BRAZIL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00429A001200040001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 19, 2016
• Document Release Date: May 11, 2005
• Sequence Number: 1
• Publication Date: October 1, 1963
• Content Type: IM

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OCI No, 2955/63
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
1 October 1963
CURRENT INTELLIGENCE MEMORANDUM
1, Brazil's prolonged period of political and
economic instability could soon take a turn for the
worse if President Goulart fails to take effective
remedial action. Governmental ineptitude and cor-
ruption, constant agitation by the extreme left and
extreme right, serious labor problems, and a rampant
and accelerating inflation are contributing to a
growing undercurrent of dissatisfaction and a trend
toward domestic political polarization. This in-
stability and the strong positions being won by ex-
treme leftists, if not checked, will tend to push
the country toward more radical departures in do-
mestic and foreign policies.
2. Aggravating this situation are the polit-
ical tactics of President Goulart who, although he
may be primarily interested in political power, is
most at home on the left. While he occasionally
caters to pressure from political moderates and the
military establishment, he has not disassociated
himself from the extreme left advisers. There are
indications that Goulart might attempt to exploit
the present situation by grasping greater power and
establishing at best a Peron-like regime before his
term expires in January 1966, Should this occur,
there is the possibility that his actions could ul-
timately lead to a subsequent takeover by a coalition
of ultranationalists and Communists. The danger of
such a Communist takeover, according to Ambassador
Gordon, arises from Goulart's total incompetence to
understand or resolve real. problems both economic
and administrative,
USAID, State reviews completed
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3. The threat of a military/conservative pre-
emptive coup exists and will intensify as long as
conditions remain unsettled and Goulart persists in
his leftward direction. Thus far, Goulart has been
able to keep control by a skillful shuffling of ap-
pointments and by keeping his opposition off guard.
How long he can succeed in balancing political pres-
sures is problematical.
Goulart and the Left
4, The leftist ultranationalists and pro-
Communists appear to be benefiting both from the
present confused political situation and from the
tolerant attitude of the President. Goulart has
appointed some Communists and Communist sympathizers
to key administration posts and has removed a num-
be
f
r o
proUS andtiC
- an-ommunists from office.
he is relying
increasing y on ex reme e ch
, as pro-
Communist Governor Miguel Arraes of Pernambuco, for
counsel on major problems.
5. Goulart, of course, derives his mass sup-
port from labor, and therefore-claims he must appease
the left. At the same time he recognizes that his
inclinations--and indeed his associations--impose on
him the need for pacifying the military which has
become increasingly disturbed by the aggressiveness
of the far left, particularly Communist labor and
the radical fringe led by Leonel Brizola, Goulart's
anti-US brother-in-law.
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Labor
7. The Brazilian labor code gives the President
extensive control over the trade unions, and Goulart
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has successfully employed this power to manipulate
organized labor, which is now the core of his politi-
cal support. Through the use of patronage, Goulart
has kept tight control on union leaders. In return
for their support he has helped pro-Communist and
Communist elements reach prominent positions in the
labor movement.
8. Goulart apparently believes that he can
maintain a Communist led labor force to insulate
him from industrialist and military pressures and
yet keep labor sufficiently under his power to pre-
vent a complete Communist takeover. While Goulart
does appear to have power over the unions, he says
at times that he is somewhat alarmed over increased
Communist influence in labor. In May 1963 Goulart
encouraged the non-Communist Workers Trade Union
(UST) of Sao Paulo to expand into Rio de Janeiro and
other areas as a rival to the Communist-dominated
General Workers Command (CGT) and gave it financial
assistance. He subsequently removed the pro-Communist
Minister of Labor, Almino Afonso. His interest in
the UST, however, appears to have waned recently.
9. Nevertheless, the Labor Attache believes
that Goulart will probably attempt to keep the labor
movement divided between the CGT and UST so that
neither will be a threat to him, "zigging and zag-
ging as seems most expedient" at any given moment.
The Communists
10. The Brazilian Communist Party (PCB) has
been illegal since 1947, but it has considerable
freedom of operation. Despite its relatively small
membership-?50,000 in a population of 75 million--
the PCB and its sympathizers possess an influence
beyond that which the size of the party would indi-
cate. As has been indicated, they hold important
posts in the federal government, and some half-dozen
Communists hold congressional seats under other
party labels. In the northeast, the governor of
the key state of Pernambuco and the mayor-elect of
the region's chief city, Recife, are pro-Communist
and work closely with the PCB. The Communists
virtually control three of Brazil's five labor con-
federations and also dominate the country's major
student organizations.
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11, It is the PCB's policy to promote a "peaceful
revolution," taking advantage of the present favorable
climate which the Communists apparently feel affords
adequate opportunity for extending their influence.
The Communists' present emphasis on penetration has
split the party, and there is now a small, separate,
pro-Chinese group, called the Communist Party of Brazil
(CPB).
The Right
12. Opposition to the regime extends across
the political spectrum but is predominantly rightist
and military. It is centered in the country's two
leading cities, Rio de Janeiro and Sao Paulo. Gov-
ernor Carlos Lacerda of Guanabara State (the city of
Rio de Janeiro), perennial critic of incumbent Pres-
idents, is perhaps Goulart's most outspoken opponent.
A shrewd politician himself and an effective reform
administrator, Lacerda enjoys considerable support
among conservative military officers as well as his
own large National Democratic Union, and increasing
support from all classes in Guanabara. Lacerda be-
lieves that Goulart will use some pretext for inter-
vening in Guanabara to depose him.
The Military
13. The most effective restraint on Goulart is
the tradition of anti-extremism in the armed forces
which still operates despite Goulart's recent reas-
signments and promotions. The key figure in the mili-
tary at present is War Minister Jair Ribeiro, who ap-
pears to be loyal to Goulart and, following the mili-
tary tradition, is probably willing to support him in
any action that falls short of unconstitutional behav-
ior.
14. Ribeiro has a reputation as a man without
deep personal convictions who is basically ultrana-
tionalist. Ribeiro appears to be torn between con-
flicting pressures. On the one hand he has expressed
a determination to keep the military out of politics,
while on the other hand he is being urged by military
leaders to seize the initiative and crack down on the
leftists. He acted firmly to put down the recent
leftist sergeants outbreak and endorsed the use of
troops against the strikers in Santos in early September.
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15. While the majority of active military offi
cers probably mistrust Goulart, he has made consider-
able progress towards neutralizing the military as a
check on his political actions. Using his control
over promotions and assignments, Goulart has removed
from key commands officers who are not entirely loyal
to him and replaced them with his supporters, many of
whom are leftist ultranationalists unfriendly to the
US. Goulart reached far down the eligibility list to
promote a probable Communist to Brigadier General.
The officer in question--Argemiro de Assis Brasil--
was subsequently appointed as chief military adviser
to President Goulart. Of 16 officers promoted to
Brigadier General or higher on 26 July, eight have
ultranationalist connections, while the others are
considered "legalists" who would probably support the
administration,
Foreign Policy
16. Brazil's foreign policy during the past
decade has become increasingly nationalistic and
independent, a policy which Goulart has continued.
In line with the prevalent feeling in Brazil that
the country is entitled to great power status, Pres-
ident Goulart seeks to have Brazil play a promient
role in international affairs. In a speech during
Marshal Tito's recent visit, Goulart said that Brazil
"does not accept the present division of the world
into two opposing camps" as a basis for international
relations.
17. US-Brazil relations have declined since
World War II largely because many Brazilian leaders
feel their country has outgrown its traditional
position vis-a-vis the US. The divergence in US-
Brazilian positions has been exacerbated by pressure
from ultranationalists and extreme leftists who picture
the US as responsible for Brazil's economic difficulties
and as desirous of keeping Brazil in a subordinate posi-
tion. The shortcomings of the Alliance for Progress
in Brazil have contributed to this unfavorable attitude.
Meanwhile, the government has been exploring the pos-
sibility of expanding relations with the Communist bloc.
18. Brazil now maintains diplomatic relations
with Cuba, the Soviet Union, and with all East European
satellites except East Germany. In April 1963 Brazil
and the USSR concluded a five-year trade and payments
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agreement calling for an increase in the level of
trade from the 1962 level of $70 million to $225
million in 1965. By 1965 the USSR may provide up
to one-third of Brazil's imports of crude oil and
petroleum products.
The Economy
19. On the economic front, inflation is
rampant and accelerating. The cost of living, which
went up about 20 percent a year in the 1950'x, shot
up by some 50 percent in 1962. During the first
eight months of 1963 it advanced over 40 percent
and may go well beyond 60 percent by the end of the
year. The cruzeiro has dropped to a record low of
1,200 to the dollar from about 850 two months ago.
20. The state of virtually chronic financial
crisis has brought a decline in business confidence
and slowed down the rate of economic growth. GNP
has been going up, but at a declining rate. This
year, the GNP figure may well go down in per capita
terms, partly as a result of a sharp decline in
coffee production occasioned by a combination of
frosts, drought, and fire.
21. The stabilization program outlined in an
exchange of letters last March between US AID Admin-
istrator Bell and the Brazilian finance minister now
seems to be a dead letter. The program contemplated
the rescue of the Brazilian economy by new aid from
the US, the International Monetary Fund, and other
sources. The aid was to be contingent on Brazilian
measures to set the economy in order, but these meas-
ures were not taken. Rumors are now rife that Brazil
will ask for a moratorium on payments to at least
some foreign creditors, since the country's burden of
debt service is so extraordinarily high--more than
40 percent of export receipts. About one-half of
Brazil's outstanding foreign debt, totaling $3 bil-
lion, matures during the period 1965?65. The prob-
lem is compounded by the arrears in commercial debt--
now more than $175 million.
22. With virtually no foreign exchange reserves
to fall back on and with large-scale foreign assistance
held up, Brazil's options are dangerously narrowed.
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If the government finds itself forced to curtail
imports drastically in order to balance its inter-
national accounts, there may be a serious depression
of the domestic economy, with attendant political
repercussions.
Recent Developments
23. Political instability heightened as a re-
sult of the abortive 12 September uprising in Bra-
silia by nearly 600 air force and naval non-commissioned
officers. The outbreak was ostensibly a protest demon-
stration against a court decision prohibiting sergeants
from holding public office. Subsequently, evidence was
reported which indicated that the "sergeants' revolt"
may actually have been linked to a wider plot.
24. Following the War Minister's quick and firm
suppression of the uprising, a rightist anti-Goulart
plot was discovered near Rio de Janeiro on 18 Septem-
ber. While the apparent instigator of the plot--re-
tired Admiral Sylvio Heck--lacks significant support
and is not considered a serious threat, the incident
aggravated the already tense situation and encouraged
extreme leftists in labor's leadership to revive
their threat of a general strike.
25. Reacting against the strike threat, General
Peri Berilacqua, anti-Communist Commander of the
Second Army in Sao Paulo, publicly denounced the
Communist labor leaders and their allies and threat-
ened to use troops to prevent any mass walkout. The
Communist-dominated General Workers Command (CGT)
retaliated with an unsuccessful demand for Bevilacqua's
dismissal and issued a "manifesto" calling for immediate
acceptance of a radical program by the government which
would include drastic constitutional changes. While
the evidence is inconclusive, it is possible that
Goulart has encouraged the CGT behind the scenes in
order to gain support for his program of "basic reforms."
Prospects
26. While the government's decision to retain
General Bevilacqua as Second Army Commander has tem-
porarily calmed the situation somewhat, indications
are that political conditions will remain unstable.
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Plotting by rightist military officers continues;
there are reports that a series of leftist strikes
is planned soon for Rio de Janeiro and Sao Paulo
and possibly other areas; and leftist sergeant
groups may react vigorously to pending judicial
decisions on their political candidacies,
27. How President Goulart, his political op-
ponents, and the armed forces react to these and
other matters over the next few weeks and months
may be critical for Brazil. No matter what the
outcomes Brazil will continue to face basic political,
economic, and sociological problems which the Goulart
administration has done little to alleviate during
the last two years. At issue is not only the direc-
tion the regime may take in these difficult circumstances
but also the capacity and willingness of Goulart to deal
effectively with Brazil's most urgent needs,
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