BOOK THREE: COUNTRY BRIEFINGS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00827A000700060001-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 98
• Document Creation Date: December 21, 2016
• Document Release Date: October 6, 2008
• Sequence Number: 1
• Publication Date: February 1, 1967
• Content Type: BRIEF

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KOREA
February 1967
I. The North Koreans raised the tension along the
Demilitarized Zone between North and South Ko-
rea last fall with a series of armed incidents,
but the pressure was maintained only for a few
weeks.
A. A flurry of attacks between mid-October and
November 2 brought casualty figures for
1966 to 6 American and about 30 South Korean
fatalities in 40 incidents. The 36 deaths
compare with 20 South Korean soldiers killed
in 1965, and only four in all of 1964.
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Uniformed patrols on sev-
eral occasions deliberately sought
out and attacked South Korean forces.
C. The South Koreans retaliated. They mounted
a raid on October 26 which inflicted about
30 casualties, and may have penetrated all
the way through the DMZ into North Korea.
D. Up to this point, the North Koreans had
centered their harassment in sectors not
manned by U.S. troops. On November 2,
however, they ambushed an American patrol,
killing six Americans and one South Korean
who accompanied the Americans.
E. The South Koreans carried out another
strong reprisal raid the next day. Three
teams made four separate attacks on
North Korean installations in the DMZ.
The North Koreans did not retaliate.
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II. The Military Armistice Committee met at Panmunjon
on November 4, and the UN senior representative
delivered a stern warning against further North
Korean raids.
A. The Communist representatives made no mention
of the South Korean operations, and there
have been no serious incidents since that time.
B. The UN commander and the U.S. Ambassador also
privately warned the South Koreans against any
further attacks on the Communists.
III. We can not say for sure just what the intention
of the North Koreans was.
A. They may have been testing the effectiveness
and reaction of South Korean troops which
had only recently been deployed to the
Demarcation Line.
B. If their intention was to show the South
Korean government that the Communists could
retaliate for Korean participation in the
Vietnamese war, the Communists appear to
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have given up early, after a minimal effort.
1. A major policy statement by Kim Il-song
on October 5 contained the customary of-
fer to send North Korean volunteers to
Hanoi, but there was no threat to open a
"second front" in Korea.
2. Pyongyang has made little of no effort
in its propaganda to claim that the DMZ
clashes show Communist support for the
Viet Cong.
IV. The regular North Korean agent operations in and
through the Demilitarized Zone are at a low ebb
right now, part of the pattern of previous years.
A. These operations regularly taper off as soon
as the foliage disappears and snow begins to
fall. They are infrequent from November
through February.
V. Two naval incidents off the east coast, in an
area of previous clashes involving North and South
Korean fishing boats and patrol craft, may have
been intended by Pyongyang to maintain tension
generated by the armed incidents along the DMZ.
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A. One ROK navy patrol craft received super-
ficial damage on November 22 and one patrol
escort vessel was sunk on January 19 by
North Korean shore batteries. The latter
case may have been a well laid trap by North
Korean coastal defense units.
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February 1967
PAKISTAN
I. Pakistan, the tension arising from the hostili-
ties with India over Kashmir has eased. President
Ayub Khan is still in full control, and apparently
is able to deal with any threat to his rule,
A, The military appears solidly behind Ayub, de-
spite some grumbling among junior officers,
B, Most members of Ayub's political party remain
loyal to him, There is some dissatisfaction,
partly led by the pro-Chinese former foreign
minister, Bhutto.,
Co A seven-year ban against political activity,
imposed by Ayub on most of the country's lead-
ing civilian politicians of the 1950s, expired
on December 31st. To the extent that these
men have resumed political life, at least as
many are supporting Ayub as opposing him,
Do East Pakistani separatists are less active
than last spring and summer, but are still
vocal.
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II. No progress is being made toward negotiating
Pakistan's problems with India.
Indian plans to build a dam which would divert
a large part of East Pakistan's water could
become a serious problem.
C. Neither country appears willing to push the
disagreements to open hostilities again in
the near future.
III. Ayub continues to try to maintain a balance between
East and West in his foreign policy.
A. Relations with China are still good, although
Peking apparently can spare no more arms.
The Chinese Communists have already supplied
nearly 70 jet aircraft, and more than 100 tanks.
B. Relations with the USSR have warmed, but neither
country has gotten anything significant from the
other.
IV. Many Pakistanis are upset with the US for cutting
off arms aid, and for not backing Pakistan against India.
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B. Ayub realizes that he needs food and economic
aid from the US to keep Pakistan going, and so
will be extremely cautious about risking any
open break with Washington.
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February 1967
CYPRUS
I. The Cyprus dispute is still with us, and there
is no solution in sight.
A. Conversations between the Greek and Turkish
governments had caused some cautious optimism,
but there has been no agreement on substan-
tive differences. Athens still insists that
any solution must not tule out eventual
enosis, meaning union with Greece. Ankara
demands some form of Turkish presence on
the island as an adequate guarantee of the
safety of the Turkish Cypriot community.
B. Greece's interim government, although ex-
pressly in favor of a resumption of the
dialogue, has yet to make a formal declara-
tion of intent to Ankara. Ankara is pes-
simistic about chances of reaching a useful
agreement with the temporary Greek govern-
ment whose main concern will be to administer
the elections in late May.
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II. If the Greeks and the Turks should reach some
agreement on the future of Cyprus, they will
still face the major job of selling their so-
lution to the President of Cyprus, Archbishop
Makarios.
A. Makarios has given the talks his unenthusi-
astic endorsement, but his actions continue
to undermine chances for success by raising
the tensions on the island.
B. His latest move of this kind was the ac-
quisition of light and heavy weapons from
Czechoslovakia,
1. Athens controls the Cypriot National
Guard. Makarios wants a military force
independent of Greek control, and or-
dered the Czech arms to beef up the
Cypriot national police force. The
first Czech shipment reached Cyprus
before the Greeks were even aware that
Makarioa was dealing with Prague.
2. Athens had tried to take possession of
the weapons, but Makarios has refused to
turn them over to the Cypriot National
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Guard, He agreed only to let the UN
Peace Force inspect them, and says the
heavy arms will be used only in an
"emergency" and the light arms are not
likely to be distributed at least until
April.
B. The Turks also raised a strong protest, and
can be expected to react strongly if Makarios
goes through with his plans to issue the
weapons. Prague suspended an additional
shipment, which was to have included armored
cars. the cars
may yet be delivered when the present con-
troversy subsides.
C. The incident points up how little leverage
Athens has with Makariosa Greece has kept
about 10,000 mainland troops on Cyprus
since 1964, and General Grivas commands the
Cypriot National Guard. Makarios, however,
still manages to go his own way. With an
interim government and a political crisis,
Athens has even less chance of controlling
him.
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III. The United Nations Peace Force, which has the
task of heading off serious confrontations be-
tween the rival forces of Greek Cypriots and
Turkish Cypriots, now numbers about 4,500 men.
Its mandate at present runs to June 26, 1967,
and there is financial pressure in the UN to
reduce the strength. Most observers believe
that any substantial reduction would seriously
downgrade the ability of the UN Force to keep
the peace.
V. The Communist Party of Cyprus, with a member-
ship of about 12,000, is the largest and best
organized political group on the island. Ma-
karios apparently believes he can control the
party by exploiting its tacit support for
Cyprus' policy for self-determination and ter-
ritorial integrity.
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February 1967
I. The government of Turkey continues to affirm
that Turkey is aligned with the West and loyal
to NATO ..
A. In the wake of the Cyprus crisis, however,
there is a new attitude of independence in
Ankara; there is less cooperation with the
United States; there is a growing desire
for trade with the Communist countries; and
leftist elements have been able to mount an
active campaign of anti-Americanism.
II. The government of Suleyman Demirel has now been
in power for one year, and retains wide public
support. It has strengthened its control of
parliament, bolstered the confidence of the
business community, and solidified its relations
with the top military command.
A. The military leaders were wary and suspicious
a year ago when government passed to Demirel's
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Justice Party. They considered it a re-
grouping of the elements which had supported
former Premier Menderes.
B. At the same time, however, they recognized
that it had the strongest popular backing of
any party, and offered the best chance of stable
and effective government. Demirel's responsible
leadership over the past year has justified
the almost reluctant decision of the military
command to let the Justice Party take over.
C. Demirel probably has enough opposition to
keep him busy without the military. The
educated urban elite and important segments
of the press and the government bureaucracy
are traditionally aligned with the main
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opposition group, the Republican People's
Party of former premier Inonu.
D. Leftism, which was vigorously suppressed
before the military revolution against Menderes
in 1960, has gained a new respectability in
Turkey. The Republican People's Party has been
giving greater stress to leftist themes, and
the Turkish Labor Party, a Marxist group, has
a solid representation in the National Assembly.
1. These leftist elements are doing their
best to exploit American activities in
Turkey, and incidents involving Ameri-
cans, to create anti-American sentiment.
2. They then use the demonstrations of anti-
Americanism they have instigated to bring
pressure on the government to reduce
or restrict the American presence in
Turkey.
3. Most of the demonstrations of anti-Ameri-
canism in Turkey in recent months have
either been promoted or exploited by ele-
ments connected with the Turkish Labor
Party.
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III. The government has, in fact, been much less forth-
coming in its cooperation with the United States,
although this should be attributed much more to
the Cyprus problem--and the desire to improve rela-
tions with the Soviet Union--than to the workings
of the leftists.
A. One of the most important problems in US-
Turkish relations at present is a re-
appraisal, at Ankara's request, of some
55 U.S.-Turkish bilateral agreements.
C. The Cyprus question, with its inherent
strains on Turkish relations with both
Greece and the United States, remains a
dilemma for Ankara.
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1. Public interest in the dispute has waned,
but the Turkish Government remains firmly
committed to support and protect the
Turkish Cypriot community--by military
intervention if necessary.
2. Intervention on Cyprus would be a major
military operation for the Turks, almost
certainly running the risk of war with
Greece in view of the 10,000 regular
Greek troops on the island.
3. It would require the use of NATO-committed
forces, and weapons subject to U.S. Military
Assistance Program restrictions. The Turks
may be considering the creation of additional
military forces not committed to NATO, and
not subject to restrictions on US-supplied
armament.
IV. Turkish moves toward a detente with the Soviet Union,
except for economic relations, have been cautious
and restrained.
A. Soviet Premier Kosygin was given a cool and
at times hostile reception by Turkish crowds on
his recent visit to Ankara.
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B. The Turks have, however, cited concern for
their relations with the Russians in such
moves as turning down U.S. naval visits to
Turkish Black Sea ports
C. The Turks have accepted Soviet economic aid,
and a small but increasing share of Turkish
trade has been swinging to the Soviet Union
and Eastern Europe.
1. There have also been unofficial economic
contacts with the Chinese Communists, but
there appears to be little likelihood of
any substantial development there in the
near future.
V. The Turkish economy has shown increasing signs of
health in the past year, due in part to a bumper
agricultural crop.
A. Turkey still faces serious economic problems,
including the threat of inflation, due largely
to rising production and investment based on
slender capital reserves.
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B. There is a general consensus, however, that
Turkey's economic program for the coming year
is more reasonable than those of past years.
Balance-of-payments estimates are generally
fair, and Turkish leaders have indicated
their readiness to take all necessary measures
to ensure economic stability.
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29 January 1967
EGYPT
I. The prestige of Egyptian President Nasir in the
Arab world is at its lowest point of recent
years, and he has severe economic problems at
home, but there is no indication that he will
moderate any of his policies.
A. Nasir would like to destroy Israel and es-
tablish Egyptian hegemony over the entire
Middle East, but for the moment his princi-
pal concern is getting enough for the Egyp-
tians to eat.
B. The US-Egyptian agreement for Public Law 480
wheat has not been renewed.
1. Egyptian foreign exchange holdings are
very low, so that Cairo can seek only
small quantities of wheat in the open
world market.
2. The Soviet Union has promised to help,
and can do so from its record crop.
they have agreed
to supply Egypt with 650,000 tons over
the next few months.
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3. Egypt has to import about two and a half
million tons a year. In the past, PL-480
shipments have run as high as 1.5 million,
but in the last full crop year they fell
short of one million tons.
C. Nasir is bitter. In a speech just before
Christmas, he charged that the United States
had cleverly made Egypt dependent on PL-480
wheat and thus induced Cairo to put the result-
ant savings into development.
1. Then, Nasir charged, we began to impose
conditions on the agreement, calling for re-
strictions on Egyptian missile and nuclear
research and other defense expenditures.
2. When Nasir rejected these strings, he says,
the United States began what he calls a "war
of starvation," He also reportedly said
that within two years Egypt's economic situ-
ation will improve to the point where he can
then "thumb his nose at the West."
3. I would anticipate a rash of tirades of
this nature from various nonaligned coun-
tries as they learn that there is no longer
cheap surplus wheat to satisfy everybody's
desires.
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II. To cope with Egyptian economic problems, Nasir
is curtailing the development program, even
cutting back on Aswan Dam expenditures.
A. Shortages in a number of goods are increas-
ing, There is growing discontent in the
middle class.
B. The army, the mainstay of the regime, is
still being pampered, and gets what it
wants.
III. In all fairness, the Egyptian Army could point
out that it is entitled to some priorities with
about 40,000 men still bogged down in the Yemen
civil war.
A. As a result, Egypt is actually in poor shape
to back up its calls for a more challenging
Arab posture toward Israel.
B. Nasir's immediate target, however, is not
Israel, but conservative King Hussein in
Jordan.
C. Cairo is carrying on a fierce propaganda
campaign against both Hussein and King Fay-
sal of Saudi Arabia, the two moderates who
are bucking Nasir's plans for a united rad-
ical Arab world.
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29 January 1967
BRIEFING PACKAGE
I. In Syria, members of the radical Baathist clique
which seized power in February 1966 continue to
be split into factions.
A. Last September the regime crushed a coup
attempt by one of its members, Major Salim
Hatum, who subsequently fled to Jordan.
II. Meanwhile, the regime as presently constituted
continues to take a radical posture.
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B. A mutual defense pact was signed with Egypt
last November, and both countries are
concerting their strident campaign against
Jordan since the Israeli raid into Jordan
in November.
III. The Syrians last December seized the pipeline
of the Iraq Petroleum Company (IPC) in retalia-
tion for the company's refusal to double the
transit fee and pay $100 million in retroactive
increases.
A. Syrian demands on the company have been
totally unrealistic, and the shutdown is
likely to have adverse economic consequences
not only for Syria, but especially for Iraq.
B. The Syrian move may have been designed in
part to put pressure on the more moderate
Iraqi Government. Both Cairo and Damascus
have been putting pressure on Baghdad to
nationalize the Iraq Petroleum Company.
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C. IPC royalty payments account for 70 percent
of Iraq's annual $360-million oil income
and 40 percent of the Iraqi national budget.
IV. IPC, a partnership of mobil Oil, Standard Oil
of New Jersey, British Petroleum, Compagnie
Francaise des Petroles, and the Gulbenkian in-
terests, feels that it cannot pay appreciably
more to Iraq and Syria without being priced out
of the market.
A. IPC offered an extensive expansion of the
oil fields in southern Iraq if the Syrians
keep the pipeline from the northern fields
to the Mediterranean shut down.
B. Lebanon's oil needs, normally covered by
IPC's Iraqi-Syrian pipeline, are now being
filled through the pipeline from Saudi Arabia.
1. The Lebanese, however, stand to lose
about $4 million a year in transit fees
if the IPC pipeline remains shut down.
2. Furthermore, the Aramco pipeline from
Saudi Arabia to Lebanon also runs through
Syria, and is thus vulnerable to Syrian
pressure.
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C. The Iraqi regime by its public statements
may be working itself into a position where
it may have little choice but to seize IPC
installations.
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BRIEFING PACKAGE
29 January 1967
I. In Yemen, an agreement signed by Egypt's Nasir
and Saudi Arabia's Faysal in August 1965 stopped
the four-year-old war, at least temporarily,
but there has been virtually no progress beyond
the cease-fire toward a solution.
The Egyptians, who in the past have backed
the Yemeni republicans with up to 60,000
troops, have reduced their forces to about
40,000 men.
C. Efforts by Kuwait to mediate a conclusion
of the war and establishment of a joint
Yemeni government have come to nothing.
II, Meanwhile, Yemen became a virtual Egyptian
colony in August, 1966, when Nasir sent Yemen's
President Sallal back from Cairo to resume con-
trol of the government.
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A. All Yemeni republican leaders not subser-
vient to Egypt have been jailed, dismissed
from the government, or forced to flee to
safety in the hills or in Saudi Arabia.
B. Royalist and republican Yemenis have not
yet been able to unite, however, against
the common foe--Sallal and the Egyptians.
No Foreign Dissem
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4. Egyptian aircraft attacked a northern
Yemeni village early in January with
poison gas, causing a reported 200
deaths.
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February 1967
WHITE SOUTHERN AFRICA
I. The British showdown with Rhodesia in recent
months has to some degree shifted the spot-
light away from the so-called "white redoubt"
in Southern Africa--the Republic of South
Africa, and Portuguese Angola and Mozambique.
A. In South Africa, the new regime which took
over when Hendrik Verwoerd was assassinated
is as dedicated as he was to the continuation
of undiluted white rule and of apartheid
(racial separation).
B. Portugal is managing to contain increased
insurgency in Angola and Mozambique.
C. The new African nations are helping that the
sanctions which the United Nations voted
against Rhodesia can be extended to hit
South Africa and Portuguese Africa as well,
since Rhodesia gets help from her neighbors
in surmounting the sanctions.
D. At the moment, however, the existing regimes
appear to be securely in control of their
"white redoubt."
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Portuguese Africa
II. Portugal should easily retain control in Angola
and Mozambique for the foreseeable future, not-
withstanding the recent increase in rebel
activity.
A. In Mozambique on the east coast, improved
Portuguese equipment and military tactics
have enabled the government to confine the
insurgency, based in Tanzania, to remote
bush areas along the northern border.
1. Even that area is at best a no-man's land.
The capabilities of the insurgents have
improved, but they do not have the strength
to establish administrative control in any
areas.
2. They are too weak to challenge the Portu-
guese in any areas Lisbon wishes to defend.
III. The resurgence of rebel activity in Angola is of
far greater concern to the Portuguese at present.
A. Angolan nationalists, raiding from bases in
the Congo and Zambia, recently have made larger
attacks than normal.
B. However, the Angolans in the Congo are split and
disorganized. Thus far, their uncoordinated
raids and sabotage show no signs of developing
into a serious military threat to political
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control, even in areas where Portuguese
forces are as yet small and scattered.
C. Portugal is in the fortunate position of
controlling the trade routes of most of
the countries which can offer bases for
the insurgents--the Congo and Zambia.
1. Lisbon takes a cooperative attitude
toward these countries as long as they
encourage restraint in support for
anti-Portuguese nationalists.
2. Whenever the cooperative policy fails
to produce results, Lisbon can squeeze
down on the trade routes by graduated
degrees until the desired response is
obtained.
3. When a recent attack along the main
Angolan railroad led to a brief suspen-
sion by Lisbon of Congolese and Zambian
transit trade, the Congo Foreign Minister
expressed his regrets over the raid and
said that the government in Kinshasa
would take every possible action to pre-
vent further incidents.
4. Even insurgent chief Holden Roberto, who
lives in Kinshasa and doesn't want to be
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IL KL 1
'13 -
thrown out by the Congolese, said that
his insurgents are instructed to confine
their efforts to minor harassment,.
IV. Johannes Vorster, the new Prime Minister of South
Africa, is continuing the foreign and domestic
policies of Verwoerd, whose assassination last
September had no political overtones.
A. The two top foreign policy issues for South
Africa today are Rhodesia, and the old League
of National mandate of South-West Africa.
1. South Africa would prefer to avoid a
direct confrontation with Britain and
the United States over the United Nations
sanctions. Pretoria hopes that the British
and Rhodesians can reach some kind of set-
tlement before the point where there might
be strong pressure to extend the sanctions
to South Africa.
2. South Africa, however, almost certainly
will continue to support the Rhodesians,
giving them outlets to circumvent the
sanctions in addition to continuing the
direct trade between the two countries.
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3. South Africa itself is a potential target
for UN sanctions, and the Vorster govern-
ment would like to help Rhodesia demon-
strate the ineffectiveness of such meas-
ures, particularly against so-called
"white southern African."
B. South Africa continues to assert its right
to govern South-West Africa without UN super-
vision.
1. The International Court of Justice ruled
last summer that Liberia and Ethiopia
lacked a proper "legal standing" as
plaintiffs for their suit to have the
League mandate transferred to the United
Nations.
2. Pretoria claims that this decision confirms
South Africa's legal position in the area.
3. To reinforce the decision, the South Afri-
cans may soon launch an international
public relations campaign to emphasize
its accomplishments in South-West Africa,
such as the schools, hospitals, housing
and roads which serve the African popu-
lation.
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ShCKh1
4. Such a campaign, however, might also
generate a counter-campaign which could
expose recent African unrest in the
territory larger than South Africa admits.
C. It is highly unlikely that UN sanctions will
be taken against South Africa over these or
other issues. The major powers which would
have to enforce them almost certainly would
refuse to do so?
2. UN sanctions against South Africa also
would have serious consequences for several
small, neighboring black African states,
some of whom would not participate.
3. Nonetheless, South Africa is continuing
contingency plans which would allow it
to survive total sanctions for several
years, even in the unlikely event that
such sanctions would get universal com-
pliance.
D. The Vorster regime is continuing the increased
sophistication Verwoerd began in South Africa's
relations with black African countries.
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1. Pretoria, for instance, has shown some
willingness to accept as equals the
leaders of the newly independent coun-
tries of Lesotho and Botswana--formerly
British Basutoland and Bechuanaland.
2. It is helping the conservative govern-
ment of nearby Malawi with some develop-
ment projects.
3. As far as we can determine, South Africa
has been wary about associating itself
with the schemes of various adventurists
to return Tshomb6 to power in the Congo.
V. Within South Africa, the ruling Nationalist Party
is continuing to expand its apartheid policy of
racial separation.
A. The economic demands of a booming economy and
a scarcity of white labor has produced some
opposition from businessmen in the ruling
Afrikaner group to a doctrinaire application
of apartheid in job restrictions.
B. Some labor unions and white militants, in turn,
have objected to any modification of apartheid,
such as "lowering" job racial qualifications to
permit non-whites in certain employment.
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C. The ruling party faces no political threat
from these small groups, however, nor from
the almost politically extinct white liberal
parties.
D. The South African Communist party has been
crushed.
E. The disorganized non-white population offers
no threat to the government's effective
security laws and forces.
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L,UK1, I -
February 1967
RADICAL AFRICA
I. The influence of the more radical nations of
West Africa--Brazzaville Congo, Mali, and Guinea--
declined in 1966, and one of the prime movers
dropped from the ranks when Kwame Nkrumah was
overthrown in Ghana.
A. The heady political exuberance of independence
has given way to the sobering discovery that
there isn't very much pie in the sky.
B. In other words, the new governments have
found out that independence is not just a
matter of taking over a bonanza from the
colonialist powers.
1. They are all having trouble keeping
their economies on an even keel.
2. There is an increasing dependence on
foreign aid.
3. In particular, those who looked to the
Communist world for economic aid have
found that it is limited in scope, slow
to pay off, and has to be repaid.
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(Congo-Brazzaville)
II. In the former French Congo--Congo (;Brazzaville);,
as it is called--President Alphonse Massamba-Debat
is having trouble keeping control of a radical
regime which is at odds with its military forces.
A. The government is dominated by left extremists
who have made little headway in either improving
the economy or resolving ideological, tribal,
and personal disputes.
B. The regime follows a Marxist line in interna-
tional policy, and relies heavily on foreign
Communist support,
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III. French interests still control most of the Braz-
zaville-Congo economy.
A. The French aid program is still the largest
and most significant in the country. (In
1965, it amounted to $11 million.)
1. Brazzaville has remained in the French
franc zone, and extremist pressures have
not yet forced the nationalization of
industry.
2. The growth of Communist influence has
eroded the French position, however, and
harassment of French diplomatic personnel
led to the recall of the Ambassador
(quote) "for consultations."
3. (The United States has had no diplomatic
representation in Congo-Brazzaville since
August 1965, when we withdrew our person-
nel after similar harassment.)
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bv-UKLi1
1 14W .
(Mali)
IV. Mali, which has been relying on Communist hand-
outs to keep its economy afloat, has started
formal negotiations to get French backing for
its Malian franc and more French help with its
other economic problems.
A. The Communist countries may yet outbid the
French for influence in Mali, but President
Mobido Keita reportedly is willing to accept
considerable French control over the monetary
policy of Mali to get back on good terms
with De Gaulle.
1. Mali still takes a public stand with the
Communists on international issues, but
has toned down its propaganda attacks on
the West.
2. United States relations with Mali are
friendly, and we have a modest aid pro-
gram there.
3. If Mali reaches financial agreement with
France, this will probably also mean
better relations with the moderate pro-
French nations of Africa such as Ivory
Coast and Senegal. Keita has made
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S L' U KF:1
overtures in this direction, and his re-
lations with the radicals, particularly
Guinea, have cooled correspondingly.
B. Mali's main problem has been a series of re-
current foreign exchange crises which threaten
to cut off essential supplies and transport
lines,
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(Guinea)
In Guinea, President Sekou Toure and his regime
are zigzagging back and forth as though they were
riding a pendulum.
A. For instance, the regime sounds like Peking
in its calls for a revival of the country's
"revolutionary militancy," but at the same
time Toure has soured on his now thoroughly
unwelcome guest, former President Nkrumah
of Ghana. Toure proclaimed Nkrumah "co-Pres-
ident" of Guinea when he was first overthrown;
now Nkrumah is no longer allowed to make
broadcasts.
B. Similarly, Guinea apparently will depend in-
creasingly on Chinese help in a drive for
greater economic self-sufficiency, but at
the same time Toure is trying to patch up
his quarrels with the United States.
1. You will recall that last October, when
the new Ghana regime took a Guinean dele-
gation headed for an international meet-
ing off a Pan-American Airways flight in
Accra, Guinea blamed the United States.
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2. The Peace Corps was ordered out of the
country,=five embassy officials were ex-
pelled, Pan-Am?s landing rights were
cancelled, and U.S.I.S. activities were
suspended.
3. We called out ambassador home temporarily
for consultation, withdrew some AID per-
sonnel, and cancelled some AID projects.
4. On December 14, President Toure apologized
to our ambassador for the incident, ex-
plaining that he had been misled by some
of his advisors and by foreign powers.
Now a new modus vivendi is being worked
out gradually.
5. Guinea apparently is not asking for U.S.
food shipments, but does want certain
technical aid projects continued, and still
welcomes U.S. investment to develop bauxite
deposits.
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D. The Soviets have shown no eagerness to
match new Chinese offers, but Moscow re-
lations with Guinea remain fairly stable.
E. The outlook is for Tour6 to remain in power,
but the leadership he used to exercise among
the radical African states has been eroded by
his economic and political problems at home.
.1. He has a one-party system, but there are
competing factions within the single party.
a. The high-handed behavior of party
paramilitary groups irritates the
regular security forces.
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(Ghana)
VI. Kwame Nkrumah, as I said, is no longer in a po-
sition of power. He appears occasionally at
public functions in Guinea, but he has only about
100 followers with him.
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(Tanzania
VIII. The principal remaining center of Communist ac-
tivity now is in East Africa, at Dar es Salaam,
the capital of former Tanganyika.
A. President Julius Nyerere of Tanzania is no
Communist, nor is he a willing or conscious
Communist stooge.
to Tanganyika became Tanzania, in fact,
when Nyerere merged his country'with
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Z) t'.u Nano
Zanzibar in an attempt to undo the Commu-
nist take-over of that island country.
B. Nyerere is obsessed, however, with the libera-
tion of the remaining countries of white South-
ern Africa.
2. Nyerere has turned bitter and mistrustful
against nations which he considers reluctant
to exert every possible pressure against
such nations as South Africa, Portugal,
and Rhodesia.
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C. As Nyerere chokes off his relations with the
West, he becomes increasingly dependent on
Communist assistance?
D. Tanzania is training and arming nationalists
from all over southern Africa, with priority
for Mozambique first, Rhodesia second,
Tanzania is understandably nervous about'the
possibility of Portuguese retaliation, and
is expanding its own defense forces.
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G. Nyerere came to power as one of the promising,
British-trained African moderates, but his
desire to remake Africa around him is making
him a captive of Communists and other extrem=
fists.
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W SECRET
February 1967
I. Nigeria is a separate problem in Africa. Deep
tribal and regional antagonism has ripped up an
artificial national unity that rested precari-
ously on more-'than 250 separate and often quar-
reling tribes.
A. Two military coups in the past year swept
away the main political leaders and insti-
tutions of the federation which the British
had created. These coups were basically a
reflection of the division between the more
numerous and backward Northerners--most of
them Muslims--and the more advanced tribes--
some of them Christian--of the coastal regions.
B. At present there is a near stalemate; the
four principal regions have found it ex-
tremely difficult to conduct negotiations,
let alone reach agreement.
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r SECRET
1. The federal military government, since
the second coup last summer, has been
headed by a Christian Northerner, Lt.
Col. Gowon. Gowon wants a strong cen-
tral government, and more small states
instead of the four regions.
2. The oil-rich Eastern region, led by
Lt. Col. :Ojukwu, is dominated by the
Christian Ibo tribe. Ibos, under
the old civilian regime, had many
of the better civil service jobs in
the North because of their better
education. During the second coup,
undisciplined northern soldiers
began a pogrom against`Ibos in the
army culminating in a mass slaughter
last fall of Ibo civilians all over
the North. Now the Ibos insist on a
loose union in which the four regions
would share certain common services.
C. The meeting of Nigeria's top leaders last
month in Ghana reduced tensions momentarily,
but they have already begun to build up again.
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1. The area of announced agreement was
limited to begin with and now it is
evident that Gowon and Ojukwu differ
sharply over what was agreed to.
2. Accelerating the new downward trend
are urgent new pressures from minori-
ties in the North and East who=-.are de-
manding separate states.
a. Last week Gowo.n again publicly as-
sociated himself with this campaign
which could lead to civil war
should he or any successor try to
force such a division on the East.
II. The United States has no military commitments
in Nigeria, but we must perforce be interested
in developments in the most populous country in
Africa, with some 50 million inhabitants.
A. The largest AID, Peace Corps, and U.S.I.S.
programs in Africa are all located in Nigeria.
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CONFIDENTIAL
February 1967
I. Generalissimo Francisco Franco has finally dealt
with the problem of his succession.
A. The Spanish people in a referendum on
December 14 gave overwhelming approval to the
constitutional law which he devised.
B. It provides some cautious changes which
do not immediately affect Franco's authoritarian
rule, but will permit some liberalization after
he goes.
1. It reaffirms that Spain is a monarchy,
and outlines the procedure for choosing
Franco's royal successor as chief of state.
It also permits designation of a nonroyal
regent who could continue the present
authoritarian regime.
2. One major innovation is a provision that
the chief of state can appoint a premier.
This makes it possible to separate Franco's
dual positions as chief of state and
premier.
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v CONFIDENTIAL
C. Among the few measures of political
liberalization are: direct election of
about one fifth of the Cortes; voting
privilege for married women; religious liberty
for non-Catholics as a legal right; and
termination of Falange control over labor
syndicates.
1. Political parties are still outlawed.
110 Franco is likely to continue in office until he
dies or is incapacitated.
B. He may appoint a premier but will most likely
refrain from naming his successor as chief of
state. The most logical choice for premier
is captain General Agostin Munoz Grandes,
the present vice chief of government.
C. There is no threat to his tenure from the
three power groups in Spain.
1. The security forces remain loyal.
2. In the other two pillars of his support
--the business interests and the Catholic
Church--whatever discontent there is
looks for changes after Franco goes, not
for his removal or restriction.
SP-2
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CONFIDENTIAL
D. Opposition groups are illegal and disorganized.
1. Most opposition leaders are also more
concerned with changes after Franco goes
than with trying to oust him now.
III. The army will control the succession.
A. The most likely choice for chief of state
if Franco dies within the next few years is
Don Juan de Borbon, son of the last king,
Alfonso XIII.
B. The new government would not be much less
authoritarian than Franco's at the start, al-
though it might permit liberalization more
rapidly than Franco has done.
IV. US Spanish relations face some minor problems in
the next,two years.
A. Madrid is pressing the US to support its bid
for closer economic and defense relationships
with Western Europe.
1. It wants to be included in readjustments
of Western defense arrangements which
result from French withdrawal from NATO.
2. It also wants US support in its current
effort to regain Gibraltar.
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UON 1111)LN"1'!AL
B. Madrid continues to forbid overflight rights
for aircraft with nuclear weapons, as a result
of the January 1966 crash at Palomares.
C. Spain may be inclined to bargain for additional
benefits when the US-Spanish defense agreement
comes up or review and possible renegotia-
tion in 1968,
V. Spain's economy continues to prosper.
A. GNP shows a 9.2 percent annual average growth
since 1960.
B. Per capita national income rose sharply
in 1965 to $595, the first year above the $500
level which is generally considered the
dividing tae two-,n an underdeveloped and
a developed economy.
C. nf:. :unary pressures which were cause
.:-= in 1965 showed signs: of tapering
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CONFIDENTIAL vv~
February 1967
$RIEFING PACKAGE
I. In the Dominican Republic, the regime of Presi-
dent Joaquin Balaguer has made a generally en-
couraging start, but that is all. A firm basis
for Dominican political stability has not yet
been developed.
A. Balaguer has a number of factors working
for him.
1. He received a clear election mandate in
June 1966.
2. The President has been relatively effec-
tive in handling major problems.
3. Many Dominicans realize that there is
no satisfactory alternative to the pres-
ent government. There will be chaos if
Balaguer falls.
The fact remains that the country has no his-
tory or tradition of constitutional and demo-
cratic rule.
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CONFIDENTIAL
2, Opposition elements are charging that
Balaguer--who served Trujillo for many
years--is using some of the dictator's
tactics.
a. Government actions, such as the
roundup of more than 600 "anti-Bala-
guer conspirators" on January 22
and 23, have lent some credibility
to these charges.
3. Balaguer runs the risk of seeing his
election mandate seriously eroded over
the coming months.
II. Balaguer has put special emphasis on his rela-
tions with the military.
A. Before the Inter-American Peace Force was
pulled out last September, Balaguer made
changes in the military organization and
leadership aimed at strengthening his con-
trol of the armed services.
DR-2
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CON N'IDENTIAL
C. Balaguer must still take the military's
views into account when he advocates re-
forms, or when he is dealing with the left.
III. Relations between Balaguer and the non-Commu-
nist left are not satisfactory. They have been
characterized by mutual suspicion and tension.
A. The left-of-center Dominican Revolutionary
Party (PRD), the leading opposition group,
seems somewhat uncertain of its future course.
In The departure of Juan Bosch in late No-
vember on an extended European trip has
contributed to this uncertainty.
DR-3
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C;ON N'1DEN"1'IAL law
C. The government may be tempted to employ re-
pressive measures against the PRD, a move
certain to increase political tensions.
IV. Numerous economic and social problems pose a
serious danger to long-term stability.
A. There is a continuing threat of labor dis-
turbances, and severe unemployment creates
discontent, particularly in Santo Domingo.
B. The country has an international payments
gap which could become critical.
C. The economy in 1967 is expected to show im-
provements over 1966, but the US Embassy
feels it will remain below pre-revolt levels.
D. Many of Balaguer's economic policies appear
headed in the right direction, but his cen-
tralized control of most economic decisions
has slowed down implementation of an emer-
gency investment program financed by the
United States.
E. Substantial sums of foreign assistance will
continue to be needed if the country is to
attempt to solve its problems.
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SECRET -?
February 1967
I. In Haiti, President Duvalier remains in firm control
of the country.
A. "Papa Doc" hit hard and fast in November when
he had reason to suspect a military plot
against his regime.
1. On November 10 and 11 he fired a number
of high-ranking officers, waited a few
days to make sure this did not trigger
a revolt, and then ordered the officers
to present themselves in Port-au-Prince
for courtmariial.
2. Duvalier thus benefited :three ways from
this suspected plot:
--He got rid of a number of officers he
didn't trust;
--He replaced them with handpicked, loyal
supporters; and
--by firing men at the top, he created open-
ings for a wave of promotions to reward his
adherents in both the army and the security.
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VkW SECRET
B. This is typical of Duvalier's shrewd opera-
tions. So was the legislative election held
on January 220
2m The possibility of cabinet changes was
also considered likely, Nonetheless,
President Duvalier's carefully staged
legislative elections were routine
with his pre-picked slate of candidates
emerging victorious.
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II. While Duvalier's political grip remains firm, the
Haitian economy keeps on going downhill.
A. Per capita gross national product is about
$70--the lowest in Latin America.
B. In the past, solvency depended to a large
degree on U. So loans and grants. There
haven't been any since 1963.
C. 1964, 1965, and 1966 were all bad years,
and the outlook for 1967 is not favorable.
Hurricane Inez in September caused severe
damage in an area that produces about 40
percent of Haiti's coffee, Haiti's chief
product.
D. A recent agreement with the Dominican
Republic promises that Duvalier's own
finances will stay in better shape. A
Migrant Labor Agreement calls for 20,000
to 24,000 Haitian cane-cutters to work in
the Dominican sugar harvest.
1. Duvalier will make his own arrangements
with the Haitian workers.
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, SECRET
20 The Dominican payment for their services--
estimated as high as $400,000--will be
paid into Duvalier's so-called "non-fiscal
funds," which he uses to maintain his
power structure.
III. There is practically no active opposition worthy
of the name left in Haiti, The few politically-
minded people who are against Duvalier are cowed
by his oppressive policies and are unorganized.
A. He watches the army like a hawk, and keeps
a good hare of their weapons and ammunition
locked up in the Presidential Palace.
to His own private goon squads, the Ton Ton
Macoutes or "boogeymen," amount to a
private army which keeps tabs on the
military among other duties,
B. There are no longer any significant opposition
political parties out in the open. There is an
underground Social Christian movement called the
Personalistes, which may have one or two hundred
adherents, mainly in Port-au-Prince, but it ap-
pears to have little organization.
C. There are two rival Communist parties, which may
have as many as 500 members combined, but they are
lacking in discipline, are poorly indoctrinated,
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and inclined to compete rather than
cooperate.
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February 1967
I. Relations with Panama are approaching a new and
crucial stage.
A. Maneuvering for the 1968 presidential elec-
tions already has started, and the canal
treaty negotiations with the US are the ma-
jor issue.
B. The heat of an election campaign will put
pressure on the Robles government to obtain
a treaty settlement as early as possible.
C. If I am going to talk about Panama elections,
I must first take a minute to explain some
of the terms our Panama experts love to use.
1. Most of the time, politics in Panama is
controlled by a number of well-entrenched
families. These families lead a handful
of political parties which, with a few
scattered interruptions, have either
shared or taken turns at running the
country.
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3. To avoid having to repeat this identi-
fication every time that the ruling
elements are mentioned, we generally
refer to the "oligarchical parties."
The term is not a happy one, but it
saves a lot of words.
D. President Marco Aurelio Robles leads a
coalition of the oligarchical parties. The
perennial challenger is Arnulfo Arias, who
heads the mass-based Panamenista Party.
1. Arias became President by coup in 1941,
and by election in 1951, but the oligarchy
threw him out before he could finish
either term. He may very well have won
the 1964 voting, but he lost when the
government counted the ballots.
2. He is a very effective demagogue who needs
only a good issue, and that is why the
negotiations for the new canal treaty
are so important.
E. If no agreement can be reached, or if the
agreement is unsatisfactory to Panama, Arias
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will make a strong run in 1968 on the plat-
form that the oligarchy cannot defend
Panamanian interests against the United
States.
II. Robles is firmly convinced that his government
at present has the strength to obtain ratifica-
tion if the draft treaty meets the long-standing
aspirations of Panama.
A. Foreign Minister Eleta gave the National As-
sembly a secret briefing about the treaty
talks on December 20. He came away feeling
--almost for the first time--that the re-
action was favorable enough to justify the
belief that a new treaty can be negotiated
and ratified.
B. One of the sticking points is United States
insistence on having the directorship and a
majority of the seats on the joint canal
authority which is to administer the present
canal.
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III. Maneuvering for the 1968 general elections is begin-
ning to exert a strong influence on political
activity.
A. There are four major political parties and
several minor ones, mainly left of center
in their political orientation and volubly
devoted to social reform. The Communist Party
is barred from political activities.
B. Leaders of the political parties have been
meeting to discuss the formation of coalitions
or to make deals for the coming elections.
IV. Oil continues to dominate the Venezuelan economy,
despite some diversification through increased
agricultural output, expansion of light industry,
and development of the Guyana iron industry.
A. The government's petroleum policy has been aimed
largely at increasing tax revenues and making
clear Venezuelan control over the operations in
Venezuela of the foreign oil companies.
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B. Weak spots in the economy include a mild
slump in the construction industry and
continuing high unemployment.
C. The Venezuelan economy has grown at an
average annual rate of six percent since
1962, and prospects for the continuation of
this rate of growth are good.
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February 1967
I. Ecuador at the moment is involved in the delicate
process of trying to shift from military back to
constitutional government.
A. A constituent assembly last November chose
Otto Arosemena as provisional president,
1. He may serve for as much as a year before
a constitutional successor emerges.
B. The primary functions of the assembly, which
is also acting as a legislature, are to pro=-
duce a new constitution to replace that of
1946, and to lay the groundwork for general
elections.
1. The assembly has decided on direct popu-
lar election of the next president, but
has set no date.
20 The assembly has done little else, Ses-
sions have been so disorderly that the
delegates are not expected to complete
their work before April 19670
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Co The new interim president is a hard-driving,
personable, opportunistic professional poli-
tician, Arosemena is a member of a long-
established Guayaquil banking family? and is
backed by conservative elements. He is
therefore looked upon by the center-left op-
position as a representative of the vested
interests,
20 The center-left opposition is beginning to
accept the idea that it may have to live
with Arosemena for a while, but will un-
doubtedly try to depose him if the op-
portunity presents itself.
D. Arosemena has reached a modus vivendi with
the military by promising that no major
changes will be made in the command structure,;
and that his government will not support any
measures adopted by the assembly that are re.--
pugnant to the armed forces.
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II0 While the political situation remains 'uncertain,
the most immediate problem facing the government
is the worsening financial and economic situa-
tion,
A. Encouraging progress has been made x.n slowing
the loss of foreign exchange reserves.
1. There seems to be little likelihood, how=
ever, of dealing with the long=range fi-
nancial and economic problems in the near
future, given the caretaker nature of
the government and the size of the prob-
lems0
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February 1967
BOLIVIA
I. The Bolivian political scene has been relatively
quiet since the inauguration last August of Pres-
ident Rene Barrientos Ortuno. This condition
will probably continue for the short run;, punc
tuated at times by periods of uneasiness.
A. Barrientos is a popular president. He won
62 percent of the vote in the July elections,
His ruling political coalition? the Bolivian
Revolutionary Front or FRB, also enjoys an
overwhelming majority in both houses of
Congress. In spite of the statistics, how-
ever, the Barrientos government is not
strong.
1. The FRB--a patchwork combination of four
minor political parties and two interest
groups-lacks unity, central control, and
a common political doctrine?
2. It is already falling apart and Barrientos
has been looking for some alternative or
substitute. He will probably be able to
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reorganize his political base eventually,
but in the meantime Bolivian politics and
government is going to be pretty much a
personal one-man shows
B. Barrientos? real base of power is the armed
forces. Without their support, his govern=-
ment can not survive.
C. The chief rival for power is the armed forces
commander, General Alfredo Ovando Candia.,
1, Ovando is an ambitious, but cautious man-
He will probably not seek a direct con-
frontation with Barrientos in the immed
ate future, for fear of splitting the
armed forces' loyalties.
2, Instead, Ovando will try to keep pressure
on Barrientos in hopes that he will stumble.
Ovando would then be in a position to take
over.
D. The political opposition to Barrientos is too
badly fragmented and internally disoriented to
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pose a-serious threat at this time,
II. Bolivia has enjoyed a measure of economic stability
under the military junta and the Barrientos govern-
ment, but many problems remain.
A. These include a large budget deficit, a rising
cost of living, and heavy foreign debt, The
Bolivian Government is counting heavily on the
US to help alleviate these burdens.
B. The major source of economic difficulties for
the government continues to be the mining in-
dustry, which accounts for nearly all of
Bolivia's export earnings.
1. In 1966, COMIBOL, the nation's mining in
dustry, was put on a paying basis for the
first time since 1952.
2. The government expects some labor trouble
in the tin mines over the issue of wages.
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Feb~uary 1967
I. Brazilian President Castello Branco will turn
over his office on March 15 to former War Min-
ister Arti~ur da Costa e Silva, a retired army
marshal.
A. Costa e Silva has not yet announced any
specific policies. He is expected to con-
tinue most of.the present lines. He may
try some relaxation of the stringent eco-
nomic austerity measures.
B. His primary base of support, as with Castello
Branco, will be the armed forces.
C. The new constitution, which takes effect on
March 15, incorporates many of the special
powers exercised by Castello Branco and
greatly strengthens executive power.
D. A new press law strengthens penalties for
slander or disclosure of "state secrets,!
and may force the press to be more sure of
its facts before attacking public officials,
especially the president.
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II. The Castello Branco government has made an im-
pressive effort to alleviate the chaotic con-
ditions inherited from its predecessors, but
many critical problems remain.
A. The 1966 annual rate of inflation was
41.1 percent, substantially less than
the 1964 rate of 87 percent, but near
the 1965 level of 45 percent.
B. Real wages have declined steadily, contribu-
ting to the substantial dissatisfaction among
urban labor.
C. Restrictive credit policies have drawn pro-
tests from business leaders.
D. Agricultural output in 1966 was probably
down from the bumper 1965 harvest.
III. The government has effectively reduced the threat
of subversion, but there are still potential
threats to stability.
A. The only legal opposition party, the Brazil-
ian Democratic Movement, has been unable to
exploit the widespread popular dissatisfac-
tion with the government; in the November
congressional elections-the pro-government
party successfully defended its large majori-
ties in Congress.
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B. A political alliance between ex-President
Kubitschek and conservative leader Carlos
Lacerda has been formed in hopes of captur-
ing popular support. It may, however, fail
to qualify as a political party.
C. Some hard-line military elements continue
to press for stronger action against corrupt
or subversive elements.
E. The Communist Party, in considerable dis-
array after the revolution, is still fic-
tionalized but beginning to reorganize and
to reassert its influence, particularly in
labor and-among students and intellectuals.
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February 1967
ARGENTINA
I. In Argentina, the authoritarian regime of
President Juan Carlos Ongania remains in firm
control despite public grumbling over its efforts
at economic and labor reform.
A. The armed forces still support Ongania for
the present, despite dissatisfaction with
some government policies. The military
brought him to power after deposing the Illia
government in June 1966.
1. After the cpup, the generals yielded to
Ongania's -Insistence that they concern
themselves only with military affairs,
but lately they have again talked of
demanding a greater role in policy-
making.
2. Ongania's appointment of Julio Alsogaray,
as
commander in chief of the army, gives the
generals a forceful spokesman if they
continue to disagree with government
policies.
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B. The Argentine economy suffers from budgetary
deficits, a large external debt, and
chronic inflation. The government's initial
reform moves alienated business and labor
interests.
1. Some business interests welcomed the
coup last summer, but were quickly
disenchanted when it became clear that
there would not be a crackdown on
organized labor, that foreign ex-
change restrictions would continue,
and that tax laws would be enforced.
2. Organized labor had accepted the new
government grudgingly. A compulsory
arbitration law and new work rules
for port and railroad workers have
now given labor leaders the issues
they needed to rally support for anti-
government strikes.
3. The appointment of Adalbert Krieger Vasena,
a highly qualified and experienced econ-
omist, as the new Minister of Economy
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could promote efforts to develop an
effective stabilization program. Krieger
Vasena quickly announced the 1967 budget
after taking office. The budget had
been stalled during the ineffective ad-
ministration of his predecessor, Jorge
Salimei.
II. The Ongania regime has indicated that it plans to
stay in power until its reforms are completed.
Even then it will not permit a return to the
former political system.
A. Those government officials who loudly
supported a political system based on a
"corporate state" have been replaced in
Ongania's new cabinet by members of a mod-
erate right-wing intellectual group headed
by Ambassador to Brazil Mario Amadeo.
B. Ongania, however, has stated that he would
prefer to see the development of a two-party
system of liberals and conservatives which
would absorb both the Peronists and the Radi-
cals.
III. At.present, there is no suba,ersive threat to the
government from either the Peronists or the
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Communists, and there seems little likelihood
that the two groups could ever join forces.
A. The Peronists, who once had a reputation for
subversion and terrorism, have been split.
The moderates in the movement seem to be
gaining control.
1. The moderates, led by labor leader Au-
gusto Vandor, dominate the General Con-
federation of Labor, and have lately
supported'negotiations with the regime
to end labor disputes.
2. Vandor has also talked of eventually
leading a labor party which would be
Peronist-based.
B. The Communist Party, although the second
largest in Latin America, is weak and in-
effective, and closely watched by the gov-
ernment.
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February 1967
1. Uruguay has dropped its Swiss-style plural execu-
tive system, and Oscar Gestido will take office in
:-'arch as the first one-man president in 16 years.
A. In November 1966, largely because of dissatis-
faction with the government's inability to deal
with deteriorating economic conditions, the
voters decided to do away with their cumbersome
9-man executive and end eight years of Blanco
Party dominance.
B. Gestido, a Colorado Party member, has not de-
vised any comprehensive plan to deal with the
country's ills, but he has formed a cabinet
representing all major sectors of his party
and has organized a reasonably competent eco-
nomic team.
C. His job will be difficult because his elec-
toral alliance will control less than half of
the Colorado congressional majority.
1. Unless all of the Colorado factions sup-
port Gestido's programs, the Communists
may have an important swing vote. They
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increased their congressional represen-
tation from 3 to five or six seats in the
99-seat Chamber of Deputies and 1 or 2 in
the 30-seat Senate, depending on the de-
cision of the Electoral Court sometime in
February.
II. The new constitution, which was approved by the
voters in the November elections, will improve
the government's ability to deal with problems.
A. It increases presidential powers and provides
for much-needed organizational improvements
throughout the executive branch.
III. Uruguay has serious economic problems.
A. The rate of inflation in 1967 could match
the 1965 rate of nearly 90 percent unless
the new government takes energetic action.
B. Industry and agriculture.. are stagnant,.and
both imports and exports are down.
C. Unemployment, estimated between 12 and..20.
percent, is rising.
D. The budget deficit and foreign debt are also
increasing.
E. Workers are being hit hardest by the economic
pinch. The serious strikes which plagued
Uruguay in late 1966 are likely to be re-
peated in .1967.
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IV. The Communist Party, with 18,000 to 20,000 mem-
bers, has a demonstrated ability to exploit po-
litical and economic issues.
A. The Party's electoral front, FIDEL, doubled
its 1962 vote to six percent in recent elec-
tions, although it was unable to make sig-
nificant gains outside of Montevideo.
B. The Communists dominate a newly formed labor
confederation whivh:represents most of or-
ganized labor.
C. The party will continue to exploit labor's
grievances, both legitimate and artificial,
although no major labor agitation with purely
political objectives by the Communists is
likely until sometime after the new govern-
ment takes office in March.
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