CENTRAL AMERICA: POLITICAL-ECONOMIC ASSESSMENTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85M00364R000300340036-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 20, 2016
• Document Release Date: January 4, 2008
• Sequence Number: 36
• Publication Date: March 1, 1983
• Content Type: REPORT

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1 March 1983
CENTRAL AMERICA: POLITICAL - ECONOMIC ASSESSMENTS
The military stalemate continues, but the five Marxist'-
guerrilla factions and their political front groups have adopted
more aggressive tactics over the last six months that threaten to
weaken the provisional government. External support to the
guerrillas--training, supplies, and weapons--continues. at a high
level,. mainly from Nicaragua.. El Salvador probably will require
greater amounts of military aid this year if it is to gain the
initiative on the battlefield. Even so, outright defeat of the
cutbacks in international financial and material aid.
This is a critical year for El Salvador.. The Magana
administration must contain the insurgency., stave off economic
collapse, and prepare for presidential elections in early 1984.
These tasks are complicated by divisions in both the civilian
government and. in the military officer corps, and by possible
El Salvador
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insurgents is unlikely. Even:assuming a continuation of current
scheduled aid levels, the government probably will only manage to
contain the guerrillas as it moves to strengthen its economic and
political programs.
As long as the military stalemate goes on, prospects for
serious negotiations between the government and the guerrillas.
are dim. Both sides. view dialogue asa political tactic and
currently are not interested in compromise. Thus, the
government's political focus during the year will be on preparing
for the 1984 elections, while the insurgents are likely to aim at
forcing their cancellation.
El Salvador's economy remains extremely vulnerable to
guerrilla disruption. Economic output fell in 1982 for the
fourth straight year, mainly because of inadequate security,
-foreign exchange shortages, political uncertainties,. and
considerable storm damage. Barring major unforeseen improvements
in security or world economic conditions, a recovery is unlikely
in 1983. Furthermore, increased flows of foreign financial
assistance this year will be needed simply to prevent continuing.
deterioration.
The risks of a further major economic slide are
considerable. Mounting unemployment--already more than 30
percent--and declining per capita income--already a third lower
than in 1978--could generate popular dissatisfaction with the
government. Worsening economic conditions also could strengthen
the hand of the extreme right in the government, thus
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jeopardizing the reform programs that extremists blame for the
country's economic problems.
Guatemala
The March 1982 coup that brought General Rios Montt to power
was spurred by fraudalent national elections and the prospect
that continuing corruption and repression would further polarize
the nation. Staunchly anti-Communist and dedicated to defeating
the 2,000-3,000 Guatemalan insurgents, Rios Montt also has
instituted some reforms designed to restore the government's
domestic and international legitimacy. Although he has had some
success in improving human rights and containing corruption, he
has moved more slowly toward his longer term goal of holding
honest national elections and returning the country to civilian
rule:
The government has succeeded, at least temporarily, in
lessening the level of insurgent attacks. Death squad. activity
and killings attributable to national police elements also have
been dramatically reduced, although human.rights abuses--while
declining--still occur in rural areas. A new counterinsurgency
strategy combines military operations with civic action programs
for Indian peasants, many of whom formerly supported the
insurgents. The Army also is gaining support from local
communities and has organized more than 300,000 civilians into
civil defense forces.
Nevertheless, worsening economic conditions are a major
threat to Rios. Montt's administration. Depressed export markets,
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regional turmoil, and an inability to obtain foreign loans have
exhausted Guatemala's exchange reserves and precipitated a
decline in national ouput which will last at least through this
year. The government is responding with tough austerity
measures, which, though necessary to obtain an IMF loan, could
generate political opposition.
Further shrinkage of the economy will substantially raise an
already high unemployment rate. The government also may have to
cut back on social services and small development projects in the
predominately Indian areas. Both eventualities could spur
popular discontent and indirectly assist the guerrilla
recruitment effort.
Costa Rica
Since his inauguration in May 1982, President Monge has
returned Costa Rica to a course more consistently in line with US
interests in Central America and less given to the political and
economic eccentricities that characterized the preceding Carazo
government. In particular, Monge has conducted a tough
diplomatic offensive against subversion by Nicaragua, taken a
leading role in the regional effort to isolate both the Castro
and Sandinista regimes, and embarked on a sorely needed economic
austerity program. These policies have generated strong popular
support, even in the face of reduced living standards in a nation
unaccustomed to economic deprivation.
Monge realizes that Costa Rica's badly faltering economy is
his major domestic challenge. Faced with near triple-digit
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