WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00827A000400030008-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 55
• Document Creation Date: December 9, 2016
• Document Release Date: January 12, 2000
• Sequence Number: 8
• Publication Date: August 5, 1966
• Content Type: REPORT

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5 August 1966
SC No. 00781/66
Copy No. 4 5 8
WEEKLY REVIEW
CENTRAL INTELLIGENCE AGENCY
DIRECTORATE OF INTELLIGENCE
THIS DOCUMENT CONTAINS CODE WORD MATERIAL NO FOREIGN DISSEM TOP SECR
T
E
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(Information as of noon EDT, 4 August 1966)
VIETNAM I
Major allied military operations in South Vietnam con-
tinue to keep Communist forces on the defensive. Po-
litical developments are increasingly centered on the
September elections for a constitutional assembly. The
screening of candidates is virtually complete and thus
far the military government has given every appearance
of impartiality. Hanoi has recently published two au-
thoritative assessments of the military situation in
the South, providing a rare insight into the DRV leader-
ship's concern over the adverse effects of the massive
US troop buildup. North Vietnam is stepping up efforts
to keep major rail lines open, and is continuing to send
supplies along the Laotian road system despite the
weather. 25X1D
25X1 D
NORTH VIETNAM'S OIL IMPORTS
The USSR is resuming bulk seaborne deliveries after a
25X1D two-month lull followin the US air strikes at Hanoi
and Haiphong.
CHINA'S GROWING ISOLATION IN THE COMMUNIST MOVEMENT
Two years ago Peking appeared successfully on its way
toward challenging Moscow's hegemony within the world
Communist movement, but no significant threat to Soviet
leadership now exists. The Chinese have suffered their
most serious setbacks in the Far East, but relations with
such one-time sympathizers as Cuba and Rumania have
encountered increasingly serious difficulties. Although
the setbacks have been largely due to Peking's dogmatism
and ineptitude, Soviet tactics since Khrushchev's ouster
have refurbished Moscow's image. (Published separately
as Special Report SC No. 00781/66B)
INCREASE OF TERRORISM IN THE PHILIPPINES
The new outbreaks in central Luzon appear to be essen-
tially a reaction to President Marcos' efforts to end
lawlessness in the countryside.
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COMMUNIST ACTIVITY IN THAILAND
North Vietnam is reportedly providing direct guerrilla
training to the insurgents in northeast Thailand, sug-
gesting that the groundwork is being laid for a more
concerted armed effort.
25X1 D
25X1 D
GENEVA DISARMAMENT TALKS NEAR END
East-West differences over a nonproliferation treaty and
diminishing support from the nonaligned members for the
Western formula have precluded any real progress so far,
and little is likely in the remaining weeks.
WARSAW PACT FORCES HOLD EXERCISE IN BALTIC
Recent naval and air maneuvers involving Soviet, East
German, and Polish forces reflect the greater effort
being made by the Warsaw Pact to improve the effective-
ness of the "northern tier" forces.
25X1 D
SOVIET UNION IMPROVES ITS AIR DEFENSES
A new Soviet interceptor aircraft is now in the last
stages of testing before deployment. There are several
other major programs under way to modernize and strengthen
the USSR's defenses against air and missile attack.
EAST GERMAN REGIME CONCERNED WITH PUBLIC UNREST
The staging of a parade to forestall any popular demon-
stration on the anniversary of the erection of the Ber-
lin Wall is indicative of the e ime's concern with
scattered but rising unrest.
YUGOSLAVIA--THE FALL OF RANKOVIC
With the firing of heir-apparent Rankovic, Marshal Tito
has touched off a major reorganization of both party
and government. Precipitated by the discovery of
Rankovic's intensive use of the secret police to en-
sure his succession, Tito's move marks a further imple-
mentation of liberal policies and reforms that have
been hampered by vested conservative interests within
the party. The reopening of several sensitive issues
could cause severe political instability in the near
future. (Published separately as Special Report
SC No. 00781/66A)
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DE GAULLE'S ROUND-THE-WORLD TRIP
The announced purpose of the French President's trip
is to observe a nuclear test at France's Pacific test
site, but scheduled stops in Ethiopia and Cambodia
provide him with an opportunity to show the flag and
expound his views.
RECENT SOVIET MILITARY AID DELIVERIES
In fulfillment of agreements reached over the past two
years, Soviet military equipment has recently been de-
livered to Algeria, Mali, India, and Cambodia.
25X1 D
CONGO MUTINY CONTINUES
The mutiny of Katangan troops in Kisangani is still not
settled, and the Congo's relations with Belgium are
continuing to decline.
SUDAN GETS NEW COALITION CABINET
The cabinet contains an equal number from Prime Minister
Sadiq al-Mahdi's Umma Party and the National Union Party,
but specific portfolios have not yet been assigned.
NEW ARMY COUP THREATENS EARLY BREAKUP OF NIGERIA
The upheaval was triggered by northern dissatisfaction
with the regime of General Ironsi, who came to power
last January after young southern officers overthrew
Nigeria's northern-dominated constitutional government.
SOVIET AID FOR INDIA'S FOURTH FIVE-YEAR PLAN
The USSR has reportedly promised a new commitment of
about $630 million for India's five-year plan, the
largest single aid package Moscow has ever offered to
a free world country.
Western Hemisphere
ARGENTINA BEGINS ITS EFFORTS AT REFORM
The Ongania regime has taken action against some of the
causes of the military criticism that led to the ouster
of the Illia administration, but the nature of the moves
adds to a growing concern about a developing dictatorship.
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TERRORISM CAUSING PUBLIC ANXIETY IN BRAZIL
The government is attempting to determine whether a
growing number of terrorist incidents is part of a
deliberate campaign to create unrest or only scattered
acts of protest against the Castello Branco regime.
NEW BOLIVIAN PRESIDENT TO ASSUME OFFICE 6 AUGUST
The government-military relationship will be the most
difficult of the problems facing President-elect Rene
Barrientos. The key military figure is outgoing Junta
chief General Alfredo Ovando, and a confrontation between
the two is possible at any time.
PROBLEMS FACING BALAGUER'S DOMINICAN GOVERNMENT
President Joaquin Balaguer has taken office with wide-
spread acceptance and even enthusiasm, but his regime
faces severe economic, social, and political problems.
The President will probably come under increasing fire
from the military and privileged civilian interests
if he vigorously presses his pledged reforms. If he
does not, the general public's heightened expectations
of immediate--and unrealistic--economic improvements
could lead to disillusionment and future instability.
Moreover, left-wing extremists retain their ability
to initiate unrest and insurgency. (Published sepa-
rately as Special Report SC No. 00781/66C)
GUATEMALAN GUERRILLAS REJECT AMNESTY 22
Although Communist guerrilla leader Luis Turcios
has again turned down a government attempt to make
peace, President Mendez' amnesty offer may turn out
to be a shrewd political move toward national unity.
SOMOZA'S NOMINATION BEGINS NICARAGUAN ELECTION CAMPAIGN 22
General Anastasio Somoza--whose father and brother have
already ruled Nicaragua--has been nominated by the
governing party. Although he faces an active opposition,
he is certain to be the front-runner by far.
INAUGURATION OF COLOMBIAN PRESIDENT
President-elect Carlos Llera.s Restrepo begins his term
on 7 August in generally auspicious circumstances, but
he faces serious and persistent economic and political
problems.
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Far East
VI ETNAM
25X1D
Major allied military opera-
tions in South Vietnam continue to
keep Communist forces on the defen-
sive.
Joint US - South Vietnamese
forces continued their sweep of
northernmost Quang Tri Province in
pursuit of remnants of the North
Vietnamese 324B Infantry Division.
On 3 August, four new US Marine
battalions replaced battle-weary
marine units participating. in Oper-
ation HASTINGS/LAM SON: 289, and the
operation was renamed PRAIRIE/LAM
SON 289. Final casualty figures
for HASTINGS were 126 Americans
killed and 448 wounded. Communist
losses include 882 killed, 15 cap-
tured, and 254 weapons.
In the central highlands, ele-
ents of the US 25th Infantry and
%Ifst Cavalry divisions reported
scattered contacts with Communist
units during Operation PAUL REVERE
in Pleiku and Kontum provinces.
Since 9 May, this sweep has pre-
vented any major Communist offensive
in the region and has cost the Com-
munists 803 killed and 76 captured.
Viet Cong in III and IV Corps
General Khang, new III Corps
commander, recently noted that al-
lied spoiling operations and the
destruction of enemy food supplies
in III Corps have forced the Viet
Cong to scale down their operations.
Khang also speculated that more
available food and manpower in the
delta area of IV Corps is causing
the Viet Cong to move units there
from III Corps in the hope of scor?-
ing a needed victory.
The Viet Cong have drawn heav-
ily on their delta forces in the
past year to reinforce their III
Corps strength, but there is no
confirmation yet that troops have
moved back.
Coming Elections in Saigon
Political developments are in--
creasingly centered on the Septem-
ber elections for a constitutional
assembly.
Local screening of candidates
is complete and a review board in
Saigon is considering complaints
and appeals. Thus far, the govern-
ment has given every appearance of
impartiality. Several well-known
independents have been approved
and candidates--including military
officers--have been eliminated be-
cause of clear-cut irregularities.
The appeals are to be completed by
12 August, and the campaign is to
begin on 26 August.
To maximize voter turnout and
neutralize Viet Cong antielection
propaganda and plans to disrupt the
elections through terrorism and
sabotage, the government started a
three-day seminar in Saigon on
1 August for province chiefs
and other officials on election
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The Indochina -South China Area
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25X1 D
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organization, security, and public-
ity. Government information media
have been exhorting the population
to participate in the elections.
lw~
No specific campaign issues
have yet emerged. A few well-known
independents in the Saigon area are
planning to portray themselves as
the nucleus of a "loyal opposition,"
which may partially alleviate the
cynicism toward elections expressed
in some Saigon quarters. Presuma-
bly, most contests will be on the
basis of individual personalities
and qualifications, with victors
reflecting to some extent existing
regional, religious, and political
groupings. The elected assembly
may thus be somewhat predisposed to
provide for local autonomy in the
draft constitution.
The military has apparently
made no significant effort to par-
ticipate in the constitutional as-
sembly thus far, but may be more
concerned by future events such as
the form of the constitution and 25X1D
the eventual government.
would not play an active role in 25X1D
the new government next year, but
mentioned Chief of State Thieu as
a potential military candidate for
chief executive. Former I Corps
commander Thi announced his inten-
tion to be a candidate for the
post shortly after arriving in the
US for a three-month visit.
Hanoi's Views on the War
Hanoi recently published two
lengthy, candid assessments of the
military situation in South Vietnam,
providing a rare insight into the
North Vietnamese leaders' concern
over the massive buildup of US
troops and their subsequent effec-
tiveness in military operations.
The first article was purport-
edly "sent out of South Vietnam"
under a pseudonym to the North Viet-
namese Army journal. The second,
in the authoritative party theoret-
ical journal, is by DRV politburo
member Nguyen Chi Thanh, who has
reportedly been in the South direct-
ing the war effort since early 1965.
Both articles admit American supe-
riority in numbers and equipment,
display a grudging admiration of US
tactics, and hint that US spoiling
operations have disrupted Communist
base areas.
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US Embassy officials have com-
mented that the candidates' re-
gional backgrounds appear more im-
portant than religion or party.
Most are business or professional
men--including teachers and pro-
fessors--and local councilors, but
civil servants and military offi-
cers constitute a significant group
in rural areas, where there are
fewer politically aware private
citizens. Preliminary reports
from most of the country indicate
an average of about six candidates
for each assembly seat, although
a province in the central highlands
has only one candidate. In central
Vietnam, few persons associated
with the recent "struggle" movement
filed, and those who did were dis-
qualified.
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The second article has some
pointed criticism for a few long-
standing theoretical formulations
on conducting the war. The tone
suggests that author Thanh was de-
fending his stewardship of the war
during the past year. Although he
did not advance any new theories,
Thanh was clearly criticizing some
of his comrades--perhaps even high-
level ones--as too detached from
present realities and too reliant
on their experiences in the war
with the French.
The publication of an article
hinting at top-level differences
of opinion probably indicates these
have been resolved and that Thanh's
views--although not explicitly set
forth in the article--have prevailed.
The articles admit the Communists
have been forced to re-evaluate
some of their traditional military
plans and concepts, however, and
Thanh possibly has some authority
to adjust tactics and strategy to
meet the American troop buildup.
Hanoi's Efforts to Keep Rails Open
North Vietnam is stepping up
efforts to build bypass bridges on
important rail lines to reduce their
vulnerability to air attack. Re-
cent photography shows nine major
bridges on the vital Hanoi - Ping-
hsiang and Hanoi-Haiphong lines with
bypasses completed or under con-
struction. Some work is probably
being done by Chinese Communist mil-
itary engineers.
Despite this obvious priority,
the Hanoi - Ping-hsiang line re-
mained closed to through traffic.
As of late July, both the main and
bypass bridges at Cao Nung and
the main rail bridge at Dap Cau
were unserviceable; the bypass
bridge at Dap Cau had not been com-
pleted.
Supplies Still Moving in Laos
is sending supplies down the Laotian
road system despite the rainy
weather. In past years, virtually no
traffic has moved here from approxi-
mately June to November.
Chinese Combat Unit in the DRV
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NORTH VIETNAM'S OIL IMPORTS
The USSR, North Vietnam's
normal source of petroleum prod-
ucts, is resuming bulk seaborne
deliveries. None had arrived by
sea since the first air strikes
against petroleum storage facili-
ties in Haiphong and Hanoi on 29
June.
At least one Soviet tanker
with 10,000 metric tons of diesel
fuel aboard will deliver POL for
North Vietnam in late August. A
small tanker, en route from the
Black Sea to the Soviet Far East,
may also unload its 4,000-ton
cargo of diesel fuel in North
Vietnam.
Deliveries at this rate
should be sufficient to meet Ha-
noi's present military and eco-
nomic needs. Although Soviet bulk
deliveries had been increased in
the year preceding the air
strikes from an annual rate of
150,000 tons to nearly 275,000
tons, much of the increase was
apparently used to create stock-
piles.
In addition to the bulk
shipments, Soviet freighters
have brought in an average of
1,000 tons of petroleum products
in some 5,000 drums each month
this year. Much of this is lu-
bricants and specialized oils,
but some fuel for vehicles is
included.
China has not been a tradi-
tional source of POL for North
Vietnam, but in mid-July about
150 tons of kerosene was shipped
to. North Vietnam from the Lanchou
refinery in north-central China.
Although no critical shortage of
SOVIET BULK OIL SHIPMENTS TO NORTH VIETNAM
25X1 D
*An additional 24,000 tons diverted to Chinese ports for subsequent,
but undetected transshipment to North Vietnam,
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kerosene is known to exist in
North Vietnam, this shipment 25X1
suggests that emergency supplies
25X1 D
The step-up in Soviet de-
liveries had overtaxed the fa-
cilities at Haiphong by mid-June
and it became necessary to di-
vert one Soviet tanker to Shang-
hai for transshipment. Subse-
quently an unusual concentration
of Chinese tank cars observed
at Shanghai may have been used
to move this petroleum to North
827A000400030008-3
Vietnam, despite the high overland
transport costs. A second tanker
due to arrive in Haiphong im-
mediately following the first
US air attack there, also was
diverted to a South China port
and its cargo may have been
transshipped via rail to North
Vietnam.
Unused rail and road capac-
ity across the China border is
adequate to sustain sizable
overland movements of oil. Only
about one percent of China's
tank-car inventory would be
required to maintain this year's
monthly rate of seaborne deliv-
eries.
INCREASE OF TERRORISM I N PHILIPPINES
The recent resurgence of
terrorism in central Luzon ap-
pears to be essentially a re-
action to President's Marcos'
efforts to end lawlessness in the
Philippine countryside. Marcos'
campaign has tended to disrupt
a mutually beneficial collusion
between local officials and law-
less elements, some of which are
still controlled or influenced
by the Huks.
The strength of the Huk move-
ment was broken in the 1950s by
the late president Magsaysay, and
subsequent efforts to revitalize
it has been hampered by dissen-
sion among its leaders. Never-
theless, remnants of the movement
have maintained a profitable al-
liance with gangster and politi-
cal elements, particularly in its
former stronghold in. central
Luzon.
This area has long been
plagued by lawlessness, corrup-
tion, and civil unrest, encour-
aged by the vast divergences in
personal wealth. President Mar-
cos, soon after taking office,
began a broad program of mili-
tary and civic action aimed at
wiping out sources of discontent
in the area. In the face of the
most recent incidents, including
the assassination of a strongly
anti-Communist mayor in mid-July,
Marcos has authorized additional
troops and initiated. a crash
civic reform program utilizing
the civic action troops slated
for Vietnam.
The Huk threat has frequently
been overplayed by Filipino lead-
ers and the sensationalist Manila
press, both for domestic politi-
cal reasons and as a lever for
seeking greater US aid. However, if
Marcos' reform program fails, central
Luzon provides an ideal environ-
ment for a significant Huk revival.
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COMMUNIST ACTIVITY I N THAILAND
A rash of small attacks
against government troops in
northeastern Thailand last month
has not been followed up by sig-
nificant new insurgent activity.
However, a report that North
Vietnam is providing direct guer-
rilla training to the insurgents
indicates the Communists are
laying the groundwork for a more
concerted armed effort.
The government is continu-
ing to mount large-scale suppres-
sion operations, but with uncer-
tain results. Troops that re-
cently completed a sweep in Pat-
thalung Province in the south
failed to establish any signifi-
cant contact, although a number
of suspects were taken into cus-
tody. In the northeast, where
the insurgency has been strongest,
a 1,500-man security operation
is under way following state-
ments by a captured Communist
that a 50-man band in the area
was recently reinforced with
Vietnamese infiltrators.
eight-month political and mili-
tary training course given in
North Vietnam, and that he was
one in a class of 130 Thais who
received training in guerrilla
tactics from North Vietnamese
officers. He believes that this
was the first such class in
North Vietnam but that others
were planned.
Deputy Premier Praphat ap-
parently is exaggerating reports
of North Vietnamese involvement
for domestic political reasons.
He told the press last week that
documents found on two persons
killed in recent skirmishes
"proved" North Vietnamese "sol-
diers" have been infiltrating
the northeast. This statement
followed other public remarks
indicating Praphat is pushing
for yet another postponement of
a new constitution and elections
on grounds that the security
situation precludes political
There have been reports be-
fore of North Vietnamese troops
in the northeast, but their
presence has never been verified.
It seems unlikely that North
Vietnam would commit regular
troops there at this stage of
the Thai insurgency, although
it may have sent some cadre to
assist the weak and poorly led
Thai guerrillas. One aspect of
Hanoi's role has become clearer,
however, following the interro-
gation of a recent Thai Commu-
nist defector. He says that
early this year he completed an
25X1 C
in Laos that the Chinese Commu-
nists, operating through their
embassy in Vientiane, are plan-
ning to organize sabotage teams
to strike against US air bases
in northeast Thailand. Similar
unsubstantiated reports have
been received in the past. The
Communists probably already have
the capability to mount harass-
ing actions against US installa-
tions in the northeast, although
thus far there have been none.
25X1 D
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Europe
GENEVA DISARMAMENT TALKS NEAR END
Members of the Eighteen Na-
tion Disarmament Committee (ENDC)
are trying to wind up their pres-
ent session in order to report
to the UN General Assembly in
September. East-West differ-
ences over a nonproliferation
treaty and diminishing support
from the nonaligned members for
the Western formula have pre-
cluded any real progress, and
little is likely in the remain-
ing weeks.
In the past few months the
Soviets have come down heavily
on the fact that the Western
draft for a nonproliferation
treaty would not outlaw the trans-
fer of nuclear weapons to non-
nuclear powers--West Germany in
particular--but only require the
consent of a nuclear state be-
fore such weapons are used. These
Soviet attacks have tended to
erode support for the Western
formula, which was designed to
leave open the possibility for
some kind of a NATO nuclear
force.
In a recent meeting of the
NATO Council, Britain, the Neth-
erlands, and Belgium urged in
particular that the so-called
European option clause in the
Western draft, which allows for
the development of a European
nuclear force, be reconsidered.
They contended that some such
move is necessary if anything
is to be accomplished at Geneva.
By all indications, however,
the Soviets' genuine concern is
the prevention of any form of
access to nuclear weapons by
West Germany. Any tinkering
with the European option clause
is not likely to allay this.
The prolonged deadlock has
disillusioned the nonaligned
members, and they may present
their own version of a nonpro-
liferation treaty. This would
reportedly call for a ban on
the transfer of nuclear weapons
to states not already having
them, a cut-off on the produc-
tion of fissionable material for
weapons, an obligation on nuclear
states to reduce stockpiles, and
the universal application of in-
ternational safeguards to all
nuclear activities. By intro-
ducing additional measures on
which the major powers do not
agree, such a proposal would
tend to complicate the proceed-
ings further.
The Italian delegate has
revived the "Fanfani proposal,"
which calls for all states not
having nuclear weapons to de-
clare unilaterally that they
will not acquire them. The Ital-
ians have also proposed that
the the UN General Assembly
should ask the nuclear powers to
agree not to use their weapons
against states who issue such
declarations and to come to
their aid in case of nuclear
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attack or blackmail. Rome be-
lieves this would at least
avoid having the ENDC wind up
without having accomplished any-
thing, a prospect that might
lead to its abolition or to a
revived interest in a world dis-
armament conference.
The Egyptian delegate, to
help justify the existence of
25X1 D
WARSAW PACT FORCES HOLD EXERCISE IN BALTIC
Recent naval and air ma-
neuvers in the Baltic involving
Soviet, East German, and Polish
forces are part of the greater
effort being made within the
Warsaw Pact to improve the ef-
fectiveness of the "northern
tier" forces in various contin-
gency roles.
The Polish press announced
that the maneuvers were con-
ducted from 20 to 27 July under
the command of the Warsaw Pact
commander in chief, Soviet
Marshal A. Grechko, and that
their purpose was to check the
combat readiness and coordina-
tion of Pact forces. The com-
manders of the naval forces of
each of the countries, as well
as the Polish defense minister
and his deputy--who is chief of
Poland's territorial defense--
were reportedly also present.
At least 20 Baltic-based
Soviet, East German, and Pol-
25X1 D
ish ships took part in the naval
portion of the exercise, which
apparently included antisubma-
rine and missile patrol-boat ac-
tivity as well as torpedo fir-
ings and minesweeping. A small
amphibious landing may also have
taken place. A paradrop op-
eration in northern Poland by
Polish airborne forces probably
simulated the air landing of an
"aggressor" force.
The exercise appears to
have been the largest of its
type held in the Baltic area un-
der Warsaw Pact auspices. It
accounts in part for a 30 July
Soviet Navy Day statement by
Soviet naval chief Admiral
Gorshkov, who said that coop-
eration between the fleets of
the Warsaw Pact countries was
"growing and strengthenin with
each passing day."
25X1 D
the ENDC, would have the non-
aligned members issue a memo-
randum on the topic of general
and complete disarmament, men-
tioning the proposals that have
been made, recognizing the im-
portance of disarmament, and
stating that discussion should
continue.
25X1 D
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SOVIET UNION IMPROVES ITS AIR DEFENSES
25X1 D
A new Soviet interceptor air-
craft is in the late stages of
testing before deployment. This
is one of several major projects
under way to modernize and
strengthen the USSR's defenses
against air and missile attack.
one of two target drones near the
Caspian Sea, about 900 miles away.
An intercept exercise at this
range is beyond the capabilities
of all known Soviet fighters ex-
cept the Fiddler, which has been
under development for several
years and is expected to enter
operational service next winter.
The Firebar, an operational in-
terceptor, is capable of this
range, but could probably not
reach the high speeds--Mach 1.2
in this case--necessary to carry
out a successful interception af-
ter such a long flight.
The Fiddler has airborne
intercept radar and armament cap-
abilities superior to those of
any operational Soviet fighter,
enabling it to attack higher per-
formance targets than can present
operational interceptors. These
capabilities, in addition to the
OF
SELECTED SOVIET INTERCEPTORS
(MAXIMUM RADIUS MISSION)
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Fiddler's long range, will improve
Soviet air defense and extend the
distance at which aerial targets
can be engaged by several hundred
miles.
In addition to the Fiddler
project, the USSR is augmenting
its missile defenses against air
and ICBM attack. During the past
EAST GERMAN REGIME CONCERNED WITH PUBLIC UNREST
The East German regime plans
to hold a parade in East Berlin
on 13 August, the fifth anniversary
of the erection of the Berlin
Wall. Factory militia army units
and more than 50 vehicles are to
take part in the event, which may
be intended to discourage any
popular demonstrations on this
occasion.
Unrest in East Germany has
seemed to be on the increase.
On 17 June, the anniversary of
the 1953 uprising, Soviet war
memorials in Dresden, Halle, and
Leipzig were reportedly desecrated.
Factory workers in Dresden erected
a gallows and called for the hang-
ing of the local party secretary.
Reports to Berlin by local East
German party officials also in-
dicated considerable negative
public reaction when the party,
25X1 D
on 29 June, backed out of the
plan for public debates with the
West German Socialists.
A list of price changes an-
nounced by the regime without
warning on 11 July elicited an
extremely negative response.
People feared it was only the
first of a series of increases
that might eventually affect
rents, food, appliances, and
building material. Intensive
regime reporting during the last
two weeks of July on popular re-
action to the price increases was
evidence of its concern for the
public's mood on the issue. One
party functionary remarked on 25
July that "surely the number of
complaints will have decreased
in two weeks or so."
25X1 D
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DE GAULLE'S ROUND-THE-WORLD TRIP
President De Gaulle leaves
Paris 25 August on a three-week
trip with stops in French Soma-
liland, Ethiopia, Cambodia, French
Polynesia, and Guadaloupe. The
stated purpose of the trip is
to allow him to observe a nuclear
test at France's Pacific test
site during the second week of
September. The stops in Ethio-
pia and Cambodia, however, pro-
vide him with an opportunity to
show the flag and to press his
views on such issues as Vietnam.
De Gaulle has scheduled a
two-day state visit to Ethiopia,
returning Emperor Haile Selassie's
two earlier visits to France.
Although the-emphasis will be or}
the protocol aspects of the visit,
a cultural and technical assist-
ance agreement may be signed
if negotiations are completed in
time. De Gaulle probably chose
Ethiopia as his major African
stop to avoid singling out one
of the numerous French-speaking
states that have invited him.
The announcement that De
Gaulle would visit Cambodia from
31 August to 2 September has
given rise to reports that he
would meet with Ho Chi Minh
there. These reports have been
largely discredited, however,
with both North Vietnam and Cam-
bodia having denied that a meet-
ing is planned. A French For-
eign Ministry official was less
categorical, saying only that he
had no information to confirm
the reports.
It seems unlikely that De
Gaulle would engage his prestige
in a meeting with Ho unless he
felt that prospects for some
movement toward a negotiated
settlement were good. All evi-
dence indicates that the general
remains convinced the time is
not ripe for a French initiative.
Nevertheless, Vietnam will prob-
ably be a major topic in his
conversations with. Sihanouk.
Speculation has also arisen
over the possibility of a meet-
ing with President: Johnson,
either when De Gaulle's plane
refuels at Guadaloupe on 13 Sep-
tember or at the UN, should De
Gaulle add a stop there to his
itinerary. There is evidence
that the French have encouraged
this speculation probably to
further the idea that it is
Washington which is unwilling
to exchange views. The French
foreign minister has said pri-
vately, however, that De Gaulle
has no i ntion of coming to
the US.
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Middle East - Africa
CONGO MUTINY CONTINUES
The mutiny of Katangan troops
in Kisangani is still not set-
tled, and the Congo's relations
with Belgium are continuing to
decline.
Shooting apparently has
stopped in Kisangani, and Pre-
-mier Mulamba says he has worked
out a cease-fire.. There is no
word, however, of any agreement
by the Katangans to return to
central government authority.
President Mobutu has objected
to one part of the cease-fire
arrangement which would leave
the mutineers in control of
most of the city.
The mutiny may be affect-
ing other Katangan units as
well. The Katangans stationed
along the border with the Su-
dan and Uganda apparently have
Left their posts and are mov-
ing toward Kisangani. Neither
their purpose nor their rela-
tionship with the Kisangani
mutineers is clear. Even if
they are not connected with
the original mutiny, however,
they are a disruptive force
in their own right. Their de-
parture also leaves a poten-
tially restive area ungarri-
soned.
US Ambassador Godley com-
ments that the mutiny has once
again exposed the weakness of
the eastern Congo. He believes
that the government's handling
of the crisis has harmed Mo-
butu's own position, perhaps
:irrevocably. Godley also
speculates that even if the Ka-
tangans' original acts-on was not
connected with the widely ru-
mored pro-Tshombe coup plot, the
mutinees may come to believe
they are not alone as a result
of the government's revelation
of the plot reports. The Congo-
lese appear convinced of the
truth of the plot, and they are
growing jumpy over reports of
real or fancied movements by
mercenaries and Katangan troops.
The Belgian consul general
in Lubumbashi has been expelled,
DEMOCRATIC REPUBLIC OF THE CONGO
6NTP.AL APBtCAN RETUlit1C
J k tHasa
L E OLDVILLE)
'e0-CEl1lTRA
p rleeonai coital
-- Consolidated province boundary
A Province capital
Administration unresolved
UELE
Isirop
!-TAUT-CONGO
KASAI -
OCCIDENTAL
KASAI-
ORIENTAL
Luluabourp ?Mbuy MMLyi
NORD-KATANGAJ
Lubumbashi
( Elisebethyllle)
.~-_ Ass w
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and further steps against Bel-
gians seem inevitable. For its
part, Brussels appears likely
to curtail its aid program. How-
ever, though relations probably
will continue to deteriorate for
some time, a complete break seems
unlikely since both sides would
stand to lose s ch. 25X1D
25X1 A
SUDAN GETS NEW COALITION CABINET
Newly elected Prime Minis-
ter Sadiq al-Mahdi announced the
composition of his coalition
cabinet on 2 August. Specific
portfolios, however, have not
yet been assigned.
The recent conflict within
Sadiq's Umma Party apparently
encouraged the National Union
Party (NUP), Umma's coalition
partner, to demand an increase
in its cabinet representation
as a price for cooperation. Ac-
cordingly, the new cabinet is
equally distributed between
seven Umma, including the prime
minister, and seven NUP minis-
ters. Ousted prime minister
Mahjoub and his Umma backers,
led by the influential Imam of
the Ansar sect, had threatened
to join the parliamentary opposi-
tion when Sadiq was elected, but
25X1
making an effort at reconcilia-
tion.
Hamza Mirghani Hamza's re-
turn from his position with the
International Bank for Reconstruc-
tion and Development to join the
cabinet indicates that the new
government will make a serious
effort to solve the Sudan's crit-
ical economic problems. Mir-
ghani Hamza is expected to take
over the finance portfolio.
The US Embassy in Khartoum
feels that the new government
offers prospects for considerable
improvement over its ineffectual
predecessor. The majority of
NUP ministers are holdovers,how-
ever, and the new Umma members
are for the most part untested
in polic making.
25X1 D
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NEW ARMY COUP THREATENS EARLY BREAKUP OF NIGERIA
A mutiny by northern-led army
elements toppled the regime of Cen-
ral Aguiyi Ironsi last weekend and
atapulted to power 31-year-old army
chief of staff Gowon, a Christian
from the predominantly Muslim North.
The successful revolt of the
northerners, mainly Muslim Hausa:,
began on 29 July in army units in
Western Nigeria. It spread quickly
to the North, then to Lagos, and ap-
parently also to the battalion in
the Ibo-dominated East. It was di-
rected mainly at Ibos, beginning with
Ironsi, who was in Ibadan. He was
apparently killed during the early
stages.
Additional killings and the one
known clash between mutineers and an
organized opposition force probably
have resulted so far in several hun-
dred Ibo military casualties
NIGERIA
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including a large number of officers.
Others have been arrested or have
taken flight as have many Ibo civil-
ians, especially in the North where
the bloody vendetta continues.
The Hausas' traditional suspi-
cion of the aggressive Ibos had been
fanned by Ironsi's failure to punish
the young Ibo officers who assassi-
nated the North's two most influen-
tial political leaders as well as
several senior northern officers in
last January's coup which overthrew
the northern-dominated civilian gov-
ernment. Northern conviction that
the Ironsi regime sought "Ibo domina-
tion" deepened in late May when
Ironsi announced unitary reforms that
would have placed the backward North
at a competitive disadvantage. Al-
though Ironsi pulled back before vio-
lent northern protests, his assur-
ances that the North would be allowed
to retain its identity and preroga-
tives were evidently considered in-
adequate.
In assuming authority at the
urging of the dissident elements--
and with the nominal consent of key
remnants of the Ironsi administra-
tion--Gowon flatly rejected the
planned unitary government. He ini-
tially had sided with extremists who
favor immediate northern separation,
but under pressure from the British
and moderate northern leaders--who
realize secession would bring wide-
spread economic disruption--he pledged
to try to save the country from "ut-
ter destruction." Gowon also prom-
ised to honor Nigeria's international
commitments. He has in the past been
very well disposed toward the US.
Gowon's prospects for establish-
ing a viable regime do not now seem
bright. Army discipline is tenuous
and its ability to function as a co-
hesive organization has been crippled
However, discipline is reported firm
and morale high among most of the
18,000-man police force, which can
probably handle disturbances that
do not involve the military.
Gowon's most immediate problem
is coping with the oil-rich Eastern
provinces. Eastern military gover-
nor Ojukwu has said the only answer
is for each of the four former re-
gions to "go its own way" and that
what was required is an early meet-
ing to settle the terms for parting.
In the North there appears to
be increasing danger that moderates
who want to preserve the country's
basic unity are losing ground to
separatist-minded Islamic extrem-
ists. Some pressure for secession
evidently also exists in the West
where Gowon has tried to gain Yoruba
support by releasing their most
popular leader, Obafemi Awolowo,
and other political prisoners.
If any form of united Nigeria
manages to survive, it presumably
will be a loose federation with
northerners and western Yorubas
playing key roles in a weak central
government. Gowon evidently in-
tends to bring important civilians
into the new military government 25X1D
very soon with a view toward an
early return to civilian rule.
25X1 D
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SOVIET AID FOR INDIA'S FOURTH FIVE-YEAR PLAN
The USSR has reportedly
promised a new commitment of
about $630 million for India's
five-year plan, the largest sin-
gle aid package Moscow has ever
offered to a free world country.
The commitment demonstrates the
importance Moscow attaches to its
relations with New Delhi, and is
evidence of its desire to help
India develop as a counterweight
to China. The new extension ac-
counts for only about seven per-
cent of the total foreign as-
sistance India hopes to obtain
for the plan.
In addition to the new aid,
about $400 million remains from
the Soviet aid extended for the
third five-year plan, and will
be available for the current
plan. About half of this amount
represents the Soviet commitment
to the Bokaro steel mill. Al-
though the plant has become a
matter of controversy between
the two countries, this is un-
likely to affect Soviet-Indian
aid relations. India feels that
economies might be realized if
the USSR would accept design sug-
gestions of a private Indian
consulting firm, but the USSR
will probably continue to insist
on rigid adherence to its own
technical specifications.
Details on how the new aid
will be used are apparently yet
to be worked out. It is likely,
however, that about $410 million
will be allocated for the con-
struction of major projects and
about $220 million will be made
available for medium-term com-
mercial credits to finance im-
ports associated with the devel-
opment program. Some specifics
on the allocation of the project
aid probably will be announced
during Premier Kosygin's visit
to India this fall.
During India's previous
five-year plans, the Soviets
supplemented. their initial aid
extension with additional cred-
its as the plans progressed. How-
ever, during the previous two
five-year plans only about $650
million in Soviet aid was used.
The Soviets reportedly have
stated that commitments in Viet-
nam and grain purchases in the
West rule out additional help
for the new plan. Despite
this, India will probably seek
more Soviet aid for the plan in
1967 or 1968.
25X1 D
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Western Hemisphere
ARGENTINA BEGINS ITS
The Ongania regime has be-
gun to attack some of the causes
of the military criticism that
culminated in the ouster of the
Illia administration.
On 26 July, police began
confiscating Communist periodi-
cals from Buenos Aires newsstands,
apparently beginning a drive to
end the distribution of Commu-
nist literature in Argentina.
However, the police also confis-
cated so-called "obscene" maga-
zines, and this and subsequent
statements by police gave the
campaign a highly moralistic
tone.
On the same day, the govern-
ment announced that it plans to
return to private ownership 36
radio stations and one TV sta-
tion nationalized by Peron and
still under government control.
These stations have often been
the means by which former govern-
ments were able to disseminate
slanted news.
On 27 July, the government
assumed direct control of the
national universities, thus end-
ing the traditional university
autonomy. The regime took this
step to end Communist agitation
and all other political activity
at the universities, one of the
major complaints of the generals
before the June coup. When the
rectors were told to accept the
government's university reform
program within 48 hours, several
EFFORTS AT REFORM
either refused or resigned. Some
students and professors then oc-
cupied university buildings in
Buenos Aires, and were ousted by
police in a violent clash.
Press reaction to the re-
forms has been mixed. The press
has deplored the censorship, al-
though in guarded comments
that apparently indicate some
fear that severe criticism of
Ongania could result in repris-
als. It has applauded the take-
over of the universities, but
has expressed considerable con-
cern at the violent methods of
the police.
Despite Ongania's popularity
and the general acceptance of
the new government after the
fall of Illia, the regime is
apparently beginning to realize
that its plans are bound to
bring criticism from various af-
fected circles and that it must
prepare the public for the re-
forms it intends to make. The
nature of the more recent gov-
ernment actions has added to
growing concern, both in Argen-
tina and abroad, that the On-
gania regime is becoming a
right-wing dictatorship. This is
an image it can hardly afford if
it expects to carry out the re-
forms promised by Ongania soon
25X1 D
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TERRORISM CAUSING PUBLIC ANXIETY IN BRAZIL
A growing number of terrorist requested additional police pro-
incidents of unexplained origin
has caused widespread, if vaguely
expressed, anxiety among the Bra-
zilian public and the business com-
munity. The government is attempt-
ing to determine whether the in-
cidents are part of a Communist--
inspired campaign to create unrest
or are scattered acts of protest:
by one or more groups against the
regime of Castello Branco and his
likely successor, retired Marshal
Costa e Silva, who will run as the
government's candidate in the Oc-
tober presidential election.
On 25 July three bombs were
exploded in Recife. One, which
went off in the airport lobby,
was timed for the scheduled ar-
rival of Costa e Silva. His air--
craft was delayed, however, and
he was unharmed, but two persons
were killed and several injured.
Since then, bombs have been ex-
ploded in Sao Paulo, Goiania, and
Brasilia, although none has caused
any further loss of life. The US
Embassy in Brasilia and a US bank
there have received bomb threats.
At least two foreign-owned oil
companies--Esso and Shell--have
25X1 D
NEW BOLIVIAN PRESIDENT' TO ASSUME OFFICE 6 AUGUST
Twenty-two months of mili-
tary rule in Bolivia will end of-
ficially on 6 August with the in-
auguration of President-elect Rene
Barrientos. The new, freely
elected regime will be hampered
by shifting political alliances,
several chronic economic prob-
lems, and governmental inexperi-
ence. However, the major prob-
lem will still be the government-
military relationship. As in the
SE
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These incidents add to pre-
election tensions that have also
been heightened by the govern-
ment's obvious determination to
ensure the election of progovern-
ment candidates in the September
gubernatorial and the October
presidential elections. Opposi-
tion leaders have been quick to
denounce the terrorist acts. Their
main concern apparently is that
a wave of terrorism might lead
the government to cancel the con-
gressional elections scheduled for
November; these, unlike the two
preceding elections, are to be
by direct popular vote.
Although a number of Com-
munists and extreme leftists
have been rounded up, the gov-
ernment does not yet seem in-
clined to take more drastic ac-
tion. This attitude could
change swiftly, however, should
the terrorism continue.
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25X6
25X6
past, outgoing junta chief General
Alfredo Ovando will be the key to
this affiliation, and his personal
attitude may determine the success
of the new government.
Ovando is variously described
25X6
uring
the past month, he has qone to
great lengths to enhance this image
by staging a number of public
triumphs, including the announced
completion of legal formalities
and financial arrangements for con-
struction of a tin smelter in Bo-
livia by a West German company.
This meets a long-time Bolivian
national aspiration, second only
to access to the sea. In reality,
however, he has left most of the
hard financial problems concern-
General Alfredo Ovando Candia
8:;265
ing the smelter's construction
for Barrientos to solve.
During a rare candid conver-
sation with the US ambassador in
late June, Ovando said that he
was pessimistic about prospects
for Barrientos' success in gov-
erning the country. Moreover,
Ovando had earlier implied that
he would play on the new Presi-
dent's well-known impulsiveness
until some explosion occurs.
This he believes would leave him
as the only logical person to
pick up the pieces.
The first several months of
the new government, therefore, will
probably see a major attempt by
Barrientos to build a new political
base and to strengthen his own sup-
port in the military, an endeavor
that could lead to a confrontation
with Ovando at any time. 25X1D
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President Rene Barrientos
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GUATEMALAN GUERRILLAS REJECT AMNESTY
Guatemalan Communist guer-
rilla leader Luis Turcios has
again turned down a government
offer to make peace. Turcios, in
his first press conference with
Guatemalan newsmen, rejected am-
nesty and reaffirmed his inten-
tion to continue a violent strug-
gle against the army. There has
been no significant guerrilla-
terrorist action, however, since
Julio Cesar Mendez assumed the
presidential office on 1 July.
Despite earlier guerrilla
rejections, the government sought
to implement its stated policy
for reintegrating disaffected ele-
ments by promulgating generous
terms for amnesty. These desig-
nated an eight-day period ending
3 August during which the guer-
rillas might surrender kidnap vic-
tims and arms without retribution.
The government presumably hoped
to lure away at least some who
were not fully committed to a
hard-line antigovernment position,
and in the process may have ef-
fected a shrewd political move
toward national unity.
President. Mendez has dis-
played sensitivity to the poor
aftertaste left by the arbitrar-
iness of the former military
regime and to the need for good
public relations. He appears to
believe that his government's
legal charity toward the rebels
will lay a basis for judging them
in the future, when guerrilla-
terrorist action against his
regime could then be reasonably
identifiable as hard-core Commu-
nist in character. Mendez' move
may therefore serve to encourage
public cooperation with security
forces. 25X1D
SOMOZA'S NOMINATION BEGINS NICARAGUAN ELECTION CAMPAIGN
The campaign for the presi-
dential election scheduled for
February 1967 is now officially
under way.
General Anastasio Somoza De-
bayle was nominated on 30 July as
the presidential candidate of the
governing Nationalist Liberal
Party (PLN), and the sudden death
of President Rene Schick on 3
August removes from the scene one
of the few moderating influences
on Somoza's ambitions. Lorenzo
Guerrero, designated president
for the remaining nine months of
Schick's term, is expected to
support General Somoza.
Somoza, son of the late dic-
tator and brother of a former
president, has made no secret of
his own presidential ambitions.
Since the assassination of his
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father in 1956, General Somoza has
been commander of the National
Guard, a position of considerable
power which he resigned upon ac-
cepting the PLN nomination. His
resignation, however, does not
remove the Guard from family con-
trol as a half brother was recent-
ly put in command of the National
Guard unit in Managua.
There will be active opposi-
tion to Somoza, although he is
certain to be the front-runner by
far.
On 27 July, the largest oppo-
sition group, the Traditionalist
Conservative Party (PCT), was
granted the status of a legal party
and will oppose the governing PLN
for the presidency as well as for
all seats in the bicameral legis-
lature and for all municipal offi-
ces. Although the governing party
has polled almost 90 percent of
the votes cast in recent elections,
a substantial number of eligible
voters have abstained and the PCT
claims these were largely its
following. On this ground, the
PCT claims to represent a sub-
stantial portion of the electorate
but the 1967 elections will be
its first real test of strength.
Although the PCT claims to be
the ideological heir to the orig-
inal conservative party which
split in 1957, a smaller faction,
the Nicaraguan Conservative Party,
took part in the last two elections
as the only legal opposition.
Even though this faction polled
but ten percent of the votes, it
was entitled to the entire one
third of the seats in both houses
of Congress that the constitution
reserves for the combined opposi-
tion. Therefore this faction
stands to lose substantially by
the legalization of a larger con-
servative rival. It has been try-
ing to increase its strength by
wooing dissatisfied conservatives
into a united front.
Another coalition has been
formed by several small parties
of extreme liberal views but is
of negligible strength.
One group not yet drawn into
either coalition is the small but
growing Social Christian Party.
However, it opposes Somoza's can-
didacy and has stated it would
support the PCT to avoid split-
ting the opposition vote.
25X1 D
SECRET TRINE
TOP
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25,-.July 1966
1. SUMMARY (SECRET NO FOREIGN DISSEM/NO
DISSEM ABROAD/BACKGROUND USE ONLY/
CONTROLLED DISSEM/INTERNAL CIA USE
ONLY)
Page
1
2. GENERAL SITUATION (SECRET NO FOREIGN 3
t `.:DISSEM
3. THE PANAMANIAN ECONOMY (SECRET) 7
4. US SUPPORT FOR THE NATIONAL GUARD (SECRET) 13
5. STATUS OF NEGOTIATIONS (SECRET NO FOREIGN 15
DISSEM/NO DISSEM ABROAD/BACKGROUND USE
ONLY/CONTROLLED DISSEM/INTERNAL CIA
USE ONLY
6. DARIEN GAP AND THE PAN AMERICAN HIGHWAY 21
(CONFIDENTIAL (Map
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Summary
Violent student disorders in Panama City and Colon
last month again pointed up basic socioeconomic
weaknesses which undermine stability.
President Robles' shaky coalition government of
~Ww
oligarchical parties has been unable to cope, with
Panama's serious problems and there is evidence that
his position may be weakening. Arnulfo Arias--
leader of Panama's largest political party--continues
to be President Robles' most immediate threat. He
is in a position to take advantage of the govern-
ment's increasing inability to cope with the country's
problems and to exploit popular discontent. The
outcome of the canal negotiations could determine his
course of.action.
While Panama's economy has grown rapidly in recent
years, the disparity in living standards, wide-
spread unemployment, and growing poverty--particu-
larly in the urban areas--make the outlook for polit-
ical stability increasingly bleak. Thus, there seems
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to be a need for a new long-range political as well
as economic approach to Panama; basic reforms in the
electoral, parliamentary, and legal structure seem
indicated as are quick impact economic approaches
such as the Mekong-Delta concept.
Panama's 4,200-man National Guard was able to con-
trol last month's riots, but fear of further urban
violence has prompted the Panamanian Government to
request and receive additional US assistance in aug-
menting the size of the guard by 500.
After almost a year and a half of negotiations, the
canal talks appear to be deadlocked and President
Robles, whose term expires in October 1968, may
have abandoned hopes for a new treaty.
To build a road through the Darien Gap connecting
Panama and Colombia would require an estimated
$150-270 million and would require approximately
1,000-1,500 persons for five years or so.
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GENERAL SITUATION
The violent student demonstrations in Panama's two
major urban centers last month have again pointed
up the basic weakness in the country's structure
and the alarming speed with which minor incidents
can grow into crises of major proportions.
The disorders were the worst since the anti-US riots
of January 1964, and drove home to the Robles govern-
ment the urgent need for action'to alleviate the
causes of growing unrest in Panama City and Colon--
'overcrowded and poor housing, rising unemployment,
and a high cost of living.
Robles and his aides, with a recent $3-.million loan
from the US, are planning several urban development
programs which will alleviate some of the worst pres-
sures in the cities. It is doubtful, however, that
enough can be done in time to stem the growing dis-
content of much of the population. Subversives and
self-seekers of all political coloration are in a
position to exploit the situation and are constantly
seeking the opportunity to do so.
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President Robles, though well intentioned, has ac-
complished only a few of the extensive social and
economic reforms he promised during his campaign,
The entrenched oligarchy that has dominated the po-
litical and economic life of the country since in-
dependence strongly resists any reforms which im-
pinge on its economic interests. Panamanian presi-
dents are characteristically placed in power for the
prime purpose of protecting these interests; corrup-
tion and chicanery of all sorts are accepted as a
matter of course within the government, and presi-
dents usually are too controlled by their backers
to change the system. Indeed, it has been the
oligarchy's adroitness in diverting popular resent-
ments from itself and against the US presence in
the Canal Zone that has helped keep it in power.
Because he heads a shaky coalition government of
oligarchi'cal_ parties, Robles must constantly per-
form a balancing act to allocate very scarce re-
sources. There is increasing evidence that his
political position is weakening. Some of his sup-
porters have already pulled away, and more will
undoubtedly do so as the end of his term approaches.
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Robles is further hampered by the fact thatthree
cabinet members and several top aides are already
presidential aspirants for the 1968 elections.
Opposition leader Arnulfo Arias continues to be the
most;immediate threat to the Robles government.
Charging that the present regime is "illegitimate,"
Arias misses no chance to condemn the government's
inability to resolve basic problems. He is joined by
a host of other dissidents--including Communists,
ultranationalists, and Christian Democrats--whose
short-term interests coincide with his own.
Through demagogic appeal Arias continues to exploit
successfully a popular feeling that Robles' failure
to alleviate misery is an intentional plot inspired
by the oligarchy to keep the country's wealth in the
hands of a few. Charging a sellout to the US, Arias
has also served notice that he will oppose any
Canal settlement that the "illegitimate" Robles
government might negotiate.
Given the widespread discontent, especially in the
urban areas, Arias and his followers could probably
trigger serious disorders at any time and eventually
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wear the government down through mob action. Arias,
apparently feels, however, that time is on his side,
He will probably continue to exploit popular pres-
sures and await the proper psychological moment.
This could come if a Canal settlement were announced
during the presidential elections set for May 1968.
OMBE
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Current Situation
Panama's economy has grown rapidly since 1960 with
the Gross National Product (GNP) rising at rates of
up to ten percent a year.
Although annual per capita income in Panama is one
of the highest in Latin America (nearly $500), there
are wide disparities in living standards.
The majority of the country's 1.2 million people
live in poverty; high unemployment combined with a
hjgh political agitation potential has often been.
fanned to violence in the past.
The combined population of Panama City and Colon com-
prises almost one third of the total population. Be-
twgen 20 and 30 percent of their labor force is un-
employed. Unemployment rates in these two cities
are over twice the national average of 12 percent
and have been rising. Upwards of one fourth of the
nhabitants of these two major urban centers live
in overcrowded and squalid slums--some of which bor-
der the Canal Zone and provide a sharp contrast in
living standards.
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Approximately 90 percent of Panama's industrial
and commercial enterprises are concentrated in the
key terminal cities. This factor, coupled with
the proximity to the Canal Zone and the near-sub-
sistence level of most agriculture, produces a
constant stream of migrants into the cities. More-
over, capital intensive investment has not provided
adequate employment opportunities for the increas-
ing numbers of unskilled young people that reach
working age each year.
The economy has been characterized by a growing
imbalance in commodity trade which makes Panama
more dependent on foreign assistance to offset.'its
deficits, by a decline in foreign exchange reserves,
and by a tendency to rely on the Canal Zone as the
principal source of income.
An annual population increase of three percent and
high unemployment and underemployment rates are
reflected in the housing situation. It is estimated
that two thirds of all Panamanians are inadequately
housed. Government efforts to alleviate this prob-
lem have been inadequate.
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In the rural areas, where 47 percent of the total na-
tional labor force is employed, underemployment is
extensive. Poor communications and transportation
facilities, unequal land distribution, insecurity
of tenure, and soil-robbing, slash-and-burn culti-
vation hold much of the rural population in a
vicious circle of almost subsistence agriculture.
Prospects
Immediate economic prospects are good by Latin
American standards. Political stability, however
is constantly threatened by rising unemployment
and the inability of the government to generate
enough investment to provide employment or to
mount a welfare program large enough to permit a
minimum level of decency for the urban masses.
The principal constraint on the government is its
inability to overcome the persistent opposition
of the country's small but powerful oligarchy to
effective fiscal reforms.
The prospect of US construction of a sea-level
canal increases the need for longer run govern-
ment planning and reform. The lack of a firm,.
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political base, :n any weaknesses of the present
government coalition, and the demonstrated record
on the part of the oligarchy to protect its special
interests point up the need for a new long-range
political approach responsive to popular aspira-
tions in Panama.
Panama's economic imbalance is aggravated by its
dependence on the present canal economy. The
prospect of the conversion of the canal into a
sea-level crossing will result in reduced revenue
for Panama, increasing the need for Panama to
diversify its economy and sources of revenue. The
present canal generates about two fifths of Panama's
GNP and two thirds of its foreign exchange. The
1964 trade deficit of 1108. million, for:example,
was financed largely by dollar flows from the Canal
Zone.
A sea-level canal would require only a small num-
ber of employees, thus eliminating much of this
income unless the Panamanian share of canal tolls
was enormously increased. Serious dislocations
in the economy would be caused by the sharp de-
cline in total employment that would follow the
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completion of a new canal in Panama and the clos-
ing of the present canal.
In speaking of a new approach to Panama's problems,
-one might for example consider a joint develop-
mental corporation--devoid to the extent possible
of political influence--which would address itself
to a greater utilization of Panamanian manpower
and to the development of certain industries and
resources such as the processing of unfinished
products passing through the canal.
Whether it is wise to be tied to the Robles govern-
ment for better or for worse is questionable
(Robles' term expires in 1968 and he cannot suc-
ceed himself). Thus one could consider an ulti-
mate method of aiding Panama quite separate from
the US AID channel. (The Mekong-Delta concept
seems worth considering.)
While the Panamanian economic needs are paramount
obstacles, their fulfillment, of course, cannot
proceed without development of a sound political
base divorced from the powerful influence of the
oligarchy. It is essential to carry out basic
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reforms in the electoral, parliamentary, and admin-
istrative fields as well as to establish a compe-
tent Civil Service and legal structure.
There are at present strong popular pressures
within Panama for national sovereignty which are
being capitalized on. by such opposition politicians
as Arnulfo Arias. Critical to any long-range
transformation of the Panama political/economic
base is a translation of this current popular pres-
sure into constructive basic reforms which can lead
to the necessary stability.
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US SUPPORT FOR THE NATIONAL GUARD
Last month's riots in Colon and Panama City, and the
possibility of similar outbursts occurring at two
or more places simultaneously, ?onv n.o d: the Robles
government that the 4,200-man national guard would
not be able to control widespread disturbances in
Panama and also prevent incursions into the Canal
Zone.
During a meeting between Foreign Minister Eleta and
Assistant Secretary Gordon on 7 July 1966, Eleta
asked that the US finance a 1,000-man increase in
the guard, since the current Panamanian budget could
not absorb the cost. This was in addition to an
earlier request of $0.5 million for a 500-man in-
crease which with US financial assistance was com-
pleted early this year.
In response to Panama's request, on 21 July the In-
terdepartmental Regional Group (IRG) agreed to recom-
mend funding a 500-man increase. One of the reasons
the CIA representative voted for this was that
during the June 1966 riots in Colon, the Communist-
inspired rioters deliberately organized into a
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number of small groups which spread their pillaging
throughout the city, thus straining the capability
of the national guard to deal with the situation.
It was felt that, should similar riots break out in
several cities at once, the present national guardfdrce
would not have the capability to effectively handle
the rioters.
The 1965 US grant to the national guard, which
covered the cost of recruiting, equiping, and train-
ing the original 500-man increase, became a hot po-
litical issue for Robles. His opponents charged
that the US was. supplying funds to maintain a "re=
pressive" force in Panama. Consequently, the Robles
government has asked that its latest request for
funds for the guard be met in such a way that direct
US involvement will not be revealed.
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25X1 C
STATUS OF NEGOTIATIONS
After almost one and a half years of negotiations
the canal talks appear to be deaalobked. Since
January 1966 the Robles government has beenrst1dying
US draft treaties on a sea-level canal, the present
lock canal, and a base rights and status-of-forces
agreement. Panama found the US drafts unaccept-
able.
Because of discord and bickering among Robles'aad-
visers, the Panamanians were unable or unwilling
to present counterproposals or counterdrafts when
the negotiations finally resumed in June 1966.
Instead, the Panamanians presented merely state-
ments of principle on which they felt negotiations
should proceed.
Despite the discord among the Panamanian negotiating
team, the demand for full assertion of Panama's:,sover-
eignty over the canal and the zone is the one issue that
draws together all Panamanians of all classes. The
statement of principles proposed by Panama in June em-
bodies long-standing national aspirations.
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If the Robles government, or any government, were to
accept a canal settlement with the US which deviates
-significantly from the positions embodied in this
statement of principles, it would be rejected by the
National Assemblyo Should this happen, the Robles
government would be driven to a less rational
position; it might even fall, thus creating a new
political crisis with serious side effects on in-
ternal security. A successor government would be
far more extreme in its demands.
25X1 C
has indi-
cated that the areas of difference between the US
and Panamanian positions were great: (1) Militar
Bases: Panama feels that it cannot permit the US
to use its military bases in the Canal Zone for
purposes of hemispheric securitym The US wants to
maintain existing military rights and activities.
(2) Joint Arrangements for Defense of the Canal:
Panama wants joint command responsibility, the sta-
tioning of units of the National Guard on the bases,
a substantial reduction in the number and size of mil-
itary installations, and limited jurisdictional and
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other rights for members of the US forces. The
US would like ultimate responsibility for canal
defense and the usual status-of-forces provisions.
(3) Joint Authority For Canal Operations: Panama
wants an equal voice in the management of the
canal. The US seeks to retain majority represen-
tation on the governing board of the canal
enterprise or at-least the deciding vote.
Option For Construction of Sea-level Canal: Panama
has decided it cannot grant the US an option for
the future construction of a sea-level canal
unless the US will agree not to explore the pos-
sible construction of a canal in another country
during the term of the option. Panama also wants
a sea-level canal which will be "Panamanian."
The US seeks an open-ended option to build a canal
at a place and by methods of its own choosing, with
unilateral US responsibility for financing and con-
struction. Indeed, the US is presently negotiat-
ing with Colombia to go ahead with a feasibility study
of such a canal in that country. In addition, the
US would like some form of international administration
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of the canal which would carry over for an indef-
inite period after amortization of the funded debt.
(5) Laws and Courts: Panama wants its own laws,
applied by Panamanian judges, to be enforced in the
canal areas. An exception would be allowed in a
limited number of cases directly related to se-
curity and operation of the canal. The US seeks an
initial continuation of the Canal Zone Code and
later the establishment of mixed courts which
would permit trial of US nationals by US judges.
(6) Tolls and Compensation: Panama believes that
canal tolls--not increased since the canal opened--
can be substantially raised without causing a re-
duction in traffic, It seeks to receive compensa-
tion from the canal at a rate independent of the
level of tolls. Panama wants to receive an annual
payment based on a fixed amount for each unit of
cargo transiting the canal, plus an annual incre-
ment needed to maintain its present rate of economic
growth.
(7) Functionstof the Canal Organization: Panama wants
to_;limit the functions of the new Joint Canal Authority
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to those it considers necessary for operation of the
canal. This would mean the discontinuation of many
US activities which the US considers essential. The
US wishes to transfer to the new Joint Canal Authority
all present functions of the Panama Canal Company and
the Canal Zone Government.
President Robles reportedly is disillusioned over
what he claims is harshness of the US drafts and the
slow pace of the talks. In private conversations with
US officials both Robles and Foreign Minister Eleta
have warned that the negotiations are in danger of
becoming enmeshed in the campaign for the 1968 presi-
dential elections. This would make the ratification
process enormously more difficult, since the National
Assembly is extremely susceptible to public pressure.
Arnulfo Arias and other political opponents of the
goverment will attack any settlement by calling
it a sellout to the US. Robles will also be under
heavy fire unless he can demonstrate some progress
before the National Assembly reconvenes in October.
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Publicly Robles continues to state that a new treaty
will be signed before the year's end or early in
1967 but that the date is unpredictable due to various
"contingencies." Robles may have decided that a canal
settlement will not be reached before his term ex-
pires in October 1968. There are indications that
he is now more interested in building an independent
power base from which he can control the selection
of the president in 1968 than in shoring up the gov-
ernment block in the National Assembly. This does
not necessarily mean that the Robles administration
has completely abandoned hopes for a canal settlement,
but it does imply an appraisal by Panamanian offi-
cials that a mutually advantageous canal settlement
may be a long way off.
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THE DARIEN GAP AND THE PAN :AMERICAN HIGHWAY IN PANAMA
The only remaining gap prohibiting through traffic
by road from the United States to the road network
of South America is between Panama and Colombia.
Designated as the Darien Gap, this stretch consists
of 180 miles of roadless area in Panama and 100 to
300 miles in Colombia.
There is virtually no economic development through-
out the entire Panamanian part of the region; slash-
and-burn agriculture is practiced by the sparse and
scattered Indian population. Only a few tiny vil-
lages are to be found.
A densely wooded rainforest covers most of the area
and would constitute the most formidable engineering
obstacle. Annual rainfall amounts throughout Darien
are high, generally 100 inches on the Caribbean
slopes and from 60 to 80 inches on the Pacific side.
The dry season lasts from January to May, but there
is no true dry season during the remainder of the
year. Temperatures are high throughout the year.
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The terrain of eastern Panama presents no unconquer-
able obstacles to road construction and in places is
favorable. The mountain ranges all trend in a gen-
erally NW to SE direction, and a broad valley system
through the central part offers relatively easy pas-
sage. The only swamps are found along the lower
reaches of the larger rivers near the coastline.
Development of a Route
The problem of locating a route for the Pan American
Highway in this tropical area has been studied for
years, having been masterminded in the last decade
by the Darien Subcommittee of the Pan American High-
way Congress. In 1960, after five years of techni-
cal studies by Panamanian, Colombian, and United
States engineers, an official route across the in-
ternational border area was selected (see map).
In 1963, contracts were let to Brown and Root Over-
seas, Inc., to conduct with Panamanian and Colombian
firms joint studies on reconnaissance surveys, de-
signs of construction plans, and cost estimates for
the route south of El Real in Panama. Financing of
the surveying was managed through the organization
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of American States--one third of the cost to be
borne by the Latin American countries and two thirds
by the United States. A total of $3 million was es-
timated, but to date only $2.75 million have been
contributed.
The surveys, which included both air and ground re-
connaissance, are now essentially completed. Re-
sults of the surveys have provided the data essential
for the further planning of the actual construction
of the route. In the course of the surveying work,
an alternate and shorter route has been located
across the Atrato swamps in Colombia (see map)
which would reduce considerably the length of the
route in that country. No changes were found in
the route proposed in Panama. Total cost estimates
vary between $270 million for the route in Panama
and along the Pacific slopes in Colombia, and $150
million for the shorter route through Panama and
across the Colombian Atrato swamps. Guesstimates
by the Bureau of Public Roads regarding the manpower
required to construct the road are from 1,000 to
1,500 persons for some five years, including super-
visory personnel who would probably be "imported."
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Decisions will now have to be made regarding the
final route and the means of financing the venture.
Impact of a Through-Route
The opening up of a route that would connect the
South and North American continents has tremendous
emotional appeal to the Latin American countries,
which probably colors their assessment of the im-
mediate economic benefits to be derived. However,
there are areas of economic potential on both sides
of the border, including land suitable for banana
and coconut plantations as well as extensive stands
of exotic timbers. International commerce could be
expected to increase for the surface transport of
marketable products, and the tourist industry would
undoubtedly expand to a considerable extent. De-
tailed feasibility studies will be required to de-
termine with any accuracy what possibilities exist
in this region that has thus far been on the isolated
fringes of the two countries concerned. (Map)
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