LATIN AMERICA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01184R000201060001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 22, 2016
• Document Release Date: October 20, 2010
• Sequence Number: 1
• Publication Date: August 31, 1984
• Content Type: REPORT

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Latin America
Review
ALA LAR 84-016
31 August 1984
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Latin America
Review
31 August 1984
Articles Brazil: The Presidential Contenders
Candidates Paulo Maluf and Tancredo Neves face a close race to
gain a majority of the 686-member electoral college that will choose
the country's next president in January.
The traditionally cool relations between the two countries have been
warming gradually, motivated largely by mutual security concerns,
Guatemala's need for Mexican oil, and Mexico City's desire for
Guatemalan support in the Contadora negotiations.
President Pinochet is seeking to reduce social and political pressures
on his regime by granting economic concessions that include moving
away from rigid free market principles and adopting more
expansionary policies.
Nicaragua: More Strikes
Japan-Cuba: Trade Insurance
Cuba: Attempt To Join ICO
Netherlands Antilles: Economic Problems
Trinidad and Tobago: Resisting Austerity
Paraguay: Conflict in Ruling Party
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Articles have been coordinated as appropriate with other offices within CIA.
Comments and queries regarding this publication may be directed to the Chief
Production Staff, Office of African and Latin American Analysis,
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ALA LAR 84-016
31 August 1984
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Articles
Brazil:
The Presidential Contenders
Paulo Maluf and Tancredo Neves, chosen by large
majorities at their parties' conventions earlier this
month, face a close election race. Although the
candidates have different personal styles and political
constituencies, both are adept at manipulating
members of the 686-member electoral college who
will choose the country's next president in January.
The nominees' proposals for policy changes sometimes
differ in emphasis but are generally similar and
moderate on key issues. While we believe Neves
currently has the edge over Maluf, the real campaign
has only just begun. The election could hinge on how
well each candidate is able to hold together his own
fractious political bloc while attracting votes from
smaller groups.
A Fast Start
Paulo Maluf, a federal deputy and former governor of
Sao Paulo state, beat his only challenger for the
government's Democratic Social Party nomination-
Interior Minister Andreazza-by 493 votes to 350, a
wider margin than we and most other observers
expected. Tancredo Neves, governor of Minas Gerais,
won the nomination of the main opposition party-the
Brazilian Democratic Movement Party-virtually by
acclamation, receiving 656 votes out of 688.
backed Andreazza may throw their support to Neves.
Both Marcilio and Sarney are from the impoverished
Northeast region and thus provide a geographic
balance to the presidential nominees, who come from
the economically developed Southeast. 25X6
The vice-presidential nominees are likely to add
significant strength to their respective tickets. We
believe Maluf's running mate, congressional leader
Flavio Marcilio, could boost the government party's
bid because most of the electoral college delegates
also are congressmen. Press and other sources indicate
that the opposition chose Senator Jose Sarney, a
government party dissident, as its vice-presidential
candidate to lure other defectors. Vice President
Chaves already has bolted the government party, and
some congressmen and state governors who previously
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In contrast to Maluf, Neves gained his party's
nomination by rallying disparate opposition groups
behind him through patient backroom negotiation and
compromise. He held top posts in civilian governments
that preceded the military takeover in 1964 and
became an influential opponent of the military
regime. According to the US Embassy, he has good
relations with President Figueiredo as well as with
radical leftists and is generally regarded as a
conciliator. Embassy sources also describe him as a
methodical and conservative-but not doctrinaire-
politician who relies on advice from prominent
bankers and lawyers. The Embassy notes that his long
political experience helps him project the image of an
elder statesman, which enhances his ability to resolve
conflicts.
Policy Proposals
The policy changes proposed by the candidates are
generally similar, although Maluf's platform appears
more conservative. Both advocate resumption of
economic growth, improvements in social welfare, and
tougher negotiations with Brazil's foreign creditors
and trade partners. Both, however, have said they will
continue to service Brazil's huge foreign debt. Unlike
Neves, Maluf has proposed a greater economic role
for the private sector.
Despite earlier differences on rules for the coming
election, the candidates now generally agree on
institutional changes needed to complete the political
liberalization process. Each has promised direct
elections to choose his successor-instead of the
presently mandated indirect system-and a new
constitution to replace the one imposed by the
military in 1967. Neither candidate has indicated that
he would significantly alter foreign policy, although
Maluf has called for closer ties to the United States.
The US Embassy points out that Maluf, who is bold
and not necessarily predictable, might switch to a
different political line in response to a changing
situation. An impasse in the renegotiation of Brazil's
foreign commercial bank debt later this year, for
example, could prompt him to assume a more
nationalistic stance in an effort to appeal to opposition
electors.
Outlook Uncertain
It is too early to offer credible predictions on the
outcome of the election, especially since the
candidates appear to have offsetting assets and
liabilities. The US Embassy reports that, although
Neves currently is the front runner, Maluf has enough
time to obtain additional support. President
Figueiredo and other top officials who previously
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opposed Maluf now have endorsed his candidacy. His
prospects will improve further if the administration
follows up its endorsement by threatening to cut
economic assistance to states where officials are
reluctant to support the government party candidate.
We judge that Maluf, who is 52, may also impress the
electors as being more dynamic and vigorous than the
74-year-old Neves. Because of Maluf's personal
characteristics and prior government service, however,
we believe that some voters may identify him with the
authoritarianism and corruption of the military
regime.
Neither candidate, in our view will provoke strong
reactions from the military.
acceptable despite reservations about his links to
leftists.
Although public opinion will play no direct role in the
electoral college, Neves's popularity could spark
demonstrations on his behalf that would influence the
delegates, most of whom will face reelection to their
legislative posts in 1986. On the other hand, if these
signs of support for Neves fail to materialize, we and
the US Embassy believe that Maluf's proven skill at
political maneuvering could wear down his opponent's
edge in the electoral college.
For both candidates, the challenge will be to hold
together their political blocs while attracting other
votes that could decide the election. Maluf will have
to win back at least 38 of the likely 55 to 60
government party defectors or entice an equal number
of wavering opposition members. Neves must first
retain the loyalty of his own party's left wing and
most of the government party defectors in his
coalition. In addition, he must persuade leftists from
small parties to drop their threat of boycotting the
electoral college.
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Mexico-Guatemala: Closer Ties
In the past year, the traditionally cool relations
between Mexico and Guatemala have been gradually
warming. Indicative of this trend are recent Mexican
decisions to move more than 42,000 Guatemalan
refugees in southern Mexico away from the border
area and to take other steps to make it more difficult
for Guatemalan insurgents to operate along the
frontier. President de la Madrid's administration also
is cracking down on Guatemalan dissidents in Mexico
City and expanding modest intelligence contacts with
Guatemala. Mexico City's actions appear aimed
primarily at preventing a breakdown of order along its
southern border and at eliminating a source of friction
with Guatemala. Guatemala welcomes any Mexican
assistance in helping it contain the rebel threat.
Mutual security concerns, Guatemala's need for
Mexican oil, and Mexico City's desire for
Guatemalan support in the Contadora negotiations
are likely to reinforce movement toward closer ties.
Background
Animosities between Mexico and Guatemala, which
share a 565-mile border, are longstanding. According
to published reports, many Guatemalans still resent
Mexico's annexation of the border state of Chiapas in
1824. In addition, Guatemala's leaders over the years
generally have been far more conservative than
Mexico's, a factor that has frequently led to political
friction.
Nonetheless, in the past year leaders of the two
countries have played down differences. Mexican
officials have avoided criticizing Guatemala's internal
policies, and both governments have sought to keep
recurring border incidents from escalating into major
diplomatic confrontations.
The Refugee Issue
Large numbers of Guatemalans-mainly subsistence
farmers of Mayan origin-first fled to Mexico in
1981 after the Guatemalan Army launched a major
counterinsurgency drive in Guatemala's western
highlands. The refugees settled in border camps in the
highlands of Chiapas state between Tapachula and
Comitan and in the Lacondona rain forest east of
Comitan.
Mexican authorities were unprepared for the influx of
mostly illiterate peasants. In July 1981, they forcibly
deported more than 1,800. After learning of the bad
treatment given the returned Guatemalans and in
response to international pressures, however, the
Mexican Government later in the year relented and
decided to allow refugees to remain in the country.
Mexico that year also concluded an agreement with
the UN High Commissioner for Refugees (UNHCR)
permitting international assistance to reach the
refugees.
New waves of Guatemalans arrived in Mexico in 1982
and 1983 after Efrain Rios Montt overthrew the
government of Gen. Romeo Lucas Garcia and stepped
up Guatemala's counterinsurgency effort. By last
May, more than 42,000 refugees were living along the
border in 80 to 90 settlements in a 180-mile zone
within Chiapas. Many were in areas accessible to
outsiders only by air or river transport.
According to the US Embassy, Mexican officials were
concerned that the refugees would:
? Remain in Mexico indefinitely, competing with
Mexicans for land and jobs.
? Pose an economic burden, despite the provision of
UNHCR and other assistance.
? Include persons sympathetic to the Guatemalan
rebels, prompting Guatemalan authorities to order
raids into the camps.
As a result, the government in May announced plans
to resettle all the refugees in areas well away from the
border to sites in Campeche and neighboring states.
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The US Embassy in Mexico City reports that 11,500
refugees had been moved as of mid-August. The
UNHCR is bearin the cost of the relocation
program.
One of the government's aims is to place the refugees
in an area where they will be less exposed to the rebel
presence and Guatemalan reprisals. More important,
Mexico City probably believes that resettling them
will improve the ability of its military to police the
border and will lessen tensions with Guatemala. F_
state that, despite the increased activity by Mexican
security forces, Guatemalan insurgents receive
supplies through Mexico and maintain safehouses in
Chiapas. In addition, Embassy reports note that many
of the refugees are sympathetic to the insurgents and
that the rebels probably come to the camps when they
are wounded, chased across the border, or in need of
rest. We have no firm indications that the insurgents
use the refugee facilities as operational bases.
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Most refugees apparently are unhappy about having
to resettle far from the border and their homeland.
According to the US Embassy in Mexico City, more
than 3,000 from one large camp fled into the jungle to
avoid being transferred. The Embassy reports that
Mexican authorities have in some cases used force to
move those who have refused relocation.
Meanwhile, the Guatemalan Government is pressing
ahead with its effort to encourage the refugees to
return home voluntarily. In the past year, Chief of
State Mejia's government has constructed a series of
"model" villages just inside Guatemala designed to
encourage refugees to return home. Most refugees,
however, are unlikely to go back until the political
situation improves in Guatemala.
Cracking Down on Guatemalan Insurgents
In addition to greater cooperation on refugee matters,
there are other signs that relations between Mexico
and Guatemala are improving. The de la Madrid
administration is taking stronger measures to deny
Guatemalan rebels safehaven in Mexico. Since at
least late 1982, the government has gradually
strengthened Army, Navy, and Marine forces in the
southern states of Chiapas, Quintano Roo, Tabasco,
and Campeche. In addition, the Interior Ministry has
increased the number of Federal Security Police and
immigration officials assigned to the area and stepped
up patrolling along the border.
Although Guatemala is pleased with Mexico City's
efforts to tighten security, neither government can
close the entire border to insurgent activities.
Guatemalan guerrillas use the dense jungle and
mountainous areas of the frontier to hide and to move
supplies and personnel freely from one country to the
other.
Mexican authorities also have begun cracking down
on Guatemalan opposition fronts in Mexico City.
officials in
June arrested members of a faction of the
Guatemalan Communist Party in Mexico City and
uncovered several of the group's safehouses.
Other Cooperation
Cooperation also appears to be growing in other areas.
Press reports indicate that Guatemalan Foreign
Minister Andrade explored ways to strengthen energy
and trade relations during his visit to Mexico City in
July.
Under terms of the San Jose accords, which were
renewed in August, Mexico and Venezuela provide oil
to a number of Caribbean and Central American
countries, including Guatemala, on favorable terms.
In the past year, Mexico has supplied Guatemala with
up to 8,500 barrels of oil per day. Mexican and
Guatemalan officials are also considering a proposal
to link the countries' electric power grids.
The balance of trade between the two currently favors
Mexico by approximately $40 million a year.
Guatemalan authorities are seeking to rectify this
imbalance by gaining more direct access to Mexican
markets for Guatemalan sugar, citrus fruits, and
meat. The countries also have considered establishing
a common policy on coffee sales.
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Foreign policy and, in particular, Central American
issues also have figured prominently in the expanding
dialogue between officials of the two countries.
Mexico City's policy of cooperating more closely with
Guatemala on refugee and border matters may in part
be intended to elicit Guatemalan support for Mexican
initiatives in the Contadora process. Earlier this year,
according to the US Embassy in Guatemala City,
General Mejia publicly stated that his government
would not sign a Central American peace treaty
unless Guatemalan refugees living in Mexico were
repatriated or moved farther away from the border.
Outlook
The future course of bilateral relations will largely
depend on whether the two countries can work out
satisfactory security arrangements along the frontier.
The task will not be easy, for even under the best of
circumstances, it will take time for Mexican and
Guatemalan leaders to overcome their past
differences and establish a climate of mutual trust.
Nonetheless, the Mejia government almost certainly
would welcome additional Mexican initiatives to help
it suppress the rebels and bolster Guatemala's sagging
economy. The de la Madrid administration, for its
part, would be uneasy about any breakdown of order
on its southern border because Mexico's leaders know
that instability in Guatemala could indirectly
threaten their own country's internal security. Were
large-scale fighting to spread to the Mexican side of
the border-a possibility that now appears remote-it
could result in sabotage of vulnerable petroleum and
hydroelectric facilities in southern Mexico. Viewed in
this context, prospects for continued Mexican-
Guatemalan cooperation appear relatively good.
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Chile: Political Concerns Motivate
Shifts in Economic Policy
During the past year, President Pinochet has sought
to reduce social and political pressures on his regime
by reorienting Chile's economic policies away from
rigid free market principles. We judge that his
expansionary policies and economic concessions have
bolstered his political standing, but they also are
threatening to bring the regime into conflict with its
foreign creditors, which will limit Pinochet's ability to
pursue this strategy in the coming months. His
dilemma is eased by the probability that domestic
protests will remain slack through yearend. If a new
financial crisis triggers another economic slide,
however, we believe the President may opt for even
more nationalistic policies aimed at preventing a
resurgence of unrest.
Gradual Changes in Market Policies
Pinochet's public statements indicate his sincere belief
in the effectiveness of free market policies. US
Embassy 0 sources indicated he resisted
urging by the business community, the civilian right,
and many of his fellow military officers to return to
more government-directed economic policies following
the economic plunge in 1982. This nosedive-real
growth plummeted 14 percent and unemployment
rocketed from 11 percent to 25 percent-fired public
discontent, which in turn stirred dormant political
opposition. Anti-Pinochet rallies grew in size and
scope, especially in the poorer neighborhoods, until
early 1983 when the President abandoned his
reluctance to tinker with the free market model.F
He was apparently convinced that his main political
goal-retaining power until his term expires in
1989-could only be achieved by more pragmatic
economic policies. In April 1983, the Finance
Minister was dismissed, and in June the currency was
devalued. Santiago began providing relief from
foreign competition for business and agriculture from
foreign competition by doubling the general tariff
level from 10 to 20 percent and applying further
surcharges for industries claiming damage from
The Pinochet government, to cope with the economic
chaos of President Allende's socialist revolution,
turned to a group of orthodox economists headed by
Finance Minister de Castro. The new economic
authorities, known locally as the Chicago Boys,
implemented thoroughgoing reforms along free
market lines. They revitalized private markets by
eliminating controls on prices, interest, and foreign
exchange. They slashed state subsidies, cut spending
and borrowing, and sold most nationalized firms to
private investors. They also dismantled barriers to
foreign investment, reduced tariffs, and eliminated
trade controls.
unfair trade practices. Additionally, the government
provided tax relief for new investments and increased
loans through the state development agency. Public
works programs grew to absorb 10 percent of the
labor force-mostly shantytown dwellers-at a
subsistence wage. According to US Embassy reports,
however, economic stimulants were meted out
cautiously to avert difficulties with foreign creditors.
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Pinochet's policy adjustments contributed to some 25X1
economic recovery and lower unemployment by early
1984, but he faced continuing opposition demands for
greater government intervention to stimulate more
rapid recovery. Within the government as well,
pressure was building for more expansionist measures.
Interior Minister Jarpa 25X1
pressed Pinochet for more growth-oriented policies to
ease grievances and reduce the level of protests. After
a large antiregime demonstration in March, Pinochet
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replaced his free market economic ministers with
advisers more in favor of state-directed economic
reactivation.
The new economic team, headed by Finance Minister
Luis Escobar, immediately proposed bolder
government actions to buoy recovery. They asked the
IMF to allow an increase in the budget deficit to
support reactivation, but the Fund has resisted. The
government directed state corporations to increase
labor-intensive investments to spur employment for
both skilled and unskilled labor. Moreover, Santiago
began selectively imposing tariffs to sustain domestic
manufacturing. The new team also responded to
domestic debt problems by easing repayment terms
for small businesses and the middle class.
We agree with the Embassy's judgment that these
measures, together with continuing disunity among
the opposition and selective repression of the radical
left, have caused the anti-Pinochet protest movement
to wane this year. The appointment of a former
Christian Democrat as Economic Minister is also
taking much of the wind out of the moderate
opposition's sails because he has pledged to implement
many of their economic proposals. In addition to such
economic concessions as debt relief, Chile's middle
class has also been influenced by shrewd official
propaganda that reminds it of the chaos of the
Pinochet's Economic Anxieties
Pinochet's recent statements to US diplomats show
that he continues to believe that another economic
crisis-generated presumably by falling copper prices
and rising world interest rates-could trigger renewed
political disorder. He especially fears, in our view,
that the radical left-fundamentally the
Communists-would be able to rally the poor, the
unemployed, and the unions against his regime, but he
also is concerned about middle- and upper-class
attitudes.
we believe that government
leaders still view the poblaciones (slums) that
surround Santiago and other cities as political
tinderboxes. They generally assume that the
Communist Party is exploiting unemployment (in
some areas as high as 50 percent), poverty,
substandard housing, and police repression to convert
the slumdwellers into leftist sympathizers and anti-
Pinochet diehards. Although we believe conditions in
the poblaciones are far more complex,
goal is to force Pinochet from power via an
insurrectionary general strike.
Although pro- and anti-government forces generally
agree that conditions are not currently ripe for such a
Allende period.
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"MISION IMPOSIBLE"
-Ud. deberil reactivar a toda maquina, sin generar infla-
cibn, sin aumentar el deficit fiscal, sin salirse del programa
del FMI, sin perder la conflanza interne y externa... Esta
cinta se autodestruirh en 20 segundos...
"MISSION IMPOSSIBLE'-You must reacti-
vate at full speed, without generating inflation,
without increasing the fiscal deficit, without devi-
ating from the IMF program, without losing
foreign or domestic confidence ... this tape will
self-destruct in 20 seconds....
strike, the Communists
are attempting to organize hunger marches, land
seizures, and other protests to augment their influence
in the shantytowns. The land seizures in some cases
have given rise to new shantytowns in which the
Communist Party may be able to manipulate renewed
economic distress to its advantage. When Communist
organizing efforts have been overtly political,
however, they have achieved little. The many
Communist-sponsored hunger marches and anti-
Pinochet rallies of recent months frequently have been
ignored by the inhabitants of the poblaciones.
Another concern of the Pinochet regime is the danger
of resurgent labor unrest. The unions played a key
role in initiating the protest movement during 1983,
role in initiating the protest movement during 1983,
but this year they have been much less effective. The
modest economic recovery has, in our view,
contributed to the quelling of labor's militancy, as has
the memory of last year's general strike, which was
easily broken by the authorities. Nevertheless, union
leaders have vowed to organize another general strike
this fall. Because political rivalries are weakening and
dividing the unions, collaboration among all sectors of
labor-essential for a successful strike-will be even
more difficult to attain.
With the political transition moving slowly, Pinochet
also recognizes that renewed economic stress could
erode his support among Chile's elites. Despite
economic concessions, many commercial farmers and
businesses-never enthusiastic supporters of free
market economics-have stepped up their demands
for protectionist measures, greater allocations of
government credit, more extensive debt relief, and, in
some cases, partial repudiation of the foreign debt.
The press reports that segments of the armed forces-
long a bastion of economic nationalism-also have
exerted discreet pressure to deviate from the strict
free market model.
Strong middle-class participation in last year's protest
movement awoke Pinochet to the danger that the
middle and lower classes might unite against him. We
believe the President's granting of economic
concessions continues to be aimed at mollifying some
of the grievances of the middle class, which had
opposed the government's free market line. According
to the press, middle-class participation in the most
recent day of protest against the regime was minimal.
Near-Term Outlook
We believe that continued recovery and government
economic concessions-both of which we foresee-
will help prevent a resurgence of domestic political
discontent. To sustain economic recovery, we believe
that Pinochet will intensify his efforts to increase the
budget deficit above current IMF limits and will press
commercial creditors for easier repayment terms and
new money in negotiations commencing next month.
In those talks, Finance Minister Escobar will
probably argue that increased economic growth is
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necessary to generate funds to pay the foreign debt,
especially at a time when world demand for copper
remains depressed.
While not fully satisfying Pinochet's domestic critics,
this strategy will probably placate the elites and
complicate Communist attempts to mobilize the
urban poor. As long as the government avoids serious
political gaffes, the unions and the middle class are
likely to provide only lukewarm support for future
anti-Pinochet protests so as not to jeopardize their
recently won concessions. Industrial and agricultural
pressure groups will also hesitate to antagonize the
regime because they want to retain government
subsidies and trade relief.
Longer Run Dangers
In our opinion, however, worsening external payments
problems will be the major threat to Pinochet's
economic maneuvering room by next year. The US
Embassy is already indicating that increased imports,
higher interest rates, lower copper prices, and a drop
in direct foreign investment are heightening stresses
on Chile's payments accounts. The middle classes-
fearing a devaluation and price hikes on imports-will
begin to make matters worse by increasing purchases
of luxury goods and, perhaps, by resorting again to
capital flight. According to the US Embassy, the
chances of Chile's borrowing more money this year
are slight and it will probably obtain only a fraction of
the new lending it needs for reactivation next year.
We judge that these external stresses will undermine
Pinochet's ability to redress popular discontent.
Another payments crisis could again precipitate an
economic slide resulting in increasing business
failures and rising unemployment. These conditions
could help Chile's disparate political factions unite in
protest against the government.
In our view, Pinochet would respond with various
policy adjustments. To shore up external accounts, he
would probably increase tariff protection, devalue the
peso, and suspend interest payments on the foreign
debt. To counter the domestic economic slide, we
judge that he would support increased public
spending, as well as new credit and consumer
subsidies, financed in part by an expansion of the
money supply. He would also consider tightening the
new foreign investment law to placate economic
nationalists. We believe such a departure from market
principles would, in the extreme, probably lead to
economic stagnation, rapid inflation, and persistent
payment constraints.
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.,cu VI
Latin America
Briefs
Nicaragua More Strikes
government and the strikers are now under way.
Since the Sandinistas restored the right to strike one month ago, several unions
have walked off the job and additional labor unrest seems likely. In mid-August,
workers in a state-owned brewery struck for four days. Shortly afterward,
employees of a sugar mill and several banks also went on strike, according to US
Embassy reporting. The brewers went back to work only after the Minister of
Labor threatened to declare the strike illegal and said the government would not
agree to any settlement until the strike ended. Negotiations between the
over and international scrutiny has lessened.
Despite the Sandinistas' hard line, additional labor unrest seems likely this fall, as
any government wage concessions will be wiped out quickly by inflation that is
likely to exceed 70 percent in 1984. The government, moreover, probably will be
reluctant to crack down harshly on strikers until after the November election is
Cuba has achieved some minor successes in commercial dealings with Japan, but
trade is likely to remain low until sugar prices rise.
25X1
Cuba recently purchased construction equipment from two
25X1
Japanese firms with favorable credit terms of more than two years. This
transaction follows Tokyo's decision in June to renew export credit insurance for
Japanese companies selling goods to Cuba.
25X1
the insurance-suspended after Havana requested debt rescheduling two
25X1
coverage.
years ago-is being offered again, although with higher premiums and lower
The US Embassy in Tokyo does not foresee any expansion of Cuban-Japanese
trade in the near term, but a number of Japanese businesses will likely continue to
export to Cuba. some Japanese firms believe Cuba 25X1
could prove to be a solid trading partner because of its dependence on Japan for
some manufactured products, and that continuing trade is the best way to ensure
payment of Havana's debts.F__~ 25X1
13 Secret
ALA LAR 84-016
31 August 1984
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Cuba Attempt To Join ICO
Havana is lobbying to join the International Coffee Organization, apparently in an
attempt to retain access to the hard currency markets of Western Europe and
Japan. The Cubans probably are concerned by proposals now before the
organization that could cut nonmember exports to these markets-the destination
of the bulk of Cuban coffee. At the same time, membership would provide Cuba
with greater opportunities to forge ties with other coffee-producing countries as
well as with Western consumers.
The Cubans, however, would receive only limited financial gains from
membership. Despite Havana's claims of an intensive drive to boost its coffee
output, industry analysts expect only a gradual expansion of production at best.
Consequently, Cuba will have to continue importing lower quality coffee for
domestic consumption in order to fill its desired 300,000-bag quota for next year-
about 15 percent above anticipated 1984 exports.
Economic conditions in the six-island federation are steadily deteriorating, mainly
because of low world demand for the country's refined petroleum products, which
contribute 97 percent of export earnings. Shell Oil Company already has slashed
refining operations to about half of capacity, and the Exxon-operated, Netherlands
Antilles-owned Lago refinery may clos In
addition, new US tax laws are expected to slice government revenues from offshore
companies by 30 percent over the next few years. On top of these woes, the steep
drop in receipts from tourism and ship repair are unlikely to recover any time soon
because of growing international competition.
Only generous Dutch aid will allow the Netherlands Antilles' economy to grow
slightly this year, but unemployment nevertheless is rising. In Curacao alone it is
already reportedly approaching 40 percent. Large budget deficits have been
avoided only by Aruba's subsidization of the other islands. Although popular
discontent is likely to increase, we see no serious destabilization threats at this time
from Cuba or local leftists. Havana regards the Antilles' economic problems as an
opportunity, however, and apparently is trying to get a foot in the door by
increasing business ties and promoting educational exchanges.
Trinidad and Tobago's foreign payments position is likely to continue deteriorating
rapidly as the government resists implementing harsher austerity measures. The
economy has been hard hit since 1981 by declines in domestic oil production-the
mainstay of the economy-and in world oil prices. Moreover, foreign investment in
the oil industry is off sharply, and some companies are trying to divest their
refinery operations altogether. As a result, Trinidad's balance-of-payments deficit
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this year is likely to approach $1 billion, further draining the country's foreign
exchange holdings. Reserves in June stood at $1.5 billion, less than half the 1981
level. Nevertheless, Prime Minister Chambers, with elections looming in 1986, is
unlikely to take the unpopular steps-devaluation in particular-that are
necessary , to put the country's finances in order and win badly needed help from
Paraguay Conflict in Ruling Party
President Stroessner has moved quickly to suppress a rare public fight in the ruling
Colorado Party, but the incident reflects deeper intraparty differences that are
likely to surface again. The US Embassy reports that the recent clash resulted
from the regime's heavyhanded attempt to promote a close presidential associate
to a high-level party post prior to the Colorado congress in September. According
to the Embassy, the President has ordered both party factions-the moderates who
advocate a more open political system and the hardliners who endorse Stroessner's
tough personalist brand of politics-to stop publicizing their disagreement over the
appointment. Many moderate leaders believe they may be facing their last chance
to prevent the hardliners from gaining complete control of the party. Both groups
judge that Stroessner's seventh term will be his last, and the faction controlling the
ruling party can significantly influence the future political transition.
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Secret
Cuba Chronology
2 July Vice Minister of Foreign Relations Oscar Oramas says that Cuba has withdrawn
troops from Ethiopia but he does not specify numbers or dates of the withdrawal.
Radio Havana blasts President Reagan for refusing to meet with Jesse Jackson,
saying Reagan wants to control the Caribbean "with fists and gunfire" and is "a
gunman retired from a Hollywood set."
10 July The Cuban Foreign Ministry categorically denies that it has received 10 Soviet
MIGs for Nicaragua, as reported in the US press.
Granma blames Australia for the failure of the UN conference on sugar to reach
an international agreement controlling the depressed sugar market and fixing
equitable prices.
Deputy Foreign Minister Ricardo Alarcon heads the Cuban delegation to talks
with the United States in New York on the return to Cuba of about 1,000
undesirable refugees and other immigration issues.
13 July Brig. Gen. Vicente Gomez Lopez speaks to the first fighter pilots to graduate after
training in Cuba rather than only in the USSR, as had been required previously.
Havana press reports that Cuba will accept the return of "undesirable" Cuban
refugees only if Washington agrees to issue visas to thousands of Cubans wanting
to emigrate.
In an anniversary message, Fidel Castro praises Nicaragua and accuses the United
States of "rapidly preparing the conditions for direct military intervention in
Central America."
Raul Leon Torras, president of the National Bank of Cuba, signs a rescheduling
agreement in Paris under which Cuba's 1984 debts will be repaid over four years
after a five-year grace period.
Dissident poet and writer Jorge Valls Arango says Cuba has 200 to 250 political
prisoners in jail subject to physical and psychological torture.
Barbados press reports that Cuba's 1983-84 sugar harvest, which ended last
month, produced more than 8 million tons; Cuba's Deputy Sugar Minister Blanco
claims it was Cuba's third-largest harvest.
17 Secret
ALA LAR 84-016
31 August 1984
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Secret
26 July
31 July
In statements to El Dia, Isidoro Malmierca says that Cuba is willing to contribute
to a negotiated political solution to the Central American crisis and denounces US
intervention in that area.
Flight Lt. Jerry Rawlings, Chairman of Ghana's Provisional National Defense
Council, is greeted by Fidel Castro at Jose Marti Airport; Rawlings will attend
ceremonies marking the 31st anniversary of the attack on Moncada barracks.
Guyana press announces that Prime Minister Ptolemy Reid has been in Cuba for
medical treatment since 16 July.
The Soviet Union sends a message to Fidel Castro on the 31st anniversary of the
assault on Moncada stressing solidarity with Cuba's struggle for liberty,
independence, and peace.
Fidel Castro, speaking at the Moncada barracks anniversary celebrations,
repeatedly stresses Havana's willingness to negotiate but warns that Cuba is
prepared to defend itself.
The Department of State rules out comprehensive talks with Cuba until Havana
demonstrates a willingness to make fundamental changes in its foreign policy,
according to Deputy Spokesman Romberg.
TASS reports that, in his 26 July speech, Fidel Castro said that Cuba's relations
with socialist countries are unbreakable.
During a reception given by Fidel Castro in Havana, Ghanaian leader Jerry
Rawlings says "there are no Cuban troops in Ghana ... but they are welcome."
Juventud Rebelde reports that the opening ceremonies for the Los Angeles
Olympics bored the 90,000 spectators.
Fidel Castro offers to grant amnesty to the Cuban asylees at the Peruvian
Embassy in Havana so that they can begin to negotiate their departure.
A US State Department spokesman says the United States and Cuba have
resumed talks in New York City to discuss problems of mutual interest.
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