WEEKLY CONTRIBUTIONS LATIN AMERICA BRANCH, ORE, CIA 22 MARCH 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000200010011-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 11
• Publication Date: March 22, 1949
• Content Type: SUMMARY

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v'eekl Contributions
Latin America anch3, OTT, CIA
22 ..arch 199
B/IA believes that, of the items this meek, that on 'rgentina is
most im'-)ortant in terms of US interests (p. 3).
25X6A
CUI'SFI:T DrV'LOP' TATS
SOUTJIE J DIVISIOiU: In Paraguay, the "Democratic" Colorado Party has
clinched its control of the govermmnt (p. 2). Argentina's moves to
meet its econonic crisis offer temporary advantages to the US (p. 3).
SPt CIAL S M J1 C TS
The Current Situation in zuatemala . . . . . . . . . . . . . . . . t
The Current Situation in 9razil . . . . . . . . . . . . . . . . . 7
DOCUMENT NO.
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AUTI H
D,ATF," "-REVIEWER: 37044
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SE, CflET
Meekly Contributions, 3/Lit 22 ':arch 19L.9
25 6A 'orking Paper)
2. PAIT ()UAY: The "Democratic" Colorudos now have gained Complete control
o the overnment by 1 appointin_? a lob=al cor:u..~arde fr or
the Asuncion cava xy ision, (2) placing ogre of their o,n members
in control of the Asuncion police, formerly the center of Liberate,
itodriguez' power, (z) reducing police ra3lita.ry power in relation to tf^.A
army by taking av:~. In at?-
tainin7 these resu11:s without violence, the 1.1'erco-Jolorados have ade
patent their predominance and now have little Lo fear from any subver-
sive attenpt made aga-inst, them by groups of T.odr!C.ucz followers, ?olas
Lopez, formerly allied nrith the i odri^uez forces, has been promised
the presidency in the 17 itpril el:-,ctions if he remains loyal to the
SECZE Z___. 2.
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Weekly Contributions, B/LA 22 '"arch 199
(CIA Working Paper)
Demo-Colorados and breaks all ties with the Gui5n Dojo, lIe is ex-
pected to do so since the Demo-Colorado control is now complete and
their victory in the elections almost a certainty. tilthough the
Demo-Colorados are using dictatorial tactics to set up their gYov-
ernment,'theyrare the most capable and Most nearly democratic group
in the country.
3. At EUTINA: Effects of T',conomic grisis on Policy Toward US and Attu
ude Toward Go-m- =ism
In s~pite of the robability that iirgentina will per-
manently abandon its normal objective of displacing influence in
Latin tmerica, the US does at present enjoy a favorable bargaining
position for the attainment of policy objectives in relation to
that country. The extent and duration of that advantage may be con-
siderably influenced by the degree of success achieved by the recent-
ly initiated policies of increased in 'ernational cooperation an.d
more orthodox commercial practices.
If these policies meet reasonable short-term success
with promise for the future, the Peron government may be expected
to intensify its anti-Communist offensive and soft-pedal its "i'hird
Position" foreign policy. The Peron government has already increased
its denunciations of strike-supported wage demands as Communist-
inspired (the ;overnment is now, as a part of its attempt to control
inflation, much more resistant to all mige demands), and has rein-
forced security measures against Communist sabotage and infiltra-
tion. The Communist Party recently broke with Peron on the issue
of revision of the constitution, after Vursuing previously a policy
of expedient collaboration based on Peron's nuisance value to the
US. Both this open break and the government's anti-Communism moves
may be expected to undermine and require revision of Peron's "Third
Position" foreign policy, which, though ostensibly opposed to both
Communism and capitalism, has actually been used in the past princi-
pally to oppose US influence in Latin America.,
If the recently initiated policies are not successful
and the Peron government ceases to place confidence in US assurances
of assistance in easing the dollar shortage and reverts to its for-
mer views (for example, that the US is using ECA imperialistically
against Argentina).. Peron may again show relative tolerance of
Communism, rehabilitate the "Third Position" thesis, and turn his
propaganda against the US. It is true that the Argentine Ar-ay
could be expected to oppose any serious anti-US measures, since it
is predominantly anti-Communist and desires improved relations with
the US in order to obtain US materiel and equipment. Such opposi-
tion, homver, would not necessarily deter Peron, who might attempt
to use his powerful labor support to counter army influence, with
resulting possibilities of violence bet,,-men armor and labor that
would lend itself to Communist exploitation.
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laeekiy Contributions, 13/LA 22 ; "arch 1949
(CIA Working Paper)
Situation i:iemorandur i )lr-Li.9
The Current Situation in Guatemala
Despite oppositionist electoral victories, recurrent alarui s of re-
volt, and prospects of an unfavorable economic situation>, the leftist
ad* inistration of President ~',rovalo appears, by Central `irierican standards,
to "C- sta,:le. Further ore, the vcccnt cox pror:;ise settler:-ent of the United
ait Cony ny stri!ce should enhance the internal stability o the re3ir tv
,a:.; troll a:z I'?prn-?,rc pros p--c i;;r i or n.iorc frierrctly rcl:;tious ?rith th3 1
'rt t.ac ~t,3onrxl st1, r nu ra-ict1 aspce~:.s of tl~.L pros tis v,r.-rr: nt,
hoc-over, isy bc a:.pected to continue to conflict zdth. certain IS econor.iic
aid forc:i~m policy interests,
This year, as last year, con~ressional and municipal election returns
have shoran a trend array from the lefty The Union Rational doctoral, which
includes heretofore politically inactive conservative elements, has won the
raayorality contest in Cruatonala City and has also ixn a fear congressional
-scats. These victories, hoverer, still probably have the effect of forc-
ing the three governrrent parties (the extreme leftist Partido Accion i;.0-?
volucionaria; the radical Partido flenovacion ?:acional; and the moderate
leftist Frento Popular Libortador) to cooperate more closely. :.ith these
three parties in control, the stability of the Arevalo government, insofar
as the congress is concerned, appears assured.
Me apparent reluctance of Colonel Arana Chief of the :irrned crces
(and the key figure in the military siti.ntion5, to load a coup against
President Arevalo has further enhanced the stability of the government,
Although Arana has used the threat of a military coup as a device for c ora-
polling President .,revalo to follow loss radical policies, he has, without
seriously weakening his control over the arr., apparently resisted pres-
sure from militant anti--Aro*valo factions that have urged open revolt.
Arena's min position seers secure. It is unlikely cithor that congross
vri.li replace him Tdth a corxsander mom favorable to ?,revaio and the left-
ist parties or that the censorvativo , now awaxc of his reluctance really
to go along vdth them in leading a coup against Ar6valo, could replace
hie Trith sor:reone more amenablo to their ainc.
The less favorable economic situation that now soemr to be developing,
while unlikely to underrne his rogine&s stability, tray sorve to increase
Arevalo's unpopularity among conservative e lermts. The period of post-
war prosperity, which has favored hie since he took office in 1945, . is
norr drav4ng to a close. Govexmmmt expenses last year exceeded income by
000,000, though availability of ',12,,700,000 surplus left over from
forner years leaves a not surplus. The fact that i. orts for the first
11 months of 1948 exceeded exports Lr some ?l, ,000,000 su, gests an even-
tual scarcity of dollar exchange. Furthermore, indications are that in-
efficiency in government-operated agricultural enterprises (covering some
30 per cent of all cultivated land and yielding some 20 per cent of the
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(CIA Working Paper)
Situation I:amrandu:: ]J4-1.9
22 larch 19
total coffee crop) ulil result in analler intone from these sources. In
view of these conditions, the ;goverment will probably choose to expand
its public debt in order to fulfill its public-rriorks projects (which in-
volve extensive higlwray constructicn and hospital building) and to main-
tain the adrrLnistrative bureaucracy that has been built up. Such debt
expansion should not be difficult in view of . uaterrala's present United
obligations. The prospect of extensive borrordn;, horrevcr, in a country
Tzhi.ch has been singularly free of debt for many years, trill increase
criticism of Arevalots policies.
The settlement of the United Fruit Companystrike has restored the
functioning of the Guatemalan economic systen to normalcy. Although a
definition of principles eras avoided in arriving at the conprourtse solu-
tion of the labor difficulties, the s Atlenent virtually assures all
parties concerned normal working conditions for the forthcoming year and
should, therefore, enhance the internal stability of the re Inc as well as
improve prospects for noro friendly relations with the
In face of continued US-USSR rivals,, Col iun1st influence in ?. uator c1a,
-which may oo expected to continue during tho cordn ; year, trill renai n a
source of concern to the US. Although there is no official ,orrn~nist
Party in Guatemala, the Partido Accion "evolucionaria (I-Wr'') ideolog;r is
closely patterned after the Conrnunist, and Co:.monist influence has pene-
trated various government departments. This has been noticeable in the
#oreirr service, both in Xwope and Latin A erica. Sale of transit visas
through the Guatenalan consular office in Prague is a practice possibly
designed to facilitate the international rioverient of .'Iorr:u.:ists. she con-
nection of the rua`,onalan Consulate in "clan : ith a . stcrious Academia
Culturale tidriatica also be, linked to Corrunist activity the
:es rn Uern.sp re, a case in point is the recent appointr.ient of "lredo
Guerra :3orges as Secretary of the r _;atenalan i massy in Salvador. Iuerra
Borges ryas associated vrith Uo rnmiats in Chic, is the rrcipiont of Con-
munist propaCa ida from Cum and I.exico, is a aorrespoiident of Lor.bardo
Toledano, and a good part of his tiic in a Lalvador is expected to be dc-
voted to organization of the local Committeo for Peace and Donocracy.
Coi unist activity in apparent also in labor organizations, and the deci-
sion of labor leaders to cow to terns frith the United rust ;oripa ny nay be
due, in part, to the advice of Lo.:rbardo Toledano, vaho conferred vrith
strike leaders and PAR 1ea.Iers in late January.
In the field of foroir economic affairs, 'uatenala ts radical doc-
trines Trill probabl, continue to cause difficulties for the Although
the United Fruit dockrror'::erst strike has '?ten settled, the controversial
"discri xlnntory" features of the Labor .,ode have not been chap ged. Oil
cow Tanies have had to carry on prolon7ed ne otiations :?rith the ^overnment
for the assurance that they nay pxofitably exploit (as c o- ttract a gents )
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situation T randun 3)4-4 9
22 -'arch 1 ?49
whatever petroleum. they riW discover. Although it appears that satis-
factmy draft contracts have finally been worked out, these rust still -.>e
submitted for congressional approval, Certain other US-orrieed companies
aro currently under -rovernment pressure to pay allegedly valid back tax
clams or labor clams.
In ibreign political affairs Guatemala has asses- d., and may be ex-
pected to continues to assume, intensely nationalistic attitudes which are
in conflict with the US concepts of Iemisphere security :.,aced on unity of
all 21 American republics toward encroac1n nts from without and on the
fraternity of interest of the democracies. By actively espousing; the
cause of the Caribbean "democracies" and by conspirinC against the !'dictat-
orships", Guatemala has increased difficulties and anta:onisms within the
inter-American systen. Guatemala has refused to recognize the norrgovern-
uent of Venezuela vlhich cams into pm7er through force, and has tried (vlith
little apparent success) to draw T U Salvador further into the "democratic"
camp. The Guatemalan delegation to the Conference of the Corardttoo on Do -
pondent Territories has assured a highly anti-imperial attitude and has
stressed the imperial rather than the democratic traditions of the ':'estern
i uropoan porters, This tends to weaken tlx' concept of fraternity of inter-
est of the '.:estorn .. an posers and the American :.epublics in opposi-
tion to the USSR. Guatemala is in the forefront of those nations which
denounce the existence of colonial possessions in the T.estern Hemisphere.
In this connection the Foreign Office has already stated that the U; de-
cision not to participate in the Conference is an unforgettable slihit to
the free peoples of Latin America, since it aligns the LTS with `?hgland
and'bther imperialist nations" (presumably France, the 1!etherlands, and
Denr.:ark).
6.
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V:eekly Contributions, D/LA
(CIA Nvvorking Paper)
Situation %:emorandum 15-49
The Current Situation in razil
22 "arch 1949
President Dutra t s statement in his ::err Year's nessa;e that brazil's
major problem is economic and financial, rather than political, offers a
good index of the high decree of stability enjoyed by the present -rovern-
ment.
'lith Dutra enterin7 the fourth year of his five-year term, representa-
tive government on the national, state, a .d municipal levels is now in full
operation. Critical situations arising out of political stru,-,:Cle within a
number of the states have been ironed out, or weathered, v:ithout resort to
Federal "intervention", and the President's demonstrated resolve to t ain-
tain constitutional r overnment has, done much to restore prestige to the
principles of state and local autonomy and the separation of po::ers. This
prestige is reflected in the general confidence in `:razil that sutra will
respect the constitutional provision .ior::iddinr the president to succeed
himself, and there is no reason to consider this confidence riisnlaced,
''razil has, of course, tiro perennial foci of unrest -- its outla::vd
Communist Party and its deposed dictator, uetulio Iargas, neither of which
is estimated to be a threat to the regime at the present time. There have,
it is true, been constant rumors that Var_,,as will enter into an electoral
alliance with the Communists in an a Lter::pt to reirain the presidency in
1950, but there have 'been no recent indications that his political strenq. h,
even with Communist help, is equal to the task. His popularity., hose rer,
could increase if the present administration fails to find adequate solu-
tions for 'irazil's more pressin7 economic problems.
In an effort to solve his country's e::onor.ic ills, President "utra,
in 1948, presented to Congress the SnLTE Plan,Ir an inte:?ral plan for the
development of important sectors of r?razil's econonv., and requested from
the US technical assistance in an -inalysis of the factors in . razil which
tend to promote or retard the economic development of that countr;;. As a
res~rlt of this request the Joint '?razil--United states Tec:nical Cormission
(generally known as the Abbink .:ission for its chairnnn, "r. John rbbink)
was established.
The :.hamber of Deputies passed the SALT!-- Plan in Februarys 1 19 and it
is expected that the Sena-c will pass the bill in this session of con-
gress which began on 15 Larch 191.49, ?razil's 1ational ''udget for 191.19,
passed by both chambers of the Legislature and sinned br President
Dutra, contains an allowance for expenditures of approximately US'`50
million for the SAL Plane
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Situation Lema randum 15-49
22 Larch 1949
After several months study, this commission has made many far-reaching
suggestions for the improvement of Brazil's econorw and finances. In order
to carry out :.satxy of the suggestions, legislation will be regaired, and it
is not likely that the T3razi1ian Legislature will adopt all of the measures
of the report, because some of these will arouse serious opposition from
certain ideological and special-interest groups, It can be expected, hovr-
ever, that Brazil will improve its inefficient . system of tax collections
as well as its national banking organization in order to strengthen in-
ternal finances, and will pass some legislation to encourage the inflow of
foreign capital and technicians.
The report also puts emphasis on the lack of petroleum, a lack which
retards the advancement of the woefully inadequate transportation system
and adds to the chronic shortage of foreif7n exchange ('Brazil spends appro-
ximately USyr300,4D0 daily for petroleum imports). Although there are pos-
sibilities for a considerable petroleum industry in , azil, there is in-
sufficient capital and technical skill within the country to explore and
develop the oil fields. `;dhile petroleum legislation has been drafted
(and has been an the agenda of the ;Brazilian Conrrress for more than a year),
present chances of enactment are sli ht. The provisions of the bill are
reported to be uninteresting to To oil firms (only 40 per cent control of
the refineries and pipelines in return for large investments); and the
legislators, fearful of political repercussion from extreme nationalist
elements and the Communists, have hesitated to pass a bill vrith even these
concessions. The only real possibility seems to be that some formula for
Brazilian legislation acceptable to the US oil companies may b-, worked out
with President Dutra when he visits this country in '.ay. Such legislation
rust not only be satiofactory to the U'S firms, but also it must appear as
a victory won by President Dutra, in order to weaken the attack that the
Communists and Nationalists are certain to rake against any investment of
foreign capital in the petroleum industry.
The most articulate sector of Brazilian public opinion feels that
President Dutra's coming visit to this country marks the moment fora de-
cisive effort to improve relations with the US, which they feel have been
deteriorating ever since the ware No doubt some still hope to see the im-
provement take ? the form of a direct government-to-government loan for
Brazilian development. C~hether the Abbini:T?ission report -- emphasizing
Brazilian self-help and an increased inflow of private foreign capital --
will be received in 'razil as a gratifying application of President Tru-
man's 'Point 4" or as evidence of US "eormnercial imperialism" will depend
in part on the political adroitness with which it is presented to Brazil.
Anti-US feeling in Brazil, a recent article in the Rio press pointed out,
is "still a superficial phenomenon", and President Dutra'a reception in
the US may be expected to improve the intangible as well as the material
aspects of US-Brazilian relations.
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