LATIN AMERICA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01184R000201070001-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: December 22, 2016
• Document Release Date: October 27, 2010
• Sequence Number: 1
• Publication Date: September 21, 1984
• Content Type: REPORT

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?.fN
Directorate of Seer
Intelligence
t ILL UP Y I
I 1"A A S
. MARK W
Latin America
Review
21 September 1984
Seeret.
ALA LAR 84-017
21 September 1984
Copy 3 be -/ 3
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Review
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The Constituent. Assembly election in July has increased the
momentum of Guatemala's transition to civilian rule, eased pressure
on Chief of State Mejia, and presented a serious dilemma to the
guerrillas, who are increasingly divided over whether to abandon
armed struggle in favor of political action.
The selection of candidates for the presidential election in
November sets the stage for a return to civilian rule next March, but
the center-left Blanco Party's refusal to abide by the agreement
between the armed forces and the other parties casts a shadow over
the transition process
Labor unions have played a leading role in organizing protests
against austerity measures, but President Jorge Blanco's effective
politicking and moderate use of force have prevented worker unrest
from becoming a serious challenge to the government.
Panama's close financial relationship with Colombia, stringent bank
secrecy laws, liberal incorporation laws, corruptible officials, and
legal tender status for the US dollar are the leading factors
contributing to Panama's status as perhaps the leading narco-dollar
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ALA Z.AR 84-017
21 September 1984
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reach agreement on the allocation of seats on a single slate
The New National Party-made up of Grenada's three leading
moderate political groups stands a good chance of winning a
strong majority in the elections scheduled for 3 December if it can
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South America: Tenuous Financial B
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Brazil: Lender Confidence Improving
Dominican Republic: Petroleum Pric
Production Staff Office ofAfrican and Latin American Analysis,
Articles have been coordinated as appropriate with other offices within CIA.
Comments and queries regarding this publication may be directed to the Chief,
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Guatemala: Imm1woving Political
Climate
'File Constituent Assembly election held on 1 July has
increased the momentum of Guatemala's transition to
civilian rule. Moderate parties comprise a majority in
the Assembly, which is drafting a new constitution
and other laws in anticipation of national elections
early next year. Widespread praise for the military's
neutrality in the voting has eased pressure on Chief of
State Mejia and has given him added latitude in
dealing with other domestic and foreign policy issues.
The Army, for its part, will continue to monitor the
democratization process closely to guard against any
moves it regards as threatening. Meanwhile, the
improving political climate has presented a serious
dilemma to the guerrillas, who are increasingly
divided over whether to abandon armed struggle in
favor of political action.
Election Wrap-up
The strong showing by both the reformist Christian
Democratic Party and a new moderate group, the
National Centrist Anion, reflects popular rejection of
scars of military doirinancc, violence, and extremist
"solutions" to the country's ills. The two centrist
parties finished one and two in the popular vote,
garnering altnost 310 percent of the nearly 1.9 million
ballots cast and 41 scats in the 88-member Assembly
between them. Nevertheless, the preelection favorite,
he tiltvarightist National liberation Movement,
remains a potent voice with 23 seats.
Official and independent observers from the
Organization of American States, several third
countries, and the various parties are almost
uniformly satisfied that the Assembly vote was
conducted honestly and without interference from the
military. Nevertheless, some critics have tried to
discredit the election by alleging that the large
Number Percentage Political
of Seats of Popular Orientation
Vote
National Liberation 23 12 Rightist
Movement/Authentic
National Center
(\4LN/CAN)
National Centrist Union 21 13 Centrist
(UCN)
Christian Democratic Party 20 16 Centrist
(DCG)
Revolutionary Party (PR) 10 7 Centrist
National Renewal Party 5
(PNR)
Democratic Institutional 5
Party (PID)
Sisniega-was quickly discredited.
number of null or void ballots-some 17 percent
was a protest against the regime. Many of these,
however, appea to have stemmed from the high
turnout of illiterates, a confusing two-ballot system,
and the inclusion of unused ballots among those
voided by election officials. Indeed, the only charge of
fraud levied by perennial coup plotter Leonel
New Assembly Opens
The Assembly was formally installed on 1 August
amid indications that extreme rightists and others will
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ALA LAR 84-017
21 September 1984
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not press their earlier demand for immediate selection
of a provisional president but will settle for a working
dialogue with the government. Both sides, for
example, recently adopted a more conciliatory tone in
an apparent effort to reduce tensions. In convening
the Assembly, which is empowered only to write a
new constitution and the associated laws regulating
the judiciary and national elections next year, Mejia
did not reissue his earlier warning against attempts to
function as a provisional government. Most delegates,
we believe, will avoid challenging Mejia's authority
and will focus-at least initially-on the tasks
one party from using the Assembly to bolster its
election prospects next year and may later be
discarded.
Coalition building probably also will be a high priority
for many of the parties as they attempt to position
themselves for the presidential campaign. Two
centrist parties, the Revolutionary Party and the
National Renewal Party, recently announced their
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immediately before them.
Most of the parties, especially the centrist ones,
probably will want to write a constitution and
electoral laws quickly to capitalize on their success at
the polls. An early election also would reduce chances
of the military's coalescing against a return of power
to civilians. Nevertheless, the need to accommodate a
variety of competing sectors, including the wishes of
the military, suggests that the process will be a slow
The Military View
Despite potential problems ahead,
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one.
The writing of the constitution and the associated
debate could prove both contentious and disquieting
to the military. Some centrist leaders have indicated
that they want to begin reestablishing civilian control
over the armed forces. They also have intimated that
they will push for constitutional limitations on
executive power, an independent judiciary, and
greater authority for elected department and local
officials. Such changes, if adopted, would weaken the
authority of the military, particularly in rural areas
where senior commanders now hold ultimate power.
The "Big Three"-the Christian Democrats,
National Centrist Union, and the National Liberation
Movement-have agreed to share leadership of the
Assembly on a rotating basis. In addition, the major
parties will chair the three main commissions
developed by the Assembly to draft the new
constitution, electoral codes, and civil rights
legislation. The US Embassy reports that a power-
sharing arrangement will permit the smaller parties to
chair several subcommissions. These arrangements,
however, appear aimed primarily at preventing any
the military,
including the junior officer corps, is highly pleased
with the outcome of the election.
the Christian Democrats' performance also would
enhance Guatemala's relations with El Salvador,
Venezuela, and Western Europe.
there had been no regret over the strong
showing by the Christian Democrats, despite the
party's longtime criticism of the military and the
pervasive view within the officer corps that it is
"subversive." military officers
told party leaders in July that the Army would honor
the results of the elections should their candidate win
the presidency
Nevertheless, we believe there are limits to the
military's tolerance of civilian rule. These same
officers, for example, told Christian Democratic
leaders that the armed forces would not permit any
new government to investigate past wrongdoing by the
military.
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In addition, we believe the Army will resist strongly
any attempt to diminish its control over the civilian
defense patrols, which continue to play a key
counterinsurgency role. Military spending, and
institutional matters such as officer promotions,
tactics, and the naming of the defense minister, also
are prerogatives expected to be guarded closely by the
Mejia, in our view, also is hopeful that these efforts 25X1
will help end Guatemala's international isolation and
improve its chances of securing financial and military
aid. As part of a campaign to improve Guatemala's
image abroad, the government resumed talks in May
with Belizean and UK officials in an effort to resolve
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Although domestic political constraints in both
Guatemala. and Belize have prevented a final accord,
Mejia's current efforts, in our opinion, ultimately will
result in increased negotiating flexibility for a new
civilian administration.
Meanwhile, the election has aggravated the
insurgents' internal divisions.
military.
Election Impact
The honesty and efficiency of the election, in our
view, has enhanced the standing of the Mejia
government at home and abroad, and has given it
increased flexibility in dealing with other domestic
and foreign policy issues. For example, Mejia recently
took steps to demonstrate that Guatemala is making
progress on human rights. In mid-July, the
government granted full pardon from criminal
charges to all prisoners convicted under the now-
defunct special tribunals established by former
President Rios Montt. Although rightist criticism
apparently required that the move he implemented
with little fanfare, Foreign Minister Andrade told the
US Embassy that it was intended as a signal of the
changed environment in Guatemala. Mejia also has
discharged some 100 police officers. A police
spokesman told reporters that the dismissals were
initiated because the officers either had criminal
records or had been accused of abusing their
authority
accepted clandestine support from the insurgents in
the past, and they might he willing to do so again to
strengthen their chances in the presidential race.
Nevertheless, Mejia's moderate policies have led
many church, university, and political leaders-who
in the past have been quick to criticize the
government on a variety of issues-to work with him
to facilitate the transition process. As a result, we
believe the recent vote has further eroded what
remains of popular support for the guerrillas.
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JGLI CI
Uhimas Aoricias
Colorado candidate
Sanguinetti.~
La dfaana ?
Broad Front candidate
Crottogini.
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Uruguay: Elections Finally Set
The recent selection of candidates for the presidential
election in November sets the stage for a return to
civilian rule next March after more than a decade of
military government. The center-left Blanco Party's
refusal to abide by an agreement between the armed
forces and the other parties, however, casts a shadow
over the transition process. If the Blancos win and
follow through on promises to hold new elections
within a year, the military will monitor events closely
and may be tempted to step in again.
Last month, the armed forces and several political
parties reached agreement on procedures for the
restoration of civilian government. The accord
provides for presidential, congressional, and municipal
elections on 25 November, as well as the convocation
of a constituent assembly next July. According to US
Embassy reporting, the military--thoroughly
discredited and eager to return to the barracks-
compromised on a variety of issues. The high
command rescinded most of the exceptional decrees
that had formed the basis of military rule, promised to
release a number of political prisoners, and agreed
that future presidents would choose officers for
promotion to the rank of general from a short list
provided by the armed forces.
The Candidates
A key figure in the negotiations, Julio Sanguinetti, a
48-year-old moderate, is the principal candidate of
the centrist Colorado Party.' We believe Sanguinetti's
strategy is to target moderate voters while working to
weaken the Blanco Party's support on the left.
Uruguay's complicated electoral process allows each party to
nominate more than one candidate, with the frontrunner garnering
the votes received by all of his party's nominees. Because each
faction seeks as much attention as possible, the Colorado and
Blanco parties have a total of five candidates for the presidency.
The Blancos bolted the civil-military negotiations
after party leader Wilson Ferreira was arrested upon
his return from exile in June. They have since agreed
to participate in the election even though the military
still refuses to release Ferreira or to lift political
restrictions that preclude his competing for the
presidency. Most party members would rather forgo
principle and pride than risk total isolation as the
political transition proceeds without them. Stand-in
candidate Alberto Zumaran pledges that, if he wins,
he will call new elections within a year and allow
Ferreira to run. The Blancos are denouncing the
political accord as a sellout to the military and are
painting themselves as the sole prodemocratic,
antimilitary party.
The Broad Front, a leftist coalition that includes the
Uruguayan Communist Party, has anointed as its
standardbearer Juan Jose Crottogini, a 76-year-old
physician. The left typically is strong in Montevideo
and other urban areas, and the Broad Front probably
will draw many votes that otherwise would go to the
Blancos.
The Military's Role
Although most members of the armed forces favor a
return to the barracks, fear of civilian retribution is
causing some uneasiness.
many officers
believe a Blanco administration would prosecute them
for human rights abuses committed during the
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ALA LAR 84-017
21 September 1984
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Army
Commander Medina is attempting to reassure the
officer corps that the civilians will not be permitted to
take revenge.
If Zumaran and the Blancos win, the military, in our
opinion, probably would swallow hard and surrender
power on schedule. The armed forces, however,
certainly would watch for any sharp turn to the left.
They probably would continue maneuvering to deny
Ferreira the presidency, while awaiting Blanco
missteps or a general political deterioration that
might permit them to justify seizing control again.
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We believe the military high command views the
Blancos as the greatest threat and thus is in no hurry
to complete Ferreira's trial for alleged violations of
national security laws. Fearing the popular Blanco
chief would win an open election, the military also is
unlikely to restore his political rights as long as it
remains in control. Both Medina and the Interior
Minister have warned publicly that a Blanco
administration would have to abide by the spirit of the
civil-military accord or risk an abortion of the
transition process. The armed forces, meanwhile, have
endeavored to boost the Colorados by strengthening
the Broad Front at the expense of the Blancos.
Outlook
The US Embassy reports that the Colorados are
confident of victory in November. They believe the
Blancos' attacks on the civil-military accord and their
calls for new elections have not caught the
imagination of the public, which is reluctant to endure
another year of political uncertainty or risk a
derailing of the transition. Moreover, the Colorados
believe they will benefit from the divisions on the left.
We agree that the Colorado Party seems to have the
edge at the moment, but the electorate may come to
view a vote for the Blancos as an opportunity to
repudiate military rule and, by setting up another
election that includes Ferreira, to mark a return to
full democracy. Although many moderate Blancos
objected to Ferreira's dramatic return to Uruguay as
"grandstanding," we believe the Blanco chief-who
received more votes than any other candidate in the
presidential elections of 1971 remains the most
popular figure in the country.
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Dominican Republic. Fragile Rela
Between Labor and Government
jeopardize political stability.
Labor unions have played a leading role in organizing
antiaustcrity protests, but President Jorge Blanco's
effective politicking and moderate use of force have
thus far prevented worker unrest from becoming a
serious challenge to the government. Disunity in the
onions also has undermined the effectiveness of
labor's tough opposition to IMF-mandated belt--
tightening measures. Nevertheless, the long period
required to case the country's deep-seated economic
difficulties suggests that labor Militancy will grow.
Should the government fail to maintain control over
labor, it could further delay economic recovery and
Background
Politicians in the Dominican Republic have long viewed
orga.nizcd labor as a potential threat. to their power and
have kept the unions tightly controlled. Rafael Trujillo,
who ruled from 1930 to 196 I , ruthlessly crushed all
union activity. Trujillo's successor, Joaquin Balagrrer,
paid lipservice to the cause of independent labor but
continued to use repressive tactics. leaders of the ruling
Dominican Revolutionary Party (PR D), which Came to
power in 1978, have used less draconian measures but
nevertheless have kept tight control over union activities.
lnlikc ]'rujillo and lbmlagucr, however, leaders of the
urban-based PP I) have l rigid to develop better ties
with labor. Since the late 19/Os, the government has:
code drafted more than ~!0 ycars ago.
In addition, legislation favorable to workers has received
greater attention in the national legislature. Despite
these actions, however, union activity is still constrained
by a variety of' legal restrictions, including a strict labor
More then doubled the member of unions it
recognizes, to nearly 1,000,
frequently mediated disputes between unions and
employers, working through the Labor Secretariat.
Raised minimum wages with greater regularity than
previous administrations, which had. held down
wages to help foster economic growth.
By Latin American standards, the percentage of
union members is small. The US Embassy estimates
that only 200,000 workers, some 12 percent of the
country's total labor force, belong to unions. In
Mexico, in contrast, nearly 25 percent of workers
belong to unions. The most highly organized
elements, however, are in the sectors of greatest
economic importance----transportation, sugar,
communications, and mining. Some small,
independent businessmen--such as taxi drivers also
are well organized. Most unions are concentrated in
Santo Domingo, Santiago, and San Francisco de
Marcoris.
counterparts.
Unions traditionally have had limited leverage to use
in conflicts with management. Labor laws clearly
favor business interests, and the right to strike is
severely restricted. Workers also are constrained by
the ease with which strikers can be replaced--the
rate of unemployment and underemployment exceeds
50 percent, according to US officials. Moreover, the
weak financial base of most unions gives national
leaders little direct control over their local
The potential for rapid growth of Dominican unions
is limited by societal and political factors. Aside
from the sugar workers, who are highly unionized,
most of the rural population in this heavily
agricultural country is bound by traditional values
and shows little interest in unions. Restrictive
legislation. such as the law requiring unions to have
at least 20 members, in a country where most
businesses have less than 10 employees also will
continue to hinder organization
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ALA LAR 84-017
21 September 1984
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Leadership
Estimated
Membership
General Union of
Juan Pablo Reyes
34,400 members,
Dominican Workers
155 unions
(UGTD)
Autonomous Con-
Gabriel del Rio
20,800 members,
federation of the
266 unions
Working Class
(CASC)
National Confedera-
Carlos Enrique
32,400 members,
tion of Dominican
Arias Florian
277 unions
Workers (CNTD)
General Central of
Julio de Pena
39,450 members,
Workers (CGT)
Valdez
165 unions
Political International Comments
Affiliation Affiliation
Dominican Revo- International Divided leadership; losing
lutionary Party Conference of ground to better organized
(PRD) Free Trade and disciplined confedera-
Unions (ICFTU) tion
Independent Conference of Most sophisticated non-
Social Christian Latin American Communist confederation;
ties Trade Unions weakened by personal and
(CLAT) ideological rivalries.
Independent but AIFLD Contains bulk of transporta-
probably leans ICTFTU tion workers; active in re-
toward Reformist cent work stoppages.
Party
Communist, with Permanent Com- Strong in manufacturing
links to a half mittee for Labor and communications sector;
dozen leftist par- Unity in Latin largest affiliate is militant
ties, including America Dominican Teachers Asso-
Juan Bosch's Do- (CPUSTAL) ciation; leadership is sharply
minican Libera- divided.
tion Party
Workers (CUT) Duran 68 unions minican Commu-
nist Party (PCD)
Labor Disunity
Opposition to austerity has encouraged tactical
cooperation among unions and has heightened labor's
sense of purpose, but the overall movement remains
highly factionalized. The US Embassy in Santo
Domingo estimates that 30 percent of unionized labor
is Communist influenced or controlled. The labor
affiliate of the ruling party controls another 30
percent, and a group with Social Christian links
dominates some 15 percent. The remainder are
nominally independent. Preliminary plans by the
conservative Reformist Party to form its own labor
affiliate will compound the factionalism and further
weaken labor's ability to exert steady pressure on the
government.
Disunity within individual unions has magnified the
obstacles to greater cooperation by undermining the
control union leaders have over the rank and file.
According to US Embassy reports, the large
Communist-dominated labor federation was wracked
last year by a struggle for leadership between
supporters of Communist leader Isa Conde and the
head of the leftist Dominican Liberation Party, Juan
Bosch. Similarly, factionalism in the ruling party has
carried over into its labor affiliate. President Jorge
Blanco presently cannot count on the backing of the
party's union affiliate because backers of his major
opponent in the party-Senate President Jacobo
Majluta-dominate the union's leadership.
Labor's Reaction to Austerity
Despite its lack of cohesion, the labor movement is
still able to exert political and economic influence on
certain occasions. The US Embassy observes that
labor unions have emerged as Jorge Blanco's chief
antagonist in his efforts to implement austerity
measures. Selective work stoppages following food
price increases last April were particularly disruptive.
They contributed to the President's decision to
abandon talks with the IMF for a formal standby
agreement in favor of a less demanding "shadow"
accord.
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Labor leaders have also taken the lead in forcing the
government to delay electricity price increases and
have lobbied hard for wage hikes, improved social
security benefits, and other measures designed to
reduce the impact of austerity on the poor. Labor's
role as a spokesman for those hit hardest by falling
standards of living has been enhanced by the strategy
most major opposition parties are following. Although
they are opposed to key aspects of the austerity
program, they have done little to stand in the way of
its implementation because they look forward to
benefiting from popular discontent when voters go to
the polls in upcoming national elections.
In part a reflection of the leftist belief that the
country is on the verge of a revolutionary upswing, the
leftist-dominated unions have been far more
aggressive than other unions in opposing the
government's belt-tightening treasures.
thcy worked closely with radical
leftist organizations last spring to establish popular-
based front groups "popular struggle
committees" to mobilize anti-administration
sentiment.
According to US Embassy officials, these committee
members played a key role in fomenting the civil
disturbances in late April.
For his part, Jorge Blanco has followed a carrot-and-
stick approach in dealing with labor. To derail union-
sponsored, antiausterity demonstrations, he has
arrested key labor leaders and has ordered security
forces to occupy union headquarters. Earlier this
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price hikes, the President deployed troops in major
cities. Deft political moves-such as allowing the
chauffers' union (taxi and truck drivers) a rate
increase equal to the hike in gasoline prices-have
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aggressive tactics, the President also has made some
conciliatory gestures. For example, he raised
minimum wages, although not as much as labor had
demanded, and announced new welfare measures.
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Outlook
Despite Jorge Blanco's success in keeping the lid on
labor dissidence, we believe his task will become
increasingly difficult. With the rate of inflation
expected to exceed 30 percent by the end of 1984-
the highest in the Dominican Republic in four
decades-and poor economic prospects next year,
workers face more austere living conditions. Morever,
although Jorge Blanco has implemented some belt-
tightening measures, much more needs to be done if
Santo Domingo is to reach agreement with the IMF
anytime soon. We judge that the President's
demonstrated willingness to use force, together with
continued support from the military and a large share
of the private sector, are likely to give Jorge Blanco
enough leverage to further tighten austerity. We do
not rule out an increase in labor agitation, however,
especially as campaigning gets under way for national
elections scheduled for early 1986.
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Panama: Drug Money
Crossroads
Despite disclaimers by its government, Panama has
become perhaps the leading narco-dollar center in the
Caribbean. Panama's rise to prominence as a drug
money center is in large part a result of its
attractiveness to the region's dominant Colombian
trafficking organizations. Along with a long and close
financial relationship, Panama offers the Colombians
a Spanish-speaking banking system with stringent
secrecy laws, liberal incorporation laws that facilitate
shell accounts, corruptible officials, and legal tender
status for the US dollar. US pressure for relaxation of
Panama's bank secrecy laws may be forcing the
Colombians to search for alternatives to Panama, but,
as long as a modicum of bank secrecy is preserved
there, a dramatic shift in drug money movement is
unlikely. Rather, we expect the Colombians would
first attempt to alter their methods of operation in
Panama or gradually fragment the drug money chain,
with Panama becoming one of several equally
important centers.
Panama's Role as a Money Laundering Center
Over the last several years, considerable evidence has
accumulated that Panama is a leading, if not the
leading, drug money center in the Caribbean Basin.
One indicator of its importance to the all-cash drug
industry is the enormous amount of surplus dollars
returned by the Banco Nacional de Panama to the
United States. In 1982 and 1983 the returned surplus
was on the order of $1 billion-compared to several
hundred million or less from any other offshore
banking center. Although this cash cannot be directly
traced to drug trafficking, the denominations involved
suggest strongly that much of it is "street money"
derived from drug sales in the United States.
Moreover, along
with evidence compiled domestically in connection
with the indictments of several major money
launderers, overwhelmingly support the conclusion
that Panama is a narco-dollar crossroads.
Ties With Colombian Traffickers
Panama's prominence as a drug money center stems
in large part from its role as a magnet for Colombian
coca and marijuana money. From one-third to one-
half of the estimated $5-15 billion in drug money that
leaves the United States each year represents
revenues of Colombian marijuana and cocaine
traffickers, most of whom bank part of their proceeds
The first credible evidence that Panama was serving
as a center for Colombian narco-dollars was provided
in 1980 to the US Consulate in Cali, a major cocaine
trafficking center. A Cali exchange house operator
familiar with black-market money movements
reported that "a great deal of [drug money] passes 25X1
straight through the country to Ecuador or never
The attraction of Panama for Colombian drug
traffickers is a reflection of a close financial
relationship that extends back several decades. Even
before Panamanian banking law was liberalized in
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1970 to attract foreign banks, three Colombian banks
had branches in Panama, a representation exceeded 25X1
only by the United States' four branch banks. There
are now nine Colombian banks with general licenses
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ALA LAR 84-017
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Secret
General License Banks in Panama
As of 31 December 1982
Banks
Number
External
Loans
Local
Loans
External
Deposits
Local
Deposits
Panamanian
10
15.2
1,213.4
170.7
1,147.3
Us
9
7,341.8
936.1
10,074.4
751.0
Colombian
9
1,689.4
255.0
1,560.3
475.0
Other Latin American
13
2,128.0
178.6
2,481.5
321.8
European and Canadian
16
3,355.9
645.8
6,730.1
770.0
Asian and Middle Eastern
9
3.541.3
133.8
4,429.9
131.6
in Panama, more than any other nationality except ? The free port of Colon, long a transit point for
the United States and Panama tsee table); and contraband, offers a convenient acquisition site for
Colombians reportedly hold substantial equity in non- precursor chemicals used in the processing of
Colombian banks. The role of Colombian traffickers cocaine.
in this expansion has never been fully documented,
but according to DEA at least one trafficker, Gilberto
Rodriguez Orjuela, is a major investor in, and officer
of, it Panamanian bank that opened in 1975. Since
most Colombian branch banks in Panama were
established in the I 960s and I 970s, the period during
which the lucrative Colombian drug trade to the
United States was launched, involvement of other
traffickers seems likely.
? The legal tender status in Panama of the US dollar,
In addition to its advantages as a Colombian offshore the medium of exchange for most Colombian drug
banking center, Panama offers a number of other deals, permits more inconspicuous handling of cash
features of particular interest to Colombian receipts than in centers where the dollar is foreign
traffickers: exchange.
? It is the only large Spanish-speaking offshore Money Flows
banking center in the Caribbean Basin area. This is The movement of drug money to Panama is
a major attraction for Colombian traffickers, many facilitated by a cadre of gray money managers in the
of whom are inexperienced in the international United States whose records have provided some of
milieu and all of whom demonstrably prefer the the most damning evidence of Panamanian
anonymity offered by a Hispanic environment.
? Panama provides perhaps the most stringent bank
secrecy in the Caribbean along with liberal
incorporation laws that facilitate establishment of
shell accounts to further disguise the true ownership
of dirty money.
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Most of the large amounts of money flowing into
Panama apparently is profits from the Colombian
organization's illicit narcotics activity. Operating
costs in Panama are minimal, with only a small
proportion of the incoming money going to pay
expenses. Judging from information obtained from
Operation Greenback and from DEA field offices,
funds used to reimburse growers, processors, and
distributors in the drug chain are delivered in the
form of cash or cashiers checks directly to Colombia.
There is little information on the disposition of those
would be most willing to tolerate lesser
accommodations in such Hispanic locales as:
Spain, to which traffickers travel frequently to avoid
arrest, to seek socially acceptable brides, and to
monitor their interests in the growing European
market for cocaine.
involved locally in drug money movements.
Venezuela and Ecuador, to which growing and
processing operations may be moved if the situation
in Colombia becomes untenable and which have
well-developed financial sectors that already are
Since no location offers all the advantages of Panama
in the eyes of the Colombians, a dramatic shift in
drug money movements is unlikely so long as some
bank secrecy protection is maintained in Panama.
More probable developments would be:
drug profits after deposit in Panama.
Outlook
Panama's status in the drug money hierarchy may be
on the wane.
in
response to US pressure for relaxation o Panamanian
bank secrecy laws, some traffickers also may be
looking for other suitable financial centers. The list of
those countries offering facilities comparable to
Panama has been reduced by cooperation agreements
signed with Switzerland and with the United
Kingdom, on behalf of the Cayman Islands. The
chances are good, however, that the Colombians
Adaptation of the modus operandi to provide
preliminary laundering of money en route to
Panama. Initial deposits of cash in other locations is
a move in this direction.
Preservation of de facto secrecy in Panama in the
form of greater corruption, an option that might be
viewed as more cost effective than investment in the
development of such untested centers as Venezuela
and Ecuador.
Greater fragmentation of the drug money chain. In
such a scenario Panama would become one of
several equally important centers,
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Secret
Grenada: Prospects for the
Moderate Alliance
Grenada's moderate alliance-the New National
Party- stands a good chance of winning a strong
majority of the 15 scats at stake in elections scheduled
for 3 December. Led by Herbert Blaize of the
Grenada National Party, the alliance also includes
George Brizan's National Democratic Party and
Francis Alexis's Grenada Democratic Movement. The
Prime Ministers of Barbados, St. Lucia, and St.
Vincent were instrumental in fashioning the
agreement. They were motivated by concern that a
return to power of the autocratic and corrupt Eric
Gairy would undermine the effectiveness of regional
security forces and provide leftists with a unifying
issue. Although the new party is a positive
development, the moderates still have to overcome
their primary area of dissension the allocation of
seats on a single slate.
Late last month, the leaders of Grenada's four major
moderate political parties agreed to unite to present a
broad-based alternative to former Prime Minister
Gairy's United Labor Party, which has benefited
from the moderate's squabbling. Shortly after,
representatives of the three larger parties voted to
oust Winston Whyte and his Christian Democratic
Labor Party from the alliance. This action stemmed
from Whyte's refusal to disassociate himself from an
article in his party's newspaper alleging secret
negotiations between Blaize and Gairy. The US
Embassy in Grenada and the other moderate leaders
believe that Whyte's ouster could actually help the
unity party. Whyte has only a limited base of public
support. Moreover, his antagonistic manner and the
controversy surrounding him because of his past
political associations with Gairy and the leftist New
Jewel Movement probably would have made Whyte a
liability to the campaign.
The US Embassies in Grenada and Barbados report
that domestic and regional reactions to the alliance
have been cautiously optimistic. A steering committee
of representatives from each of the three participating
parties already has begun work on the new
organization's structure and platform. A party
constitution has been approved, and a manifesto of
principles is being developed. According to the US
Embassy in Grenada, the National Party has put
together a $634,000 campaign budget. The members
expect to receive less than 10 percent of their funds
from local sources and will look to foreign donors for
Grenadians living abroad and private US
organizations.
The new party-if it holds together and is able to
mount a successful campaign-stands a good chance
of winning a strong majority of the 15 seats at stake in
the elections. The remainder probably would be won
by Gairy's party and a few independent candidates.
Gairy retains sizable support, however, among loyal
elderly and rural voters, according to the US
Embassy. Over the last few months, his party has
gained strength by resorting to its past tactics of
deception and vote buying. Moreover, underlying
fears among the populace of a leftist resurgence have
increased support for Gairy, whom many Grenadians
see as the only leader strong enough to put down any
Communist threat.
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secret
Leftist elements in Grenada, however, are
disorganized and, in our judgment, pose no political
threat to the moderate candidate. The Maurice
Bishop Patriotic Movement launched by Kendrick
Radix and George Louison-two former ministers in
Bishop's government-has no significant popular
support, according to the US Embassy
We believe the group is
unlikely to win any seats should it decide to contest
the elections.
The strength and durability of the unity party will be
tested in the next few weeks as the moderates try to
reach agreement on a slate of candidates. While the
key members finally appear serious about the alliance,
past disagreements are likely to surface and the
negotiations may be slow and painful. Without unity
and a strong electoral mandate, the new government
would find it difficult to deal with the island's political
and economic reconstruction. Leftists would likely
portray such problems as the legacy of the US
intervention.
I,
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3MUCL
Latin America
Briefs
Dominican Republic Petroleum Price Increase
The Jorge Blanco government's recent petroleum price hike of 20 percent could
increase revenue by as much as $40 million annually, but further austerity
measures will be needed to qualify for IMF funding. The reduction of petroleum
subsidies was a major IMF requirement for an unofficial, interim adjustment
program. This temporary program will remain in effect until a formal standby can
be put into place, perhaps as early as the first quarter of 1985. The Fund,
nevertheless, requires additional belt-tightening, including further cuts in public
spending and a restructuring of inefficient government-owned enterprises.
Meanwhile, the government is counting on the interim accord, which provides no
new IMF credit, to attract sizable new aid and investment-an unrealistic hope, in
our view.
Initial public reaction to the petroleum price hike has been muted, largely because
of the widespread deployment of troops. To deter violence, the President had put
the Army on a higher level of alert than during the food price riots in April. Unrest
could develop, however, as the troops return to their barracks and the new
measures begin to cut into living standards. Some Dominican economists and local
businessmen fear the petroleum price hike will push inflation well above its present
30-percent level.
Trade and payments improvements over the first seven months of this year have
led to renewed confidence by foreign lenders and the IMF in Brazil's ability to
deal with its debt problems. At the same time, however, Brasilia is facing domestic
criticism that austerity measures and triple-digit inflation are suppressing
economic activity and hurting living standards. We believe the government-with
a presidential election scheduled next January-may permit a moderate loosening
of credit or wage controls, but will seek to comply as much as possible with its
adjustment program in hopes of getting favorable terms during debt talks this fall.
19 Secret
ALA LAR 84-017
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.Jc~i V t
Higher interest payments, continued tight access to new credit, and-in most
cases-sagging exports will mean most South American debtor nations will
encounter deteriorating financial conditions through the rest of this year.
Although the largest debtors-Brazil, Argentina, and Venezuela-will have
improved trade surpluses, financial strains among the Andean debtors and even
Argentina will continue to grow. Political pressures for growth-especially in
Argentina, Chile, Peru, and Bolivia-may encourage some deliberate debt-
servicing interruptions. We believe that at least some financial rescue programs
will have to be revised; we also acknowledge a chance that the programs could
begin to unravel.
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Secret
Cuba Chronology
Granma publishes a joint Cuban-Ghanaian communique at the end of an official
visit to Cuba by Ghanaian leader Jerry Rawlings, stressing bilateral relations and
cooperation.
Deputy Foreign Minister Pelegrin Torras and Zhu Qizhen, assistant to China's
Foreign Minister, meet in Havana to discuss bilateral relations and international
topics.
The Foreign Ministry confirms that Deputy Foreign Minister Ricardo Alarcon is
in New York City to discuss immigration problems with US officials.
Spain's Secretary of State for Commerce Luis Velasco Rami and Foreign Trade
Minister Ricardo Cabrizas sign a protocol to develop lines of credit and increase
mutual trade.
Johannesburg Domestic Service quotes a statement issued in Pretoria by the
Department of Foreign Affairs that there are up to 31,000 Cubans-6,000
civilians and 25,000 soldiers-in Angola.
Havana press reports that seven 630-bed hospitals and two 320-bed hospitals are
now under construction, and that another 37 hospitals throughout Cuba are being
enlarged.
The Angolan press agency discloses that Luanda has agreed on the gradual
withdrawal of Cuban troops from Angola; Luanda made a similar proclamation
last March after President dos Santos's visit to Havana.
In an interview with El National in Caracas, PRC Foreign Minister Wu Xuegian
says, "Of late, the Cuban Government has shown interest in improving relations
with China, and Beijing also wants this."
Prensa Latina reports that Cuba is using 18,000 workers and 3,000 pieces of
equipment to fortify defenses against possible US attacks, adding that 15 percent
of Cuba's reinforced concrete is being used to build bunkers.
Minister of Higher Education Fernando Vecino Alegret says in Mexico that, after
25 years of living under the US threat, Cuba is ready to repel an attack by the
United States in defense of the revolution.
Cuba and Argentina sign a scientific and technical cooperation agreement, the
first of its kind to be signed by the two nations, as a result of Hector Rodriguez
Llompart's visit to Argentina.
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secret
Ecuadorean Ambassador to Cuba Eduardo Santos Alvite says on Cuban radio that
relations between Cuba and Ecuador are being normalized and have made possible
the signing of a trade agreement.
Minister of Culture Armando Hart and Diogenes Cedeno Cenci, director of the
Panamanian National Culture Institute, sign a document reaffirming ties of
friendship.
13 August The Council of State appoints Oscar Oramas as Cuba's new Ambassador and
Permanent Representative to the United Nations.
Havana television reports that the US Senate has approved the appointment of
Jorge Mas Conosa, believed to be one of the leaders of Alpha-66, as president of
the anti-Cuban Radio Marti.
Tribuna de la Habana says, "It is necessary to prepare our population to face any
attack," and adds that trenches and shelters are being built throughout Cuba as
part of a defense and resistance plan.
President of the Council of Ministers Humberto Perez and his Hungarian
counterpart Lajos Faluvegi sign an economic and scientific-technical cooperation
plan through the year 2000.
Prensa Latina says Cuba mobilized thousands of its citizens in a civil defense drill
over the weekend in anticipation of a possible US invasion led by a "massive air
attack."
24 August The Soviet ship Taras Shevchenko arrives in Cuba with some 800 Cuban students
who graduated from various universities in the Soviet Union.
Cuban Ambassador to the United Nations Raul Roa Kouri reiterates his country's
solidarity for Puerto Rico's independence and denounces US militarization of that
island during a speech before the United Nations.
Foreign Trade Minister Cabrizas and his Angolan counterpart Ismael Gaspar
Martins sign trade agreements during talks in Cuba; Havana will participate at
the Luanda trade fair this November.
Minister President of the Central Planning Board Humberto Perez arrives in
Warsaw from Bulgaria to study the coordination of economic plans between Cuba
and Poland for the next five years.
30 August President Reagan, considering an increase in travel restrictions, orders an
investigation into trips by journalists and professionals to Cuba.
Soviet Central Committee Politburo member Shcherbitskiy receives Juan
Morente, recently appointed Consul General of Cuba, in Kiev to discuss
strengthening relations.
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3ecrer
First Secretary of the Polish United Workers' Party Wojciech Jaruzelski receives
Humberto Perez, Vice President of the Council of Ministers, to coordinate Cuban-
Polish economic plans for 1986-90.
Humberto Perez and Manfred Gorywoda, chairman of Poland's Planning
Commission, sign a memorandum on coordinating the 1986-90 economic plan.
A seminar on the US elections and Washington's policy toward Latin America
opens at the Havana Convention Palace with Latin American and US researchers
participating.
At the inauguration ceremony of the Cuban magazine Cuadernos de Nuestra
America, Manuel Pineiro says Cuba is stronger, more organized, and more
capable of defending itself than ever before.
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