WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011400170001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 21, 2016
• Document Release Date: February 1, 2008
• Sequence Number: 1
• Publication Date: October 15, 1976
• Content Type: SUMMARY

Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
Next 1 Page(s) In Document Denied
Iq
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 7
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
ecret
Weekly Summary
On file Department of Agriculture release instructions apply.
State Dept. review completed
Secret
CI WS 76-042
No. 0042 / 76
October 15, 1976
Copy N! 16
Approved For Release 2008/02/01 : CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
CONTENTS
The WEEKLY SUMMARY, issued srer
F
id
y
r
ay moning b
ry th
Office of Current lntelligr aee re
ir# is
d a
}
an
nalyzes-inaf
sgi
-
cant de'elopments of the Week through noon on Thursday.
faejuent y includes material coordinated with or pr pared
by the (iff- se ke of Ecortomic'Re arch, the Office of Strategic
Research, the Office of Geagr hid and cartographic
Research;. and the Directorate of Science and Technology,
T?plcs requiring more cc" prehensive treatment and there-
fore ublishad separately as Special Reports are .listed in
the 4bterRts.
1 Far East
China; Thailand
2 Middle East
Lebanon:
3 Africa
Rhodesia; Angola
6 Western Hemisphere
Panama; Peru; Argentina
7 India: Gandhi's Rule
9 Spain: Economic Austerity plan
11 UK: Impact of Defense Cuts
13 Philippines: Another Referendum
15 USSR: Grain Outlook
16 Mexico: Economic Measures
Comm t
en and
s queries on the content
publication are welcome. They may be
directed to the editor Of the Weekly
Summary,
25X1
25X1
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
October 15, 1976
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
CHINA
4--
in two dramatic and apparently related
moves, Hua Kuo-feng has succeeded Mao
Tse-tung as chairman of the Chinese
Communist Party and of the powerful
Military Commission, while the Polit-
buro's four leading leftists have report-
edly been arrested. Public announce-
ment of these changes-and perhaps
others-is likely only at the conclusion
of a Central Committee meeting that is
apparently in session.
Hua's rapid promotion, a month after
Mao's death, was probably made possible
by a coalition of centrist and rightist
civilians with the support of the military.
The military may try to extract rewards
for its support, and there is potential for
friction between civilians and some
military leaders.
In addition to ratifying Hua's promo-
tion, the Central Committee is probably
reviewing the charges against the four lef-
tists, one of whom is Mao's widow Chiang
Ching. These people are widely disliked
and, if the party looks back to the leftist-
inspired purges of the cultural revolution
a decade ago, the list of their "crimes" is
likely to be long. Thus far, they have
reportedly been accused of plotting a
coup, presumably against Hua, and of dis-
torting Mao's writings.
There are rumors that several dozen
supporters of the leftists have also been
arrested. These are said to include Mao's
nephew, who apparently was in charge of
Mao's personal secretariat just before his
death, and the minister of culture, a
protege of Mao's widow.
The Central Committee may also be
considering the case of Politburo member
Li Te-sheng, the only regional military
commander who has espoused leftist
causes since the fall of Teng Hsiao-ping.
Li could be in serious trouble, but his case
is probably a delicate one because he has
troops at his command.
The Central Committee may also be
trying to reconstitute the Politburo,
depleted by deaths and purges. Among its
decisions could be the appointment of a
new premier should Hua relinquish that
job, which seems likely. Rightist Polit-
buro member Li Hsien-nien, a vice
premier, is the most logical choice if leftist
First Vice Premier Chang Chun-chiao has
indeed fallen. Li was eclipsed by Chang
for most of the year but has been very
prominent in the past week.
Chang and the other leftists have not
appeared in public since late last month.
Their purge would leave the rightists with
more power than they have had in over a
decade and would remove a major source
of contention in the leadership.
25X1
THAILAND Z
Bangkok has remained quiet since the
armed forces overthrew the constitutional
government on October 6. The military's
newly formed National Administrative
Reform Council, led by Admiral Sa-ngat,
is in effective control as new government
institutions are being developed.
The abrupt dismissal from active ser-
vice on October 9 of General Chalat, a
former deputy army commander attached
to the Ministry of Defense, was meant to
warn senior officers outside the Coun-
cil-as well as subordinate troop com-
manders-of the hazards of joining any
countercoup attempt.
Admiral Sa-ngat has been concerned
about the intentions of leaders of the now
banned Thai Nation Party-and their
associates in the military such as General
Chalat-who have been removed from
positions of power. None of these figures
commands troops, and chances of a
countercoup are poor.
There are simmering problems within
the Council. Its expansion to include
several more army officers has soothed
the army's initial disgruntlement over its
limited representation.
Admiral Sa-ngat apparently hopes that
the rapid formation of a civilian caretaker
administration will defuse the growing
ambitions of some military officers for a
greater political role. Thanin
Kraiwichian, a Supreme Court justice
known for conservative but not extreme
right-wing views, was appointed prime
minister on October 8, and a cabinet is
likely to be selected shortly. Sa-ngat is
also planning to accelerate the appoint-
ment of a national assembly-a un-
icameral body with virtually no
power-and hopes to complete the entire
process by the end of October.
It is not clear how much latitude will be
permitted the civilian cabinet. When a
civilian administration is in place, the
Council intends to disband, but a smaller
residual military committee will continue
to give policy guidance to the prime
minister. There are plans, moreover, to
appoint a military man-perhaps
retired-as deputy prime minister.
Military leaders are willing, for the mo-
ment, to operate behind a civilian facade,
but they do not want to relinquish com-
plete control of the government to
civilians-no matter how conser-
vative-and have already given notice
that they would again step in should the
civilians falter. 25X1
The students who were arrested last
week are gradually being released on bail.
possible terrorist activities have produced
a military alert and a decision to close
primary and secondary schools tem-
porarily, a more serious threat of disrup-
tions in the near future lies with ambitious
army officers within the Council who
may be loath to give up the power that
Paae 1 WEEKLY SUMMARY Oct 15, 76
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
Syria's terms for a cease-fire.
Negotiations last weekend in Syrian-
occupied Shaturah between represen-
tatives of the Syrians, Palestinians, and
Lebanese President Sarkis were yet
another charade; the Palestinians ap-
parently did not make any significant con-
cessions.
The Syrians resumed their offensive For their part, the Syrians almost cer-
both in southern Lebanon and in the tainly attended the Shaturah talks only as
mountains east of Beirut this week after a a public relations exercise to avoid
pause during which they apparently found appearing intransigent. The Syrians are
the Palestinians still unwilling to accept probably still bent on obtaining Yasir
_ 4 rael
0-]0 CIA
DAMASCUS
0 20 Miles
0 20 Kilometers
Arafat's removal from the chairmanship
of the Palestine Liberation
Organization-a step they apparently
believe necessary to guarantee the future
tractability of the movement.
The Syrians launched;their offensive in
south Lebanon on October 12. Starting
from their positions in Jazzin, Syrian un-
its pushed westward toward the port of
Sidon, the major entry point of supplies
for Palestinian and leftist forces. The
Syrians quickly took Rum, the
Palestinians' regional headquarters and
the last major stronghold on the Sidon
road, as well as a number of neighboring
villages.
Syrian forces also pushed south from
Jazzin toward key Palestinian positions at
Nabatiyah and Marj Uyun; by October
13 they had reached Saydun and Kafr
Hunah. It is not clear how far south the
Syrians are prepared to go. They are
steadily narrowing the gap between their
positions and the Israeli border and are
presumably wary of triggering any overt
Israeli reaction.
The Israeli government, however,
probably welcomes the new Syrian offen-
sive as a further blow to Palestinian-leftist
prospects in Lebanon that will aid Israel's
own efforts to eliminate fedayeen units
from the border area. The Israelis have
been providing Christian forces near the
border with tactical guidance and limited
military aid, including small arms, am-
munition, and training.
In the mountains east of Beirut, inten-
sive Syrian shelling of Palestinian and lef-
tist positions in Bhamdun and Alayh on
October 13 permitted Syrian troops to
enter Bhamdun by the next morning. The
Syrians are probably planning to combine
pressure on Beirut's eastern approaches
with the interdiction of the coastal road
between Beirut and Sidon, thus choking
off sources of supply for Palestinians and
leftists in Muslim-held west Beirut.
Syria announced this week that it
would attend the Arab summit conference
scheduled to begin October 18 in Cairo,
but its delegation will be headed by
Foreign Minister Khaddam, not President
Pano 9 'A/I=CLVI V Cl IF,A AA v C),+ 1 F 79
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
HMO"
Robert Mugabe (l) and Joshua Nkomo (r), with deputy
George Silundika (c), at recent news conference
RHODESIA
2c-Z'?
tion of an interim government to prepare
Rhodesia for independence under black
majority rule. Preliminary talks are
scheduled to start on October 21. The
blacks, despite more negative-sounding
declarations, are apparently preparing to
attend.
On the African side, the invitations
went to Joshua Nkomo and Robert
Mugabe, as spokesmen for the two fac-
tions that have guerrillas in the field, and
to Bishop Muzorewa, whose faction has
no guerrilla wing but has demonstrated
political support in Rhodesia. At least
some of the five "front-line" African
states that have been pressing for a
Rhodesian solution-Tanzania, Zambia,
Mozambique, Botswana, and
Angola-and South Africa are likely to
send observers.
The British named their envoy to the
UN, Ivor Richards, to be chairman of the
nounced they had formed a "patriotic
front" to negotiate for the "total and im-
mediate" transfer of power. Their alliance
is almost certainly a temporary one aimed
largely at strengthening their political
position at the expense of Muzorewa.
The statement also called for a delay in
the start of the conference-which Britain
apparently has resisted-and set forth a
series of harsh demands that Nkomo and
Mugabe said were essential to create the
proper atmosphere for talks. They
stopped short, however, of making fulfill-
ment of the demands a precondition to
their attendance at Geneva. Nkomo an-
nounced this week that he has formed
an 18-member delegation.
For his part, Ian Smith is taking to
Geneva a delegation including both
moderate whites and hard liners. Smith
has stated he is coming to the conference
prepared to negotiate only within the
framework of the "package" that he
publicly accepted on September 24. On
this point, he has received strong backing
from South Africa's Prime Minister
Vorster.
One major sticking point at Geneva will
proceedings, but apparently hope to
Britain this week invited three rival minimize their role in the conference.
black Rhodesian nationalist leaders and In anticipation of an early conference,
Prime Minister Ian Smith's political par- Nkomo and Mugabe, who had been
ty to send representatives to Geneva for holding unity talks, issued a militant joint
talks beginning October 25 on the forma- statement on October 9 in which they an-
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
be control over the Rhodesian security
forces. All the nationalist factions appear
prepared to hold out against continued
white control over these forces during a
transition period. The whites seem equally
determined not to yield on the issue.
Although most Rhodesian whites
appear to have accepted the prospect of
black rule within two years, they are keep-
ing open their options to stay or leave.
Large numbers of whites would probably
decide to go if the blacks gain early con-
trol of the defense and law and order
ministries, fearing this would lead to
widespread violence by black guerrilla
25X1 groups.
ANGOLA 1
3:0.
The USSR gave an enthusiastic
welcome to Angolan President Agostinho
Neto last week during the African leader's
first trip to the Soviet Union since the es-
tablishment of his government. The visit
was highlighted by the signing of a
20-year friendship and cooperation treaty.
The victory of Neto's Popular Move-
ment in Angola's civil war was one of
Moscow's most visible foreign policy
successes in the past few years. By further
cementing their ties with Neto, who
recently joined the ranks of the
"front-line" black African leaders, l he
Soviets hope to expand their influence in
postwar Angola as well as among the
southern African national liberationists,
especially in Namibia.
General Secretary Brezhnev, at a
dinner in Neto's honor, underlined the
Soviet Union's continuing support to the
liberationists when he gave Moscow's
most authoritative criticism of those who
"are attempting to substitute a fictitious
liberation... for a true one."
The Soviet Union has concluded
"friendship" treaties with only a few
third-world countries-India, Egypt,
Iraq, and Somalia. The text of the
Angolan treaty resembles the format and
substance of the other treaties, outlining a
commitment to cooperate in a wide varie-
ty of fields, including defense.
The treaty provides for the strengthen-
ing of military cooperation-implying
continued Soviet military aid. Under this
clause, the Soviets could try to gain access
to military facilities in Angola, but we
doubt Neto would agree.
Neto's talks in Moscow apparently
focused on party ties and the needs of
Angola's economy. At the end of Neto's
stay, the Soviets announced the signing of
a cooperation agreement between the
Popular Movement and the Soviet Com-
munist Party as well as a protocol to an
economic and technical cooperation
agreement concluded during Prime
Minister Nascimento's visit last May.
The Angolans seem anxious to see the
USSR play a greater role in their
economic development, but Angola needs
access to the West if it is to benefit fully
from its 9il, agricultural, and mineral
resources. .
Neither side mentioned it, but Neto
probably extended a personal invitation to
his Soviet hosts to attend the first anniver-
sary celebration of Angola's independence
on November 11. Should a top Soviet
leader attend, he would be the first
high-ranking Soviet to visit a southern
African country. Military Operations 31-33
The Neto government is carrying out
military operations against National
Union insurgents in southern Angola near
the Namibian border. Government forces
are being supported by Cubans and ap-
parently also by some guerrillas of the
South West Africa People's Organiza-
tion.
The operations sparked serious unrest
late last month among the population on
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
the Angolan side of the border between
Calueque and Pereira de Eca.
The Angolans, however, disputed news
stories in the South African media in-
dicating that the operations have resulted
in widespread killing of innocent persons.
The South African government con-
firmed in late September that construc-
tion has been suspended at two key
points-Calueque and Ruacana-of the
joint Angolan - South African Cunene
hydroelectric project. Work at Calueque
was halted at the request of the Angolan
government. ,
The Angolan-Namibian border area is
likely to become the scene of increasing
military activity in the months ahead. The
Neto regime is anxious to extend its
authority to the border and, with Cuban
help, has established a number of gar-
risons in the area.
SWAPO would like to step up its incur-
sions into Namibia from Angola, es-
pecially now that South Africa's control
over the territory is attracting inter-
national attention. Until recently,
SWAPO conducted its limited guerrilla
operations mainly from Zambia.
The South Africans, who have been
concerned over the border area for some
time, apparently believe the present
operations in Angola are designed to
provide support for future SWAPO incur-
sions into Namibia.
South African forces have apparently
been carrying on limited operations of
their own in southern Angola with the
assistance of anti-Neto Angolans. Neto's 25X1
forces captured a South African soldier
and three Angolans in southeastern
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
25X1
None of the government leaders ap-
pointed by Prime Minister Thorbjorn
Falldin last week has ever held a cabinet
post before, but most have served in
responsible positions in the federal
bureaucracy. Initial policy declarations
by the new government stress continuity
in Swedish foreign and domestic policy.
Falldin's own Center Party received
eight portfolios, the Conservative Party
six, and the Liberal Party five. Liberal
46-5,O
Party leader Per Ahlmark was named to
the newly created post of deputy prime
minister, as well as labor minister. The
Conservative leader, Goesta Bohman, was
made minister of economy, one of the two
posts created by splitting the finance
ministry.
For the first time, Sweden has a woman
foreign minister, Karin Soeder. She has
been the second deputy chairman of the
Center Party since 1971 and has served on
the Foreign Relations Committee in
parliament, the Council of Europe, and on
the Swedish Foreign Relations Council,
an advisory body to the prime minister.
Falldin's most innovative steps may be
in the nuclear energy field. He created a
new cabinet post to coordinate energy
policy and intends to appoint a special
commission to study the security and en-
vironmental ramifications of nuclear
power. The commission will present its
report to Parliament in 1978, and the
government will "consider" a referendum
on further nuclear expansion at that time.
,SS NATO: European Program Group Meets
The arms directors of the European
Program Group-which consists of the
ten European members of NATO plus
France-held their third meeting in Rome
recently. The purpose of the meeting was
to review progress made on European
arms collaboration and to prepare for a
meeting of the Group to be held in late
November at the political level.
Review of work accomplished thus far
focused on progress made in developing
opportunities for cooperation in present
national equipment schedules and future
equipment needs. The representatives
concluded that the overall progress so far
was satisfactory and agreed to establish
new areas for future cooperation.
The representatives also appeared
satisfied with the work of a subgroup
charged with developing political and in-
dustrial principles to guide European
arms cooperation. A full assessment of
the work of this politically oriented group
was reserved for the November meeting.
25X1
The Europeans attach considerable im-
portance to the November meeting. An
Italian official said recently that the
meeting will specifically address the ques-
tion of a formal tie to NATO.
Since the formation of the Group,
the Europeans have given first priority to
achieving arms standardization among
themselves. A formal tie with NATO
would help lay the groundwork for later
implementation of a "two-way street"
in the arms trade with the US.
The first tentative approaches may in
fact have already been made. At a
meeting of the arms directors of the US
and the three major European
powers-France, the UK, and West Ger-
many-the Europeans offered to provide
the US with the replacement schedule
developed by the European Program
Group and pledged that weapons projects
they discuss with the US would coincide
group.
Page 5 WEEKLY SUMMARY Oct 15, 76
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
Sweden's foreign policy is to remain
relatively unchanged-nonalignment in
peacetime and neutrality in war. Aid to
Cuba will be reduced further, and support
for the liberation movements in southern
Africa will be increased. The new govern-
ment is likely to show greater concern
over the practices of nuclear supplier
countries in transferring nuclear
25X1 technology and fuel to nonnuclear states,
particularly those that have not signed the
nonproliferation treaty.
PANAMA
25X1
The relatively tame, pro forma obser-
vance on October 11 of the anniversary of
the coup that brought strongman Omar
Torrijos to power in 1968 gave
Panamanians little to cheer about. Torri-
jos' speech, centering on the discouraging
economic outlook, reflected the fact that
his "revolution" is on the defensive.
The Panamanian leader's opening
assertion that the massive crowd refuted
the contention that the revolution is losing
support does not stand up to scrutiny. The
gathering of 20,000 people-many of
whom were government employees of-
ficially encouraged to attend-was far
below official targets.
Following the student-led protests
against price increases last month, the
controlled press only belatedly promoted
the anniversary. General Torrijos'
appearance was greeted with apathy, and
the mood of the crowd, like the tenor of
the speeches, was generally uninspired.
The loudest cheers came when Torrijos
announced a holiday the following day.
Torrijos admitted to a difficult
economic situation, but offered few
specific solutions. He enumerated such
urban ills as increased unemployment, the
rising cost of living, and poor transporta-
tion. He did promise an emergency
national public works program, but ad-
mitted that an unemployment survey had
yet to be started, suggesting that much
remains to be done before an effective
program is implemented.
The Panamanian leader came close to
announcing two measures that are certain
to add to discontent. Asking for sacrifice,
he said new tax measures "must be
taken." He also stated that some articles
in the labor code must be changed. He
was referring to articles popular with the
workers that are hurting business. Despite
his 'effort to pave the way for these
measures, labor unions especially will be
disgruntled at the loss of any prerogatives.
The General's swipes at the US were, in
the Panamanian context, almost perfunc-
tory. Torrijos did not set any deadlines in
the canal negotiations nor repeat past
Panamanian demands for an end to the
US presence before the year 2000. He
even noted that rash actions could cost
Panama support in the hemisphere.
PERU ~Z - 7 ~
Peruvian President Morales Bermudez
failed on October 3 to deliver the
customary "Revolution Day" address; he
was to have outlined some important
future government policies.
No explanation was given for the break
with tradition, but
government leaders could not agree
on one major aspect of policy-a more
restrictive labor law. Since the law would
reportedly limit strikes and give manage-
ment greater latitude in dismissals, it
would surely have evoked labor protests
that could have catalyzed discontent
throughout the country.
The government hopes to avoid an-
other outbreak of disorder. Popular back-
ing for the President seems weak and his
support within the armed forces is uncer-
tain. The government, therefore, has be-
come increasingly sensitive to growing
domestic criticism of its recent policies;
leftist opponents charge that the gov-
ernment has betrayed the revolution.
Many civilians are calling for the
restoration of civil liberties that were
suspended by a state of emergency decree
imposed in part to prevent labor protests.
The regime is trying to demonstrate the
need to continue the state of emergency
by giving dramatic billing to the recent
arrest of 17 members of a far-left terrorist
group, the Peruvian Popular Army. The
opposition has not yet responded to the
government's ar ument but will Probably
not be satisfied.
ARGENTINA 79_ 7 !
The government's announcement that it
has created the cabinet post of planning
minister may be a prelude to further
changes at the top. General Diaz Bessone,
a regional army corps commander, is
almost sure to get the new job.
The planning minister will coordinate
the activities of all the other ministries.
One purpose is to centralize President
Videla's authority over the government.
Videla has been criticized by some in the
military for not being assertive enough
and for permitting government policy to
drift.
Videla and others may also judge that it
is time to devote increased attention to
other important issues in addition to
economic recovery and counterinsurgen-
cy. Resolution of the difficult problem of
labor's status could be one.
Videla may also wish to delegate some
of his day-to-day responsibility as arm
commander in chief.
changes in regiona corps
commanders may be forthcoming in the
near future; the next promotion cycle is
approaching.
The forceful General Diaz Bessone is
apt to interpret rather broadly the
guidelines for the new ministry. He will be
buoyed by the fact that under new succes-
sion provisions he will head the entire ex-
ecutive branch in the event of the
President's absence or illness. The Presi-
dent is scheduled to make trips abroad in
25X1
25X1
25X1
Page 6 WEEKLY SUMMARY Oct 15, 76
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
The unprecedented powers assumed by the executive
branch under Prime Minister Gandhi will be institutionalized
this fall when Parliament approves a constitutional amend-
ment. Few Indians disapprove.
India: Gandhi's Rule
The increasingly authoritarian trend
that has marked Prime Minister Indira
Gandhi's decade in office will reach a new
benchmark this fall when Parliament ap-
proves, as it surely will, a constitutional
amendment to institutionalize un-
precedented power in the executive
branch. Future challenges to Gandhi's
authority from the courts and the
presidency will be effectively neutralized.
The most important provisions of the
omnibus amendment will:
? Unequivocally establish the prime
minister as the supreme authority in
government.
? Institutionalize many repressive
measures in effect since Gandhi im-
posed a national emergency in June
1975.
? Sharply curtail the judiciary's
power to challenge legislation and ex-
ecutive actions and to safeguard civil
liberties.
Beyond this, the provisions give Gandhi
carte blanche during the next two years to
amend the constitution further under the
pretext of removing "difficulties" that
stand in the way of implementing the new
amendment.
The amendment stems from a com-
mittee Gandhi appointed last February to
draft proposals ostensibly aimed at mak-
ing the constitution a "dynamic in-
strument" of social and economic change.
The amendment, however, goes con-
siderably beyond the committee's
recommendations, making it clear that
Gandhi plans to retain all the vast power
she has held on a temporary basis since
imposing the emergency.
Gandhi defends the amendment as a
necessary updating of India's 26-year-old
constitution. She says the present dis-
tribution of power in the constitution,
which mainly follows the British pattern,
impedes economic and social reform by
favoring the rich over the poor. In part,
this argument provides a scapegoat for
her administration's failure to improve
substantially the living standards of In-
dia's 630 million people.
Gandhi's Leadership Style
Gandhi's intolerance of criticism and
her reluctance to compromise made it
almost inevitable that her administration
would grow progressively more
authoritarian. She has repeatedly sought
full freedom of action. These traits were
not visible in 1966 when Congress Party
leaders, on the death of prime minister
Shastri, chose Gandhi as his successor
with the expectation that she would be
malleable.
Gandhi's initial uncertainty in office
gave way within months to self-con-
fidence, and by the end of 1969 Gandhi
had outmaneuvered the veteran party
leaders and gained control of the party.
She was willing to take political gambles,
and they usually paid off. By 1972 she had
won a national election giving her a large
parliamentary majority and had presided
over India's military victory over
Pakistan in the war for Bangladesh's in-
dependence.
Setbacks and Threats
Economic setbacks and political
challenges in the following years helped
nudge Gandhi toward authoritarian con-
trol. The severe impact of two poor mon-
soons and worldwide inflation made a
mockery of her promise in the 1971 cam-
paign to abolish poverty. Opposition par-
ties joined to capitalize on mounting
public discontent, and in the early
summer of 1975 Gandhi's opponents were
planning a national civil disobedience
campaign demanding her resignation.
They were further encouraged by a court
ruling that found Gandhi guilty of cam-
paign violations and threatened her with
dismissal from office.
Gandhi responded resolutely to the
threat, proclaiming a state of emergency
on June 26, 1975. Asserting that she was
acting to halt a threat to national security,
Gandhi suspended civil liberties, jailed her
opponents, and muzzled the press-un-
precedented acts in India during
peacetime.
Revising the System
In the early months of the emergency
Gandhi reportedly considered adopting a
strong presidential system, but dropped
the idea when some of her close advisers
opposed it. Instead, she opted for a
redistribution of power within the existing
parliamentary framework.
One of Gandhi's major objectives has
been to curb the judiciary. The courts,
through their substantial review powers,
have challenged a number of Gandhi's
policies. She charges that the judiciary
SECRET
%AIGGVi V ci [FAMARY Oct 15, 76
Approved For Release 2008/02/01 : CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
represents the elite and that the Supreme democratic procedures. She is trying to
Court's "narrow" interpretation of the encourage a "national debate" on the
constitution has blocked social justice. constitutional changes before pushing
The pending constitutional amendment them through Parliament.
will bar the Supreme Court from Parliament will continue to be elected
challenging the substance of any new by universal suffrage, although for a six-
amendments and will substantially limit year rather than a five-year term. In ad-
the purview of the state courts. It will dition, new procedural rules establish
enable the executive to tighten its control shorter sessions and limit debate.
over the selection and assignment of Parliament's principal task has clearly
judges at all levels. Nonetheless, the become that of approving the prime
judiciary probably will retain a fair degree minister's decisions.
of independence and continue to rule The new amendment should receive
against the government in some cases in- quick approval from Gandhi's compliant
volving either civil or corporate matters. parliamentary majority in a special ses-
The role of the president also posed a sion tentatively set for late October. The
threat to Gandhi's authority. The con- opposition may be permitted to voice
stitution, as it now stands, vests wide some criticism, but this is unlikely to
powers in India's indirectly elected receive much, if any, coverage in the
presidents although they have traditional- government-controlled media.
ly refrained from using these powers and Following parliamentary approval, en-
assumed titular roles. Gandhi has oc- dorsement of the amendment by at least
casionally clashed with the current chief half the 22 state governments is required
of state, Fakhruddin Ali Ahmed, and before it can take effect. This will be easy,
probably seeks to rule out any future con- as the Congress Party or one of its allies
frontation. The new amendment will controls all elected state governments; the
clearly subordinate the president to the federal authority administers several
prime minister. troublesome states where elected
An addition to the constitution of 10 governments have been temporarily
"fundamental duties of citizens" ex- suspended.
emplifies a shift in emphasis from in- Gandhi may lift the emergency after the
dividual rights, as outlined in the constitu- amendment is law. She may then call the
tion adopted in 1950, to the citizen's parliamentary election that was post-
obligations to the state. The duties listed poned for a year last spring. Another
include unenforceable ideals as well as postponement is possible, but the
requirements to abide by the constitution Congress Party is already soliciting cam-
and defend the nation. paign funds and making other
The duties probably would have preparations. Whenever the election is
provoked opposition, even in the held, a large Congress Party victory is
Congress Party, if Gandhi had retained assured against the various small opposi-
her original plan to impose penalties for tion parties.
noncompliance. She has emphasized, Public Support
nonetheless, that discipline and order Gandhi's actions since June 1975 have
are imperative and that the "permis- stirred little negative public reaction in In-
sive" political atmosphere that ex- dia. This is largely because of economic
isted during the first 28 years of improvements during the last 15 months.
India's independence will not be re- Gandhi's supporters credit the emergency
stored. with the economic upturn, but two benefi-
Gandhi is highly sensitive to foreign cent monsoons are at least as responsible.
criticism about her political crackdown There is uncertainty about the future,
and manipulation of the constitution. This particularly in the private business sector,
may at least partially account for her but the educated middle class generally
decision to preserve a facade of supports the emphasis on discipline and
SECRET
resulting improvements in bureaucratic
performance. The military also supports
Gandhi, and she in turn honors its desire
not to be used in dealing with domestic
civil disturbances. The masses may be
aware of some political changes, but their
lives so far have not been affected much
by the emergency.
Some intellectuals, particularly those
educated in the West, are despondent over
Gunn 0 XAICrvi ..
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
the loss of traditional democratic rights.
Gandhi has used economic pressures and
other threats to force the once-lively free
press to conform and to abide by rules
that restrict criticism of the government
or exposure of problems that would em-
barrass the government.
Popularly elected state officials resent
the central bureaucracy's powerful role
under the emergency but are unable to
prevent the growing concentration of
power in the central government. The few
opposition parties are divided and
demoralized, with some of their leaders
still in jail.
India is not, however, a repressive dic-
tatorship such as those in some third
world countries. Tens of thousands of In-
dians have been arrested for political and
economic offenses since June 1975, but
many were released after short jail terms.
Only extremist political parties have been
proscribed. Police brutality, while not un-
The Suarez government is engaged in simultaneous efforts
to fight inflation and to overcome the rightist drive to cripple
the political liberalization program.
The Spanish government has responded
to increasing economic and political
pressures by announcing strong measures
to attack inflation and by submitting to
the Cortes a bill that would effectively
legalize opposition trade unions.
The Cortes battles over various reform
bills this month may be decisive in the
government's campaign to democratize
the political system. In a final effort
to force the government to back down,
the right is reportedly concentrating on
amendments that would cripple the bills.
Suggested amendments were attached
to the constitutional reforms before they
were approved on October 8 by the
known, is uncommon. The security forces
are ubiquitous, but no attempt has been
made to transform them into a per-
sonalized force under Gandhi.
Prospects
On the basis of her performance in the
past, it seems unlikely that Gandhi will
use her enhanced power to implement
basic social and economic changes. She
recently stated that reform in the coun-
tryside must come from education and
persuasion rather than force.
Gandhi seems unwilling to face the
serious political problems that would ac-
company an attempt to upset the status
quo through far-reaching policies aimed
at redressing basic inequities in Indian
society.
There has been little real progress in
implementing the politically sensitive
aspects-such as land reform-of the 20-
point socio-economic program she in-
troduced shortly after the emergency
Spain: Economic Austerity Plan
National Council-the overseeing body
of Franco's National Movement party.
The Council's report is nonbinding but
serves as a clear warning that the right
will resist when the Cortes debates the
bills later this month.
The government still seems likely to
win the required majority in the
legislature, unless the military weighs in
against the reforms-as apparently
happened over the penal code reform
bill-or the right is galvanized by a
charismatic leader.
The right does seem to be strengthening
itself politically. Spanish officials have ex-
pressed concern over the recent formation
of a rightist alliance by former interior
minister Fraga and six other former
ministers who served under Franco.
Although Fraga drafted the last
government's reform program, he is con-
sidered a rightist at heart. The new group,
the Popular Alliance, also includes several
diehard opponents of any political reform.
Fraga, with his seemingly boundless
drive, talent, and ambition, may be the
man who can unify the right. His
successful negotiations with his former
enemies on the right have already caused
alarm in the unorganized center of the
Spanish political spectrum.
Government concern over military sup-
port was evident in the cabinet's decision
to submit the draft law on trade unions to
the Cortes. The military hierarchy has
pledged support for the government's
Page 9 WEEKLY SUMMARY Oct 15, 76
proclamation. The government's focus
rather has been on implementing birth-
control programs, curbing economic
offenses such as smuggling and hoarding,
cleaning up the cities, and improving
government services.
Gandhi delegates little authority. She
consults with a small circle of relatives
and aides, rather than with the cabinet,
but she makes all important decisions
herself. There is little opportunity for
policy debate, open criticism, or in-
novative ideas.
As she faces each new challenge,
Gandhi's sense of mission and self-
righteousness seem to grow stronger. Her
assumption of full responsibility for
government performance and the cer-
tainty of future economic crises when
poor monsoons occur, could bode ill for
Gandhi's future popularity and eventually
force her to deal again with serious
political instability.
Approved For Release 2008/02/01 : CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
CR
Manuel Fraga Iribarne
political reform program, though
reportedly with the proviso that the
reforms must be approved by the
legislature. Prime Minister Suarez ap-
parently met stiff resistance to his
reported plan to bypass rightist
dominated institutions by issuing decree
laws to accomplish political reform.
By handling the labor reform as normal
legislation, the government risks having
restrictions attached to it. In particular,
the Cortes may find a way to exclude the
Communist-dominated Workers Com-
missions. The government reportedly
wanted to allow the Communists to par-
ticipate openly through their trade unions
in Spain's political evolution in the hope
that this would ease opposition pressure
for legalization of the Communist Party.
The major opposition trade unions have
already condemned the government's ac-
tion because it:
? Allows the rightist Cortes to sit in
judgment on labor reforms.
? Reportedly sets up a registration
procedure that will force the trade un-
9RIVIVI~_
Prime Minister Suarez
ions to pass through the "government
turnstiles" in order to be legalized.
? Delays legalization for at least a
month.
? Does not completely eliminate the
existing state-run labor organization.
Economic Measures
The opposition labor unions have also
rejected the wide-ranging economic
measures announced by the government
on October 8, charging that the govern-
ment was trying to make the workers bear
the cost of ending the country's economic
crisis. Labor may be mollified, however, if
the government can hold the line on
prices.
Deputy Prime Minister Osorio an-
nounced on October 8 the strongest
measures yet taken by Spain to attack its
serious inflation problem. Most Spanish
officials blame inflation-now running at
a 20-percent annual rate-for continued
domestic economic stagnation and loss of
competitiveness abroad.
The new measures include a price freeze
on goods and services for the rest of the
SECRET
year, followed by controlled price in-
creases through September 1977. Spain
will also institute strong wage controls ty-
ing pay increases to the cost of living.
These controls will extend through next
June. A 20-percent import duty surcharge
may also be imposed. The government
decided to have the measures put into
effect immediately by a royal decree to
avoid normal legislative delays.
While the wage controls are not new,
their strict enforcement would be. Spain
already has provisions limiting pay hikes
to increases in the cost of living plus 3 per-
cent, but some recent pay increases have
been 30 percent. Osorio implied that the
provision allowing the additional 3 per-
cent over the cost of living might be
dropped.
To further assist firms in maintaining
profitability during the price freeze,
the government wants to hold dividend
payments to 10 percent and has suspended
the law preventing companies from firing
unnecessary labor.
The impact of these policies on the
economy during the remainder of the year
will be limited. Wage settlements during
the fall labor negotiations will be restrain-
ed by the measures, but beneficial! effects
will not be felt fully until next year. Ex-
port sales over the next few months will
not show much, of an increase.
Spain will probably still end 1976 with
a 20-percent rise in prices for the year and
a $3-billion current-account deficit.
Moreover, the actual jobless rate,
probably about 10 percent, will be little
improved by any of the measures so far
announced.
The government made no mention of
plans for fiscal and monetary restraints.
It probably still wants to postpone a
rigorous austerity program until after
next summer's election.
In setting its sights on improving con-
ditions by next spring without a major
overhaul of the economy, the government
is likely to push for at least one more
majoreconomic measure this year. A 15-
to 20-percent depreciation of the peseta
Page 10 WFFki V cI I F Al A . -
A p p r o v e d For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01 : CIA-RDP79-00927A011400170001-9
The British have already cut just about all they can from
defense expenditures without reducing their balanced air, sea,
and ground contribution to NATO. Still, the government is un-
der steady political and economic pressure to make further
cuts.
UK: Impact of Defense Cuts
Steady economic and political pressure
to reduce military spending could induce a
basic change in the UK's traditional
defense posture in Europe. Similar
pressures in the 1960s and early 1970s
gradually forced the British to abandon
their global military role.
The military budget has been cut four
times since the Labor Party came to
power in February 1974. Additional de
facto reductions have occurred as a result
of inflation and the fall in the value of the
pound from $2.40 in the spring of 1975 to
the current rate of about $1.65.
The rationale for the defense cutbacks
does not flow from a new estimate of the
Warsaw Pact. The UK still views NATO
as the cornerstone of its security, and the
Labor government promises to concen-
trate its resources in the Alliance.
The Labor government has tried to con-
vince NATO that reductions to date have
not harmed the UK's balanced air, sea,
and land contribution to the Alliance.
Britain's argument has been that the cuts
affect only the tail and not the teeth of its
military establishment. Britain is now in a
situation, however, where any further
economy measures are likely to cut into
the UK contributions to NATO de-
fense.
Allies Worried
In spite of economic problems and
military cutbacks, the UK continues to
provide most of NATO's maritime
defense of the eastern Atlantic, the
English Channel, and the supply and rein-
forcement routes from North America.
In addition, Britain has some 56,000
ground troops and a number of tactical
air force units assigned to the British
Army of the Rhine. With its four Polaris
submarines, Britain is the only European
NATO ally contributing to the strategic
nuclear deterrent forces,
Britain's allies are concerned about
possible future cuts in British defense
spending, which currently runs at just un-
der $10 billion annually. West Germany,
for example, is worried about the UK's
ability to maintain the British Army of
the Rhine's current strength.
The British are aware of the West Ger-
man concern but appear unable to
assuage the Germans. In fact, there are
indications the UK may try to exploit
German fears. Earlier this year then
prime minister Wilson tried to negotiate a
renewal of the Anglo-German offset
arrangements by linking a generous Ger-
man payment to the maintenance of
British troop strength in West Germany.
Recent Cuts
The UK has announced two major
defense cuts this year. In February it
slashed spending through 1980 by over $1
billion. The second cut, announced in Ju-
ly, pared an additional $178 million from
the 1977-1978 defense budget.
The cuts came on top of the reductions
announced in March 1975 following a
major review of British defense policy by
the Labor government. The goal of that
review was to bring British defense expen-
ditures more into line with those of
France and West Germany, which spend
about 3.5 to 4 percent of their gross
national product on defense.
The UK plans to reduce spending
gradually from about 5.5 percent of the
gross national product to about 4.5 per-
cent by 1984. Comparatively, this decline
will be aggravated by the rate of British
economic growth, which continues to lag
behind those of France and West Ger-
many.
The Callaghan government is under
pressure from the Labor Party left wing to
make even larger cuts in the defense
budget.
Debates in the cabinet over budget
priorities will be difficult in face of the
current economic problems, and the left
wing may find allies among cabinet
ministers intent on protecting their own
budget allocations.
New Defense Minister
In the cabinet, Callaghan will miss
former defense minister Roy Mason and
his top deputy, William Rodgers, both of
whom were moved to other posts in the re-
cent cabinet shuffle. Although their
replacements, Frederick Mulley and John
Gilbert, are well disposed toward the
military, they are not likely to be as effec-
tive in public and private debate.
Still, the new appointees will be able to
handle the left. They can argue that ad-
11 WEEKLY SUMMARY Oct 15, 76
I I
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
ditional cutbacks would increase the
record unemployment rate. Mulley and
Gilbert presumably will also remind the
party that any British slippage in conven-
tional or nuclear defense may cause the
West Germans to fill the gap. The
prospect of a strong Germany still
troubles many Britons.
The British have little room to save
further on defense if they continue current
policies. Over the longer term the UK
may reduce defense costs through
partnership arrangements on major
weapons development programs, but
these projects offer little help now,
The July reduction of $178 million, for
example, was a purely political decision
and, after the decision, senior defense of-
ficials had to search for areas where cuts
could be made. These officials had
privately indicated before the July an-
nouncement that there was no fat left in
the defense budget and that any further
reductions would have a direct effect on
front line performance.
Other British officials have told the
Alliance the cumulative cuts have not
damaged the UK contribution to NATO,
although London's reluctance to consult
with the Allies suggests there has been
some impact. The Labor government ob-
viously fears that NATO criticism would
give the opposition Conservatives a
weapon to use against the government in a
future election campaign.
If the Conservatives are returned to of-
fice in the next election, however, their ef-
forts to rebuild the defense budget would
also be limited by Britain's economic
situation.
Possible Economy Moves
Britain already has plans to abandon its
peacetime military presence in the
Mediterranean and to emphasize the
defense of northern and central Europe.
Elimination of the British military
presence outside Europe would offer only
marginal savings, Political obstacles
could even prevent these small economies.
Britain would probably not want to
remove the small Hong Kong garrison,
for instance, and the tense situation
between Guatemala and the British
GTS
colony of Belize would be exacerbated by
the withdrawal of British forces, which
have been a stabilizing factor.
Significant defense cuts will confront
the UK with a choice between main-
taining just a facade of balanced armed
forces or moving toward a specialized
contribution. Should the British shy away
from such a decision, the overall quality
of the UK's balanced force structure
would be steadily eroded.
In the event of a serious economic crisis
and a subsequent urgent review of the
defense budget, the following options
would be high on the list of prospective
cutbacks:
? Retiring Britain's only strategic
bomber, the aging Vulcan B2, six
squadrons of which are assigned to
NATO.
? Mothballing the Royal Navy's
two tiger-class cruisers and the UK's
only remaining aircraft carrier, thus
weakening NATO forces in the Atlan-
tic.
? Building only two Invincible-class
cruisers instead of the three now
planned.
? Slashing civilian defense employ-
ment beyond cuts already called for in
the 1975 defense review and the 1976
public expenditure review.
Stretching out the acquisition period
for the multirole Tornado aircraft is
another possible economy measure.
Cancellation of this ambitious mul-
tinational program is highly unlikely,
since it would add thousands more to the
unemployment rolls and undermine the
production efforts of Britain's partners,
West Germany and Italy.
The allies would strongly oppose a
sizable reduction in the British forces
stationed on the Continent. Such a reduc-
tion would in effect be a unilateral conces-
sion at the mutual and balanced force
reductions talks and further weaken
NATO's already thin Northern Army
Group. Before making such a decision,
the UK will probably try to persuade
West Germany to continue making sub-
stantial offset payments.
The UK could save money by aban-
doning its ballistic missile submarines.
The 1975 defense review hedged on this
issue by prolonging the life of the Polaris
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
missile force instead of replacing it with
the more advanced Poseidon. This deci-
sion put off the painful choice until the
1980s, when age and technology will end
the usefulness of the Polaris.
Nuclear Debate
A decision to abandon a strategic
nuclear capability would not come easily
to a British government, The capability
provides the UK with membership in a
still small international club in Europe
and gives Britain equality with France and
superiority over West Germany.
If Britain can afford a new generation
of weapons, the decisions it makes on
weaponry will reveal whether it is
prepared to end its heavy reliance on the
US for nuclear hardware and technology
and move toward collaboration with the
French.
Some Britons have renewed the push
for Anglo-French nuclear cooperation.
They argue that collaboration with
France would establish an independent
nuclear force for Western Europe. These
proponents also point out that such
cooperation would effectively combine
British nuclear technology know-how and
French delivery system expertise.
President Marcos, while intent on retaining his
authoritarian power, is preparing to create a semblance of pop-
ular participation in government.
;~ ( Philippines: Another Referendum
The referendum President Marcos has
set for October 16 will allow him to go
through the motions of re-establishing a
legislative branch in his government
without actually reducing his
authoritarian powers.
The public poll, the fourth since martial
law was imposed four years ago, will ask
Philippine voters whether martial law
should be continued and whether a par-
tially elected legislature should be created.
Marcos expects a strongly favorable
response to each question.
The new legislature would be firmly un-
der the control of the executive, who
would determine what subjects it could
discuss and how long it could remain in
session.
Marcos obviously is contriving to por-
tray himself as responsive to public
opinion. He is counting on the hand-
picked local councils set up under martial
law to guide the voters into giving him
the same strong mandate for martial law
that he received in the three previous
referendums.
Most Filipinos are apparently in-
different if not content with martial law.
They tend to look back on the old
free-wheeling political system as corrupt
and serving only the privileged. The
reduction of violence that has resulted
from martial law means more to them
than their loss of political rights.
The effort being made by some
members of the clergy and former
politicians to promote a boycott of the
referendum will probably have little effect
outside politically conscious Manila.
Local government councils appear to have
sufficient power to get out the vote and to
alter the results should they fall short of
overwhelming endorsement.
Regime Strengths
Marcos has no significant challengers.
Armed forces of 140,000, led by key sup-
porters, are the backbone for his rule. The
40,000-man constabulary provides a per-
vasive government presence.
Former political opponents are cowed,
jailed, or in exile. Former senator Aquino,
who many think would have won the
suspended 1973 election, has been in
prison since martial law was declared in
1972. He is now on trial for subversion.
The Philippine press is guided and
docile. There has been no need for harsh
censorship because surviving newspapers
are without exception owned by close
friends or relatives of the first family.
Marcos is sufficiently confident to per-
mit a degree of moderate criticism. A
number of respected figures occasionally
speak out against the government. An-
tigovernment activists are fitfully visible
in labor and student circles. Some of these
individuals have communist connections,
but more are inspired by the Catholic
Church.
The church, although basically cautious
and conservative, harbors some vigorous
critics of the regime and is the only signifi-
cant legal institutional base for opposition
to the government. Marcos is alert to the
potential danger; at least 83 percent of the
people are nominally Catholic. Marcos
frequently warns against the danger of the
"Christian left" and has served notice on
activist priests that excessive agitation
would be met by increased intimidation.
As Marcos likes to remind his coun-
trymen, his regime can point to some
achievements that the discarded political
system failed to produce. The country has
an unaccustomed sense of civil order, and
the government has kept its communist
insurgency in check. The Muslim in-
surgency in the south has, little national
political impact.
Panes 1q 1A/FFKI V CI IAAAAAMV (,-f 1' 7t
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
The estimated 1,600 regulars of the
New People's Army, the military arm of
the outlawed pro-Chinese communist par-
ty, have been generally contained and re-
main basically a police problem. Key
leaders were recently captured by govern-
ment forces.
The government can also take credit for
such programs as land reform--limited in
scope but nevertheless considerably more
far reaching than earlier attempts-ex-
panded credit to farmers, tax reform, and
rural electrification. Although Filipinos
have been disturbed over inflation, the
government in recent months has been
able to trim the inflation rate as inter-
national trade and financial conditions
have improved.
Even though the government's
achievements are generally recognized,
there is widespread annoyance, especially
among the middle class, about the visible
accumulation of great wealth by the Presi-
dent and Mrs. Marcos. There is some
general dissatisfaction with the indefinite
continuation of the theoretically tem-
porary martial law, but critics are neither
willing nor able to challenge the regime.
Marcos believes a guided vote of con-
fidence will undercut his critics. The
criticism is increasing, and the President
has been sensitive to demands by
churchmen and former politicians for a
return to constitutional government.
International press play on the mistreat-
ment of political prisoners tends to under-
cut his image of "smiling" martial law,
and he worries about the effects abroad of
such criticism, particularly the possibility
that the US Congress might balk at
further aid.
Nominal Democracy
Against this background, Marcos is
attempting to devise a system of nominal
popular participation in a government
system of easily manipulated assemblies
at the local and national levels.
The local governmental mechanism
which has been in place since the first of
the year, has worked fairly well from the
President's point of view. Marcos still
seems uncertain, however, about how to
structure a national legislature that would
provide the same image of legitimacy yet
not dilute his authority. He has been
vague about its composition, although it
would apparently include his hand-picked
cabinet members. He has also said the
timing of elections will depend on "how
things develop."
Last month, Marcos appointed a
legislative advisory council, composed of
his own cabinet members and hand-
picked members of village councils. The
first session of the council showed it to be
a totally controlled forum. Although the
President has explained that the council is
an interim body and not a substitute
legislature, he probably sees it as a rough
model for an eventual national legislature.
Marcos holds a trump card should the
referendum vote fail to meet his expec-
tations or should any new assembly
become too independent. He warns that if
the election process shows signs of dis-
honesty, he will revert to a "crisis
government."
Approved For Release 2008/02/01 :CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
Despite a prospective bumper grain harvest, we expect the
Soviets to buy about 14 million tons of foreign grain this year,
nearly 11 million tons of it from the US.
USSR: Grain Outlook 25X1
Prospects remain good for a bumper
grain harvest in the USSR, although
various methods of predicting the crop
and the range of Soviet statements still
leave room for a fairly wide span of
possibilities.
Our current estimate of Soviet grain
production, based on all-source informa-
tion on weather and crop conditions, is
205 million metric tons, up 5 million tons
from our early September estimate. The
US Department of Agriculture puts the
Soviet crop at 215 million tons.
With a grain crop of 205 million tons,
plus expected imports, the Soviets' grain
supplies will be sufficient to maintain
their momentum in rebuilding the
livestock sector, improve the quality of
bread and other consumer products, and
start restocking depleted grain reserves.
Predictions by Soviet officials of this
year's harvest range from 195 million tons
to a new record that would exceed the
1973 crop of 222.5 million tons.
In late August, Soviet Minister of
Agriculture Mesyats indicated that the
grain harvest would be over 200 million
tons. In mid-September, another ministry
official, in a conversation with the US
agricultural attache in Moscow, said that
the harvest should be "more than 200
million tons, but we must see how much
more." He then backtracked to say "it
could also be around 195 million tons."
General Secretary Brezhnev told Am-
bassador Harriman on September 22 that
"the 1976 grain harvest is expected to be
even better than in 1973, which was a
record year." On October 5, Brezhnev
predicted to a French TV interviewer that
the USSR would enjoy "a very good
harvest of grain crops."
Numerous Soviet regional yield and
production figures have appeared in the
Soviet press, covering an area of ap-
proximately 61 million hectares, or 47
percent of the area sown to grain. In many
instances these yields exceed those incor-
porated in our estimate.
SECRET
Grain Purchases
We still believe that the USSR this year
will purchase abroad about 14 million
tons, a little more than half the amount
bought in 1975. This would cost roughly
$2 to $2.5 billion, compared with the
nearly $4 billion spent for last year's
purchases. So far this year, the USSR has
bought 12.8 million tons of grain-6
million tons of wheat, and 6.8 million tons
of feedgrain-and 2 million tons of soy-
beans.
Of this amount the US will supply 10.9
million tons. The USSR has bought 6.7
million tons under the first year of the
US-USSR grain agreement and must buy
355,000 tons more of wheat to satisfy
the provision that the first 6 million
tons be equally divided between wheat
and corn.
So far, the Soviets have promised little
grain to their traditional customers. We
expect that about 2 to 3 million tons of
grain will be shipped to Eastern Europe.
Should the Soviet harvest exceed our ex-
pectations, Eastern Europe might well
press for additional amounts of grain
from the Soviets, but will remain depen-
Paae 15 WEEKLY SUMMARY Oct 15, 76
Approved For Release 2008/02/01 : CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
SECRET
The government has taken strong measures to stabilize the
economy, which was unsettled by the recent currency change.
Mexico: Economic Measures
Mexico is taking steps to stabilize the
economy in the wake of the recent 37-per-
cent drop in the value of the peso. The
government has imposed harsh new price
controls, initiated curbs on government
spending, and granted relatively restrain-
ed wage increases.
These moves are likely to have a
favorable psychological impact on the
public, which had been losing confidence
in the government's ability to control the
effects of the peso float. They will also
help to ensure that the economy does not
lose the stimulus to exports normally ex-
pected from currency devaluation.
New official price levels decreed by
President Echeverria mean that most
prices, which had skyrocketed following
the devaluation, will be rolled back. The
government has limited the price increase
for most basic consumer goods to 10 per-
cent and has greatly expanded the list of
regulated goods and services.
Nearly all basic foodstuffs, clothing,
chemicals, basic raw materials, construc-
tion materials, household appliances,
automobiles, and services such as auto
repairs and hospital care will now be con-
trolled. To avoid discouraging tourism,
hotel rates cannot be increased by more
than 20 percent and restaurant prices 15
percent. Prices for petroleum products,
natural gas, and unrefined sugar-all
produced from domestic materials-re-
main frozen.
Strict Enforcement
The government intends to enforce its
price controls strictly. Violators will be
subject to 3-month jail terms and $2,500
fines. The government's inspection staff
probably will concentrate on the larger
manufacturing and retail concerns. Com-
panies able to prove their costs have gone
up more than 10 percent will be permitted
to petition for additional price increases.
Prices ultimately may rise l5 to 20 per-
cent as a consequence of the devaluation,
but this increase will still leave a substan-
tial price benefit to exporters.
Wages for government employees will
be increased 21 to 23 percent, reportedly
to cover the rise in the cost of living
between January and August as well as to
compensate for the new 10-percent price
increase. Echeverria also set guidelines for
private sector wages because of the failure
to reach a compromise between the
l0-percent increase offered by manage-
ment and the 65-percent hike demanded
by labor under threat of a general strike.
The guidelines call for a 16- to 23-per-
cent rise, but companies engaged in
scheduled annual wage negotiations over
the next several months probably will be
forced to pay an additional 10-percent in-
crease.
Government Spending Cut
The government also has imposed
drastic curbs on government spending, the
first sign of Echeverria's willingness to
face up to the mounting government
deficits of recent years. Government hir-
ing has been frozen and new investment
undertakings have been banned.
Although these curbs probably will
have little impact on the 1976 deficit, they
will set the tone for the 1977 budget and
are expected to have a significant psy-
chological impact. The government's
borrowing to finance its deficit has been
the major source of new money fueling in-
flation.
The stabilization measures doubtless
have the approval of president-elect
Lopez Portillo, who believes that the
restoration of financial stability will be
one of his most important, duties when he
assumes office in December. While in
Washington late last month, Lopez Por-
tillo implied that his fiscal program would
be more austere tha verria's.
I 25X1
OG(
Panes i c_ %A/CCV. n...
Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
 Approved For Release 2008/02/01: CIA-RDP79-00927A011400170001-9
Secret
Secret
Approved For Release 2008/02/01 : CIA-RDP79-00927A011400170001-9