US LEVERAGE ON GUYANA AND JAMAICA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001900010093-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 19, 2016
• Document Release Date: May 22, 2006
• Sequence Number: 93
• Publication Date: January 2, 1974
• Content Type: MFR

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CRE
4 \Xtj E -4
2 January 1.974
SUI3JIECT: US Leverage on Guyana and Jamaica
? The attached paper was forwarded to Foster Collins,
Special Assistant to the Secretary for National Security,
Department of Treasury at his request on 28 December 1973
for passing on to Assistant Secretary John Ilennosey.
Paragraphs 8 and 12 were drafted by OCI and the remainder
was drafted by OER. Questions or comments may be addressed
to the author,
Attechntont :
As stated
Distribution: S-57
1 - D/OER - w/att.
l - D/I - w/att.
1 - St/P - w/att.
1 - SAAR - Watt.
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1.
2 - C -watt.
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North America/Caribbean Branch
2 - I/NA - w at+:.
OER/I`/I/NA
(2 Jan. 74)
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US L VE11G1"s ON GUYANA AND J, W.ICA
Conclusions
1. The United States has a fair amount of leverage
in dealing with Guyana, though not necessarily enough to
head off nationalization of US property. The recent
renewal of Guyana's threat to Reynolds' bauxite subsidiary
may mean that Burnham is prepared to accept,the serious
effects that nationalization could have on the economy.
2. We appear t7 be in a strong position with
respect to Jamaica. The country badly needs receipts
from US tourists, US economic assistance, and the large
US market for its bauxite. Although the United States
currently relies on Jamaica for about half of its
bauxite supply, in':erruption of this trade -- either
temporarily or for a protracted period -- almost certainly
would hurt the Jamaicans more than it would us.
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IntroducLion
3. Guyana and Jamaica have soughL in the last several
years to subsLanLially increascr their revenues from foreign
companies' exploitation of bauxite deposit-..,, -- the principal
mineral resource in both cuuntries. Guyana has taken the
stronger action. :n 1970, Prime Ministor Forbes Burnham
demanded a 51% government equity share in the subsidiary
of the Aluminum Company of Canada (Alcan) . When the
company refused, he n-itionalized its bauxite and alumina
properties. In Dece.nr--.r. 1972, t3urnhamn made. a similar
demand on the Reynolds subsidiary. He soon backed off,
however, because of the threatened loss of US economic
aid and the weak world bauxite market, which was hampering
government bauxite sales. Despite divided counsel within
his cabinet, Burnham last week renewed his demand to
purchase a 51% equity share of the Reynolds bauxite properties,
an- arrangement unacceptable to the company.
4. Jamaica's efforts have been limited to (a) tax
and other measures aimed at the profits of foreign-owned
bauxite operations and (b) moves toward state ownership
of unexpleited bauxite reserves now in foreign hands.
Thus far, the Manley government has not publicly demanded
nationalization or partial government ownership of any
bauxite operations. To eventually increase its revenues,
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 however, the clover.nment established a bauxite commission
in June 1972 to recommend appropriaLo slops. In November
1.973 Kingston demanded that the companies make confidential
financial information available to the coiumissioii. Although
the thrust- of the commisoion's initial recommendations --
expected to he completed within the next several months --
is uncertain, concern already has arisen concerning the
outlook for US investments.
Leverage -on Guyana
5. If Burnham persists in his demand for a 51% equity
Share and if Reynolds remains adamant, the confrontation
could well lead to full nationalization of its properties.
About the only US economic leverage available to head off
the danger is a renewed threat to end US economic assistance
and a threat to try to use U; voting power in international
financial institutions to deny assistance to Guyana.
The economy is vulnerable to the ending of US aid, which
in FY 1972 amounted to $18 million, or about 55% of
public investment outlays. So far at least, Guyana has
had little success in reducing its dependence on the United
States for assistance. Although Burnham probably has ap-
proached several Communist countries for aid, he has obtained
only a $2G million credit from China, to be used over five
years.
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6. T ven so, it: is uncertain how Burnham would
respond this time to a threatened loss of ITS aid. One
factor working against: a backclow?:n by him is his election
pledge last summer to renew the demand for partial
ownership of the Reynolds unit. US pressure would have
the best chance of succeeding if combined with some
face-saving out such as ]a:si. year's promise by Reynolds
to retain numerous unneeded workers.
7. The United States has little other economic
leverage to bring to bear against Guyana. 'A threat to
end its quota in the US sugar market is unlikely to be
effective, because about 85% of Guyana's sugar exports
go to the United Kingdom. In view of the present strong
demand in the free market, any sugar excluded from the
United States could readily be sold in that market at
premium prices. Threat of an overall trade embargo probably
would not very persuasive. Only about one-fourth of
Guyana's imports come from the United States, and these
goods probably could easily be obtained from the United
Kingdom and other countries. Moreover, exclusion of
Guyanese bauxite from the US market might hurt us more than
Guyana. Our small imports are mainly calcined bauxite
used for refractory purposes -- a material. in which
Guyana has a virtual world monopoly.
~Sr0
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8. Al.thouUh 13urn iatill wants cordial relations with
the United States, he will not sacrifice what he sees
as important Guyanese interests to cultivate. them. Our
ability to infl.uc;ce his actions through political
leverage thus appears to be small. Burnham has been
loath to reverse his stand on issues at the behest of
the US, even in cases (such as UN votes) where the outcome
has meant little to Guyana. Burnham does not feel he owes
the United States anything politically for the aid pro-
vided. One possible point of political pressure would be
a threat to support Venezuelan territorial claims against
Guyana.
Leverage on Jamaica
9. In case Jamica's bauxite commission w(-,re to
recommend that the government acquire parti?il oi. full
ownership of bauxite properties through purchase, the
United States has certain economic levers that might
serve to head it off. US economic aid averages about one-
quarter of public investment spending. Washington
conceivably could threaten to cut off US tourist visits,
although such a threat would seem inappropriate short of
nationalization without compensation. Gross receipts from
this source amount to some $80 million annually, wnich
equals about 20% of current account earnings and 8%-9% of
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GNP. An cmbargo on dc!li.vw: i.es of US good:, would affect a
little more than one-third of Jamaican imports, including
the bull: of grain and flour supplies.
10. US pressure on Jamaica is consizaincd but not
ruled out by the fact that we now obtain about 55% of
our total bauxite supply from it. This trade is even more
important to Jamaica than it is to the United States.
The Jamaican economy is heavily dependent on the bauxite
and alumina industry. Its production accounts for 15%
of GNP, and bauxite and alumina make up about two-thirds
of exports. About three-quarters of bauxite and alumina
exports go to the Unit:;d States. Prolonged stoppage
of US sales would have a serious adverse effect on thc.
economy. With foreign reserves of $140 million --
equivalent to about 3 1/2 months'imports -- such a
stoppage would soon force a sharp curtailment of imports.
11. The United States is in a better position than
usual to temporarily get along without Jamaican bauxite,
in the unlikely event that this should prove necessary.
The present curtailment of US aluminum output because of
electric power shortages, combined with excess bauxite
stocks in the United States and various other countries,
might enable us to get along without Jamaican bauxite
for several months. In time, the United States could
satisfy its bauxite needs from other sources.
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12. Prime MinisLe3, Ilcmley (7c iia:e:i an i1111ic,7ab].e
relata.on,hip with the United StaLc but: neverL1'be].cess
takes an indcpenclonL stand sometimes. The current
effort to develop closer tics with the Cuban gove]:nmcnt
is one example of his willingness to ignore US desire,.
A specific threat: of hostile action, however, probably
would dissuade Jamaica from a strong nationalistic course.
Manley is aware that a sharp confrontation with the
States would severely hurt the Jamaican economy and under-
mine the foundations of his political support.
CIA/OEP
28 December 1973
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