WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011400230001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 21, 2016
• Sequence Number: 1
• Content Type: SUMMARY

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Secret
Weekly Summary
Secret
CI WS 76-048
No. 0048/76
November 26, 1976
Copy N9 1460
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CONTENTS
1
Europe
Spain;
EC-CEMA; Greece-Turkey;
East Germany
4
Middle East
Lebanon; Iraq-Syria; 25X6
25X6
5
Soviet Union
Exports
8
East Asia - Pacific
China; Philippines;
8
Western Hemisphere
Mexico; Jamaica; Brazil;
Peru-Chile
10 The Palestinian Movement After Lebanon
14 Italy: A usterity Measures
16 Colombia: Troubles for President Lopez
18 Mexico: Oil, Farm Decisions for Lopez Portillo
19 Ethiopia: Institutionalizing the Revolution
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During historic session on November 18 the Cortes voted on the democratic reforms proposed by the government
SPAIN
King Juan Carlos and the government
of Prime Minister Suarez won a signifi-
cant victory last week when the Cortes
voted by a wide margin to accept the
government's key political reform bill.
The reformists' victory took much of the
steam out of the rightist demonstration in
Madrid on November 20 commemorating
the first anniversary of Franco's death.
The bill establishes a new,
democratically elected, bicameral
legislature to replace the present Cortes,
which is unicameral and largely ap-
pointed. The new legislature will have the
power to initiate further constitutional
reform by a simple majority vote.
The rightists' last-ditch efforts in the
Cortes centered on the bill's provision for
election of the lower house by propor-
tional representation. At one point the
major rightist alliance threatened to ab-
stain if its demands on this and other is-
sues were not met. Had all of the group's
100 or so members abstained, the govern-
ment would have had difficulty obtaining
the two-thirds majority required for the
bill's passage.
The government held firm, making only
a few minor concessions-largely
cosmetic modifications of the propor-
tional representation proposal that allow-
ed the rightists to save face. Last minute
pressure tactics by the government, such
as the release of an opinion poll indicating
that Spaniards backed the bill by a ma-
jority of better than 20 to I, may also have
been a factor in the capitulation of the
rightists. The government announced that
the final roll call would be televised live,
increasing the pressure on many
legislators who hope to run for the new
Cortes.
Spaniards will now be asked to ratify
the reforms in a referendum, scheduled
for December 15. Approval is a virtual
certainty, despite leftist opposition threats
to abstain. A parliamentary election, in
which the democratic opposition parties
are expected to participate, is promised
for next spring.
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EC Responds to CEMA Proposal
The EC last week approved a cautious
response to the offer from CEMA, the
closest thing to an economic community
in Eastern Europe, to conclude an "um-
brella" trade and cooperation agreement
linking the two organizations.
The EC foreign ministers, meeting in
Brussels, approved a draft accord that ig-
nored most of the provisions contained in
the draft agreement proposed by CEMA
last February. They did agree, however,
to begin negotiations on possible coopera-
tion in those areas-transportation, stan-
dardization, the environment, and the ex-
change of technical information-which
the Community believes fall within
CEMA's competence.
The EC stood firm on its position that
trade agreements with individual CEMA
members should be negotiated by the EC
Commission. In a separate letter, the
Community reiterated its offer of two
years ago to enter into such negotiations
in accordance with its common commer-
cial policy. The EC has steadfastly refus-
ed to recognize a CEMA role in trade
talks, noting that CEMA-unlike the
EC-lacks the authority to conclude trade
agreements on behalf of its members.
Several of the articles in the CEMA
draft, such as those granting most-
favored-nation status, improving credit
terms, and eliminating trade quotas and
nontariff barriers, were ignored because
the EC believes the communist states
could not reciprocate adequately. The EC
informed CEMA, however, that the Com-
munity's reply is intended only as a
starting point for the negotiations-
which it said it hopes can begin soon.
EC officials doubt that CEMA will res-
pond soon and in any event anticipate
protracted and difficult negotiations.
The EC, in such negotiations, will strive
to avoid any agreement that would:
? Strengthen Soviet control over East
European trade relations with the EC
countries by extending CEMA's authori-
ty.
? Weaken EC institutions by blurring
the jurisdictional distinction between
Community and individual members in
such matters as commercial policy.
? Advance Soviet efforts to set up per-
manent pan-European bodies to imple-
ment East-West agreements-an idea the
EC has rejected in other forums.
GREECE-TURKEY
Greece and Turkey made considerable
procedural progress and broke some new
substantive ground in their recently con-
cluded talks on the Aegean, but they have
yet to take up the most difficult issues.
Any follow-up negotiations are likely to 25X1
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be intermittent and protracted.
Both sides assert that the talks in Bern
on the Aegean continental shelf have set
the stage for serious substantive
negotiations in the coming months.
A committee of experts is to work in
secret on the question of delimitation
of the shelf, using the practice of other
states and international rules as guide-
lines.
According to a communique issued in
Bern, the two countries have also agreed
not to take any actions in the Aegean that
could disrupt the talks and not to try to
discredit each other in their bilateral
relations with other states. In practical
terms, this apparently means that the
Turks agreed not to engage in oil explora-
tion in contested waters, and the Greeks
undertook not to lobby in the US and in
Western Europe against Turkey.
The agreement offers considerable
scope for differing interpretations. For ex-
ample, the Turks are already inclined to
believe that the Greeks are violating then
commitment. The Turks, moreover, may
find it difficult not to resume an assertive
policy in the Aegean next spring, as the
campaign for the October parliamentary
election heats up.
For their part, the Greeks are unlikely
to refrain completely from their efforts to
seek external support in their dispute with
the more powerful Turks. After a summer
of high tensions, however, both sides seem
content for the time being to limit their
jockeying and to seek some narrowing of
their differences.
In the talks on Aegean airspace that
were held simultaneously in Paris, the two
sides agreed to set up a hot line connecting
the Greek and Turkish air defense com-
mand centers;-In addition, they moved
closer to agreement on the question of ad-
vance notification for military
flights-the major stumbling block in the
talks. The main issue separating the two
sides continues to be the question of the
boundaries of the zone within which
military flights must be announced in ad-
vance. This will doubtless be the subject of
the next round of talks.
SECRET
German dissident Wolf Biermann (left) at press conference
with West German writer Heinrich Boell
EAST GERMANY i'1, -/9
East Germany's decision last week to
exile Wolf Biermann, one of its most out-
spoken dissident cultural figures, may
signal a tougher party policy on domestic
criticism.
Biermann's forced exile took place
against a backdrop of mounting tension in
church-state relations and the pop-
ulation's unease over the economic situa-
tion. The public is also concerned that the
regime may tighten travel restrictions on
East German citizens.
These developments have been given
heavy play by the West German media,
which the East German leaders find par-
ticularly disturbing. The regime remains
committed to the pursuit of normalization
of relations with Bonn. It is not prepared,
however, to abandon its emphasis on in-
ternal security and ideological controls,
despite the resulting tensions within the
party and among the people.
For the moment at least, it appears that
East Germany intends to take the hard
line on day-to-day issues with West Ger-
many that ranking Politburo member
Paul Verner adopted in a speech before
the East German parliament late last
month. Verner-considered second only
to party boss Honecker in the East Ger-
man political hierarchy-is the senior
party official in charge of policy formula-
tion in the area of security.
The regime seems to have un-
derestimated the extent to which the in-
tellectual community would react to its
decision to exile Biermann. Party officials
were obviously taken aback by a public
petition condemning the critic's involun-
tary expatriation that was signed by a
number of the country's leading writers
and artists. This poses the question of
whether other East German intellectuals,
for the most part less critical of the regime
than Biermann, will go beyond symbolic
defense of the man and take a more active
role in criticizing the regime's actions.
For its part, the Honecker leadership is
trying to split the ranks of the intellectuals
by launching a campaign of its own. It is
conducting an intensive domestic media
campaign highlighting the names of those
writers and artists who support the party's
decision.
Party leader Honecker and party
cultural affairs spokesmen last week
stressed their intention to continue to sup-
port those artists in the regime's good
graces by visiting a leading conformist
sculptor who is working on a Marx-
Engels monument in East Berlin.
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SECRET
LEBANON
Contingents of the predominantly
Syrian Arab peacekeeping force entered
Tripoli and Sidon unopposed early this
week, thus tightening the Syrians' grip on
Lebanon's main coastal roads and port
facilities.
Syrian-controlled news media indicate
that peacekeeping troops may in the next
few days occupy the southern Lebanese
port city of Tyre and the Palestinian
stronghold at Nabatiyah in order to es-
tablish control over the Palestinian and
leftist forces' only remaining important
resupply routes. The Syrians, however,
probably will be reluctant to move any
farther south than Tyre because of Israeli
sensitivity to the presence of Syrian troops
near the border.
Partly as a warning to the Syrians, who
have recently increased their troop
strength inside Lebanon to about 30,000,
the Israelis on November 22 augmented
their forces near the Lebanese border.
They reportedly sent two infantry bat-
talions and two armored companies
to Rosh Haniqra on the Mediter-
ranean coast and to Metulla in the
northeast.
The Israelis are clearly disturbed about
renewed fedayeen operations along the
border last weekend. In the first such inci-
dent since early this year, Fatah guerrillas
fired across the border at an Israeli army
patrol near Zarit.
On November 21, an unidentified
commando group shelled the Israeli
coastal resort town of Nahariyya.
The Israelis say that radical Fatah
members-not Lebanese leftists-were
behind both attacks and insist that the
Syrians are in a position to put a stop to
such operations.
In reality, neither the Syrian regime nor
Fatah leader Yasir Arafat is at present
able to control the many radical Palesti-
nian splinter groups operating near the
Israeli border.
The Syrians have publicly announced
their intention to begin confiscating heavy
weapons held by Palestinian and leftist
units as well as Christian militias. This
move is certain to provoke resistance
from these groups, all of which have been
caching weapons in areas under their con-
trol. Syria's determination and ability to
enforce the cease-fire will soon be put to
large-scale exercises held near the border
early this month.
The withdrawal of a division would
leave about 40,000 troops in western Iraq
-down from some 80,000 in July. Iraq
would have one armored division near
H-3 in the west, an armored division
along the Euphrates River, and a moun-
tain infantry division in the northwest. An
additional 9,000 men in mechanized, ar-
mored, and mountain units remain in the
north and could be used against the
Kurds.
Iraq had hoped to distract Syria from
its military intervention in Lebanon by
massing forces near the Syrian border but
now clearly recognizes its inability to in-
fluence the situation in Lebanon. Baghdad
also seems to be resigned to the failure of
the buildup to encourage opponents of
Syrian President Asad to move against
him.
The Iraqis probably are now convinced
that the continued presence of their forces
on the border no longer serves the
regime's interests and, in fact, may be
contributing to morale problems in the
military.
IRAQ-SYRIA
Iraq has apparently withdrawn one
division of troops from its border with
Syria.
reported that at least one division return-
ed to its home garrison following the
It is unlikely that Iraq is planning to
pull back all of its units from the border at
this time. The two remaining armored
divisions have been in western Iraq since
June, and Baghdad may plan to station
portions of these units there permanently.
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EXPORT POLICY 0
The USSR has apparently given up
hope for now of meeting its additional
hard-currency needs by expanding exports
of manufactured goods to the West.
On at least two occasions since last
spring, a high official in the Ministry
of Foreign Trade reportedly indicated that
the USSR would have to defer plans to
favor exports of manufactured goods over
raw materials. This shift in export
strategy was confirmed recently by an of-
ficial of the Institute of US and Canadian
Studies in conversations with US of-
ficials.
Soviet interest in stressing exports of
manufactured goods had intensified since
1973, culminating in the priorities es-
tablished at the 25th Party Congress last
March. The subsequent policy shift
almost certainly has been prompted by
the USSR's realization that its need for
rapid expansion of hard-currency exports
can be met only by boosting sales of raw
materials to Western customers.
Manufactured goods still represent
only 4 percent of total sales to the West.
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SECRET
Recent statements by Chinese officials
make clear that Peking intends to put
renewed emphasis on foreign trade. The
impact of any new policies, however,
probably will not be felt until the second
half of next year.
China wants to avoid trade deficits with
the West. In deficit between 1973 and
1975, China's trade balance with the West
will be in surplus this year. Most impor-
tant, the hard-currency deficit in trade
with non-communist countries is likely to
fall to about $ 100 million, compared with
the $1-billion deficit average in 1974 and
1975.
China is likely to return to the policy of
1972 when it emphasized trade to
promote economic development, but it
will tie import growth to export perfor-
mance. An Italian delegation was recently
told that China's policy on credits is un-
changed. Supplier credits of up to five
years will be used for major purchases; the
Chinese will not seek direct loans or
long-term credits.
In the past few weeks, the Chinese press
has been enthusiastic about foreign trade,
widely quoting Chairman Mao's state-
ment of 1949 on China's desire to increase
trade as a means of developing produc-
tion. Trade officials have been discussing
trade expansion at meetings with visiting
economic groups-including one with the
National Council for US-China Trade in
which China's need for purchases of
capital goods and technology was
highlighted.
The controversy between radicals and
moderates over foreign trade policy ap-
parently stalled the drafting of the new
five-year plan that was to begin this year.
Although foreign trade
organizations-particularly the one
handling imports of whole plants and
technology-remained active throughout
the year, uncertainty about the overall
plan undoubtedly affected trade decisions.
Revisions of the five-year plan are
reported under way, including ad-
justments in import requirements because
of earthquake damage, but China's trade
balance in 1977 is not expected to show
any serious deterioration as a result.
China will continue to import
agricultural products. Purchases of some
industrial commodities, such as metals,
may pick up, but imports of fertilizer will
decline as imported plants begin produc-
tion next year. Imports of capital goods
and technology will be aimed at develop-
ing sectors of the economy that in the long
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SECRET
run will allow import substitution.
With criticism of raw material exports
by radicals now muted, China may seek to
boost crude oil sales. Negotiations on a
long-term oil contract with
Japan-China's best potential
market-may be reopened.
While non-oil export opportunities will
continue to improve with the increase in
Western demand, shortages of many com-
modities offered at the recent Canton Fair
suggest that export supplies may be a
problem early in the year.
PHILIPPINES
Philippine President Marcos has begun
a crackdown on his critics in the Catholic
Church. On November 15, he ordered the
arrest of religious and lay persons
suspected of subversive activity in
collaboration with either the communists
or with former politicians of the right.
Two American priests have been arrested
and deported; other foreign priests in-
cluding Americans are reportedly on the
list for similar action.
Dissident clerics-often joined by
moderate members of the church-have
been the most outspoken critics of Mar-
cos' martial law regime. The current
arrests are part of a comprehensive plan
to counter church criticism by deporting
foreign priests active in political agitation,
placing activist leaders in preventive
detention, and scaring off their financial
patrons. The church hierarchy is ap-
parently not actively opposing the govern-
ment crackdown.
The President's move against the Chris-
tian left was foreshadowed by his revision
last summer of the antisubversion law. He
broadened application of the law beyond
communist organizations to include any
group allegedly engaged in subversive ac-
tivities-a revision clearly aimed at his
Catholic critics.
The current action also seems to be part
of a general tightening of the regime's
control-an effort launched by Marcos
after the recent referendum that has led to
a broad investigation of the civil service
and the military for misconduct or dis-
loyalty. Thus far, 327 military personnel
have been sacked in the current drive.
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SECRET
MEXICO /4
Mexico is in the throes of a crisis in
business and public confidence in the
country's economic future.
Altogether, the peso has fallen 55 per-
cent since it was first floated in
September. On November 22, the govern-
ment, in an effort to stem the massive
capital flight of recent days, temporarily
suspended the sale and purchase of all
foreign currencies and gold by banks.
Estimates are that some $300 million
were withdrawn from Mexico City banks
last week; over $150 million left on
November 19 alone. During early Oc-
tober, capital flight reportedly occurred at
the rate of $ 100 million a week.
Mexican reserves, conservatively plac-
ed at $1.7 billion at the beginning of the
year, were under $800 million by the end
of October, despite massive foreign
borrowing this year. Reserves will be
helped, however, by drawing on an $800-
million Eurodollar loan signed on
November 16. Mexico also signed an
agreement with the International
Monetary Fund on October 28 for $963
million. It has drawn down $365 million
to repay the US for funds extended under
a stabilization program agreed to in
September.
To make matters worse, rumors of a
coup or a move by President Echeverria
to extend his term of office circulated
widely last weekend. The weekend passed
quietly, but distrust of Echeverria's inten-
tions is widespread and is influenced by
his activism in the waning weeks of his ad-
ministration when Mexican presidents
customarily begin transferring power to
their successors.
Confidence was further eroded by
Echeverria's abrupt expropriation on
November 19 of about 250,000 acres of
rich, private farm land in the northwest.
It was a move by Echeverria to go down
in history as the president who delivered
on his promise to break up large private
farms and distribute them to the peasants
The expropriation evoked a strong out-
burst from large landowners and
businessmen, who staged business strikes
in protest.
The expropriation will pose a serious
problem for president-elect Lopez Por-
tillo, who assumes office on December 1.
He has indicated that he will try to avoid
division of land holdings because it
creates uneconomic units that hinder
agricultural production. Business and
conservative interests will urge him to res-
cind the expropriation, but counter-
pressure from peasant groups will make
this difficult.
Clearly, Lopez Portillo's first task will
be to restore confidence in the economy.
The very act of taking office will help.
(Further analysis of the measures that the
new government will likely take to exploit
Mexico's oil reserves and improve its
agriculture appears in the feature section
of this publication.)
JAMAICA;
Jamaican Prime muter Manley has
called for an early general election, on
December 15, in an apparent effort to act
before his popularity is further eroded as
Jamaica's economy continues its decline.
Manley's People's National Party and
the opposition Jamaica Labor Party led
by Edward Seaga appear to be running
nearly even.
Manley, however, is relying heavily on
a gerrymandering move that will create
seven new seats in the House of Represen-
tatives. He is also counting on his skill as
a campaigner to reverse middle-class
voter defection from his party and prevent
abstentions by party members who are
dissatisfied with his handling of the
economy and alarmed at the growing in-
fluence of the party's left wing.
The closeness of the race reflects a
marked decline in the Manley
government's popularity. Manley has
acknowledged being concerned about his
party's prospects and is supporting the
renomination of even its conservative25X1
members of parliament if they have
proven vote-getting ability. The leading
party leftists have also been given a place
on the ticket, as candidates for the new
districts.
The opposition Labor Party has been
campaigning hard for several months, and
Seaga expects to win. His party could
nonetheless be handicapped by the fact
that many of its candidates are young and
not as well known as those of the ruling
party.
The campaign may well be plagued by
violence. Already a clash between ruling
party activists and part of a motorcade
carrying Seaga and former prime minister
Shearer injured ten persons, including
nine members of the Labor Party.
There have been other scattered in-
cidents, apparently instigated in most
cases by members of the ruling party ac-
ting on their own initiative.
Manley has been stressing the theme of
"national unity against imperialism," and
his attacks on the US--especially the
CIA-could become more pointed.
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BRAZIL
Brazil's persistent balance-of-payments
problems may widen the rift within the
military regime over foreign economic
policies. Planning Minister Reis Velloso
and other spokesmen are attacking in the
press recent speeches by Minister of In-
dustry and Commerce Severo Gomes in
which he called for greater insulation of
the economy from external influences.
Brazil's rapid economic progress since
the military took power in 1964 has been
greatly aided by policies that encouraged
domestic industry to compete vigorously
for markets abroad, that liberalized im-
ports, and that welcomed foreign capital
to supplement domestic savings. Since
early 1974, however, business has been
hurt by soaring import prices and weaken-
ed export demand resulting from the oil
price hike in 1973 and the subsequent
world recession.
Gomes blames the government's liberal
trade and foreign investment policies for
Brazil's economic troubles. He has
proposed redistributing income to
accelerate expansion of the domestic
market-implicitly to reduce dependence
on foreign markets-and accelerating
development of import substitution in-
dustries.
He would also trim foreign borrowing
and cut direct investment by mul-
tinational corporations. These arguments
appeal to many nationalistic Brazilians,
including some factions within the
military.
The press attack against Gomes in-
dicates that many within the government
fear his ideas may be gaining momentum.
Balance-of-payments problems already
have forced the regime to restrict imports
and accelerate import substitution.
The attack may also be inspired by a
desire to influence presidential politics.
While President Geisel's term will con-
tinue for more than two years, potential
successors already are maneuvering for
position. Government leaders probably
want to bury this divisive economic issue
before it complicates the task of choosing
a new president.
fCiJADO
XF
PERU-CHILE
Peru has presented Chile with a formal
counterproposal for creation of a corridor
giving Bolivia access to the Pacific Ocean.
Chile made its own proposal last
December.
Peru's plan calls for:
? Eventual cession to Bolivia of
sovereignty over a corridor through
northern Chile to a point short of the
ocean.
? Tripartite administration by Peru,
Chile, and Bolivia of the remaining
section of the corridor to the sea.
? Tripartite administration of the
Chilean port of Arica.
? Authorization for Bolivia to con-
struct its own port and exercise
sovereignty over waters adjacent to the
corridor's coastline.
The original Chilean proposal was to
grant Bolivia exclusive sovereignty over a
similar corridor, with no additional
provisions.
With their current offer, the Peruvians
apparently are counting on Chile and
Bolivia to disagree. Peru has long hoped
to regain territory in the Arica region that
was lost to Chile in the last century,
The Bolivian government will study the
Peruvian proposal, but for the present is
likely to await Chilean reaction. Bolivian
leaders probably will be displeased that
their country's sovereignty in the propos-
ed corridor would not continue to the sea.
Chile seems likely to take strong excep-
tion to Peru's counterproposal. The
Pinochet administration may well con-
tinue negotiations to keep relations with
Peru amicable, but will nevertheless have
reservations, particularly about the
proposed joint administration of the port
of Arica. The semiofficial press in Santi-
ago has already billed Peru's offer as "a
negative response" to Chile's earlier bid.
There is a good chance that
negotiations will eventually founder or
reach a stalemate. Chile may not be en-
tirely reluctant to see the corridor idea
languish or fail altogether, since realistic
hopes in Santiago for a workable solution
have probably never been very high,
Both sides may prefer, nevertheless, 25X1
keep the talks going as long as possible,
because a breakdown would probably in-
crease border tensions.
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SECRET
The military and political defeat suffered by the fedayeen
at the hands of the Syrians has forced the relatively moderate
leadership of the Palestinian movement to align itself with the
Arab states that want to search for the possibility of a settle-
ment with Israel.
The Palestinian Movement After Lebanon
The Palestinians' defeat in Lebanon has
forced Palestine Liberation Organiza-
tion chief Arafat to align himself with the
key Arab states interested in a settlement
with Israel. He needs their support for
his continued tenure as PLO chief.
Arafat will find it increasingly difficult
to preserve the PLO's independence, and
he will now have to emphasize the pursuit
of a more purely political strategy to
secure both his position and the goals of
the Palestinian moderates. The alter-
native-a return to terrorism-would
alienate his Arab backers and could cost
him his position.
The Palestinians gravely miscalculated
when they took sides in Lebanon's civil
war. They have been dealt a decisive
military defeat by the Syrians, previously
their staunchest allies.
The movement has also lost most of the
political standing it won at the 1974
Rabat summit, when at the expense of
King Husayn the PLO was formally
dubbed the sole representative of the
Palestinians.
A look at the post-Lebanon status of
the Palestinians suggests that:
? The PLO will be unable to challenge
Syria for the foreseeable future, either in
Lebanon or in broader Middle Eastern af-
fairs.
? Arafat will do his best to play other
Arab states off against Syria in order to
salvage a sphere of autonomy. His success
will be limited because, with the exception
of the mavericks-Iraq and Libya-the
Arab states have become convinced that a
free-wheeling Palestinian movement is a
threat.
? Arafat is likely to retain his position
as head of the PLO and spokesman for
the Palestinians, even though he has come
under attack from within the Palestinian
movement. He probably will remain will-
ing and able to commit the main body of
the PLO to peace negotiations if he
becomes convinced he can make concrete
gains.
? Syria's domination of the PLO, con-
trol of Lebanon, and closer ties with Jor-
dan will give it a strong hand in the event
of renewed Middle East negotiations.
? The PLO probably would be willing,
if invited, to participate in a new round of
peace talks as part of a joint Arab or mix-
ed Syrian-Jordanian- Palestinian delega-
tion.
? The PLO almost certainly is
prepared to recognize Israel in return for
the creation of an independent
"Palestine" made up of the West Bank
and Gaza.
? Fedayeen leaders are under ' in-
creasing pressure from their militant
followers to turn again to terrorism to
redress their grievances against the Arab
states as well as Israel. This pressure will
grow more intense if the Palestinians-in-
volved in negotiations or not-realize no
diplomatic gains.
The Palestinian movement is at a
crossroad. The fedayeen military defeat in
Lebanon at the hands of Syrian
troops-to which Arafat acquiesced at the
Arab summits in Riyadh and Cairo-has
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cost them their last independent power
base. Militarily, they have lost men,
equipment, and allies; politically, they
have lost supporters, momentum., and
prestige.
In particular, the Palestinians have had
to acknowledge the reality of Syrian
overlordship.
Syrian-Palestinian Accommodation
Arafat-and his moderate followers in
Fatah and the PLO-had come to
recognize months before the Riyadh sum-
mit that accommodation with Syria was
the only way to go. It was clear by the end
of the summer that prolonging the
fighting would simply drain the
Palestinians.
The Riyadh summit was thus in
Arafat's own interest, however little he
could have relished the legitimization of
Syria's role by the other Arab states.
Arafat was primarily interested in salvag-
ing from the debacle the existence of the
Palestinians as a viable unit, with some
military strength-theoretically
employable against Israel--and an
autonomous sphere of activity inside
Lebanon, however circumscribed.
At Riyadh, he committed the
Palestinians to a withdrawal from the few
military positions they retained-even if
this meant an open breach with the
Lebanese leftists-and a return to the
refugee camps under the terms of the
Cairo accords. He dropped the
Palestinians' insistence on ,a mutual
Syrian withdrawal and agreed to accept,
as guarantor of the peace, a pan-Arab
security force that, in reality, consisted
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overwhelmingly of Syrian troops.
Arafat will continue to maneuver
against Syria to the extent he can, but he
will be very careful to preserve his accom-
modation with President Asad. The
Palestinian movement survived the loss of
Jordan as a base of operations, but it
needs, at a minimum, a physical presence
in Lebanon if it is to retain any credibility
as an independent force against Israel.
The Palestinians in Lebanon
Arafat knows, of course, that Syria
would not now allow the fedayeen to
mount unrestricted terrorist attacks
across the Lebanon-Israel border, even if
the fedayeen were able and Israel
vulnerable. He also knows that it is not in
Syria's interest to destroy the effec-
tiveness of the fedayeen altogether, and he
probably hopes Asad will permit an oc-
casional terrorist action to remind Israel
that this weapon is still available to the
Arabs.
A Syria facing Israel over the
negotiating table needs whatever leverage
it can get, and the threat of renewed
fedayeen activity-strictly controlled by
Damascus-is useful to Asad.
Arafat is probably willing to abide by
the Cairo accords-Lebanese-Palestinian
agreements signed in 1969 and
1973-although he will stress the
prerogatives they afford the fedayeen
rather than the obligations they impose.
The accords were negotiated when
fedayeen strength in Lebanon was rising;
they are an attempt to keep the
Palestinians from interfering in
Lebanon's internal affairs, but they also
guarantee the fedayeen almost free run of
the refugee camps and their commando
bases in the east and south.
Acceptance of the Cairo accords is not
the only aspect of the Riyadh agreement
that allows Arafat considerable freedom
of maneuver. He will not give up trying to
win for the Palestinians some kind of
political role in Lebanon.
There are half a million Palestinians in
Lebanon, a quarter of the country's pop-
ulation. A sizable proportion lives outside
the refugee camps. It would not be feasi-
ble to isolate them from the country's
As always, Arafat will perceive such ef-
forts as direct challenges to his own con-
trol, but he will be unable to resist.
Can Arafat Hold On?
During the height of the fighting in
Lebanon, the Syrians attempted to under-
mine Arafat. A front-page editorial in
Syria's official Baath party newspaper as
recently as October, for example, hit out
at the Fatah leadership as responsible for
undermining the Palestinian cause and
prolonging, the fighting in Lebanon with
its "daily killing of more Arabs." The
author ridiculed the suggestion that,
Damascus would ever reconcile itself to
the present PLO leadership.
Syria is not in a good position to move
against Arafat directly. At a minimum,
the forcible removal of Arafat would frag-
ment the already divided Palestinian
movement to the point that it would be a
greater liability than help to Syria, both in
Lebanon and in wider Middle East
negotiations. Damascus is not in a posi-
Yasir Arafat (center) and president Sarkis of Lebanon (right) emerge
from unsuccessful Lebanese peace conference in September
political life, particularly because they are
the natural allies of the segment of the
political system that has been denied the
political and economic privileges enjoyed
by the Christian and Sunni Muslim elite.
It was the system's inability to absorb
the Palestinian presence that pushed
Lebanon into civil war in the first place.
Without somewhere else for the
Palestinians to go-and there is nowhere
else in the absence of some kind of Middle
East settlement-they will continue to
play a role in Lebanon.
Arafat hopes Asad will come to see that
a Fatah allied with Damascus can
promote Syria's interests in Lebanon and
in the fedayeen movement better than a
Syrian-controlled group like Saiqa that
has little political or military strength.
Asad may have followed some such line
of reasoning, at Riyadh. He undoubtedly
hopes, however, to refurbish the Syrian-
controlled fedayeen group, Saiqa, and the
Syrian-based Palestine Liberation Army.
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tion to ensure Arafat's replacement by
someone closely aligned with Syria. Syria
has been killing Palestinians in the field
too recently for a pro-Syria candidate to
win broad acceptance.
Asad probably has recognized this and
come to believe that getting rid of Arafat
would likely result in the rise of a radical
like Salah Khalaf, the terrorist leader and
head of Fatah's Black September
Organization. Khalaf has strong Egyptian
connections as well, which make him dis-
tasteful to Syria despite its rapproche-
ment with Egypt.
We have seen no signs that a broad an-
ti-Arafat movement is developing within
Fatah or the PLO. There has been
criticism of Arafat at various stages of the
Lebanon conflict, but his opponents show
no sign of being able to agree on an alter-
native leader. Arafat remains the only
leader with the stature to speak for the
movement. Lacking an alternative, the
Palestinians may well react to the trauma
of defeat by coalescing around Arafat as a
familiar and reassuring symbol.
One of the key factors influencing
Arafat's ability to hang on will be the at-
titude of Saudi Arabia. The Saudis have
been convinced that Arafat, for all his un-
desirable features, is the most moderate
leader the Palestinians are likely to
produce and the only one who can rally
the moderate fedayeen majority and
shape it into the movement's controlling
force. Saudi financial support has enabled
Fatah to dominate the PLO. With the
Saudis behind him, Arafat is in a good
position to stave off challenges to his con-
trol.
Egypt's reluctance to give the Syrians
an opening to dominate the PLO also
works in Arafat's favor. While few Arab
leaders have any great love for Arafat, he
has one great advantage: he is perceived
as being his own man, dedicated to the in-
dependence of the PLO and not under the
thumb of any particular Arab state. This
fact alone makes him preferable to many
of his would-be successors in the eyes of
those leaders who otherwise might--if
they were willing to work
together-engineer his downfall.
Arafat and the PLO
With or without Syrian prompting,
Arafat could face a challenge at the next
meeting of the Palestine National Coun-
cil, the PLO "parliament." A PNC
meeting, which is supposed to be held an-
nually, is long overdue; the last was in
June 1974. A session now would provide a
logical opportunity for the Palestinians to
chart their post-Lebanon course, but also
an obvious opening for a power play.
The most radical fedayeen groups pull-
ed out of the PLO executive committee,
the organization's small governing body,
in the fall of 1974. These "rejectionists,"
however, can be expected to participate in
any future meeting of the PNC in the
hope of forcing this larger body, which is
more difficult for Fatah to control, to
move toward their hard-line policy
positions rejecting peaceful solutions to
the Middle East and Lebanon problems.
If they are successful, they might also
attempt to unseat Arafat or to alter the
composition of the executive committee in
order to eliminate Fatah dominance.
In the present uncertain circumstances,
it is also possible that pro-Syrian
members of the PNC not affiliated with
any fedayeen group could join with Saiqa
representatives in an attempt to reduce
Arafat's and Fatah's domination of the
PLO. Several of the independent
members of the PLO executive com-
mittee-and, ironically, one of the rejec-
tionist groups-are heavily influenced by
Syria.
Splits Within Fatah
Not the least of Arafat's headaches is
keeping his hands firmly on the reins of
his own fedayeen group, Fatah. Its
nine-member central committee has never
been monolithic; decisions are more often
arrived at by give and take than by Arafat
alone, and infighting is chronic.
The moderates, including Arafat, now
have the upper hand, but the extremist
wing, led by Salah Khalaf, has challenged
Arafat's policies at various stages of the
Lebanese crisis and has acquired some
following among the group's publicists
and militia leaders.
The Salah Khalaf wing may well be
tempted to turn to terrorism in an effort
to garner publicity and win converts.
Arafat and his supporters, will probably
try to curb such activity, recognizing that
it would cost them vital support from the
Arab states interested in generating new
momentum toward settlement
negotiations.
Arafat has been maneuvering recently
to shore up his position against the ex-
tremists. He is building up the strength of
Fatah's internal security apparatus head-
ed by Ali Hasan Salamah, one of his sup-
porters. His efforts are aimed at undercut-
ting Muhammad Salih, the leftist head of
Fatah's military arm.
Another Arafat confidant, Khalil
Wazir, has been delegated much of
Fatah's day-to-day administration. Wazir
is a long-time competitor of Khalaf.
Wazir's loyalty to Arafat and lack of a
personal following make it unlikely that
he would move against Arafat. He is
respected by his Fatah colleagues and
probably would be acceptable to the
Syrians, with whom he has close ties.
Thus he would be a likely candidate for
the succession if Arafat is forced out by
others.
West Bank Palestinians
The principal Arab states as well as
Israel have made modest efforts to
enhance the influence of Palestinians from
the West Bank and Gaza within or outside
the PLO as a way of diluting or
eliminating Arafat's control of the
Palestinian movement. Several members
of the PLO executive committee are of
West Bank background, and one, Abd
al-Muhsin Abu Mayzar, has been bruited
as a possible successor to Arafat.
The West Bankers now on the executive
committee, however, are of varied
political outlook, and they all owe their
positions to Arafat.
Anti-Arafat maneuvers seem to have
little support among West Bank residents.
Most generally support the PLO and do
not object that its leadership comes from
outside their own ranks. West Bankers
have been confused and disillusioned by
events in Lebanon. Some are apparently
inclined to blame Arafat, but more feel
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betrayed by Syria's attack on the
fedayeen. Few are prepared to cooperate
with Syria.
West Bankers support the PLO as the
only genuine Palestinian organization
now in existence, and they see Arafat as
the symbol of the Palestinian cause. They
regard the PLO as the only group
dedicated to ending the Israeli occupa-
tion. The Arab states, in the West Bank's
view, are cynically using the Palestinians
as pawns to further their own interests.
The Israeli government has occasional-
ly attempted to delegate broader
municipal powers to West Bank officials
in order to foster limited Arab self-
rule-a plan that would tie West Bank
leaders more closely to Israel. The
Israelis, however, consistently work to
prevent the emergence of any potential
leader of the entire West Bank.
Inhabitants of the West Bank probably
would take a more active interest in their
own political future should the existence
of some kind of West Bank state, indepen-
dent or semi-autonomous, seem immi-
nent. In the absence of such a develop-
ment, West Bank leaders seem inclined to
support Arafat passively, while minimiz-
ing their cooperation with Israeli
authorities.
The Palestinians and Peace Talks
The odds are that Arafat will survive
the storm and hold on to his position as
chief spokesman for the Palestinian cause.
He will be obliged, however, to follow
Syria's lead on important policy matters.
Syria's influence in the PLO, its newly
won control of the situation in Lebanon,
and its ties with Jordan will give the
Syrian President a fairly strong hand in
future negotiations.
Arafat would probably have no objec-
tion to involving the Palestinians in the
negotiating process. The PLO, if invited,
would probably participate in
negotiations as part of a joint Arab
delegation or as part of a mixed
Syrian-Jordanian-Palestinian delegation.
The moderates who control the PLO
probably are prepared to drop their
declared objective of settling for nothing
less than an independent secular state with
Black September leader Salah hhalaf (right) joins PLO political
chief Naruq Qaddurni at recent news conference
Israel proper at its heart. The basic PLO
aim appears to be the creation of a
PLO-governed, independent Palestine
made up of the West Bank and Gaza.
Arafat and the present leadership will not,
however, play their only strong card in ad-
vance by recognizing Israel before peace
talks begin.
If a compromise were reached giving
the Palestinians a West Bank state, a
significant body of fedayeen opinion-the
"rejectionist" groups and perhaps the ex-
tremist members of Fatah-would
presumably refuse to adhere to the settle-
ment and would commit themselves to
continued guerrilla warfare against Israel.
They would assume that the new West
Bank state of Palestine would give them
safehaven. The rejectionists, frustrated,
probably would turn as well to inter-
national terrorism.
Militants within Fatah are probably
weighing the possibility of a return to
terrorism, both as a means of redressing
fedayeen grievances against Syria and as
an attempt to re-establish the
Palestinians' touted ability to strike at
Israel.
The basically moderate Fatah
leadership is not likely to acquiesce in
terrorism at this time, but pressure to do
so will increase if the Palestinians are ig-
nored in a future round of peace
negotiations or forced by the Syrians
to accept solutions to representational
or substantive problems that result in
no negotiating gains for the Palestin-
ians.
A Palestinian leader other than Arafat
would have greater difficulty making
compromises in negotiations. Although a
Syrian-backed successor presumably
would be even more moderate than
Arafat, most of the leading Fatah con-
tenders favor tougher tactics in dealing
with Israel. In addition, none of them has
Arafat's prestige or ability to sell a con-
troversial settlement to his followers
without making it appear to be an aban-
donment of the Palestinian cause.
With Arafat in control, however, the
near-term outlook is somewhat more en-
couraging: the PLO has been chastened
by its defeat in Lebanon, but is still able to
project enough credibility to make con-
ciliation possible.
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The austerity measures Prime Minister Andreotti has been
announcing over the past month will mean a slowdown in
economic growth next year, perhaps to zero. The continued
cooperation of the Communists will be a key to the success of
the measures.
Prime Minister Andreotti won a vote of
confidence from Parliament recently on
the fiscal and monetary program he has
been announcing piecemeal over the past
month.
The program aims to soak up the excess
Italy: Austerity Measures
consumer demand that has been fueling
rapid inflation and boosting imports
faster than exports. Inflation in Italy is
running double, and in some cases triple,
the rate in the other major industrial
countries except the UK.
Consumer prices in September were up
17 percent from a year earlier, while
wholesale prices were 27 percent higher.
Increases in both price indexes
accelerated sharply during September.
The seasonally adjusted trade deficit
totaled $2.3 billion through September,
compared with a deficit of $13 million last
year.
The government program calls for rais-
ing revenues by $5.8 billion next year
through a combination of tax hikes on
gasoline and motor vehicles, prepayment
of income taxes, higher prices for public
services such as transportation and
telephones, and increases in miscellaneous
other taxes.
The Bank of Italy estimates that, with
the large amount of funds flowing back
into the economy through public capital
investment programs, this revenue
package would yield a net reduction in
buying power of $4.1 billion, or about 2
percent of projected gross national
product.
Battle Over the Wage Escalator
Many of the government's moves to
curb its cash budget deficit will in fact add
to short-term inflationary pressures, par-
ticularly if Italy's wage indexation system
is not modified. Currently, an increase in
the government set and subsidized prices
or public service tariffs results in a wage
increase greater than the income
generated by the price increase.
Under pressure from the EC: and the
International Monetary Fund, to which
the Italians have turned for further aid,
the government now recognizes that its
Communist union leader Luciano Lama (left) and Socialist union leaders
Pietro Roni (center) and Giorgio Bcnvenutn discuss austerity measures
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austerity program cannot succeed without
substantial revisions in the wage es-
calator.
No economic issue is more sensitive
politically. To avoid a parliamentary test
that could lead to the downfall of his
minority government, Andreotti has
resisted making any strong attack on the
wage escalator, appealing instead to in-
dustry and the unions to work together for
a solution to the problem.
Despite adamant public opposition, un-
ion confederations reportedly might agree
to some changes in the escalator
mechanism, such as reducing the frequen-
cy of adjustment from three-month inter-
vals to six. Voluntary major concessions
by the unions seem unlikely.
Help for Industry
A revision of the wage escalator would
be an important boost to the
government's efforts to shift resources
from consumption to investment. Unable
to count on reform of the escalator, the
government has been casting about for
other ways to spur industrial investment.
In a combination wage-restraint and in-
vestment proposal, the government an-
nounced that it might freeze cost-of-living
and basic pay increases for workers in the
top one fourth of the income scale for the
next two years.
Another scheme under consideration is
government financing of some portion of
workers' social insurance benefits, which
account for half of labor costs. Implemen-
tation of these proposals-in whole or in
part-depends on the outcome of in-
dustry-union talks on curbing increases in
wage costs.
Problem of the Lira
Complicating the government's efforts
to stem inflation and promote economic
recovery is the persistent weakness of the
lira. The Italians are caught in a vicious
cycle in which rapid inflation leads to
depreciation of the lira and, in turn, to
more inflation. It is especially difficult to
break the cycle because imports equal
almost one third of gross national
product. Inflation has eliminated nearly
all the competitive advantage gained
through depreciation this year.
The trade deficit, which had shrunk in
the third quarter, will probably rise sharp-
ly in the final three months of 1976. As a
result, the current-account deficit is likely
to reach $2.5 billion this year.
The government has resorted to
numerous foreign exchange controls to
stabilize the lira and conserve foreign ex-
change holdings. It twice imposed a tax
on foreign currency purchases in Oc-
tober-the latest a 7-percent tax due to re-
main in effect for four months.
The government also is calling on
foreign creditors for more loans.
Negotiations are under way with the EC
for $700 million and with the Inter-
national Monetary Fund for $530 million;
the US and West Germany may be asked
for $1.2 billion. Both the EC and the IMF
are holding off their response, urging Italy
to act on the wage indexation system.
Impact of Austerity Measures
The Andreotti government's austerity
program will do little to cut inflation in
the short run. According to rough
calculations, increases in public service
and other prices already in effect will
cause a one-time increase of about two
percentage points in the consumer price
index, with most of the impact coming
late this year. The program as a whole
probably will only mildly ease in-
flationary pressure next year.
Although the government's cash deficit
is likely to decline somewhat, it will re-
main sizable. Prices will probably rise at
an annual rate of about 18 percent next
year. Achieving a lower rate will hinge on
basic reform of the wage escalator.
Attention will now shift to the coming
negotiations between labor and industry
on the wage question. Andreotti has in
effect placed on the Communists-the
most influential group in the labor
movement-considerable responsibility
for formulating wage policy.
In exchange for some key parliamen-
tary posts and a more overt consultative
voice in policy making, the Communists
have cooperated in the enactment of An-
dreotti's program so far by abstaining in
Parliament. There are signs that the Com-
munists are also prepared to work for
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some form of wage restraint, but their ad-
vocacy of such a policy would subject the
party to increased internal strain. In that
event, Communist leaders would push for
further economic or political concessions
from the government to blunt criticism
from their followers.
The price of undertaking the austerity
program will be a loss in potential growth
in real gross national product next year.
With no austerity measures in effect, real
growth might have been about 2 percent
in 1977. Calculations now suggest that
implementation of tax increases included
in the austerity program will result in no
growth next year. If the partial wage
freeze is also implemented, gross na-
tional product would probably decline
slightly.
The slowdown in growth will bring
about a significant improvement in Italy's
foreign payments position, barring a large
increase in oil prices. The trade and
current-account deficits will probably
decline substantially as import demand
falls. In the event of a 10-percent oil price
rise, however, Italy's net oil import bill
would rise about $800 million, wiping out
most of the benefit of the decline in other
imports.
Because inflation will remain high,
pressure on the lira probably will con-
tinue. The government may have to main-
tain foreign exchange controls much
longer than it now anticipates.
Colombia's present economic, social, and political dif-
ficulties do not immediately threaten its democratic in-
Colombia: Troubles for President Lopez
Colombia, one of the two remaining
democracies in South America, is beset by
economic hardships, rampant crime, and
guerrilla and other extremist activities.
These problems weigh heavily in the coun-
try's already volatile political arena as the
campaign for the 1978 presidential elec-
tion gets under way. They also have led to
growing dissatisfaction among armed
forces officers. The military's reaction is
not at present, however, a threat to
Colombia's tradition of democratic
government.
President Lopez is the first chief exec-
utive to be freely elected since the 16-
year period of the National Front ended
at the presidential level in 1974. Under
the Front, the country's two major po-
litical parties, the Liberals and the
Conservatives, agreed in 1957 to alter-
nate the presidency for four four-year
terms and to maintain equal Liberal and
Conservative representation in congress
through 1974 and in other elective and
appointive offices through 1978. This
system was devised to bring to an end
nearly two decades of bloody political
warfare and military dictatorship.
Lopez, a Liberal, came to power 27
months ago with the largest election man-
date in the country's history. His party
also gained control of both houses in con-
gress. A champion of social and economic
reform and civil liberties, Lopez hoped to
correct many of the persistent inequities
in Colombian society.
Since Lopez took office, however,
economic and social dif-
ficulties-resulting in riots and
demonstrations-have forced him to
abandon his libertarian concepts and to
impose two nationwide states of siege
separated by only three months; the latest
was imposed last month.
Declining Popularity
Lopez' popularity has declined since his
inauguration. His stern anti-inflationary
program, which has put lower income
wage earners in a financial squeeze, is
partly to blame.
Lopez has had some successes,
however. The rate of inflation has declin-
ed, and tax revenues, designed eventually
to help the neediest, have increased. The
lot of the average Colombian is
nevertheless probably no better and may
in fact be worse than when Lopez took of-
fice. As one Colombian ex-president has
observed, it is an "academic consolation"
that inflation has declined from 27 per-
cent to 20 percent.
Under Lopez real wages have fallen,
and unemployment remains high as a
result of the deflationary policies in effect.
The two-year-old income redistribution
program has not yet begun to benefit a
significant number of poorer Colombians.
The situation has led to an increase in
extremist activity, particularly by small
leftist groups. They have encouraged
strikes in both the public and private sec-
tors that have resulted in demonstrations
and violence. The country's long-standing
rural terrorism by pro-Moscow,
pro-Havana, and pro-Peking guerrilla
groups has also increased.
The reimposition of the state of siege
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has given Lopez the authority to take
some of the tough actions necessary to
regain the public confidence that has been
eroded by the continued disturbances.
With his emergency powers, he can ban
street demonstrations, control the media,
declare a curfew, and replace civil courts
with military tribunals.
Lopez also must at the same time con-
tend with rampant corruption.
Widespread press coverage of corruption
and numerous scandals involving public
officials is adding to Lopez' other
problems.
Politics and the Military
Colombians are already beginning to
prepare for national and local elections in
1978. For the first time in 20 years, all the
contests will be open to all political par-
ties.
The governing Liberal Par-
ty-weakened by factionalism-has at
least two presidential candidates com-
peting for the party's presidential nomina-
tion. The opposition Conservative Party is
intensifying its criticism of the
government-a departure from the
cooperative attitude of National Front
days.
A coalition of minor leftist parties is
attempting to muster support despite a
rather poor showing in municipal elec-
tions this year. The Moscow-line Com-
munist Party is planning to participate in
the campaign.
Because of the aura of uncertainty sur-
rounding the return to full political com-
petition, the traditionally apolitical
military will be watching carefully from
the sidelines.
The armed forces' posture of support
for Lopez has changed markedly in reac-
tion to the government's increasing dif-
ficulty in maintaining public order.
Although officers recognize that most of
Lopez' problems were inherited from the
previous administration, they nevertheless
have demanded that stop-gap measures be
instituted to cure the country's ills. They
have little sympathy for long-term
economic programs.
Since Lopez took office, the army has
been called on twice to restore order.
Colombian professional soldiers have
resented this police role and on both oc-
casions have forced the administration to
legitimize their action by declaring a state
Despite the problems that is is
experiencing, its democratic institutions
are not seriously endangered.
Lopez will press for continued social
and economic change. He believes the role
of government is to promote equality
rather than to perpetuate a traditional
wealthy elite. lie is convinced, in fact,
that the concentration of power in the
hands of an "irresponsible" elite is the
greatest danger to democracy in Colom-
bia. The military, while not entirely sym-
pathetic to Lopez' outlook, is not likely to
move against him.
Support for Conservatives
The Conservatives, who won 40 percent
of the vote in the municipal elections last
April, are increasing their popular sup-
port and have maintained party unity.
They can be expected to present the voter
with an attractive alternative to the
Liberals in the next election.
Lopez cannot seek re-election in 1978.
He has strongly defended his ad-
ministration's policies, ridiculed the left
for its attempt to create disorder, and call-
ed on Colombians to repudiate extremism
by supporting the government's emergen-
cy measures.
The President obviously considers the
public's acceptance of the new state of
siege as a mandate for his new "get
tough" policies and will work to counter
the erosion of popular support for
ministration and party.
President Lopez, whose popularity has declined since elected 27 months ago, meets the people
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The new president of Mexico, who is to be inaugurated
next week, will probably push for maximum production from
the country's vast new oil fields. He will also try to make Mex-
ico self-sufficient in farm products.
Mexico: Oil, Farm Decisions for Lopez Portillo
Mexican president-elect Lopez Portillo,
who takes office on December 1, will face
an immediate problem of restoring public
confidence in the economy. For the longer
term, he will emphasize exploitation of
the country's oil resources and assistance
to agriculture.
Recent oil discoveries in Mexico hold
out the prospect for-a substantial increase
in non-OPEC oil supplies, although Mex-
ico will continue to follow OPEC price
guidelines. In 1972, Pemex, the state oil
monopoly, discovered vast reserves in the
southern states of Tabasco and Chiapas
but kept the magnitude of these finds a
secret.
We now believe that the
Tabasco-Chiapas discovery is the largest
ever made in the Western Hemisphere
and that, when fully developed, the
reserves may rival those of such Middle
East countries as Kuwait and Iran.
Proven and probable oil reserves are now
conservatively estimated at 20 billion
barrels, but up to 60 billion barrels may
be confirmed over the next decade as a
result of continued exploration and
development.
Volume of Oil Production
Lopez Portillo would probably like to
produce and export crude at something
near the maximum level. If an all-out
development effort were begun soon,
Mexico could produce about 2.75 million25X1
barrels per day by 1980 and more than 6
million barrels per day by 1985. At this
rate, exports could reach 1.6 million
barrels per day by 1980 and 4 to 4.5
million barrels per day by 1985.
Technical and equipment limitations
and foot-dragging by government of-
ficials, however, could create major
obstacles. Production by 1980, given a
high priority, could be about 2.3 million
barrels per day, with exports of 1.2
million barrels per day.
The Pemex leadership generally
believes that crude output should be
limited to what Mexico can process itself
and that only refined products should be
exported. Shortages of equipment and, in
some cases, of trained personnel also
could slow progress. Although there is a
world-wide shortage of the deep-drilling
rigs needed in the Tabasco-Chiapas area,
the situation has improved in recent
months.
Lopez Portillo needs to reorganize
Pemex before a real effort to expand
production can get under way. Thedesire
of Pemex technicians to show themselves
technically efficient and the need to in-
crease exports to pay for equipment im-
ports will strengthen the new President's
hand in his battle with the bureaucracy.
Mexico also could increase production
faster if foreign firms were allowed to par-
ticipate in development projects. Lopez
Portillo reportedly has tentative plans to
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seek assistance from the US to help
develop the country's oil potential.
Although he has not spelled out what sort
of assistance he contemplates, Lopez Por-
tillo does respect the technical capabilities
of US oil companies.
Seeking US help in this sensitive area
would clash with past Mexican policy,
and Lopez Portillo would doubtless en-
counter stubborn opposition to the idea
from Pemex and from other nationalistic
groups in the bureaucracy.
Agriculture
In the agricultural sector, Lopez Por-
tillo's goal is to raise productivity and
make Mexico self-sufficient in farm
products, particularly corn and oil seeds,
and boost exports of such commodities.
The president-elect realizes that this will
be a difficult and slow process and will
require significantly more direct govern-
ment assistance to both large and small
farmers than is currently being provided.
There would be a political price as well.
Land redistribution, an integral
ideological feature of the party that has
governed Mexico for decades, would have
to be curtailed in favor of creating
large-scale commercial farms to max-
imize output.
Lopez Portillo appears to want to stress
productivity over land redistribution. His
The military officers ruling Ethiopia are developing what
they expect to become a nationwide complex of grassroots
organizations to implement government policies in a variety of
areas political, economic, social, and even military.
BELIZE
I U ,K.)
plan is to group together some of the
small communal farms into larger units in
the hope of increasing their productivity.
Ethiopia: Institutionalizing the Revolution
Ethiopia's ruling military council is
moving ahead with efforts to in-
stitutionalize its socialist revolution
despite widespread opposition and unrest
produced during its two years of rule.
New administrative units have been es-
tablished in urban and rural areas and
given responsibility, under the central
government's supervision, for carrying
out many of the council's social and
economic programs. The new structures
are fragile, but over time could provide
the council with the political base it now
lacks.
In cities and towns, the council has
created urban dwellers' associations as the
key units in a system of municipal ad-
ministration based on "democratic cen-
tralism." The system is supposed to
provide for popular participation in public
affairs, but in practice it appears short on
democracy and long on centralism.
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Chairman of the Provisional
Military Government Teferi Benti
Urban Associations
A proclamation issued in early October
gave legal status to the associations and
defined their functions and duties. The
associations are responsible for municipal
administration, organizing "the masses,"
and encouraging participation in
government-initiated development pro-
jects.
They are to establish and operate
cooperatives, schools, low-cost housing,
and welfare programs. Judicial tribunals
are to be established in the associations,
with jurisdiction to hear criminal and civil
cases involving minor disputes.
Members of the associations' manage-
ment committees in Addis Ababa were
elected this month in tightly controlled
proceedings. All candidates had to meet
requirements set forth in the October
proclamation-including, of course, a
commitment to the council's "national
democratic revolution program."
'I he election was run by supervisory
committees, which in turn wereelected in
October. The supervisory committees had
to approve all nominees for the manage-
ment committees and had the authority to
investigate candidates to ensure they met
the requirements.
The associations are likely to be pliant
tools of the council and will allow it to ex-
ert more direct control over local affairs.
fhe central government will supervise
association activities, and ministerial
representatives will participate in the
deliberations of management committees.
Peasant Associations
In rural areas, peasant associations
have been established as the basic units of
political and economic administration,
allowing for a degree of governmental
decentralization. The duties and powers
of the associations were spelled out in
guidelines issued by the council in late
1975.
A primary task of the peasant groups is
to implement the council's land reform
program. All matters concerning land
have been taken out of the hands of local
officials and courts and placed under the
jurisdiction of the associations.
I he peasant associations have the right
to form peacekeeping forces under
guidelines established in Addis Ababa. In
some provinces, these local militia have
been used to fight insurgents led by
landlords opposed to the military regime.
The associations also have some respon-
sibility for marketing agricultural
products and for providing "ideological
education" to the peasants.
the effectiveness of the peasant
associations has varied in different parts
of the country, reflecting different reac-
tions to land reform.
In the southern provinces the peasants
welcomed the reform because it allowed
them to regain land that for decades had
been controlled by landlords from domi-
nant northern tribes, or by local elites
co-opted by the northerners. The peasants
looked favorably on the formation of the
associations, and a large number have
already been formed.
In the northern provinces, where land
ownership based on a communal land
tenure system was firmly established, few
peasant associations have been formed.
Many peasants in the north have opposed
land reform and joined prominent
landlords in insurgency against the
government.
Labor Unions
The council also is in the process of
restructuring organized labor in Ethiopia.
Eight of nine planned unions for major
categories of workers have been formed.
After the ninth is established, they will all
be represented in a national organization
called the All-Ethiopian Trade Union.
This structure is intended to make the
labor movement an instrument for carry-
ing out the council's program for es-
tablishing a socialist regime in Ethiopia.
The All-Ethiopian Trade Union will
cooperate in formulating policy directives
and in social and economic planning. The
unions will also provide ideological train-
ing and political indoctrination to the
workers. The national labor group
replaces the Confederation of Ethiopian
Labor Unions, which was disbanded last
year because the council feared it would
become a center of opposition.
The ruling military council may find it
difficult to control the unions. The labor
movement harbors a substantial number
of opponents of the military government
whose agitation has caused some delays in
the government's efforts to organize the
new unions.
Some oppositionists are members of
the Ethiopian People's Revolutionary
Party, an underground group led by
radical leftists that has carried out
numerous terrorist incidents in Addis
Ababa in recent months. The
Revolutionary Party is probably also
responsible for isolated strikes and work
stoppages that have occurred recently.
The council's intention is to form a
national front composed of all
"progressive" forces in Ethiopia, under
the leadership of a working class party.
An organized and "properly oriented"
working class is considered necessary to
produce the leaders of the party.
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