education, and
land ownership. Chinese voting strength was re-
stricted through the device of giving the rural, and
therefore Malay, voting districts a disproportion-
'ally heavy representation.
The political vehicle for this arrangement
between the Malay and Chinese establishments
was a coalition called the "Alliance," within
whose framework the United Malay National
Organization (UMNO) was the senior member.
The two junior partners were the Malayan Chi-
nese Association (MCA) and the Malayan Indian
Congress. Chinese voting strength was in effect
further restricted by the MCA's willingness to
contest only a mutually agreed upon number of
"Chinese" parliamentary seats.
The Alliance was credited with achieving
remarkable communal and political stability, and
Malaya was widely hailed as the prime example of
a multiracial nation functioning as a successful
parliamentary democracy. The strength of com-
munal feeling, however, was not to be papered
over indefinitely. The establishment of the wider
federation of Malaysia in 1963, with a greater
Chinese percentage of the racial mix, significantly
heightened the Malays' concern over the security
of their dominant political position. Malay initia-
tive in easing the Chinese city of Singapore out of
the nation in 1965 was a direct result of this
apprehension. The Malay-led government in Kuala
Lumpur feared, with some justification, that
Singapore Prime Minister Lee Kuan Yew's po-
litical appeal and organizational success in the
island state might be extended to the Malayan
peninsula itself.
In retrospect, however, the expulsion of
Singapore only postponed the day of reckoning
for the Alliance. Large numbers of politically
active Chinese in Malaysia, fully aware of the
implications the expulsion of Singapore held for
their own future, became increasingly disen-
chanted with the "Uncle Tom" MCA and more
Special Report
and more dissatisfied with the secondary political
status of the Chinese population. Signs of Chinese
disaffection inevitably led to a fanning of con-
servative, anti-Chinese Malay sentiment.
The unexpected depth of this reaction
against the old Alliance system was revealed by
the National elections in April 1969. The govern-
ment went into the elections with 115 out of 144
parliamentary seats, including 89 out of the 104
West Malaysian seats. To the government's
dismay, the extremist or "ultra" Pan-Malayan
Islamic Party (PMIP) captured three UMNO seats,
minor Chinese-dominated parties took 14 of the
MCA's 27 seats, and the Indian partner also lost
seats. The Alliance was left with only 65 of the
West Malaysian seats. In addition, the PMIP won a
majority of the Malay vote in almost all the
constituencies in which it ran candidates. Al-
though it only won 12 seats, its popular vote was
almost one fourth of the total.
This evidence of political polarization along
racial lines and the ensuing riots left the govern-
ment badly shaken. The lethargic Alliance had
not been aware that the moderate Chinese in the
MCA were scorned by such large numbers of the
Chinese population, or that the PMIP, whose
strength is based mainly in the predominantly
Malay northeast states, had so expanded its ap-
peal. The Chinese partner in the Alliance added to
Malay apprehensions when a spokesman an-
nounced that his party was withdrawing from the
cabinet but would support the government. Many
Malays interpreted this as an abandonment of the
Alliance concept.
When the election results came in, the gov-
ernment's authority broke down, and widespread
racial rioting erupted. At least 150 people, mostly
Chinese, were killed, and the government imposed
a state of emergency that still stands. After the
violence broke out, Kuala Lumpur suspended
elections in the Borneo states of Sabah and
Sarawak-elections that are only now being held.
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Special Report
tjl?C:RET
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In May 1969, the National Operations Coun-
cil was set up to conduct the essential business of
government under emergency powers. The Malay
leaders made it clear that Malay domination of
the government would be maintained at all costs,
and there have been few indications over the past
year that a return to parliamentary methods will
come soon. A "multiracial" cabinet appointed in
late May 1969 is largely a facade with no real
influence. Two Indians and four Chinese were
appointed to fulfill "special functions" that were
never defined, but otherwise the cabinet is made
up entirely of Malays. Subordinate state opera-
tions councils were also established to supervise
political activity in Malaysia's 11 mainland states
as well as in Sarawak and Sabah.
The government's primary concern during
the past year has been to keep the lid on rather
than to try to solve the country's many problems.
Tunku Rahman's major peacekeeping contribu-
tion was to establish a series of "good will" com-
mittees at various governmental levels. These
committees, which operate on the premise that
the less said about Malaysian racial problems the
better, have accomplished little. The National
Operations Council has yet to open an inquiry
into the cause of the May 1969 disturbances, and
the Alliance government continues to dismiss
objective accounts of the scope and nature of last
year's disturbances as malicious and unfounded.
In short, with the government simply marking
time, the political and racial situations are po-
tentially as explosive now as they were a year ago.
Most Malaysian Chinese are lying low for the
time being, perhaps seeing a renewal of communal
violence as worse than the present status quo.
As for the Malays, the "ultras" have become
increasingly estranged from their more moderate
compatriots in the government. On the pre-
dominantly Malay-populated East Coast, anti-
Chinese feeling is particularly high, and the
prestige of the extremist Pan-Malay Islamic Party
has increased. Some months ago the moderates
ousted Dr. Mahatir, an "ultra," from the central
executive committee of the United Malay Na-
tional Organization, for attacks on Prime Minister
Rahman's leadership, and he was subsequently
expelled from the party. While biding his time on
the sidelines, Dr. Mahatir has elected to validate
his credentials as an extremist by issuing at least
one pamphlet calling for a renewal of communal
violence. Thus, the weak government seems to be
caught in the middle between wary, dissatisfied
Chinese and vainglorious Malays.
In this fluid situation, perhaps the most
serious problem facing the government is a po-
tential leadership gap. Prime Minister Rahman
went into semiretirement for a period following
PRIME MINISTER RAHMAN:
SOON TO RETIRE?
Special Report
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the riots and, although now back on the job, he
still professes a desire to retire "soon." Rahman
suffered considerable loss of political stature
among many Malays because of his policy of
cooperation with the Chinese community.
Deputy Prime Minister Tun Abdul Razak, long
the heir apparent in Kuala Lumpur, has proved an
indecisive leader who lacks the Tunku's charisma
and shrewdness in dealing with the government's
multitude of problems.
bred a strong tradition of nonparticipation in
politics. The majority of the armed forces are
probably loyal to the government, although how
quickly or impartially they would act to put
down communal disturbances is an open ques-
tion, particularly if, as in May 1969, the Chinese
were the chief victims. Leading elements in the
army are almost entirely Malay, and even the
high-ranking positions in the police, many of
which have been held by Chinese, are being filled
by Malays.
The inability of Ismail, probably
the brightest fight in the present leadership, to
return to active duty would be a heavy loss.
Razak has indicated that when he succeeds to the
premiership he hopes to lean heavily on Ismail-
suggesting that the country would be run virtually
by a dual premier system.
Aside from the Tunku, Razak, and Ismail,
no other elected Malay official has demonstrated
any particular leadership qualities. Potentially the
most influential civilian leader is Permanent
Secretary of the Ministry of Foreign Affairs Tan
Sri Ghazali. He is not a member of parliament and
is therefore ineligible for participation in the
cabinet, but his political ambitions are well
known. During the past few months Ghazali has
been spreading rumors seemingly devised to at-
tract the sympathy of the radical Malays, and he
may be trying to lay the groundwork for his own
political career.
The Role of the Military
In the context of the country's future
leadership, the army and police are an enigmatic
factor. British influence on the security forces has
Special Report
Communist Activity
In addition to the overriding communal
problem, Kuala Lumpur during the past year has
been faced with increased activity on the part of
the Communist Terrorist Organization (CTO), the
militant arm of the Malayan Communist Party. At
the end of the Communist terrorist Emergency
ten years ago, a remnant of Communist insurgents
fled to bases in southern Thailand, and today
some 1,300 insurgents and a larger number of
sympathizers still maintain those bases. In 1968
the long-inactive insurgents announced their in-
tention of moving from "revolutionary to armed
struggle and have since made good on their word
by harassing government patrols and outposts and
occasionally mounting larger attacks on com-
munications facilities and isolated villages. The
-6- 26 June 1970
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SOUTH
VIETNAM
Kota
Kinabalu
tion increased its strength by about one third,
gaining recruits mainly from the Chinese popula-
tion, its traditional base of support. It also en-
listed some Malays in the border area, however, a
distinct change from the previous Communist
practice of recruiting Chinese almost exclusively.
The CTO's effort to lose its "Chinese" label also
has been reflected in recent Communist propa-
ganda activity. "The Voice of the Malayan Revo-
lution," a radio station that began broadcasting
from southern China last fall, has emphasized the
need for all of Malaysia's ethnic groups to join the
CTO in its fight against the "bourgeois" govern-
ment in Kuala Lumpur.
A more balanced racial base indeed is prob-
ably a necessity if the terrorist organization is
ever to mount a successful nationwide insurgency.
Given the rising level of communal antagonism in
Malaysia, however, long-overdue Communist
efforts in this direction are not likely to have
quick or dramatic results.
98954 6-70
insurgents, however, apparently have not yet
made serious efforts to establish permanent bases
in Malaysian territory.
Kuala Lumpur has met this increased insur-
gent aggressiveness by reinforcing government
units in the border area
The gov-
ernment, denying that it is particularly concerned
about the CTO, points to the Communists' failure
to establish base areas on Malaysian soil.
Perhaps the most noteworthy aspect of this
renewed insurgency has been the CTO's attempt
to widen its appeal by capitalizing on anti - cen-
tral government feeling growing within all
Malaysia's racial groups. Last year the organiza-
Special Report
-7- 26 June 1970
PHILIPPINES
SABAH zi % '~
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Problems in East Malaysia
Communist terrorism in Sarawak also poses
a definite problem for the government. Although
only about 300 armed insurgents are presently
operating in Sarawak, the potential for expanded
insurgency could still be as serious as that in West
Malaysia. As in West Malaysia, the Communist
movement in Sarawak consists predominantly of
Chinese operating for the most part from within
the rural Chinese community. The situation dif-
fers from that in West Malaysia, however, in that
the Chinese, who constitute about 30 percent of
the population, heavily outnumber the Malays
and are generally supported by the indigenous
tribal peoples who make up more than 40 percent
of the population. The Chinese and tribal popula-
tion resents not only the political control by the
Malay government in Kuala Lumpur but even
more the indiscriminate and heavy-handed tactics
of Malay security officials.
For the time being, at least, the problem of
potentially serious Communist insurgency has
been overshadowed by steadily growing political
tension in Kuching. Sarawak political leaders have
become more and more restive since state elec-
tions were suspended in the wake of the 1969
riots. The predominantly Chinese and tribal
Special Report
political parties have deeply resented the Malay
rule by fiat during the past year. More recently,
Kuala Lumpur's announced intention to take for
itself the lucrative benefits of future offshore oil
ventures has generated a mood in which the idea
of secession is germinating.
In an obvious attempt to damp down po-
litical unrest, Kuala Lumpur announced last
March that Sarawak state elections were being
scheduled for June 1970. Although there was
some doubt that the government would go ahead
with the elections, polling began in mid-June and
will be concluded in mid-July. The Alliance Party
will almost certainly fail to win a majority in
Sarawak, and the government will probably in the
end have either to strike some kind of "under-
standing" with the Sarawak United Peoples Party
(SUPP), a Chinese-dominated party that stands to
make the best electoral showing, or to help form
a coalition among SUPP and the indigenous and
Malay parties in the state. Kuala Lumpur hopes to
make an arrangement that might allow the Al-
liance Party to join a coalition government or at
least allow it to exert some influence over the
state government. Whether or not such a scheme
can get off the ground, Kuala Lumpur will have
difficulty with any non - Alliance Party gov-
ernment, and discontent in Kuching is sure to
remain a major political preoccupation for the
central government.
Sabah, the other political component of East
Malaysia, has been an area of relative calm. Its
chief minister is a Malay who is fully responsive
to the wishes of the central government. Re-
cently, however, the chief minister has been pro-
moting his theories of cultural unity that envision
a Malay-dominated and Malay-oriented society.
The climate created by the racial outbreaks
in 1969 has had a direct effect on Malaysia's
relations with its close neighbor, Singapore. The
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same Malay distrust of predominantly Chinese
Singapore that led to the city's expulsion from
Malaysia in 1965 surfaced in full force after the
1969 rioting, and relations since have been cool.
On the other hand, relations with Indonesia have
improved considerably over the past year. The
suspicions and strains caused by Sukarno's "con-
frontation" have largely been put aside, and the
anti-Chinese orientation of the two Muslim-
dominated states has been a unifying factor. Else-
where, Kuala Lumpur has managed to make
progress on two long-standing foreign problems.
Diplomatic relations with the Philippines, sus-
pended in 1968 during the dispute over the
ownership of Sabah, were restored early this year
despite the fact that Manila has not et dropped
its claim to the Malaysian state.
Although Malaysia has established ties with
the Soviet Union and several other Eastern
European countries, its orientation remains
primarily Western. With the UK planning to with-
draw its troops from Malaysia in late 1971, Kuala
Lumpur hopes to be able to utilize the nascent
five-power defense agreement, a planned joint
venture by Malaysia, Singapore, New Zealand,
Australia, and Britain, as the keystone for its
future defense policies. Given the country's pres-
ent good relations with Thailand, its at least out-
ward truce with the Philippines, and Singapore's
reluctance to become involved in international
battles, Malaysia probably will not require any
outside help to maintain its sovereignty. More-
over, the five-power arrangement, although un-
likely to function as a real military force, will
help to meet the country's thwarted desires for a
continued British military presence. The British
themselves now are planning to maintain at least a
token presence after the pullout in late 1971; the
rotation of training missions, a concept London
has considered recently in the case of Brunei,
scheduled for independence late this year, could
provide a convenient means of reassuring Kuala
Lumpur, too.
Special Report
The continued agitation by conservatives for
further guarantees of Malay political dominance
and greater Malay economic opportunities casts a
shadow over Malaysia's future. I n other words,
the government remains under pressure to pledge
openly its allegiance to a 19th century political
and social system, a system that how is being
rejected by the sizable Chinese and tribal
minority. Although the more moderate elements
of the present leadership may recognize the need
for change, no Malay government is likely to
repudiate conservative sentiment that has wide-
spread appeal throughout the Malay countryside.
As a result, the government has been able to do
little more than maintain an uneasy peace.
In this volatile climate there are several pos-
sibilities that leave Kuala Lumpur's future uncer-
tain. If severe racial rioting were to break out, the
army might refuse to act against the Malay rioters
and, as a result of the likelihood of widespread
carnage, might decide to take over the reins of
government. This very real possibility, given the
growing antipathy between the Chinese and
radical Malays, is one the government is largely
ignoring. Adding to the dimensions of this po-
tential problem is the possibility of attrition in
the ranks of the very small Malay political elite.
The loss of even one or two key officials could
produce a leadership shortage and a government
less capable of dealing with Malaysia's problems.
If, however, the government can hold elec-
tions, restore parliamentary forms, continue the
current moderate leadership, and throw enough
crumbs to the conservative Malays to pacify
them, then Malaysia will probably rock along in a
relatively peaceable fashion for the next few
years. Malaysia's thriving economy will continue
to be a definite plus for the government in its
efforts to maintain racial peace, but sooner or
later-and probably sooner-Kuala Lumpur will
be forced to face up to its own identity cri-
sis.
-9- 26 June 1970
25X1
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DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
The New Politics Panama Style
Secret
N2 44
26 June 1970
No. 0376/70B
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%Now SECRE'i' i4w
After twenty months in power, General Omar Torrijos' Provisional Junta Government is beginning
to bring its policy goals into focus. Torrijos apparently knows the direction in which he wants to go,
but he has not yet mapped out the route or found a way to attain his contradictory objectives. Desiring
to make fundamental changes in Panamanian politics, the government has dissolved all political parties
and is determined to prevent a return of the traditional oligarchy-dominated political system. Although
the government had promised elections in 1970, it has made no plans as yet and shows no inclination to
relinquish power within the foreseeable future.
The regime has also demonstrated its concern for economic development and economic reform. It
has attempted to a far greater extent than past governments to assist the poor, the middle class, and the
labor unions. At the same time it has tried to attract foreign capital and to stimulate domestic private
investment. To this end, despite its
ment is a serious irritant-one that threatens - Panama Style
d nt intrusion into the
nme
b
for to raise its level of invest-
willingness of the private sec- The New Politics :
sometimes revolutionary rhetoric,
the government has moved cau-
tiously and has avoided a frontal
attack on the economic position
of the oligarchy. A basic distrust
between local business cornmu-
nity and the government re-
mains nevertheless. The un-
out increase gover
to bring a
economy.
For both political and economic reasons, Tor-
rijos is showing increased interest in reopening canal
treaty negotiations, dormant since 1967. The record
of previous negotiations has been under close review,
but details of the government's current negotiating
objectives have not yet been disclosed. Nevertheless,
top officials have already expressed irritation over the
use of the Canal Zone as a safe haven for political op-
ponents of the regime. They are convinced, more-
over, that the country is not receiving sufficient
economic benefits from the canal, and the gov-
ernment has indicated its interest in having
a number of areas and facilities within the
zone returned to Panama.
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From 1903, when Panama gained its inde-
pendence from Colombia, until the 1968 coup,
politics was a game played largely by the oli-
garchy-a small group of elite families comprising
less than two percent of the population. Political
parties were temporary and shifting alliances of
convenience formed around various political lead-
ers. These personalistic parties generally trum-
peted Panamanian nationalism and accepted the
notion that the oligarchy's near monopoly of
social, economic, and political power should be
defended. Political competition between factions
of the oligarchy was rooted in the desire to ensure
a place at the trough when the political and
economic spoils were being distributed.
Until the late 1940s, the National Guard, the
country's only military force, had merely sup-
ported the oligarchy and rarely entered directly
into politics. In 1949, however, it intervened in
the wake of fraudulent elections, recounted the
ballots, and declared Arnulfo Arias the winner.
Two years later the Guard, tired of Arias' authori-
tarian approach, ousted him. Then, in 1952, the
Guard commandant was elected president in a
relatively honest election-the first time that a
military man had headed the government. Al-
though the Guard had clearly established itself as
an independent political force, the oligarchy was
able to reassert its traditional control of the polit-
ical system from 1956 to 1.968.
Given the very extensive patronage at the
disposal of the chief executive, it was not surpris-
ing that presidential elections were hotly con-
tested affairs and often marked by some degree of
electoral fraud. The 1968 election, however, was
one of the most vicious in Panamanian history.
President Robles, sparing no effort to impose a
successor, sought and gained the support of the
National Guard for his choice. Nevertheless, the
opposition candidate, Arniulfo Arias, piled up so
large a vote that the Guard, fearing a dishonest
Special Report
ballot count would lead to violence, shifted its
support and allowed Arias to win.
Challenge and Response
A consummate politician who had endeared
himself to the masses, Arias excelled as a candi-
date but was singularly unsuccessful as an office-
holder. He had been president twice before, but
each time had been kicked out of office. Ap-
proaching his third term and upset by the bla-
tantly political role of the Guard, Arias appeared
determined to strip the military of its political
power. Despite his initial efforts to allay suspi-
cions and placate the military, the Guard placed
little confidence in his assurances. Only ten days
after his inauguration, Arias again found himself
unemployed, and Panama was treated to its first
direct military dictatorship.
The October 1968 coup was simply an ac-
tion by the Guard in defense of its interests.
Officers whose positions were threatened ensured
their own job security in the most direct way
possible. Once in power, however, they found it
necessary to justify their disregard for democratic
and constitutional procedures. The bald power
politics that motivated the coup was quietly
swept under the rug, and an elaborate facade of
rationalization was quickly constructed.
Rationalization and Reality
It took the publicists nearly a year to settle
on the slogan The New Panama Movement," but
almost from the beginning the coup was labeled a
revolution. The political power of the oligarchy
was declared at an end, and it was alleged that
public policy henceforth would benefit all of so-
ciety. In language reminiscent of other Latin
American military politicians, Panama's new lead-
ers pledged themselves to make honesty and ef-
ficiency the guiding principles of government, and
promised to put an end to corruption and nep-
otism.
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Brigadier General Omar Torrijos
Torrijos, the de facto dictator of Panama, is
a 41-year-old career officer who brings to govern-
ment an explosive combination of shrewdness,
inexperience, and impatience. A man in a hurry,
whose planning horizon probably extends less
than 90 days into the future, he tends to deal
with problems on an ad hoc basis. This gives
Panamanian politics a somewhat frenetic quality,
with frequent shifts in attention and emphasis.
Torrijos appears to have a low tolerance for frus-
tration, and he favors a direct, even roughshod
approach to attain his objectives. It is the desire
of the moment that counts with him, and past
favors or services pale Into insignificance if his
current ambitions are thwarted. Torrijos works
hard and long at affairs of state,
Special Report
Despite the rhetoric, the regime's first con-
cern was to neutralize all opposition. Constitu-
tional guarantees were suspended, known leftists
were arrested, university autonomy was ignored,
and schools were closed. Pro-Arias officers within
the Guard were purged, some opposition news-
papers and radio stations were taken over, and
efforts were organized to root out the small and
poorly organized pro-Arias guerrilla movement
that had sprung up in the interior. The massive
opposition that was expected never materialized,
however, and power struggles within the Guard
rather than the threat from Arias posed the major
danger to stability.
A provisional junta government headed by
two figureheads and assisted by a civilian cabinet
had been set up, but the locus of power rested
with the two principal architects of the coup-
colonels Omar Torrijos and Boris Martinez. Al-
though a subordinate, Martinez set about the task
of upstaging and undermining Torrijos. He under-
took policy initiatives reflecting his strong an-
tagonism toward the oligarchs and politicians and
placed his followers in key command positions.
Torrijos attempted to avoid a showdown, but by
February 1969 Martinez' growing domination of
the Guard and the government had reached the
point where Torrijos could no longer afford to
temporize.
The ouster of Martinez and his principal
supporters ended Torrijos' problems for a time,
but factionalism within the Guard continued.
Matters again came to a head in mid-December
when the Deputy Commandant Silvera and Chief
of Staff of the Guard Sanjurseized control of the
government while Torrijos was in Mexico on a
pleasure trip. Their coup was short-lived; Torrijos
landed in the interior, rallied his supporters, and
returned in triumph to Panama City.
The December coup attempt marked a kind
of watershed for Torrijos. Although he had estab-
lished himself as the dominant political figure
after the ouster of Martinez, he apparently had
not been comfortable in the role of leader of the
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"revolution." The coup attempt was only a mat-
ter of internal Guard politics, but quashing it
seemed to give his ego and his popularity a boost.
His return was one of the most exciting events in
recent Panamanian history; his style and verve
caught the popular imagination, and he emerged
as something of a hero.
If Torrijos felt a new sense of legitimacy, he
also felt an almost paranoid distrust of his fellow
officers. He had always demanded a very high
level of personal loyalty from his subordinates,
but now loyalty became a near obsession.
Changes were made in the Guard hierarchy and in
the government, and two close friends, Demetrio
Lakas and Arturo Sucre, were appointed as Presi-
dent and member of the new civilian junta, re-
spectively. Torrijos became more reluctant to
delegate authority and more concerned to gather
all of the reins of power into his own hands.
Policy Developments
Given the inexperience of Panama's revolu-
tionary leaders, it was not surprising that a period
of policy improvision :should occur or that the
regime would be more clear about what it op-
posed than what it supported. Martinez, an un-
compromising opponent of corruption, an
avowed enemy of the oligarchy, and a vocal ad-
vocate of radical reform, had set the moral and
policy tone for the Provisional Government. As a
result of his influence, therefore, the early rhe-
toric of revolution and reform became more than
mere cosmetics.
Torrijos found many of Martinez' ideas con-
genial. He too was fed up with the politicians,
distrustful of the oligarchy, and sincerely inter-
ested in helping the people. He was not an ideo-
logue, however, and if he heard the same clarion
call to reform, he was prepared to march with a
slower and more hesitant step.
Although a competent Guard officer and an
effective military leader, Torrijos was ill-equipped
by temperament and training to lead a govern-
Special Report
ment. Accustomed to an environment in which
problems could be resolved by simply giving or-
ders, Torrijos found it difficult to adjust to the
relatively complex process of policy making. Eco-
nomically unsophisticated and impatient with
complicated strategies or involved argumentation,
he opted for policies that would yield quick and
visible results. Thus the airport, the university,
and sundry public buildings were refurbished, gar-
bage collection was improved, and streets were
repaired.
Torrijos was initially very conscious of his
own deficiencies and prepared to lean upon a
number of capable and reform-minded. "techni-
cians" who had been brought into the
oovern-
ment.
Torrijos became more confident of his abil-
ity to run the country after quashing the Decem-
ber 1969 coup. He became less dependent on his
official advisers, but remained impulsive. Ready
to listen to cronies he had known during tours of
duty in Santiago and David, he was not averse to
turning their uninformed and off-the-cuff advice
into policy directives. To his credit, however, he
was not wedded to his mistakes. If a decision
proved erroneous or if a policy generated stiff
opposition, he could be quite pragmatic and trim
his sails to the prevailing winds. Nevertheless, this
approach tended to give government policy a
ragged, uneven quality.
little
interested in pomp and ceremony, Torrijos likes
to rub elbows with the people and to get a per-
sonal feel for what is going on. Concerned also
with building popular support for himself and his
government, he has adopted what might be called
the "Santa Claus approach" to development prob-
lems. He will visit a village, for example, find out
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what is troubling the people, and do something
about it. If a roof leaks or a school needs repair, it
is noted and the job is done. If a young girl needs
money for a dress, Torrijos fishes in his pocket
and leaps to the rescue. If a local official has been
arbitrary, Torrijos listens to the complaint and
rights the wrong.
The fundamental problems are not being
touched, of course, and little is really being ac-
complished. The villagers, however, can point to
something concrete. They can see that the govern-
ment cares about them and they will remember
Torrijos. But this too is policy on the run, im-
provisation rather than planning.
Domestic Policy Goals
Although Torrijos' personal style has helped
to give government policy an impressionistic
flavor with false starts, shifts in emphasis, and
grandiose announcements accompanied by little
or no action, it is also 1:rue that he has had to
confront very difficult problems and accommo-
date almost irreconcilable interests. His most dif-
ficult problem is to maintain business confidence
while building a revolutionary image.
From the beginning, the regime had made a
whipping boy of the oligarchy, blaming it for all
of Panama's ills. Torrijos separated politics from
economics, however, and made no move to inter-
fere seriously with the economic position of the
oligarchy. Apparently expecting business as usual
despite his antioligarchy pronouncements, he was
vexed by the negative reaction of the business
community and dismayed that domestic private
investment declined.
The oligarchy had initially believed that the
military interlude would be brief and that, with
only a minor change of cast, the show would go
on as before. Martinez quickly demonstrated,
however, that he would riot operate in the cor-
rupt albeit time-honored way. He could not be
bought and he would not play ball. Business lead-
ers, although relieved when he was ousted, con-
Special Report - 5 -
NATIONAL GUARD DISTRIBUTING
SHOES TO CHILDREN
tinued to withhold cooperation in the hope of
gaining a larger role in government. The regime's
one unalterable article of faith, however, was that
the traditional oligarchy-dominated system had to
be destroyed. As time went on, it became clear to
the business community that Torrijos had no in-
tention of relinquishing power, that general elec-
tions would not be held soon, and that whatever
elections were held would be carefully controlled.
If the oligarchy was to be frozen out of
politics and if power was to rest on more than the
guns of the Guard, it was obvious that an alter-
native political system had to be devised. This, of
course, was a task that would tax the resources of
even the most skilled politicians, and it was com-
plicated even more by the fact that neither Tor-
rijos nor his advisers had a very clear conception
of what they wanted to do.
Three points became evident, however. In
order for power to be institutionalized, an elec-
toral vehicle had to be created. Secondly, if the
power of the elite was to be broken, a mass or
popular base of support had to be developed.
Finally, if mass support was essential, organized
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labor could form the nucleus from which other
mass organizations might subsequently be fash-
ioned.
Drawing upon the (Mexican model, the gov-
ernment unveiled the New Panama Movement on
the first anniversary of the October coup. This
was to be a broadly based political organization,
organized on a sector basis and including peasant,
worker, student, and professional groups. Taking
a page from Peron, Torrijos the following month
announced plans to establish a government-
controlled national labor organization in which
the participation of existing unions would be
compulsory.
For a number of reasons, the government
did not go very far with either scheme. It did not
organize the New Panama Movement, probably
because more pressing matters arose and because
Torrijos could not find an individual he consid-
ered capable and loyal enough to be entrusted
with such an imposing responsibility. The govern-
ment also backed away from the idea of an all-en-
compassing government union in the face of vig-
orous opposition from businessmen and from
union leaders who felt that their positions would
be threatened.
Despite the government's tactical retreat,
these and other pronouncements frightened both
the oligarchy and the business community. F
Al-
though most businessmen were unwilling to stick
their necks out so long as Torrijos showed some
degree of restraint, they resorted to a kind of
passive resistance-a slowing of their investment
in the economy.
If businessmen were suspicious of the gov-
ernment, the reverse was equally true. CONEP's
condemnation of one-man rule-an obvious refer-
Special Report
ence to Torrijos-only
hours after colonels San-
jur and Silvera at-
tempted to seize power,
reinforced Torrijos' dis-
trust of the oligarchy.
Still, Torrijos preferred
to avoid an open break
with the business com-
munity, and the newly
appointed president,
Demetrio Lakas, took on
as his major task the es-
tablishment of a dia-
logue between govern-
ment and business.
The reason for Torrijos' forbearance was his
continued desire to improve the climate for in-
vestment. In mid-1969 the government had been
forced to institute an expensive public works pro-
gram in order to counter a slowdown in the rate
of private domestic investment. The regime had
believed that the business community would soon
accept the new political situation and the eco-
nomic picture would improve, but the growth of
domestic private investment remained at little
more than half the 1967 level. Government pro-
grams were not scaled down, and the budget
deficit increased substantially.
Considering the gulf that had already devel-
oped, Lakas' efforts to build bridges to the busi-
ness community should not have been expected
to bear fruit overnight. Torrijos, however, was
neither prepared for a long courtship nor willing
to give up his efforts to gain popular support.
Prolabor statements continued, taxes were in-
creased, and workmen's compensation insurance,
previously handled by private companies, was
taken over by the government's Social Security
Fund.
These last two measures in particular deep-
ened the alienation of the business community.
Even though the government toned down the tax
measure after Lakas interceded with Torrijos on
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behalf of the business interests, it remained a
bitter pill. Reaction against the take-over of work-
men's compensation was even stronger. The insur-
ance companies attacked the decree as tanta-
mount to expropriation, and other businessmen
became concerned that the government might
move against them next.
Although Torrijos was prepared to advertise
these measures as evidence of his commitment to
reform, his primary motivation apparently was
not reform and certainly not the alienation of the
business community. Probably his main concern
was for additional revenue. Because the govern-
ment taps the Social Security Fund at will, any
additional monies put into it would become im-
mediately available for government programs. The
tax measure was more obvious-it promised to
yield more than $10 million in 1970.
With revenue still insufficient to support the
politically and economically necessary public
works program, the government has had to rely
on foreign borrowing to cover budget deficits and
upon foreign investment to help keep the econ-
omy healthy. Torrijos, therefore, has seemed even
more concerned about Panama's standing with
the international financial community than about
his relations with the local businessmen. This may
help to explain the recent removal from the cabi-
Special Report
net of two prominent leftists, Minister of the
Presidency Vasquez and Minister of Labor Esco-
bar. Although Lakas had long sought their ouster,
complaining that they were undercutting his ef-
forts to improve relations with the private sector,
Torrijos apparently became convinced only after
Lakas stressed that the presence of the two men
hurt the country's image abroad and frightened
off foreign lenders and investors.
These cabinet changes do not appear to fore-
shadow a shift to the right, however. Both men
were appointed to judicial posts. Escobar became
president of the Electoral Tribunal and Vasquez
was given a seat on the Supreme Court, and there
is no evidence that Torrijos has lost confidence in
either man or that he will not make use of them
in the future. More importantly, Torrijos'enmity
toward the business community has not dimin-
ished. He is convinced that it is trying to sabotage
his efforts to keep the economy moving, and he
has reportedly given up hope of winning it over.
Constrained to revalidate his reformist cre-
dentials and interested in cutting the oligarchy
down a peg or two, Torrijos may be moving to set
up cooperatives that would compete directly with
oligarchy-owned enterprises. The government has
already announced plans to build a $12-million
sugar mill in Veraguas to give cane growers an
alternative outlet to the two existing mills con-
trolled by the oligarchy even though such a sugar
mill cannot be justified on economic grounds.
This approach would offer significant ad-
vantages. It can help win popular support even if
simply presented as part of a development pro-
gram designed to increase production capacity,
improve skills, and provide jobs. It also gives the
government a convenient way to put pressure on
the business community either to increase the
rate of investment or to adhere to a particular
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Relations again became strained in February
when Hildebrando Nicosia, a top aide of deposed
President Arias, returned to Panama in an effort
to organize a coup against the government. Un-
successful, he sought asylum in the Canal Zone.
Nicosia's claims during his brief stay in Panama
that he enjoyed US backing rekindled Torrijos'
Over the past few months US efforts to
promote a closer working relationship with the
Panamanian Government have helped to dissipate
some of the coolness and suspicion that had de-
veloped since the coup in October 1968. The
government, realizing its need to get along with
the US, has evinced an interest in better relations.
Described as having a "love-hate" attitude toward
the US, Torrijos is deeply nationalistic and, al-
though desirous of a mature and equal relation-
ship with the US, is prone to strong and emo-
tional outbursts when thwarted.
Torrijos deeply resented the failure of the
US to embrace his "reformist" regime imme-
diately after he had overthrown Arias, the consti-
tutionally elected president, and for the first year
relations were "correct" rather than "cordial."
After Torrijos' visit to the US in October 1969
and a change in the US policy posture, relations
began to improve. They :suffered a serious set-
back, however, immediate) after the December
cou attem to
In early June the issue of political asylum
again came to the fore when the three colonels
who led the abortive December coup escaped
from a Panamanian jail and fled into the Zone.
The government has formally demanded the re-
turn of the colonels and has strenuously denied
the right of Canal Zone officials to grant political
asylum to Panamanian nationals.
Despite these latest complications, the gov-
ernment is apparently eager to avoid jeopardizing
relations with the US, presumably because of its
interest in resuming the canal treaty negotiations,
suspended since 1967. In an obvious effort to
improve relations, the government appointed a
new ambassador to the US in May after the post
had remained vacant for five months. In early
June, President Lakas emphasized to the US am-
bassador the government's interest in creating an
atmosphere conducive to mutual cooperation.
General Torrijos has also reaffirmed his willing-
ness to extend for another year the agreement
permitting use of Rio Hato, the major US military
installation outside the Canal Zone. The existing
agreerent expires in late August, and although it
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Locks
Mira
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Mheflo e
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COS A'RICA
'PANA
Special Report
75 Miles
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boundary
O* National capital
Zf~ Urban area
Panama Canal
10 Miles
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will probably be renewed without prior conces-
sions, the US may be expected to reciprocate by
agreeing to a number of Panamanian requests.
The full catalogue of requirements probably
has not been formulated and Panamanian think-
ing on treaty negotiations is still subject to
change, but preliminary information suggests that
Torrijos wants to embark on entirely new negotia-
tions rather than to recommence talks on the
three 1967 draft treaties dealing with the present
lock canal, a possible sea-level canal, and defense
arrangements. The Panamanians apparently ant to
retain the concessions embodied in these drafts,
such as sharing toll revenues and gaining a reduc-
tion in the size of the Canal Zone, but they will
want even more generous terms in any new
treaty.
In January, Torrijos and Lakas told the US
ambassador that all commercial activities should
be turned over to Panama and that they wanted
the Zone to be more closely integrated eco-
nomically with the rest of the country. Although
they recognized US requirements for controlling
the operation and defense of the canal, they
stressed that Panama must be treated as a full and
equal partner. Torrijos noted also that the present
situation giving the US rights in perpetuity was
unacceptable. He thought, however, that a treaty
that had no terminal date would be politically
manageable if it provided for periodic consulta-
tion and adjustment, and also for a complete
review in 20 to 30 years.
More recently, Torrijos told his canal ad-
visers that he would push for a considerable in-
crease in US economic and technical assistance
and also would seek considerable equipment of all
types for the National Guard. In view of the
current problems, Panama probably will also de-
mand that a clarification of the right of asylum be
included. The Panamanians have paid rather close
attention to US negotiations with Spain and can
be expected to insist upon an annual payment for
base rights in Panama.
The Panamanians have also expressed an in-
terest in obtaining concessions in advance of
treaty negotiations. They have pressed in particu-
lar the return of the Balboa ship repair facilities
and Old France Field. The lands and facilities of
the France Field area would be used to enlarge
the Colon Free Zone, and the Panamanian
Planning Director has stated publicly that if this
were done annual earnings from the Free Zone
would double within the next five years. The
Panamanians also want a substantial increase in
the sugar quota and additional US assistance for
road-building. Obtaining these concessions is
likely to be quite important to Torrijos because
they would increase his prestige and demonstrate
his ability to deal effectively with the US. They
would also provide a much-needed financial
cushion. US failure to accede to such requests
could prompt a hard-line response, particularly if
the Rio Hato agreement had been renewed with-
out obtaining compensating concessions. The gov-
ernment would probably feel swindled
Although Torrijos' tenure cannot be assured,
he appears to have a firm grasp on the levers of
power.
strong or united opposition to the General has
not developed within the Guard. As long as he
does not absent himself from the country for an
extended period of time and his subordinates
continue to bicker among themselves, Torrijos
stands a good chance of being able to move
against his opponents before they can move
against him.
The government's most immediate problem
has been to scare up enough money to refinance
the $22 million in short-term funds borrowed last
year and to find additional credits to cover cur-
rent expenditures. A $10-million loan was secured
in March, and prospects for obtaining an addi-
tional $30 million now appear to be good.
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Although the government will proceed cau-
tiously, once the liquidity problem subsides, more
sustained efforts to undermine the economic
power of the oligarchy could develop. In addi-
tion, business concern about the high rate of
government spending and the possibility of addi-
tional taxes is likely to have a continuing dampen-
ing effect on domestic private investment. Thus,
relations with the business community may get
worse before they get better.
Torrijos will probably push ahead in areas
such as public administration, community devel-
opment, and land reform. As before, however,
emphasis will be on highly visible projects. The
government is unlikely to revive plans for a com-
pulsory government-controlled labor federation
despite continuing efforts to build labor support.
Special Report
Restoration of normal political activity is
not yet in sight. The government has publicly
committed itself to hold elections this year, pre-
sumably for a constituent assembly that would
amend the constitution and pave the way for
general elections. The lack of any preparations to
date suggests slippage in the electoral timetable.
Although both the procedures and results of any
election would be carefully controlled, Torrijos
would have to balance the possible advantages of
legitimizing the Provisional Junta Government
against the danger of disorders. A final decision
may depend on what happens over the next
couple of months. Thus far, Torrijos has little to
show for his 20 months in power. If he can come
up with some dramatic accomplishment-perhaps
important concessions from the US-he may de-
cide to push for elections and may re-examine the
possibility of organizing the New Panama Move-
ment. If there are setbacks, however, or if prob-
lems develop within the Guard, Torrijos will not
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