WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011300200001-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 21, 2016
• Document Release Date: January 30, 2008
• Sequence Number: 1
• Publication Date: May 14, 1976
• Content Type: SUMMARY

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Secret
Weekly Summary
DOS review completed
Secret
CI WS 76-020
No. 0020/76
May 14, 1976
Copy N2 1409
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The WEEKLY SUMMARY, issued every Friday 'morning by the
Office of Current Intelligence, reports and analyzes signifi-
cant developments of the week through noon on Thursday. it
frequently includes material coordinated with
or prepared
by the Office of Economic Research, the Office of Strategic
Res--arch, the Office of Geographic and Cartographic
Research, and the Directorate of Science and Technology,
CONTENTS
1 Middle East
Lebanon; Israel; USSR-
Egypt; Pakistan
3 Africa
Namibia
3 Europe
Italy; Portugal; USSR;
Iceland-UK; France
6 East Asia - Pacific
China; USSR-Indochina;
Thailand
8 Western Hemisphere
Argentina
9 Spain: Prospects for Reform
11 Italy: C'ommunists' Economic Proposals
14 Lebanon: Prospects for Ilyas Sarkis
17 Jamaica: In Pursuit of Its National Identity
Comments and queries on the contents of this
publication are welcome. They may be
directed to the editor of the ekly
Summary
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LEBANON
Ilyas Sarkis, with strong backing from
Syria and conservative Christians and
Muslims, was elected president by Leb-
anon's parliament last weekend, despite
last-minute efforts by militant leftists
to impede the vote. The outcome of the
balloting was a major setback for left-
ist coalition leader Kamal Jumblatt, who
was able to prevent only 29 of the 98
deputies from participating in the elec-
tion. Sarkis' victory also gave a much
needed boost to Syrian policy in Lebanon.
Jumblatt's failure to disrupt the session
and Sarkis' near unanimous en-
dorsement-he received the votes of 66 of
the 69 deputies in attendance-have had a
sobering effect on the leftists. They have
shown some willingness this week to
cooperate with Sarkis, if not with their
nemesis, Syria. The Syrians, for their
part, see Sarkis' strong showing in the
vote and the endorsements he has since
received from a broad spectrum of
Lebanese notables as a vote of confidence
for Syrian peace efforts and a sign that
Jumblatt and the leftists are becoming in-
creasingly isolated.
Damascus still faces many problems in
Lebanon, the most pressing of which is
the smooth transfer of power to the
president-elect. Ironically, the Christians
themselves pose the greatest single threat
to plans for Sarkis' inauguration next
week.
On the eve of the election, Christian
militiamen launched a major offensive in
the mountains of central Lebanon with a
view to improving their bargaining posi-
tion before political negotiations begin.
The Christians apparently want to secure
several mountain villages lost earlier so
that they can create a supply route that
connects the major Christian city in the
east with the Christian core area. The
leftists have retaliated by escalating
the fighting in disputed areas of Beirut.
Despite their failure to make any
significant territorial gains, the Christians
have refused to accept a Syrian-brokered
cease-fire. There is some concern that
President Franjiyah may delay his
resignation, thus preventing Sarkis from
assuming office.
There are tentative signs that additional
Syrian troops have moved into Lebanon
since the election to ensure Sarkis' in-
auguration. The Syrians remain reluctant
to use their forces in a way that would in-
crease animosity among the Lebanese
toward their presence and heighten
Israel's suspicion of Damascus' inten-
tions. Consequently, Syrian troops have
been used only to quell disturbances in
northern Lebanon, where pro-Iraqi
Palestinians and Lebanese have tried to
spark new violence. (An estimate of what
a Sarkis presidency might be like appears
on page 14).
ISRAEL
Tot Aviv WEST BAN ,.~
The coalition cabinet on May 9 debated
at length its policy on additional Jewish
settlements in the occupied territories. In
the end, a compromise resolution was
adopted that averted a possible immediate
government crisis but left politically
troublesome basic issues unresolved.
Prime Minister Rabin's government
committed itself to the debate last
December when the extremist Gush
Emunim religious settlement group
sought to establish a settlement near
Sebastia in Samaria without government
approval. Over 100 squatters were per-
mitted to remain at an Israeli army camp
at nearby Qadum pending the
government's review of its overall settle-
ment policy. The resolution adopted last
weekend-without the support of two
coalition parties-stated that no perma-
nent settlement is to be established at
Qadum. The resolution reaffirmed,
however, the government's commitment
to set up additional settlements elsewhere
in the occupied territories.
The cabinet decided that it would offer
the settlers a new site, but deferred a deci-
sion on the explosive issue of where that25X1
might be. The settlers are demanding
another site in Samaria. They hope to
force the government to modify its
long-held policy of prohibiting Jewish
settlements in that region, which is heavily
populated by Arabs. The government has
promised to reach a decision soon.
Rabin's coalition cabinet remains
divided on the issue. The struggle is essen-
tially between those who assert that Jews
should be allowed to settle anywhere in
the traditional "Land of Israel," including
the West Bank, and those who want to
limit settlements to strategically impor-
tant locations in order to leave open the
option of territorial compromise in peace
negotiations with the Arabs. Rabin, sup-
ported by a cabinet majority, favors the
latter approach.
The conservative National Religious
Party, supported to some extent by Labor
Party conservatives such as Defense
Minister Peres, argues that no part of the
West Bank should be subject to a blanket
prohibition against Jewish settlements.
This position is strongly opposed by the
coalition's left-wing Mapam Party, which
believes that any additional West Bank
settlements only serve to undercut efforts
to reach a peace agreement.
Pane 1 1A/CCVl V 01 I AR A A nv NA mw 1 d 7r,
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USSR-EGYPT
Since the signing of the annual Egyp-
tian-Soviet trade protocol late last month,
Moscow and Cairo have taken additional
steps to ease the strain in their relations.
The Egyptians made the unusual
gesture of sending Minister of War
Gamasy to Moscow for the funeral of
Marshal Grechko, ended their strident an-
ti-Soviet propaganda campaign, and have
not followed through on President Sadat's
threat to publish Soviet-Egyptian
diplomatic correspondence detrimental to
Moscow.
The Soviets reciprocated by giving
Gamasy a cordial reception and by ceas-
ing much of their polemics against Cairo.
They have even replayed Egyptian com-
ments that despite the "mistakes" that led
to abrogation of the Soviet-Egyptian
friendship treaty, relations should be
"protected and preserved."
These developments indicate that
cooler heads have prevailed and that both
Moscow and Cairo want to prevent a con-
tinuing downward spiral in relations.
C. Rs
So far, the resumed Egyptian-Soviet
dialogue has been confined largely to at-
mospherics. Gamasy had no substantive
conversations in Moscow, and Soviet
Ambassador Polyakov's two recent talks
with Fahmi appear not to have gone
beyond a general discussion of a Middle
East settlement.
The Kremlin is presumably still angry
about Sadat's humiliating decision to an-
nul the treaty and his subsequent moves to
improve relations with Peking. Sadat has
displayed no inclination to make any
political concessions to Moscow that
would be prerequisite to a significant im-
provement in relations. He remains con-
vinced that Moscow will pull no punches
in seeking to break his hold on power in
Egypt.
As long as the underlying suspicion and
antagonism prevail, it seems that the most
Cairo and Moscow can hope for is the es-
tablishment of more businesslike relations
and a muting of open hostility.
Foreign Minister Fahmi
ew AS
PAKISTAN
Afghanistan's invitation last week to
Pakistani Prime Minister Bhutto to visit
Kabul, and Bhutto's acceptance, are the
latest signs that relations between the two
countries are improving. The visit may
take place next month.
Relations have been poor since
Mohammad Daoud came to power in
Kabul in 1973 and sharply increased
Afghan agitation on the Pushtunistan
issue, a long-standing territorial dispute
between the two countries.
Last month the Pakistanis pledged
some $I million in food and other relief
assistance for victims of a recent earth-
quake and flooding in Afghanistan. They
also suspended propaganda against the
Daoud regime. The Afghans responded by
easing their anti-Pakistan propaganda.
These developments followed a
Pakistani initiative to ease tensions with
India, Pakistan's other regional adversary
and a supporter of the Daoud govern-
ment. In late March, Bhutto wrote to In-
dia's Prime Minister Gandhi offering to
withdraw a five-year-old Pakistani claim
against India before the International
Civil Aviation Organization. Bhutto's
letter opened the way for an agreement to
hold a new round of talks on various In-
do-Pakistani issues, including possible
restoration of diplomatic relations, which
were suspended during the 1971 In-
do-Pakistani war. The talks began on
May 12 with the arrival in Islamabad of
an Indian team led by Foreign Secretary
Mehta.
1hutto's interest in reducing tensions
with his Indian and Afghan neighbors
may have been stimulated by recent signs
of a modest improvement in India's frosty
relationship with China, which Pakistan
has long viewed as its primary big-power
supporter. Daoud, for his part, may
believe that the nascent thaw between In-
dia and Pakistan increases Afghanistan's
need to reduce friction with Pakistan,
which is stronger militarily.
Even though both countries appear in-
terested in lessening tensions, neither
seems prepared to make basic concessions
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Gtmmr
on the Pushtunistan issue. Afghanistan
has maintained its position that the two
Pakistani border provinces inhabited by
the Pushtun and Baluchi ethnic groups
should be granted self-determination or
greater autonomy by Islamabad; the
Pakistanis reject this view.
parallel the border of the Ovambo tribal
homeland, is intended to help counter
sporadic cross-border incursions by
Namibian nationalist guerrillas belonging
to the South-West African Peoples'
Organization who are operating from
Angola.
Since last August a series of small-scale
terrorist attacks in northern Namibia,
which the South Africans blame on
SWAPO guerrillas, has resulted in the
killing of at least 17 Ovambo tribesmen
and the abduction of 21 others. The South
Africans fear that Namibian guerrillas
will receive increasing aid from the
Popular Movement government in
Angola, or from the Cuban contingents
helping Agostinho Neto's regime to con-
solidate its control over southern Angola.
Neto's future support for SWAPO will
probably be tempered by fears of South
African military reprisals, and by
Angola's need for South African par-
ticipation in completing the important
Cunene hydroelectric project.
Nevertheless, international backing for
SWAPO insurgency is likely to grow as
long as Pretoria tries to maintain its con-
trol of Namibia in defiance of the UN and
the Organization of African Unity.
On the other hand, the effectiveness of
the insurgency may be impeded by
quarreling among the Namibian exiles. In
Zambia, where SWAPO has maintained
bases since 1966, government authorities
recently announced that a number of
SWAPO officials had been placed under
"protective custody." In addition, 41
SWAPO guerrillas based in Zambia have
reportedly been detained.
South African authorities have an-
nounced that a security buffer zone one
kilometer in depth is being established
along part of Namibia's border with
Angola. The buffer zone, which is to
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OVAMBOLANO
NAMIBIA
The Zambians probably also fear that
an open split among SWAPO leaders
might lead to competing bids for Chinese
and Soviet support. In the past SWAPO
has received token aid from both Peking
and Moscow as well as the OAU.
1
The campaign for Italy's parliamentary
election on June 20 is getting under way.
The parties are now drawing up candidate
lists, which must be submitted by May 19.
The Christian Democrats and Com-
munists, in particular, are attempting to
broaden their appeal by including some
"new faces" among their candidates. The
Communists, for example, have per-
suaded some prominent Catholic intellec-
tuals and a retired air force general to run
on their lists for the Senate. The Christian
Democrats' most impressive catch so far
is Umberto Agnelli, managing director25X1
Fiat and brother of Fiat chairman
Giovanni Agnelli. The latter, Italy's most
influential industrialist, has so far resisted
attempts by the fiscally conservative
Republican Party to enlist him as a can-
didate.
The parties are still developing their
platforms. Preliminary comments by
Prime Minister Moro and Socialist leader
De Martino indicate that campaign
debate will center on whether or not to
grant the Communist Party a role in the
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government. In an interview this week,
Moro asserted that his Christian
Democrats remain the "central axis" of
Italian democracy and implied that in-
creased Communist influence would
threaten Italian liberties. De Martino,
meanwhile, has ridiculed the Christian
Democrats for continuing to insist that
the Communists should not be in the
government, while at the same time show-
ing a willingness to negotiate government
programs with them-something Moro
seemed ready to do before his govern-
ment fell on April 30.
The Communists got a jump on cam-
paign preparations, but are wrestling with
some difficult tactical problems
themselves. The principal one is how to
balance an attack on the Christian
Democrats with continued defense of
25X1 Communist chief Berlinguer's "historic
compromise" proposal for an eventual
25X1
The Communists are also worried
about how to hold on to the middle class
votes that helped them score a near
plurality in local elections last. summer
without alienating the party's labor base
PORTUGAL ! 7.
i_ fW
US-are exempt.
To increase the inflow of foreign ex-
change, Rome has imposed additional ex-
port financing rules and currency con-
trols. Exporters are now required to ob-
tain 30 percent of the value of any export
credit in foreign c. irrencies. Furthermore,
all foreign currency receipts must becon-
verted into lira within seven days of ac-
quisition. The Bank of Italy has also
prohibited short-term lira loans to foreign
banks as a way of stemming speculation.
Italy's trade account has begun to
deteriorate badly. The first quarter trade
deficit this year-$1.5 billion-was dou-
ble that for the first three months of 1975.
Past devaluations have driven up import
prices, and nervous businessmen have
used the trade account to hide capital
flight by padding import invoices. The
new plan would make this practice less
profitable.
Rome apparently plans to supplement
its defense of the lira with intervention in
exchange markets to moderate swings in
the lira's value. Italy will ask the EC for a
new short-term loan of up to $1
billion-already approved in prin-
ciple-to prop up its reserves. Rome also
is seeking funds from other sources as
well as asking for extensions of some out-
standing obligations.
posed, the election would be viewed both
in Portugal and abroad as undemocratic.
Eanes' backers are confident that his
broad support in the military and among
the parties will assure his election despite
the fact that he is not nearly as well
known as some other military figures.
Azevedo has no such recognition
problem, and if the election were held now
he would probably win. His courageous
performance as prime minister during an
extremely difficult period has won him
many admirers, but organized support for
his candidacy may be forthcoming only
from the Communists and possibly other
leftist groups. Such support could
An endorsement by Portuguese
Socialist Party leader Mario Snares on
May 12 has established Army Chief of
Staff Ramalho Eanes as the front-
runner for the presidential election on
June 27. Eanes' chief opponent may be
Prime Minister Pinheiro de Azevedo,
who earlier this week reaffirmed his in-
terest in becoming a candidate.
Soares emphasized that no deal had
been made with Eanes to gain his support
for the Socialists' plan to form a minority
government. Soares said it is only a coin-
cidence that the centrist Popular
Democrats and the conservative Social
in the process. (An analysis of Italian
Communist Party economic proposals,
appears on page 11.) Stabilization Measures
Rome Last week announced an import
deposit plan, an export financing scheme,
and further currency controls intended to
boost the lira in the weeks before the
national election of June 20 and 21.
The import deposit plan requires im-
porters and others dealing in foreign ex-
change to deposit half the value of their
foreign purchases in noninterest-bearing
accounts at the central bank for three
months. Imports financed by external
borrowing are exempt from this deposit
requirement. This restriction, besides dis-
couraging the outflow of foreign ex-
change, should sop up domestic liquidity
and help reduce the money supply. The
blocking of funds on such a major scale,
however, may exert further pressure on
bank interest rates-already at 15 percent
and more-and increase the financial
problems of small businessmen.
If importers can secure necessary finan-
cing, the deposit plan is likely to have only
a limited effect on trading patterns. Its
low carrying charges will boost prices of
foreign goods only marginally. Imports
from the US would be less affected than
others because wheat purchases-a sub-
stantial share of Italian imports from the
Democratic Center are also backing
E:anes, and that the Socialists do not plan
to join them in a coalition government
this summer.
Eanes, a 41-year-old infantry officer,
still has not made a formal announcement
of his candidacy, but he is expected to this
weekend. He has spent the past week
soliciting the views of military colleagues
at bases throughout the country.
A decision by Azevedo-a career naval
officer-to throw his hat into the ring
could result in a split in loyalties in the
armed forces. Many Portuguese civilians
and military officers believe, however,
that a second viable candidate is impor-
tant. Should General Eanes run unop-
prove a liability.
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General Secretary Brezhnev's military
promotion to Marshal of the Soviet
Union may have been prompted by a
desire to reassure the population that,
although a civilian had been named to
replace Grechko, the person in ultimate
charge is the "experienced" Brezhnev.
Over the last few years there has been a
considerable effort to build up Brezhnev's
war record, even though as political of-
ficer, he played only a minor combat role.
Last year, he was honored with a promo-
tion to general of the army. His latest
promotion may have also been intended
to reassure the military that Brezhnev-as
Marshal of the Soviet Union and chair-
man of the USSR Defense Council-will
look after the interests of the armed
forces.
The next step in enhancing Brezhnev's
role as military leader could be some
public recognition that he is commander
of the armed forces in peacetime. At the
moment he is apparently designated to act
as Supreme Commander in Chief only in
the event of war. This arrangement was
probably acceptable both to the political
leadership and the military hierarchy so
long as a professional soldier headed the
Defense Ministry. The appointment of
Ustinov, however, may prompt the
military to argue more strongly for the
creation of a unified, military-political
command with Brezhnev or his successor
as Supreme Commander in Chief.
Since Brezhnev's promotion, Soviet
publications have been full of praise for
him as a political and military leader. Re-
cent speeches by Brezhnev's Politburo
colleagues Podgorny and Shcherbitsky
have emphasized that Brezhnev's life and
work have been closely associated with
the armed forces.
The rank of Marshal of the Soviet
Union, created in 1935, is the second
highest rank in the Soviet military.
Generalissimo is the highest, but Stalin is
the only one who has held that rank. In
addition to Brezhnev, three professional
military officers on active duty are
Marshals of the Soviet Union.
Tension increased over the past week
following a series of new incidents
between the Icelandic coast guard and
British protection vessels. Unless a new
fishing agreement is reached soon, public
sentiment in Iceland against the US-
manned base at Keflavik, as well as
against the country's membership in
NATO, will mount.
London ordered its protection vessels to
modify their tactics against the Icelandic
patrol boats three week ago. Iceland did
not relax its tactics, however, and several
British trawlers lost expensive gear. On
May 4, some of the trawlers threatened to
leave the area permanently unless London
authorized better naval protection. The
next day, the trawlers returned, and this
time the British protection vessels en-
gaged the Icelandic patrol boats. Within
a few hours, ships on both sides sus-
tained crippling damage.
Officials of the Progressive Party-the
junior partner in the two-party Icelandic
coalition-last weekend attacked the US
and NATO for failure to support Iceland.
After a strongly worded speech by party
chairman and former prime minister
Olafur Johannesson, the party's central
committee on May 8 issued a resolution
citing the "difficulty" for Iceland of con-
tinued cooperation with NATO and urg-
ing the US not to take the Keflavik base
"for granted." Johannesson's criticism of
the US stemmed this time from the deci-
sion not to lend or lease Iceland fast
patrol boats.
Two days later, Foreign Minister
Agustsson-also of the Progressive Par-
ty-suggested publicly that he might
boycott the NATO ministerial meeting
next week. He added that Iceland could
close the base, "which Iceland does not
need," and still remain a member of
NATO.
In private, Agustsson has told the US
charge that he could offer some "slight
hope for a settlement' next week," after
parliament adjourns. He warned that a
settlement must be reached soon if the
"common interests of all of us are not to
be damaged."
Agustsson's tough public stance
presumably reflects his party's attitude,
while his private willingness to com-
promise could signal the government's in-
tention to try to end the dispute soon. Any
quick agreement at this time, however,
would tend to vindicate London's
aggressive tactics at sea, and a week or
two of cooling off might be necessary
before a settlement could be reached.
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FRANCE
The French Ministry of Defense has
proposed a five-year military spending
plan that calls for a record defense budget
of almost $12.5 billion in 1977, up about
16 percent from this year's budget.
The plan was approved by the Council
of Ministers on May 5 and is to be for-
mally presented to the National Assembly
later this month. Military spending under
the plan will continue to increase an
average of almost 15 percent a year dur-
ing the next five years. At this rate, the
defense budget would be almost $25
billion by 1982-about one fifth of the
projected national budget.
These increases reflect the trend in
French defense policy toward moder-
nizing the navy and creating stronger,
more flexible conventional forces. Under
the five-year plan, France's tactical and
strategic nuclear forces-with the excep-
tion of the strategic bombers-will con-
tinue to be given priority attention, but
the conventional forces will receive a
larger share of the defense budget than in
25X1 the past. The increased allocation to con-
ventional forces will be used, in part, to
enhance their capability to respond to
crisis in areas of key interest, such as the
Mediterranean region.
The plan reportedly calls for acquiring
during the next five years:
? A large number of new AMX-10
RC armored vehicles and additional
AMX-30 medium tanks.
? Some 200 Jaguar fighter bombers
and Alpha Jet ground attack aircraft.
? A number of Super Etendard air-
craft capable of delivering nuclear
weapons for the navy.
? The first 4 of 20 nuclear-powered
attack submarines.
? The country's first nuclear-
powered helicopter carrier.
? A sixth ballistic-missile sub-
marine.
The Ministry of Defense also an-
nounced that the number of men and
command levels in the army will be re-
duced in an attempt to make that force
more efficient. The one-year conscrip-
tion system will be retained, however, de-
spite its growing unpopularity within the
country
The situation in China remains tense in
the wake of the Peking riots of April 5
and Teng Hsiao-ping's ouster. The party's
left wing would like to continue its offen-
sive-especially while Chairman Mao is
still alive-by purging other unnamed
"capitalist roaders" who supported Teng.
Party moderates thus far have managed
to keep the lid on.
The left continues to dominate the
propaganda and has escalated its attacks
on Teng. It has branded him a
"conspirator," implying that he had
collaborators whom the left would like to
remove. At least one broadcast has
argued for Teng's removal from the party.
Several others have gone well beyond
criticism of Teng, calling for expanding
the campaign to include other capitalist
roaders still in power in the party.
GAmmA
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Teng's removal was not a popular step,
and word of disaffection within the
general populace and on the part of some
provincial leaders continues to filter out
of China. Concern that this dissatisfaction
may result in further violence, such as the
explosion outside the Soviet embassy in
late April, is evident in the propaganda
against "counterrevolutionaries"-a
codeword for perpetrators of civil dis-
order-and in heightened security
measures in Peking.
Despite their show of unity on May
Day, Chinese leaders seem to be making
no secret of the divisions among them.
Three leading moderates appear to have
boycotted a reception on April 26, at-
tended by the rest of the leadership, to
honor those who put down the Peking
disturbances. The reception seemed a
symbolic act to underline the militant
suppression of pro-Teng sentiment at the
riot of April 5, but it has not received
much propaganda play.
It is far from certain that the left can
carry out a wide-scale purge. Given the
Poster at recent Canton fair
sullen mood throughout the country, and
especially the feeling the anti-Teng
campaign is besmirching the memory of
Chou En-lai, a massive effort to root out
Teng's supporters could well prompt a
new and larger round of political turmoil.
This is something that leaders of all
political stripes would like to avoid.
For the moment, the left has been un-
able to translate its rhetoric into action.
The bitterness caused by Teng's removal
suggests that the current stalemate cannot
hold indefinitely and will give way to
another major leadership struggle before
some degree of stability in the upper ranks
of the party can be achieved.
USSR-INDOCHINA n
Lao party and government leader
Kaysone Phomvihan's recent two-week
state visit to the USSR was the occasion
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U ?1
for the latest Soviet effort to foster im-
proved relations with the communist
regimes of Indochina. The USSR enjoys
relatively little influence elsewhere in
Southeast Asia and hopes to profit from
the problems confronting China in its
relations with Vietnam and Laos.
Kaysone's trip was successful, even
though long on ceremony and short on
substance. The major economic aid agree-
ment between the two countries for
1976-77 was signed last January, and
Kaysone spent most of his time touring
the USSR. The visit nevertheless resulted
in four new agreements and a com-
munique confirming that Vientiane-like
Hanoi-is presently friendlier toward
Moscow than it is toward Peking.
In the communique, the Lao endorsed a
number of Soviet positions on inter-
national communist and foreign policy
issues. For example, they accepted the
current Soviet formula on Asian security.
In endorsing the Soviet call for Asian
"peace and stability" through the "joint
efforts of the states of the continent," the
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Lao moved a step ahead of their mentors
in Hanoi. This will not sit well with the
Chinese, who maintain that the Soviet
Asian security proposal is aimed at
developing a pro-Soviet alliance on
China's borders.
Before Kaysone's visit, the Soviets had
sent Deputy Premier Arkhipov to Hanoi
to follow up on the aid commitments
Moscow made last fall during North Viet-
namese party leader Le Duan's state visit
to the USSR. Arkhipov attended the third
session of the Soviet-Vietnamese joint
economic commission and signed a new
protocol on aid and trade.
Moscow is also continuing its courtship
of the Cambodian Communists. Soviet
leaders sent congratulatory messages to
their Cambodian counterparts when their
party and government assignments were
formally announced in mid-April. Cam-
bodia, which had previously ignored such
messages, this time responded to the
Soviet greetings.
One Soviet official, presumably en-
couraged by this show of courtesy by
Phnom Penh, subsequently said that
Moscow expected to reopen its embassy
in Phnom Penh soon and had already
selected an ambassador. Other Soviet of-
ficials, however, are pessimistic.
ARGENTINA
The trust and confidence engendered by
the military junta's politically neutral,
businesslike approach to governing are
beginning to give way to concern over ar-
bitrary security practices and over Presi-
dent Videla's seemingly unsteady grasp on
his authority.
Members of major unions and political
parties have expressed fear about the im-
plications of recent widespread arrests
and take-overs of unions the government
had pledged not to touch. Their impres-
sion that local military commanders are
operating without-or perhaps
despite-central direction is shared by
likely to lead to strict curbs on Malaysian
counterterrorist activities inside Thailand.
that the way will be cleared for implemen-
ting its broad range of policies.
Meanwhile, however, Videla's low-key
style and lack of aggressiveness have con-
tributed to independent behavior by local
commanders and to interservice competi-
tion. Proponents of harsher security
measures take the President's mild
manner as an invitation to do things their
own way. At some point soon, Videla will
be obliged to assert his authority by rein-
ing in officers operating counter to his
wishes. His failure to do so would cost the
junta the favorable image it has managed
to create abroad as well as the popular
support that gives the government
leverage against the terrorists and other
domestic problems.
The new Seni government, in office
only two weeks, is already moving
decisively and effectively to resolve
several potentially troublesome issues.
Within days of winning a lopsided vote
of confidence in the National Assembly,
Seni announced a shake-up of the armed
forces high command that has won high
praise from most senior military officers.
Seni inherited an army leadership em-
bittered by efforts of Deputy Prime
Minister Praman, in his former capacity
as defense minister, to increase his in-
fluence in the army by ignoring
traditional promotion channels and ap-
pointing his own men to key positions.
Seni has now pushed aside those generals
loyal to Praman, strengthening his own
position within the military, while
weakening, at least temporarily,
Praman's political base.
Within the past week Seni's foreign
minister, Phichai Rattakun, signaled his
intention to continue an increasingly
nationalistic Thai foreign policy. In
response to public outcries over a Malay-
sian military operation against local in-
surgents that spilled over into Thailand,
Phichai delivered a toughly worded note
to the Malaysian ambassador that seems
journalists. Indications are that the three
services are working at cross purposes.
The navy, for example, has failed to honor
Videla's request for a comprehensive list
of prisoners it is holding. Videla has
reportedly encountered opposition from
navy chief Admiral Massera, a fellow jun-
ta member.
Videla has been preoccupied with
creating the impression of
evenhandedness toward business and
labor. To soften the impact of the junta's
pro-business economic policy, Videla
decreed across-the-board wage hikes and
arrested a number of businessmen ac-
cused of price gouging. He evidently sees
his immediate prime task as convincing
the country of the junta's good faith, so
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The Spanish government is advancing the pace of its
reform program, but still faces the problem of proceeding fast
enough to placate the left without provoking a rightist
backlash.
Spain: Prospects for Reform
The Spanish government, largely in
response to increasingly vocal opposition
from the left, is moving forward on its
program to liberalize the system inherited
from Franco.
In the six months since Franco's death,
King Juan Carlos and the government
headed by Prime Minister Arias have
created a freer atmosphere, but they have
been slow in developing and publicizing
plans for changing the basic political
structure.
Prime Minister Arias finally laid out a
timetable for reform in his speech on
April 28. Arias' imprecise outline of the
government's plan did little to quiet the
opposition, however, and the government
last week began to flesh out the bare
bones program he announced. Indeed, the
proposals for the referendum to be held
next October, as approved by the cabinet
last Friday, go further than Arias had
seemed to promise in his speech.
In other gestures toward a more open
political system, King Juan Carlos has
been consulting with opposition leaders,
the government has released several
well-known Communists arrested last
month, and it has promised to free all
remaining political prisoners soon.
The Reform Program
The government has chosen to follow a
path of gradual change and to push its
program through the rightist-dominated
Cortes-Spain's parliament-in the hope
the legislators will go along as they
become exposed to the pressures for
reform. The government's strategy is to
retain as much of the form of Franco's
system as possible. Even major changes
are couched in corporate-state ter-
minology-legislators are referred to as
Prime Minister Arias (1) with King Juan Carlos *4 p
"family representatives," and political
parties as associations.
More than just the rhetoric of the cor-
porate state will be retained. The referen-
dum will call for a bicameral legislature in
which the 300 "family representatives" of
the lower house will be selected by univer-
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sal suffrage, but the upper house will
represent interest groups as does the pre-
sent Cortes.
Initially, the government was reported
to favor a proposal calling for the upper
house to be selected through indirect elec-
tions, but this drew the immediate fire of
the opposition. Socialist leader Felipe
Gonzalez threatened to boycott the
referendum.
Reformist cabinet ministers led by
Interior Minister Fraga and Foreign
Minister Areilza apparently won some
concessions last week. The government's
proposal now calls for an upper house of
285 members, of whom 200 will be direct-
ly elected from lists drawn up by
municipal and provincial councils and
labor unions. Twenty-five of the senators
are to be appointed by the king, 20 chosen
by professional groups, and 40 members
of the current Cortes, appointed for life by
/tee e+o rAe.?RrAm2
Franco, will be retained.
Questions still remain whether the up-
per house will have equal power with the
lower house and to what extent the
government will be responsible to a
parliamentary majority. Neither the con-
stitution nor the government's explana-
tion of its referendum proposal appears to
establish a traditional parliamentary
system.
The referendum will also provide an in-
direct test of popular sentiment about the
monarchy. The question to be voted will
propose lowering the minimum age of the
King's successor from 30 to 18 and per-
mitting women to accede to the throne.
The wording of the government's
proposal for a consultative economic and
social council is being interpreted as es-
tablishing the right of labor to organize
separately from management. The
current Spanish syndical system merges
both into the same organization. This
appears to be a government concession to
the opposition, which had been upset that
labor reform was not to be included in the
referendum.
Other aspects of the government's
reform package are to be handled only as
simple legislation. An election law ex-
tending suffrage will be submitted within
a few weeks, and draft laws lifting the
restrictions on freedom of assembly and
organization of political parties have
already been sent to the Cortes.
Reform advocates are convinced that
the government has sufficient influence to
get its proposals passed. To reduce the op-
portunity for rightist obstruction, Arias
has invoked "urgency procedures" requir-
ing the Cortes to act within 25 days.
Objections from the Left
The opposition remains skeptical,
however, that reforms can be made from
within a system in which the right wing is
so entrenched. Principal opposition
leaders are thus unwilling to be seen as
cooperating with the government, at least
until there has been some significant
progress.
Government hopes of luring most of the
opposition into full political participation
are complicated by the troublesome ques-
tion of the Communist Party. The one
issue on which even the more democratic-
minded members of the government
refuse to budge is the left's demand for the
legalization of the Communist Party.
They fear legalization would provoke the
right and cause the military to intervene.
Major opposition groups, like the
Socialist Workers Party and leftist Chris-
tian Democratic factions, have recently
aligned themselves with the Communists
in a political alliance called the
Democratic Coordination. These groups,
and especially Socialist Workers' leader
Gonzalez, believe the Communists' long
opposition to Franco and the pragmatic
political positions they now espouse earn
them a legitimate claim to political par-
ticipation.
The democratic opposition groups are
willing to work with the Communists
because they believe:
? That a tactical alliance of all op-
position groups is the only way to
mount sufficient pressure for reform.
? That the Communists can best be
contained through open competition
that will expose their limited popular
support.
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? That operating freely will rein-
force any democratic trends that may
exist within the Communist Party.
Despite many impediments to coopera-
tion between the opposition and the
government, there are indications that the
democratic left may yet have a positive
role to play. There are increasing contacts
between the two, highlighted most recent-
ly by King Juan Carlos' discussion with
Jose Maria Gil Robles, who last month
led his Christian Democratic faction into
the Democratic Coordination alliance.
Such contacts could evolve into a
dialogue.
Odds of the Gamble
Spain's economic progress in recent
years has given most Spaniards a sense of
having a stake in the system, an attitude
that cuts across class lines. There is no
large, disenchanted group of people eager-
ly awaiting a revolution.
Even at the height of the leftist-spon-
sored strikes and demonstrations a few
weeks ago, the workers' protests appeared
to be primarily over economic issues. The
Communists and Socialists are strong in
the labor movement but have had little
success so far in interesting the workers in
political issues.
Polls this year suggest that most
Spaniards favor the government's ap-
proach to reform and support the King.
At the same time, however, the polls show
a desire to move faster to liberalize the
system.
The government has been slow to
capitalize on this latent support. Efforts
are only now getting under way to form
centrist parties that would draw support
from the middle class and provide a
bridge between pro-government groups
and the opposition. Opposition Christian
Democratic leaders are talking with
pro-government groups, and if they can be
persuaded to support the government's
program, the Socialists might reconsider
their threat to boycott the
government-sponsored referendum and
elections to the bicameral legislature.
To gain active support from the center,
however, the government must show some
concrete achievements soon, although ef-
forts to speed change would further
energize the right and jeopardize govern-
ment unity.
Arias has been accused of foot-
dragging by reformists in the cabinet, and
even Juan Carlos is said to have lost his
patience with the Prime Minister's reluc-
tance to take a leadership role.
An attempt to replace Arias could
bring the King into direct confrontation
with the right-something he has avoided
so far. He backed off from an earlier no-
tion to replace Arias in the belief that the
Francoist majority in the Council of the
Realm-which is constitutionally charged
with nominating the prime
minister-would give him a slate of un-
acceptable candidates to choose from.
Should Arias continue to be seen as an
impediment to reform, the King might
have no choice but to try to strong-arm
the Council into putting his candidate on
the three-man list. The King might also be
forced to take a tougher stance if the
Cortes stymies his reform program. Some
thought has already been given to taking
the entire reform program to the people in
The Communist Party is working hard to persuade voters
that its participation in policy making is essential for economic
stability. Party economists have been proposing a number of
nondoctrinaire solutions to Italy's economic woes, many of
them close to those advocated by center-left parties.
Italy: Communists' Economic Proposals
The Italian Communist Party is work-
ing hard to convince voters in the national
election next month that its participation
in policy making is essential for economic
stability.
Economic proposals that have been
made by party experts largely provide
nondoctrinaire solutions to Italy's im-
mediate problems. Many of the
proposals, particularly on fiscal matters,
are close to those advocated by center-left
parties. The Communist program,
nevertheless, is carefully contrived to
protect worker income and reduce Italy's
economic dependence on the West.
The Communists are vague about their
longer term economic goals. Party chief
Enrico Berlinguer talks of a system of
"democratic planning," but what he
means by this has never been defined.
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The Communists see an equilibrium in
Italy's balance of payments as the most
immediate economic goal. To relieve
pressure on the lira, they recommend
tighter controls over speculative financial
flight and over foreign exchange
payments. The party wants the EC to
grant Italy authority to establish import
quotas for luxury items, and has called for
revival of the import deposit scheme, a
step the government took last week. If
consumption of imported goods must be
curbed, the Communists view rationing as
more equitable than price increases.
Party economists generally oppose
further economic assistance from abroad.
They consider Italy's huge foreign
debt-totaling $15.5 billion-a symbol of
foreign control over the Italian economy.
Eugenio Peggio, one of the party's leading
economic experts, has denounced credits
from the EC and the International
Monetary Fund as threats to Italian
autonomy because they specify con-
straints on the growth of public spending
and credit. Any further foreign borrow-
ing, he asserts, must come with no strings
attached.
The Communists reject any type of in-
comes policy as a way to reduce Italy's
payments deficit. They argue that the
burden of such policies would fall largely
0. RS
on lower income groups. The party admits
that unit labor costs must be competitive
with those of trading rivals, but it rejects
wage controls of any kind. Peggio asserts
that moderation on wages can come about
only after organized labor has been given
a larger role in business planning and in-
vestment.
The Communists also promise voters
relief from the credit squeeze that the
government has instituted to bolster the
lira. The party recommends that the
government establish a special line of
credit to provide financing for priority
projects in agriculture, housing, energy,
and the employment of youth. At the
same time, it recommends that financial
institutions give priority to small
businesses in providing credit.
Import Substitution
The Communists consider import sub-
stitution essential to long-run improve-
ment in Italy's balance of payments. In
common with many center-left
economists, Peggio recommends the rapid
expansion of domestic agriculture and the
maintenance of the farm population at
current levels. He particularly emphasizes
the need for increased meat production;
foreign exchange expenditures for im-
ported meat are second only to those for
crude oil.
The Communists go much further than
most economists in advocating major sur-
gery for the Common Agricultural Policy
of the EC. In the party's view, the EC
farm policy has served only to keep the
prices of Italian agricultural imports high.
The Communists would restructure EC
policy so that benefiting members would
finance at least half of their own
agricultural surpluses.
The party also advocates some shift in
the flow of Italian trade, ostensibly to
conserve foreign exchange. Peggio urges
that trade in industrial goods be shifted
toward supposedly less expensive
suppliers either in the USSR and Eastern
Europe or among the developing coun-
tries. He also recommends barter
agreements like those between East Euro-
pean countries and the USSR.
The Communists believe long-term
economic stability requires the streamlin-
ing of government operations. Party
resolutions recommend ceilings on the ex-
penditures of the central government and
state-owned companies, as well as the
decentralization of fiscal programs. The
Communists would have almost all public
projects in the fields of health, education,
housing, and transportation turned over
to the regional governments. To add to
government revenues, the party favors
tougher tax treatment for upper income
groups; it urges random tax auditing to
curb evasion and accelerated collection of
overdue taxes.
System Called Obsolete
Luciano Barca, chief of the party
economics section, says Italy's economic
system is obsolete. He asserts that free
enterprise in Italy has rested on cheap
labor and inexpensive raw materials. He
adds that the collapse of these pillars, with
the strengthening of the labor union
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movement and the energy crisis, plunged
Italy into its present economic troubles.
He would, however, grant broad con-
cessions to the market, since Italy would
need continued contacts with outside
market economies.
The Communists insist that they want
to move Italy toward a planned economy
through democratic processes. They are
purposefully vague about their ultimate
goals, including the eventual ownership of
the factors of production. I n the short run,
the Communists would apparently like as
full control of the economy as possible
without completely alienating private
business.
They reject massive nationalization,
which would quickly extinguish private
enterprise. In any event, the government
already owns at least one third of Italian
industry. The Communists would attempt
to control investment flows through credit
and tax policies, more effective manipula-
tion of public companies, and planning
agreements with private companies.
Economic planning should work, Barca
states, to achieve a "fundamental social
transformation" by mustering the full
weight of industry to serve social needs.
The Communists would channel more in-
vestment into housing, schools, hospitals,
public transportation, and economic
development in southern Italy. They favor
labor-intensive investments and increased
capital spending in food-processing in-
dustries. One party member who deals in
economic and labor policy matters says
planning would reduce duplication of
manufacturing facilities and lead to a
better utilization of industrial capacity.
With the lessons of Chile in mind, the
party is cautious not to present too mili-
tant a front. The Communist platform has
considerable appeal to the mass of voters,
especially at a time when unemployment
is still rising. To many Italians, the party
is not only blameless for the current
economic malaise, but it offers a way out
that entails minimum sacrifice for labor.
Despite the party's professed allegiance
to the EC, several of its proposals run
counter to Community doctrine. Com-
munist demands for a reform of the EC's
agricultural subsidy mechanism amount
to an attack on the system itself.
Proposals to control luxury imports,
reduce import dependence, and redirect
trade toward the East could only be ac-
complished by imposing controls or
providing subsidies. Such measures would
threaten the most solid achievement of the
EC-the free flow of goods and services
among member states.
Many of the party's proposals are, of
course, dominated by self-interest.
? Its call for fiscal decentralization
Enrico Berlinguer (r) with Communist Party President Luigi Longo
is clearly motivated by the pronounced
strength of the party in regional
governments rather than by any clear
prospect of efficiency gains.
? Its proposal to curb federal ex-
penditures sets no limits on local
government funds or social security
funds. 25X1
? Its call for greater direction of in-
dustry and formulation of economic
priorities by the central government
would increase the power of the
bureaucracy.
to P/
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Assuming the security situation settles down enough to
permit Sarkis to assume the presidency, he may be able to act
as a relatively neutral arbiter of Christian and Muslim interests.
Much will depend on leftist leader Kamal Jumblatt's
willingness to work with Sarkis and on the latter's ability to
control the Christians.
Lebanon: Prospects for llyas Sarkis
Renewed fighting in Lebanon following
the presidential election on May 8 un-
derscores the magnitude of the task of
reconciliation facing president-elect Ilyas
Sarkis. Until more security is restored,
Sarkis cannot be certain he will assume
office, let alone be able to cope effectively
with the problems of bringing Christians
and Muslims to the negotiating table.
Although a Christian, Sarkis does not
pt the traditional mold of Lebanese chiefs
of state. Unlike most of his predecessors,
he was not born into the conservative
Christian establishment. He has always
been close to the center of power, but he
has little taste for its trappings. He rose to
the presidency on his own, in large part
because of his abilities as a highly compe-
tent administrator and a shrewd
behind-the-scenes negotiator. He has been
helped along by several leading politicians
but is obligated to few.
Perhaps the most important difference
between Sarkis and other Lebanese
leaders is his emphasis on practicality
over principle. He may be able to set at-
tainable goals and realistic priorities. This
pragmatism is likely to offend his
co-religionists and the Muslim left-both
of whom see their struggle in moral as
well as political terms-but it may keep
Sarkis above the endless wrangling over
which side is right and which is wrong.
This has scuttled previous attempts at
reconciliation and compromise.
If leftist leader Kamal Jumblatt can be
persuaded to work with the new president,
Sarkis may be able to act as a relatively
neutral arbiter of Christian and Muslim
interests. He seems personally to favor
this role. This would allow the Syrians,
whose own role as mediators has been
controversial, to work through Sarkis.
The Christians will put strong pressure
on Sarkis to argue their case, and, over
time, Sarkis will inevitably be drawn close
to their side, especially on such conten-
tious issues as secularization of the
government and reconstruction of the ar-
my.
As a conservative Christian, Sarkis is
likely to work hard to preserve as much of
the Christians' special political status as
possible. He may press Christian leaders,
however, to give up their less useful
prerogatives and to be more flexible.
Sarkis also seems to appreciate the
power of the Palestinians in Lebanon and
the need for their continuing cooperation
in peace efforts. Sarkis will have difficulty
overcoming the near obsession of the
Christians with the need to control the
Palestinians. He may be able to fashion
some compromises, however, by giving
private assurances to Palestinian leaders.
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We know little about Sarkis' personal
relationship with important Christian
leaders. The strong support he received
from Phalanges Party leader Pierre
Jumayyil suggests that Jumayyil has con-
fidence in Sarkis and generally approves
his stand on key issues. Interior Minister
Shamun, on the other hand, has a
long-standing grudge against Sarkis stem-
ming from Shamun's intense dislike for
Sarkis' political mentor, the late president
Fuad Chehab. Shamun, moreover, almost
certainly finds fault with Sarkis' liberal
attitude on reforms and his inclination to
seek compromise.
Sarkis should be able to strengthen
Jumayyil's hand in dealing with Shamun,
who, with President Franjiyah's support,
often scuttled Jumayyil's more flexible
proposals. Sarkis, however, has no in-
dependent power base in Christian circles,
and he will have to depend almost ex-
elusively on persuasion in dealing with
both Shamun and Jumayyil.
To a large extent, his success will hinge
on his ability to control the Christians,
who expect him to delay any further ero-
sion of their power. Should Sarkis fail to
do this, his presidency will be wholly
dependent on support from Syria and,
thus, would be attacked by both
Christians and Muslims.
25X1 25X1
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Prime Minister Manley's efforts to bring Jamaica's black
population into the mainstream both socially and economically
has led him steadily leftward. Less radical than some of his
followers, he would probably prefer to court middle-class sup-
port in the election he,faces before May of next year, but events
may impel him to run on a strictly radical versus conservative
platform instead.
( 2 J
Jamaica: In Pursuit of Its National Identity
Nearly 16 years after its independence
from the UK, Jamaica has reached a
crossroads. Prime Minister Michael
Manley's efforts to bring the black pop-
ulation into the mainstream both socially
and economically has led him steadily
leftward.
Manley claims to be a democratic
socialist, but he has aroused fears of more
revolutionary intentions. He has strongly
identified his country's foreign policy
with the Third World and has looked to
Fidel Castro's Cuba for models and for
moral support in carrying out his
domestic reforms.
Manley's policies-particularly the
close ties with Cuba and the independence
he has allowed young militants in his own
party-have caused a strong backlash. As
an election year begins, he finds himself in
serious political trouble. He has moved
toward the center in recent weeks in an ef-
fort to recapture middle-class and
business support, but he is finding it dif-
ficult to shed his leftist image.
The Cuban Tie
Castro has had a major impact on
Manley. En route to the nonaligned con-
ference in Algiers in September 1973,
Manley, Castro, and Prime Minister
Forbes Burnham of Guyana spent long
hours together aboard Castro's plane.
Manley later referred to the flight as "one
of the great experiences of my life."
Manley has found Cuba's experience in
developing social programs, particularly
in the fields of education, public health,
and school and housing construction, es-
pecially relevant to Jamaica. Manley has
also been impressed with Cuban technical
advances in areas such as agriculture and
livestock, sugar cane technology, and
commercial fishing.
In March 1975, the first major
technical cooperation agreement between
the two countries was signed. It provided
for 183 Jamaican youths to go to Cuba to
study the use of community self-help in
housing construction.
During Manley's visit to Cuba last Ju-
ly, technical cooperation was in-
stitutionalized with the establishment of a
joint economic, scientific, and technical
commission that is to meet semiannually.
Since the commission's first meeting last
November in Kingston, three projects
have been begun, and others are in the
planning stage.
Cuba now has 83 technical specialists in
Jamaica, in addition to an active embassy
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staff and a Cuban press office. They in-
clude:
? A team of 20 Cubans who arrived
in early February to build six small
dams that will be used as models for an
ambitious program to provide water to
Jamaica's farmers.
? An advance party of 55 Cubans
who arrived in February to make final
preparations for the building of a
500-student residential secondary
school specializing in the training of
agricultural technicians. The remain-
ing members of what is to be a 250-
man construction team are due to
arrive soon.
? Eight specialists in the construc-
tion of prefabricated houses who are
working on a project in the town of
Falmouth.
Cuban Activities
Havana has been particularly active
and successful in cultivating Jamaican
youth groups. Its contacts with the youth
wing of Manley's People's National Party
date from August 1974, and many of the
leaders of that organization, including its
director, Luis Castriota, are fervent ad-
vocates of close ties with Cuba.
The Cubans may already be providing
political training of some Jamaicans. The
Jamaican youths who were sent to Cuba
last summer to work in housing construc-
tion were selected from Minister of Hous-
ing Anthony Spaulding's stable of party
thugs, and at least a few of them can be
expected to become grass-roots party
organizers when they return.
Party's Leftward Drift
The People's National Party has begun
to move further and further to the left.
Party leaders have publicly advocated the
creation of a one-party state and an end to
any role for private enterprise.
The racial overtones of statements by
party leaders have caused ethnic minori-
ties to emigrate at accelerating rates. In
January, political violence sparked by
rival gangs affiliated with the People's
National Party and the Jamaican Labor
Party devastated entire city blocks in
the slums of West Kingston.
The Offensive Boomerangs
With elections due no later than May
1977, Manley's base of support has been
weakened, but probably not enough to
prevent his re-election. He has almost cer-
tainly lost ground among middle class
voters and among the young businessmen
and professionals who financed his last
campaign.
Manley could be hurt in the rural areas
as well, where his party made significant
inroads into the opposition's traditional
rural base in 1972. Manley's flirtation
with Cuba may cost him the votes of some
small farmers.
Manley will try to recoup by con-
solidating his hold over the urban poor.
The critical question in the election will
probably turn on whether Manley's party
can secure a high turnout of slum voters
and win a good percentage of the 18 to 21
year olds who are voting for the first time.
Search for Aid
The Manley government appears to be
making some headway, especially with in-
ternational organizations, in its search for
economic assistance. Jamaica has ob-
tained emergency balance-of-payments
aid of $29.2 million from the Inter-
national Monetary Fund's oil facility
mechanism and has availed itself of the
Fund's gold tranche.
The World Bank is studying several
new loans totaling at least $45 million
that would promote rural and urban
development and is considering Jamaica
for an ambitious pilot program aimed at
tackling urban unemployment. The
Inter-American Development Bank is ex-
amining a request for a $20-million in-
dustrial credit loan. In addition, smaller
loans have been offered by Kuwait and the
Caribbean Development Bank.
Jamaica has begun to turn to some of
the more radical nonaligned countries and
to Eastern Europe in its efforts to expand
its markets, acquire technology, and
decrease its economic dependence on the
US. In March, Hungary reportedly
agreed to construct an alumina plant in
Jamaica, and Algeria signed an agree-
ment for future yearly delivery of 150,000
tons of Jamaican alumina.
Diplomatic relations were established
with Libya in February, and the Qadhafi
government agreed to send a delegation to
Kingston soon to promote economic and
technical cooperation.
US Interests
US investments in Jamaica total about
$1 billion. The US receives over half of its
bauxite and nearly one quarter of its
alumina from Jamaica. US investment in
the Jamaican bauxite and alumina in-
dustry is about $660 million.
Realizing the need for the US market,
Manley and his negotiators have dealt
judiciously with the six North American
aluminum companies (five US, one Cana-
dian) that dominate the industry. It was
not until the dramatic rise in oil prices in
the winter of 1973 and 1974 that the
government began to pressure the com-
panies to renegotiate their contracts.
In June 1974, Jamaica broke off
negotiations and increased the export tax
on bauxite by 500 percent. The tax has
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been crucial to the island's economic sur-
vival and now accounts for over 30 per-
cent of government revenues.
Shortly after the imposition of the
bauxite tax, the government began acquir-
ing majority ownership in the aluminum
companies. In October 1974, provisional
agreements were reached with Kaiser-
and in the following months with
Reynolds and Revere-that called for the
government to buy 51 percent of the min-
ing operation over a 10-year period.
Discussions are under way with the
largest company, Alcoa, that will
presumably set the pattern for the final
agreement with all the companies.
Kingston has been in no hurry to make a
final settlement, presumably because it
lacks the revenue to purchase equity par-
ticipation.
The government has been put in a dif-
ficult bargaining position because of the
depressed state of the bauxite industry.
Bauxite and alumina export earnings in
real terms dropped by about 20 percent
last year. Reduced aluminum demand
forced Revere to close down its refinery,
and other companies have had to lay off
workers or shorten working hours.
As the bauxite industry recovers from
its current depressed state, Manley will be
encouraged to drive a hard bargain with
the companies, especially on the issue of
minimum production levels. This issue
could become particularly delicate if the
government thinks the companies are cut-
ting back production in Jamaica dis-
proportionately to cutbacks in other
countries where they have operations.
Manley's Prospects
To retain power, Manley will probably
try to carry water on both shoulders,
attempting to regain the confidence of his
former middle-class backers while at the
same time holding on to his left-wing sup-
port. This will not be easy, but Manley
will probably muddle through, winning
re-election, although by a much smaller
margin than in 1972. Left wingers in the
party will put continual pressure on him,
but as long as he does not move too sharp-
ly to the center they are likely to see their
long-run prospects as being better served
by working for his re-election than by
splintering the party and leaving the field
to the opposition. While Manley's support
from business and the middle class has
eroded markedly, the point of no return
has not been reached, and Manley is ac-
tively courting the favor of the commer-
cial elite-apparently with some success.
There is some danger, of course, that
the relationship with Cuba may already
have acquired sufficient momentum to
make a reconciliation with the
middle-class, moneyed-elite branch of his
coalition impossible to achieve even
through the election period. If Manley
judges that to be the case, he is likely to
run on a straight radicals versus conser-
vatives platform. In that event Manley
would have to mortgage himself to the
strong-arm methods of the ultra-radicals.
Though Manley's constitutionalist roots
are still strong enough to allow him to
accept honorable defeat, this is not true of
the left-wing party leaders, and their ef-
forts to steal the election or seize it by
force could either mark the end of West-
minster democrat in Jamaica or produce
bloody civil strife.
25X1
Fireman surveys damage following January riots in Kingston
P 25X1
1n VAirrv. V niIAAR AAMW P.Anv 1d 71
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