LATIN AMERICA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01184R000301680002-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 28
• Document Creation Date: December 22, 2016
• Document Release Date: October 1, 2010
• Sequence Number: 2
• Publication Date: June 21, 1985
• Content Type: REPORT

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Latin America
Review
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Secret
Latin America
Review 25X1
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The once solid military support for President Pinochet may be
eroding. Disaffection appears to have become more persistent over
the past year and reportedly has led to secret meetings with civilian
political opponents of the regime to discuss the merits of removing
Pinochet from office.
In the past few years, Cuba has undertaken a major effort to
improve its tourist industry after largely neglecting it since the
1960s.
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President Castro's intensified campaign for Third World debt relief
is an effort to strike out against the United States, win friends for
Cuba, and divert domestic attention from the island's economic
problems.
Brazil: Relations With the Middle East-the Primacy of Trade
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Brazil's policy toward the Middle East is driven mainly by the quest
to expand markets for exports, especially military equipment. 25X1
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President Barletta's effort to revise the country's worker laws, which
are among the most pro-labor in the world, has been resisted by the
unions, but recent support for reform from the military and the
government party suggests that moderate changes are likely.
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Mexico: President de la Madrid's European Tour 0 17
Brazil: Agrarian Reform 17
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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Secret
Chile:
Signs of Military
Dissidence
The once solid support of the armed forces for
President Pinochet may be eroding somewhat.
Although we lack extensive information on the
military, on several occasions since
1982 have privately expressed reservations over
Pinochet's policies and actions. These usually were
short-lived, but over the past year military
disaffection has appeared to be more persistent F_
Military-Opposition Contacts
In contrast to the pattern in other South American
countries ruled by the military in recent decades,
Chilean military officers assiduously avoided direct
dealings with politicians-especially those from the
opposition-throughout most of the period since the
1973 coup. Nevertheless, over the past two years,
-]meetings between a few disgruntled officers and
there has been
command initially endorsed the state of siege imposed
last November-viewing it as necessary to curb leftist
terrorism
= senior officers of most of the services
recommended against extending the measure in
February and again in early May.
some officers question the
to democracy.
Despite these rumblings, we believe the highly
disciplined armed forces remain basically loyal to
Pinochet, and, whether they personally support him or
not, most officers evidently fear that there is no
acceptable alternative to Pinochet, at least in the near
term. They also are kept in line by Pinochet's skillful
use of rewards and punishments and by an apparent
conviction that they have a "mission" to remake
Chile. Nevertheless, dissatisfaction within the
military probably will grow in the coming months if
the President remains obdurate about not relaxing
political restrictions, leftist terrorism continues
unabated, relations with Washington worsen, and
Chile plunges deeper into a severe economic recession.
opposition groups involved initially were unidentified
factions of the Christian Democratic, Socialist, and
Radical parties. Later, the conservative National
Party reportedly played a leading role in the
discussions.
a Venezuelan press story-
claims that the National Party is in touch with Navy
and Air Force officers who are seeking a "negotiated"
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alternative to Pinochet in order to avoid civil war. 25X1
These officers are said to have arranged meetings
between opposition representatives and a select few
Army colonels and at least two generals. While Air
Force and Navy officers reportedly have given vague
promises of assistance for an effort to oust Pinochet,
they have made clear they will do nothing until Army
combat commanders take action.
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The Christian Democrats believe
against Pinochet any time soon,
reportedly stalled because the military participants
insisted on receiving a commitment from the political
party representatives that once Pinochet is ousted the
military will be treated with "decorum" for having
carried out his orders.
Other Stirrings in the Armed Forces
Over the past year, senior military officers
occasionally have manifested deep reservations about
some of Pinochet's actions,
For example, despite wholehearted
military support for the President's decision to impose
the state of siege on 6 November, the high command
was taken aback by the resignation a day earlier of
Interior Minister Jarpa, who opposed Pinochet's
harder line.
t ree of the four mem ers
of the junta concluded that greater caution was
needed and that Jarpa should not be replaced by a
hardline civilian or military officer. Jarpa was in fact
reappointed, reportedly at least in part due to pressure
from the junta
Support for the state of siege dwindled quickly and its
extension became a source of military grumbling
against Pinochet.
==by early January the intelligence directorates
of the four services advised their commanding officers
to recommend to the President that the state of siege
be lifted because of its excessive budgetary costs and
the wear and tear on enforcement personnel.
senior
officers of the Carabineros-the militarized national
police force chiefly responsible for population
control-prevailed upon them commanding
general to oppose extending the state of siege because
it was causing morale problems and damaging the
Carabineros' public standing.
other junta members sought to convince Pinochet that
the state of siege not only was no longer necessary,
but also that it was exacerbating domestic political
tensions and harming Chile's international image.
The junta bowed to Pinochet's insistence on renewing
the state of siege on two different occasions, but by
early May regime spokesmen were claiming publicly
that terrorist activity had been effectively curbed. The
armed forces' reaction to these moves-and to the
firing of Jarpa by Pinochet in February-was muted,
but, in our view, their concern probably is growing
because the President's harsh policies are fueling
polarization and leftist terrorism continues. We
believe that Pinochet's decision finally to suspend the
state of siege on 17 June was motivated in part by the
realization he could no longer remain unresponsive to
the recommendations of senior military officers.
Pinochet's Carrot-and-Stick Approach
Pinochet, in our view, probably will continue to use
several customary devices to exert influence over the
officer corps. These include: direct control over
assignments and promotions, placement of senior
officers in key government positions, strict limitations
on involvement of military personnel in political
activities, and vigorous reprisals for challenges to his
authority. The US Embassy reports that of the 52
active-duty Army generals, 29 are considered
hardline, unswerving supporters of the President.
More important, virtually all troop commands or
other key positions in either the Army or the
government are filled by officers regarded as
hardliners. Moreover,
Pinochet has kept on active duty a select
group of loyal officers who are well beyond statutory
retirement age.
The US Embassy notes that few senior Army officers
are willing to criticize Pinochet's policies-even in
private discussions with other officers. Those who do
are identified readily, and Pinochet is kept informed
of their statements and activities by a long-established
informant system that reports through the chain of
command directly to him,
The US Embassy reports that the
Navy and Air Force are less rigid in this regard and
that both of these services, along with the
Carabineros, have more dealings with the civilian
sector.
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~~..
Pinochet remains especially sensitive to indications
that officers may be discussing the pace of a transition
Communist Party, appears to be gaining strength-
despite the state of siege-and moving deliberately
toward a state of armed insurgency. The Communists
to democracy,
One of the participants in these discussions, Brig.
Gen. Luis Danus Covian-who is known to favor an
early return to civilian government-was transferred
last December to southernmost Chile,
to isolate him in a non- rmy
command position. The regional Army division
commander reportedly was ordered to keep watch
over Danus.
For the past
five or six years, Pinochet has been paying a monthly
stipend of about $400 directly to each of the general
or flag officers of the armed forces, and possibly the
Carabineros, drawn from a secret presidential slush
fund. This system reportedly was begun soon after
Pinochet fired the commander of the Air Force in
1977-a move that led to the resignation of almost
the entire Air Force general officer corps.
The US
Embassy notes that apart from this system, the level
of corruption in the Chilean armed forces is
remarkably low by Latin American standardsF_
Outlook
There is, in our view, little prospect for an early
challenge to Pinochet from within the armed forces or
for an appreciable number of senior officers to
collaborate with opposition politicians in a move to
oust him. The conflictive political situation and
worsening economy, nevertheless, suggest a possible
trend in that direction and thus pose potentially
serious risks for regime stability over the next few
years. Polarization is deepening as even formerly
proregime conservative groups are moving into
opposition, and moderate political parties continue to
clamor for an accelerated transition and Pinochet's
departure. Meanwhile, the far left, especially the
insistently propagate the notion that their violent 25X1
strategy is the only viable one to bring down Pinochet,
and at least some Christian Democratic Party leaders
reportedly are prepared to cooperate with the
Communists.
On the international front, Pinochet faces increasing
pressure to lift his harsh political restrictions and
speed up the transition process. He recently
complained to US officials about Washington's call
for lifting the state of siege as a condition for US
support for Chile's renegotiated debt package. F_
economic crises drag on, the armed forces will 25X1
increasingly question Pinochet's leadership, and the
latter's carrot-and-stick approach may begin to lose
effect. If terrorist activity also continues unabated
and large-scale, broad-based antiregime protests
resume during the next few months, an inflexible
Pinochet may begin to see his authority challenged by
some officers. The military almost certainly would
continue to rally around the President on the need to
contain forcefully the leftist threat, but the
Carabineros, the Air Force, and the Navy probably
would resist reimposing the state of siege as the
primary instrument for this purpose. If the Army is
required to use troops to control serious social unrest,
such as spontaneous riots in slum areas, mass
demonstrations in Santiago, or wildcat labor strikes,
Pinochet's problems would be compounded. We
believe that the continuation of such an atmosphere
over several weeks and Pinochet's insistence on
continued repression would cause at least some groups
in the armed forces to begin advocating his removal
from oificel
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Cuban Tourism:
Prospects for Development
In the past few years, Cuba has undertaken a major
effort to improve its tourist industry after largely
neglecting it since the 1960s. Over 200,000 tourists-
many on package tours from Spain, Mexico, and
Canada-visited Cuba last year. Efforts to develop
tourism have thus far been concentrated in Havana,
the Varadero Beach area 75 miles east of the capital,
and on Cayo Largo, a small island 25 miles off Cuba's
southwestern coast. In addition to the construction of
hotels, shopping centers, and recreation facilities at
these locations, Cuban tourist officials have been
engaged in an active worldwide promotional effort.
Cuba has been aggressively seeking Western
investment in these projects, but so far has generated
little interest, primarily because the US embargo
prevents most US citizens from traveling to the island.
Cuba's untested labor force, its restrictive foreign
investment law, as well as its general economic
inefficiencies. also probably have discouraged
Western investors and tourists. Moreover, President
Castro's recent ban on travel by Cuban-Americans to
the island-in response to the startup of Radio Marti
broadcasts-will be a severe impediment to the
tourism sector.
Tourism's Contribution to the Economy
Tourism ranks a distant third behind oil reexports and
sugar as Cuba's leading hard currency export earners.
Havana earned about $75 million in hard currency
from tourists-approximately $365 per person-in
1984. The 39,000 tourists from Communist countries
contributed a much smaller proportion of that sum
than did Western tourists.
Tourist travel to Cuba, although much greater in
recent years, still is well below the levels of the 1950s
when about 300,000 tourists visited annually, making
the island one of the leading resorts in the Caribbean.
The loss of the US tourist market in the early 1960s,
coupled with the Castro regime's revolutionary
strictures against gambling and other vices, resulted
in a steep decline in visits to the island by Western
tourists. Havana lost most of its Western tourist trade
to other Caribbean islands that, in contrast to
Castro's Cuba, offered first-rate accommodations,
restaurants, and entertainment. Although more
Western tourists-some 168,000 in 1984-have
vacationed in Cuba over the past few years, many are
traveling on relatively inexpensive group package
tours from Mexico, Spain, and Canada. Havana is
still unable to attract the free-spending tourists who
could significantly enrich the island's hard currency
coffers.
Tourism's contribution to the Cuban economy will be
especially important over the course of the next few
years as Havana grapples with economic austerity.
Castro, in declaring a policy of "economic war" late
last year, set as one of his primary goals the
generation of increased hard currency earnings. Much
of the increase is to come from nonsugar exports, but,
given the poor hard currency earnings prospects for
Cuban nickel, sugar, and citrus, Havana probably will
rely heavily on tourism to achieve its objective
We believe that, at least for the short term, tourism
will continue to contribute a steady, although modest,
flow of hard currency to the economy. Tourism,
however, probably will not produce the revenue
necessary to ease the impact of Havana's current
economic austerity policies. Over the longer term,
tourism could become a significant Cuban export if
the joint venture law is modified to the satisfaction of
Western business interests and Havana is able to
complete its costly upgrading of tourism facilities.
Tourism Projects and Promotions
Over the next five years, the Castro regime plans to
invest heavily in the development of tourist facilities.
It has contracted with an Argentine firm at a cost of
$90 million to build eight fully equipped hotels with a
total of 2,000 rooms in the Varadero area by 1990.
According to the Cuban press, the runway at
Varadero Airport is being extended, and hotels and
shopping centers in the area are being remodeled. The
press also reports that extensive improvements are
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being made to the Jose Marti International Airport in
Havana, and that by 1990 some 1,500 to 2,000 new
hotel rooms will be built in the Cuban capital.
Cuba
has approached the Mexicans with a proposal to build
six new hotels in Havana.
Cayo Largo, a small island about 25 miles off the
southwestern coast, appears to be the primary focus of
development efforts.
investors from Canada, France, Italy, Japan, Kuwait,
Sweden, and Switzerland have expressed interest in
the Cayo Largo projects, but there is no indication
that any intend to commit funds. Havana reportedly
plans to increase Cayo Largo's present 60-room hotel
capacity, build a marina, expand the existing airport
runway, and improve hunting and fishing facilities on
the island over the next five years.
a bank and
shopping center are also under construction on Cayo
Largo.
To supplement the earnings from vacationers, Cuba
also is emphasizing tourist stores catering to Western
consumers. The Cuban company Cimex is planning to
open three large duty-free shops, including one at
Varadero and another on Cayo Largo.
the company has negotiated to buy
6,000 color televisions from Japan for resale at a
much higher price in the tourist stores.
a Cuban company
in Tokyo intended to purchase $55 million in Japanese
consumer products this year, principally for resale to
Cuban-American tourists.
Mexican subsidiary of Cimex was seeking to purchase
US consumer products to stock tourist stores in
Havana. the
government also is involved with several Panamanian
companies in operating tourist shops in various Cuban
hotels and resorts that will accept only US dollars as
payment.
Havana has been trying to increase its exposure to the
Western market through promotional trips by Cuban
tourism officials, the establishment of foreign travel
offices, and sponsorship of travel conventions and
foreign journalist visits.
Cuba is directing its promotional
activities at Mexican, Canadian, and West European
tourists who have the means to spend substantial
amounts of hard currency. Over the past few years,
delegations from the Cuban National Institute of
Tourism have made annual promotional visits to West
European countries, and tourist information offices
have been established in Canada, Mexico, France,
West Germany, and Italy. Havana says it is planning
to open promotional offices in Spain, the United
Kingdom, and the Scandinavian countries as well.
Since 1981, Cubana Airlines and Aerocaribe
Airlines-both owned by the government-have
arranged charter flights from Canada, Mexico,
France, Venezuela, West Germany, Italy, the United
Kingdom, and Luxembourg. In addition, Cuba has
held a trade show for foreign travel professionals each
year since 1981 and has hosted conferences or
sponsored tours for foreign journalists, travel agents,
and travel writers.
Havana also has attempted to improve the availability
of travel-related services on the island for the
convenience of tourists. Cuba began accepting
international credit cards (except those issued by US
banks) in 1981, and a limited number of rental cars
are now available. Moreover, customs requirements
have been eased for West European, Canadian, and
Mexican visitors, who are permitted to use the Cuban
Tourist Card, available from certain travel agencies,
in lieu of a visa as their documentation for vacationing
in Cuba.
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secret
Obstacles to Tourism's Growth
Although the regime is energetically pursuing the
Western market, there are serious impediments to
further growth in the tourism sector-the most
damaging being Cuba's lack of access to the US
market. Under the restrictions imposed by the United
States in 1982, only Cuban-Americans, academics,
journalists, and government employees are authorized
to travel to Cuba. This has discouraged investment in
the Cuban tourism industry by Western firms that
might otherwise view such an undertaking as less
risky and potentially profitable.
In recent years, Cuban-Americans visiting Cuba have
not been permitted to bring goods into the country.
Instead, Havana has established retail outlets to
capture hard currency from the visiting Cuban-
Americans, who now must use these stores to buy
household goods and other gifts for their Cuban
relatives. However, the Castro regime's recent
decision to bar Cuban-Americans from traveling to
Cuba in retaliation for Radio Marti could cost
Havana tens of millions of dollars in hard currency
income. Hard currency sales to Cuban-Americans, in
the opinion of Cuban tourism industry officials, could
be worth some $50 million this year if Castro lifts the
travel ban.
Another major impediment to tourism is a joint
venture or foreign investment law issued by Havana in
February 1982. Several restrictions contained in the
law have served to inhibit foreign investment: labor
must be hired through a state entity, state entities are
granted first option for suppying inputs, Cuban
management is required, and only minority foreign
ownership is permitted. Western businesses are
especially concerned that Cuba could take advantage
of the law because it fails to adequately address the
issue of expropriation. Although Cuba has made
special provision for joint ventures in the tourist
sector, such as exemption from all taxes, duties,
tariffs, and special work regulations, these concessions
have not been sufficient to encourage Western
investment in Cuba's tourism industry.
Cuba's untrained labor force and general economic
inefficiencies also probably have discouraged investors
and tourists. Western businessmen and travel agents
have expressed concern over Cuba's creditworthiness,
the reported high rates of worker absenteeism,
transport and warehousing bottlenecks, party
interference in plant management, and poor worker
service. Last November, the President of the Cuban 25X1
National Institute of Tourism publicly criticized the
low quality of tourism services.
although West German
tourists are offered inexpensive flights, few have
wanted to return to Cuba for a second visit because of
the substandard facilities on the island.
contacted by Havana to construct and finance a
turnkey hotel project have serious doubts about
Cuba's long-term creditworthiness. The Japanese
firms were particularly concerned about Cuba's
continued dependence on the weak world sugar
market and said they probably would not participate
in the proposed project
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A severe shortage of first-class hotels, entertainment,
restaurants, and other services also discourages visits
by more affluent tourists. Cuba's beach resorts have
only about 6,000 hotel rooms in the three-star and
above category. Moreover, tourist groups visiting
Havana are often lodged outside the capital during
the winter months, when international conferences or
conventions put a tight squeeze on the city's hotel 25X1
space. Restaurant menus and food preparation have
fallen far short of Western expectations, and nightlife
is dull in comparison with the diversions offered at
other Caribbean resorts. Rental cars and taxis are still
few and far between, limiting the mobility of richer
tourists not participating in group tour packages.
Havana seems to be caught in a bind; its troubles in
providing first-rate tourist service often stem from the
shortage of foreign exchange to purchase imported
inputs, but its inability to attract well-heeled tourists
in turn inhibits investment in tourism projects by
Western developers. Argentina, Mexico, and Spain
appear to be the only Western countries willing to
assist the tourist industry.
=Mexico has granted Havana a $13 million letter
of credit for hotel renovations. Madrid agreed late last
year to cooperate with Havana in researching tourist
markets, in exchanging information on tourist
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to
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... that friendly gesture
and symbol of Cuban hospitality.
?tIARANA HBr,[ ^HABANA RIVIE 11A
NACIONAI_ M CUBA
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? VI G10 H A
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EL COLONY
A 1984 advertisement published by the Cuban National Institute
of Tourism. F---]
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OcUrt
legislation, hotel construction, and the formation of a
Cuban center for tourist documentation. According to
press reports, Havana also has contracted with a
Spanish firm to manage four Varadero Beach hotels.
Outlook
While tourism is likely to continue to provide a
steady, albeit modest, flow of hard currency earnings,
it probably will not contribute enough foreign
exchange in the short term to help Havana counter
the stagnation in other hard currency exports. The
Castro regime probably will be disappointed if it
expects tourism to make a significant contribution to
hard currency income in the next five-year plan-
1986-90. The modest prospects for tourism will also
make it difficult for Havana to meet its goal of
increasing nonsugar convertible currency earnings by
44 percent this year.
Tourism could become a significant Cuban export
over the longer term under certain conditions. If the
joint venture law were modified and the restraints on
foreign investment weakened or removed, Western
businesses may be more amenable to participate in
the Cuban tourist sector. However, even if the foreign
investment law were changed, a continued lack of
access to the US market probably would discourage
many, if not most, Western firms from Cuban tourism
ventures. Should Havana overcome its current
economic difficulties, it might be able to afford an
expensive upgrading of hotels, stores, and restaurants
to lure the more affluent tourists who now bypass the
island.
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Cuba:
Castro Pontificates on
Third World Debt F_
President Castro's intensified campaign for Third
World debt relief is an effort to strike out against the
United States, win friends for Cuba, and divert
domestic attention from the island's economic
problems. Despite Castro's claims to the contrary, we
believe that Cuba will have serious difficulties in
meeting its own debt obligations, starting with the
renegotiation of its 1985 debt principal with official
creditors this summer.
Castro's Solution for World Debt
Castro has publicly accused Washington of leading
creditor countries in an undeclared war against
developing countries, using extortive interest rates,
depressed commodity prices, and trade protectionism.
He asserts that the resulting Third World debt is
"illegal" and must be paid by creditor governments,
possibly through defense cuts. According to Castro,
any legitimate foreign debt should be negotiated
multilaterally by a debtors' club.
The campaign has broadened from Latin America to
the Third World and has gained international
attention as a result of highly touted interviews with
Castro in Latin American and West European
journals, by visits with high-ranking foreign officials,
and Cuba's sponsorship of international debt
conferences.
the campaign will culminate during the UN General
Assembly this fall.
Castro probably believes he can use the issue to
inflame opinion against the United States and to
curry favor with Third World governments. The
initiation of Radio Marti broadcasts, which Castro
seems to have interpreted as the end of any chance for
improving relations with the Reagan administration,
has given the campaign added impetus. The heavy
domestic propaganda accorded the debt proposals
probably also is intended to portray Castro as a
capable economic leader and to distract attention
from Cuba's increasing financial pressures and fluid
economic policies.
Cuba's Debt Problems
Castro has denied repeatedly that his debt proposals
are self-serving, claiming Cuba has relatively few debt
pressures. However, we believe that Havana will have
serious difficulties meeting performance targets
recently agreed to with its official creditors as the first
step to rescheduling 1985 debt principal. Although
the terms negotiated are generous, considering that
Cuba failed to meet six out of nine of these targets
last year, Havana's shortcomings may lead to a
reevaluation of the agreement either later this
summer, when repayment terms are renegotiated, or
during a formal review proposed for October. F
For example, Havana will fall far short of the new
target to increase nonsugar hard currency exports by
some 40 percent this year. The short-term outlook is
bleak for hard currency citrus and nickel earnings.
The potential earnings from fuel reexports are limited
because of stagnating Soviet oil deliveries and Cuba's
growing domestic energy needs. Furthermore,
bureaucratic tangles in Havana have prevented the
development and marketing of nontraditional exports.
We believe the goals for sugar exports to the West
also are overoptimistic, in view of Cuba's production
problems this year and Castro's vow to fill sugar
quotas to CEMA countries first. Havana's
disappointing hard currency export earnings, in
addition to a hoped-for increase in Western imports,
probably will contribute to a hard currency current
account deficit this year far in excess of the $48
million approved by Paris Club creditors.
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Cuba's Hard Currency
Creditor Targets and Performance,
Trade balance
Of which:
(Nonsugar exports)
473
457
636
Imports from the West
912
1,097
1,172
Current account
34
-236
-48
Short-term debt
1,026 to 1,140
1,138
1,045 to 1,100
Maximum gross debt
3,591
3,458
3,520
Minimum foreign reserves
171
204
165
Maximum net debt
3,249
3,254
3,190
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Secret
Brazil: Relations With the
Middle East-The
Primacy of Trade
Brazil's policy toward the Middle East is driven
mainly by the quest to expand markets for its exports,
especially military equipment. In pursuing increased
arms trade, Brasilia has been engaged in a delicate
balancing act involving opposing blocs of Islamic
Middle Eastern nations-Iraq and Saudi Arabia on
the one hand, and Libya and Iran on the other. F_
Brazil's relations with Israel, although correct, are
limited because Brasilia sees little market potential
there and does not want to offend its Arab clients.
The Brazilians also have kept a low diplomatic profile
on Middle Eastern political and territorial disputes to
avoid antagonizing any of the nations involved.F_
Iraq and Saudi Arabia
Iraq is the largest supplier of oil to Brazil, the largest
customer for Brazilian arms, and a major purchaser
of various other Brazilian industrial and agricultural
goods and services. More than 2,200 armored vehicles
and 60 Astros II surface-to-surface missile systems
have been sold to the Iraqis since the mid-1970s,
shipped uranium yellowcake to Iraq during the past
two years and have shared some limited nuclear
technology with Baghdad.
The Iran-Iraq war has led to increased Brazilian sales
of military equipment to Iraq, despite Iranian
objections. Brasilia claims that it provides Baghdad
only with weapons ordered before the war's outbreak
in 1980, the
two countries recently signed a new contract for $88
million worth of Brazilian armored vehicles
Saudi Arabia is an important financial backer for
Iraq's trade with Brazil. In addition to selling oil and
buying Brazilian steel and copper for themselves, the
Saudis have helped bankroll Brazil's development of
the Astros II missile system, intended primarily for
Iraq. Recently, Saudi Arabia reportedly signed a
contract to purchase $300 million worth of Brazilian
rockets, probably on behalf of Baghdad. Saudi
investors also have bought stock in Engesa, the
Brazilian company that manufactures armored
vehicles for Iraq. The contract for rockets was part of
a five-year Brazilian-Saudi military cooperation
agreement reached in October 1984 that will
facilitate additional purchases by Saudi Arabia of
weapons for itself and Iraq.
Relations With the Radicals
Libya has long been a customer for Brazilian small
arms, ammunition, and armored vehicles, although
Libyan purchases of Brazilian military equipment
have fallen off in recent years. The reasons for this are
unclear. Reservations among some Brazilian officials
about selling arms to the notorious Qadhafi regime
appear to be a factor; other officials, however, favor
an expansion of military sales to Tripoli. The main
obstacles appear to be the decline in international oil
prices, which has adversely affected Libyan revenues,
and Libyan pique over the Brazilian military's seizure
in 1983 of a Libyan arms supply flight bound for
Nicaragua.
Because of its size, Iran offers a potentially larger
market than other Middle Eastern nations for
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Brazilian arms, but Brasilia has resisted selling 25X1
weapons directly to Tehran for fear of upsetting the
lucrative trade with Iraq and Saudi Arabia.
Nevertheless, Tehran has obtained Brazilian small
arms and armored vehicles from Syria and Libya, 25X1
Brasilia continues to
tolerate this leakage and evidently has no plans to
impose restrictions on resales to third parties for any
of its arms exports. The new civilian government of
President Sarney apparently has left the door open to
further military cooperation with Tehran once the
Iran-Iraq war ends. For example,
Iranian helicopter pilots are
currently being trained at a Brazilian naval base.
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Since the early 1980s, Tehran has sharply expanded
its purchases of Brazilian manufactures and
chemicals.
a new $1.4 billion trade agreement-par
of which will involve sales of Iranian oil in exchange
for Brazilian trucks and tractors-may be signed
soon.
Other Countries
Brazil has also sold a variety of products, including
military equipment, to other Middle Eastern nations,
including Algeria, Egypt, and Kuwait.
Brasilia's recognition of the Algerian-
backed Polisario Front over Moroccan objections was
part of a major new agreement to exchange Algerian
oil for Brazilian goods, probably including military
equipment. This agreement again reflects the
influence of trade on Brazil's policies toward the
Middle East
Outlook
The Sarney government probably will try to maintain
goad relations with all of Brazil's trading partners in
the Middle East, hoping to keep open prospects for
gaining new markets in such countries as Iran and
Libya without jeopardizing established relations with
other countries. Despite its desire to expand trade
with Iran, as long as the Iran-Iraq war continues
Brasilia probably will not sell weapons directly to
Tehran for fear of antagonizing Iraq, its largest arms
customer.
Even so, Brazilian exporting companies, particularly
in the arms industry, will exert pressure for increased
trade with the radical states. When circumstances
permit, Brazil almost certainly will make a concerted
effort to expand its military trade ties to Iran and
Libya.
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Panama:
Reforming the Labor Code
Panama's labor code-a collection of some of the
most proworker laws in the world-is cited by
President Barletta, the business sector, and
international lenders as a major impediment to
economic growth. The administration's plan to revise
the code in an effort to encourage investment and
create jobs has been resisted by organized labor.
Barletta now has some support from the military and
the government party, however, and moderate reform
of the work rules appears likely.
General Torrijos, Panama's strongman from 1968
until his death in 1981, built a political base outside
the military by appealing to the urban working class.
In 1972, he enacted a far-reaching labor code, which
stipulates that a worker's salary cannot be reduced
under any circumstances, bases severance payments
on a sharply increasing scale, and provides fired
workers an appeals process through the Ministry of
Labor. It also guarantees collective bargaining and
the right to strike, and grants workers the indirect
benefits of social security, sick leave, workmen's
compensation, a month's paid vacation, and an annual
Christmas bonus equivalent to a month's salary.
These benefits total about 36 percent of direct wages.
Impetus for Reform
As the Panamanian economy has languished since the
late 1970s, businessmen increasingly have viewed the
labor code as a hindrance to investment and growth.
Strict provisions concerning layoffs and firings make
it almost impossible to trim labor rolls, and the
prohibition of any wage cuts inhibits the introduction
of incentive systems aimed at increasing productivity.
Moreover, employers complain of the difficulty of
judging the competency of new employees during the
short probationary period stipulated by the code.
Barletta has made revision of the code one of his
government's primary objectives. Unemployment
continues to be a major problem, and Barletta is
unable to fulfill his campaign promise to generate
25,000 new jobs each year. The President hopes to
encourage foreign and domestic investment and
expand employment opportunities by giving
management greater control over work rules. He
agrees with the claim of business leaders that they
need freedom to negotiate flexible wage and
productivity rates to develop assembly and piecework
industries and generate export-led growth.
Barletta's concern about the labor code is shared by
international financial institutions, which argue that
government meddling in the labor market must be
eased to attract investors. The World Bank is calling
for reform of the work rules as a prerequisite for a
structural adjustment loan. Similarly, the IMF has
listed code revision as a condition for rescheduling the
$3.6 billion foreign debt.
The Political Process
Barletta encountered resistance as soon as he moved
to reform the labor laws in March. Organized labor,
which disputed any connection between
unemployment and the code, sponsored a protest
march of several hundred workers. Government party
leaders reiterated their loyalty to the economic and
social welfare model established by Torrijos as a
means of forcing Barletta to give them additional 25X1
Cabinet posts.
General Noriega, Commander of the Panamanian
Defense Forces, affirmed his approval of moderate
revisions while cautioning the President to secure his
political base first. With Noriega's quiet support,
Barletta shuffled his Cabinet in May and began to
make headway in winning government party backing
in the legislature.
party leaders claim to have sufficient control
over the labor unions to ensure acceptance of changes.
Moreover, the recently named Labor Minister is close
to Noriega and presumably will help Barletta in 25X1
negotiating with the unions.
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Leaders of the largest labor federation, perhaps
sensing that reform cannot be blocked entirely, have
indicated privately that they would be receptive to
changes designed to increase worker productivity and
facilitate dismissal settlements,
they intend, however, to
continue opposing efforts to reduce the minimum
wage or weaken union organization
the Communist Party-which controls the other
labor confederation-will oppose any changes that
would reduce salaries or enable employers to fire
workers more easily.
Prospects
We believe the odds favor moderate revisions in the
labor code. Noriega apparently is maneuvering behind
the scenes with the trade unions with which he has
substantial influence. In response to this pressure and
the government party's new support for Barletta,
some union leaders appear ready to compromise, and
the Communist Party probably will not be able to
block reform on its own. On the other side, the IMF
and World Bank have shown a willingness to accept
moderate measures rather than demand an unrealistic
reform that might provoke a serious political
backlash.
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Secret
Latin America
Briefs
President de la Madrid this month is taking his first major trip to Europe-a
three-week visit to Great Britain, Spain, West Germany, Belgium, and France. He
seeks financial, trade, and industrial technology agreements that would give
Mexico increased access for nonpetroleum exports and the foreign exchange
necessary to resume economic growth. As a Latin American spokesman, de la
Madrid is likely to press European nations for support in obtaining more favorable
terms for debtor countries, peaceful resolutions to Central American conflict, and
world disarmament. Mexico, as a member of the Contadora Group, has wagered
considerable national prestige on the Group's efforts to bring an end to hostilities
in Central America, and de la Madrid may seek to enlist active European
participation to revitalize the negotiations. He may also request that his hosts
attempt to influence Washington to resume bilateral talks with Nicaragua. Having
participated in a meeting in January in India on disarmament with counterparts
from Argentina, Greece, Sweden, Tanzania, and India, he probably will call for
the denuclearization of Europe.
A strong performance in Europe may bolster de la Madrid's popularity at a time
when, according to US officials, many Mexicans are growing impatient with his
austerity measures and failure to curb corruption, and are showing disaffection
with the ruling Institutional Revolutionary Party (PRI). He probably hopes that if
he is successful in Europe, the PRI's stock will rise going into legislative and
gubernatorial elections that will be held on 7 July, shortly after his return home.
Some observers believe these elections will mark a crossroad in Mexican politics
because of the particularly strong challenge the conservative National Action
Party is expected to pose to the PRI in several races.
Brazil Agrarian Reform
President Sarney proposed a far-reaching land reform program to the Congress on
27 May that calls for elimination of underutilized large estates and uneconomic
small holdings, chiefly through expropriation. Some 7.1 million people would be
resettled on such lands over the next 15 years. Sarney has decreed a 30-day period
of national debate on the plan before legislative hearings begin.
The US Embassy reports that landowners' groups have been sharply critical of the
plan. The landowners claim that they do not oppose agrarian reform in principle,
but that the new program goes too far and encourages illegal land invasions by
peasants. over 20 people have been killed
thus far incases between landowners' private militias and squatters acting in
anticipation of land reform. F_ I
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According to the US Embassy, the government's abrupt introduction of the plan
without advance publicity or consultations with interested parties has added to the
controversy. Sarney and his Minister of Agrarian Reform already have publicly
toned down their endorsement of the plan, and the President may take steps to
water down the program during the weeks ahead to reduce opposition. If he cannot
forge a consensus on the issue, however, further violence between squatters and
landowners is Iikely.F-~
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Cuba Chronology
Fidel Castro leads Cuba's May Day parade through Revolution Square. From the
reviewing stand, he and other leaders of the Central Committee watch 500,000
workers march by, chanting "for Cuba with Fidel."
Secretary General of the Central Organization of Cuban Trade Unions Roberto
Veiga, speaking at the May Day celebrations in Havana, stresses support for
cancellation of the foreign debt.
Brazilian Foreign Minister Setubal announces that his government is studying the
possibility of reestablishing diplomatic relations with Cuba.
Havana TV reports that the US Government has asked the Nicaraguan
Government to break relations with Cuba and the USSR as a condition for the
suspension of the trade blockage imposed by the United States.
In a farewell ceremony for 100 departing Cuban military advisers, Nicaraguan
Defense Minister Humberto Ortega says, "We are not stepping back even 1
millimeter in our relations with Cuba."
Deputy Foreign Minister Roberto Alarcon says the trade embargo imposed on
Nicaragua by the United States, "is an irresponsible measure and part of an
escalation that could include other types of action."
The Georgi Dimitrov Brigade of Cuban construction workers returns to Havana
after working one year at the nuclear power plant in Kozloduy, Bulgaria.
In La Paz, Bolivian President Siles inaugurates the Ismaelillo pediatric intensive
care unit donated by Cuba. Cuba's Vice Minister of Public Health Ramon Diaz
Vallina attends the ceremony.
At a foreign meeting in Buenos Aires, Cuban and Uruguayan officials agree that a
dialogue among Latin American countries on the debt problem is necessary.
Vice Foreign Minister Pelegrin Torras arrives in China. He visits Shanghai,
Guangzhou, Shenzhen, Nanjing, and Beijing.
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6 May
In Moscow, Lionel Soto, Ambassador of Cuba to the USSR, speaks at a press
conference marking the 40th anniversary of the victory over fascism and the 25th
anniversary of USSR-Cuban relations.
In a meeting with the diplomatic corps, Soviet Ambassador to Cuba Konstantin
Katushev says that trade between the two countries will increase to more than 8
billion rubles per year.
In an interview in Paris, Isidoro Malmierca and his French counterpart Roland
Dumas, discuss bilateral relations and agree to seek solutions to the conflict in
Central America.
T May
Argentine Planning Secretary Bernardo Grinspun attends the first
intergovernment meeting on economic and scientific-technical cooperation in
Havana. He predicts a promising future for relations.
Prensa Latina in Havana reports that the coordinating bureau of the countries of
the Nonaligned Movement condemn the trade embargo and other economic
measures imposed by the United States against Nicaragua.
Granma announces that Luis Castillo Campos has been named Cuban
Ambassador to Rwanda.
Soviet official Ivan Kalin arrives in Havana to celebrate the 40th anniversary of
the Soviets in the Great Patriotic War and the 25th anniversary of Soviet-Cuban
relations.
Cuba and the Soviet Union celebrate the 25th anniversary of the establishment of
diplomatic relations. Fidel Castro attends the ceremony in Havana; Raul Castro
and Ivan Kalin speak.
Raul Castro says that Cuba's ties with the Soviet Union are as unshakable as ever
and will remain so.
ILO Director General Francis Blanchard arrives in Havana to attend meetings
with Roberto Veiga, CTC Secretary General.
Politburo alternate member Jesus Montane meets in Havana with Gerardo
Iglesias, Secretary General of the Spanish Communist Party, to discuss the
international situation and matters of mutual interest.
Raul Castro presides over a military ceremony on the 40th anniversary of the
victory over fascism at the tomb of the Soviet internationalist soldiers in Havana.
Ivan Kalin also is present.
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secret
Raul Saladrit concludes three days of meetings in Buenos Aires where it was
decided that the two countries would carry out a broad program of scientific and
technological cooperation.
Havana press reports that Uruguayan Senator Juan Adolfo Singer, while
attending a meeting in Washington, said that his country plans to increase trade
with Cuba.
Algerian President Chadli Bendjedid arrives in Havana and is greeted at the
airport by Fidel Castro and Vilma Espin.
Fidel Castro decorates Bendjedid with the Order of Jose Marti in a ceremony in
Havana, and Ramiro Valdes speaks of the deep roots between the two countries.
Spiridhon Kyprianou receives the credentials of the new Cuban Ambassador to
Cyprus, Guillermo Zurbitu Gomez, during a ceremony in Nicosia.
12 May Mikhail Solomentsev, member of the CPSU Politburo arrives in Havana and is
received by Jose Ramon Machado Ventura, Jesus Montane, and Flavio Bravo.
13 May Algerian President Bendjedid and his delegation host a reception in honor of Fidel
Castro. Ramiro Valdes, Armando Hart, and Jorge Risquet attend.
Algerian Minister of Foreign Affairs Ahmed Taleb Ibrahimi tells the press in
Havana that during the meetings between Bendjedid and Cuban leaders, the issue
of bilateral cooperation was raised.
Havana press reports that during his visit to Beijing, Pelegrin Torras met with his
counterpart, Zhu Qizhen, to discuss bilateral relations and the international
situation.
Raul Castro and Solomentsev discuss the 27th CPSU congress and the third PCC
congress; they exchange points of view on building socialism.
14 May Carlos Rafael Rodriguez receives the credentials of the new Mexican Ambassador
to Cuba, Enrique Olivares Santana.
Beijing press reports that Pelegrin Torras and Gao Shangquan, Vice Minister of
State for Restructuring the Economy, discussed China's economic restructuring at
a meeting in Beijing.
Carlos Rafael Rodriguez and Solomentsev preside over the ceremony of the
Cuban-Soviet Friendship Association marking the 40th anniversary of the victory
over fascism.
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Solomentsev assures the Cuban people that the Soviet people have been, are, and
will always be faithful friends and comrades.
15 May
16 May
Solomentsev and Fidel Castro exchange opinions on CPSU and PCC domestic and
foreign policy and on topical international problems during a meeting in Havana.
The fifth meeting of the Mexican-Cuban business committee is held in Havana.
Fidel Castro discusses Cuba's economic and social development with the Mexican
business delegation.
Ramon Castro heads a technical-trade delegation to Guayaquil. In a press
statement, Castro underscores the importance of international cooperation above
all ideological differences.
Fidel Castro meets with a delegation of politicians and scientists from the FRG.
He tells them that Nicaraguan President Ortega has asked the Soviets to cover his
country's oil needs.
17 May
Solomentsev departs for the USSR. Jorge Risque and Jesus Montane bid him
farewell at Jose Marti Airport.
Venezuela is negotiating the sale of 40,000 tons of steel to Cuba, and private firms
in Caracas are negotiating to sell Cuba 30,000 tons of seamless pipes.
Bolivian President Hernan Siles Zuazo appoints Miguel Angel Flores as Bolivia's
first charge d'affaires to Cuba. Bolivia resumed diplomatic relations with Cuba in
early 1983.
19 May
20 May
Yasir Arafat meets with Deputy Foreign Minister Raul Roa Kouri in Tunisia to
discuss the current situation in the Middle East, particularly in Lebanon.
The US launches Radio Marti, a Spanish-language broadcast service to Cuba.
Fidel Castro reacts by suspending the immigration pact, halting all visits to Cuba
by Cuban-Americans, and radio jamming.
Eleven former Cuban political prisoners, the first to be freed under a 1984 US-
Cuba accord, arrive in Miami Airport minutes before Fidel Castro shuts off
emigration from Cuba.
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21 May TASS reports that Radio Marti's broadcasts to Cuba are "ideological sabotage"
against the island.
Thousands of workers, students, and officials take part in Havana and other
Cuban cities in demonstrations in support of the government's resolute reply to the
United States for beginning Radio Marti.
A meeting is held with generals, officials, sergeants, soldiers, and civilian
employees who work at the Ministry of the Revolutionary Armed Forces to
denounce Radio Marti.
Uruguayan Chamber of Deputies President Antonio Marchesano arrives in
Havana and meets with Flavio Bravo. Marchesano says the Latin American debt
is an unbearable weight for Uruguay.
The papal nuncio to Nicaragua, Monsignor Andrea Laza de Monte Zemulo,
arrives in Cuba.
The President of India's Atomic Energy Commission, Rajo Ramanna, and the
Executive Secretary of Cuba's Atomic Energy Commission, Fidel Castro Diaz-
Balart, sign a bilateral nuclear cooperation agreement.
Raja Ramanna, Jose Ramon Fernandez, and Foreign Minister Malmierca discuss
cooperation between the two countries. The Indian delegation tours places of
scientific interest in Havana.
For the first time in 21 years, a Cuban parliamentary delegation visits Brazil. The
delegation condemns the US embargo against Nicaragua and defends the principle
of nonintervention.
Carlos Rafael Rodriguez discusses the Latin American debt situation with
Uruguay's Chamber of Deputies President Antonio Marchesano.
Cuban Ambassador to the United Nations, Oscar Oramas, conveys a message
from Fidel Castro to UN Secretary General de Cuellar in which Fidel calls the US
decision to begin Radio Marti cynical and provocative.
Paris press reports that Cuban candidates for immigration can travel to the United
States via other countries, despite the suppression of the immigration agreements
between Havana and Washington.
Granma announces that Ana Maria Gonzalez Suarez was named Cuban
Ambassador to Indonesia, with residence in Manila.
Torras visits industrial enterprises and meets with livestock-breeders and farmers
in Ulaanbaatar.
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Deputy Foreign Minister Pelegrin Torras visits Mongolia and discusses bilateral
relations and international issues with his counterpart, G. Gashdabaa.
24 May
Madhav Keshav Mangalmurti, the new Indian Ambassador to Cuba, presents his
credentials to Carlos Rafael Rodriguez.
Carlos Rafael Rodriguez receives the credentials of Tseliso Thamae, the new
Lesotho Ambassador to Cuba.
25 May
27 May
28 May
In Luanda, Cuban Ambassador Rodolfo Puentes Ferro reads a message from Fidel
Castro to Jose Eduardo dos Santos on the occasion of Africa Day; Castro
reiterates his support for Angola.
Havana International Service inaugurates an hour-long Havana English broadcast
to North America.
A protocol of the Intergovernmental Economic and Scientific meeting of Korea
and Cuba is signed in P'yongyang by Yim Ki-song, Vice Minister of External
Affairs, and Lester Rodriguez Perez.
Foreign Minister Malmierca receives Guy Penne, adviser to French President
Mitterrand on African affairs, to discuss the international situation and bilateral
relations.
UN Secretary General Perez de Cuellar arrives in Havana. Fidel Castro, Carlos
Rafael Rodriguez, and Isidoro Malmierca discuss Central America, the world
economic situation, and South Africa with the UN leader.
29 May
For the first time outside Europe, an exhibit of nuclear equipment and instruments
from socialist areas begins in Havana.
Secretary General of the Central Organization of Cuban Trade Unions Roberto
Veiga announces that a trade union conference of Latin American and Caribbean
workers will be held 15-17 July in Havana.
Port of Spain Press announces that the new Cuban Ambassador to Trinidad and
Tobago, Severino Mansur Jorge, presented his credentials to President Clarke on
23 May.
Fidel Castro and Perez de Cuellar visit the Isle of Youth. Fidel tells Namibian
students that he is willing to send "200,000" more Cuban troops to Angola if
South Africa fails to grant Namibia independence.
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Fidel Castro discusses Radio Marti with Penne. Castro says if the Americans give
up transmitting from Radio Marti, Cuba will reverse its decision on suspension of
the immigration agreements.
Penne tells AFP he is carrying a message from Fidel Castro to President
Mitterrand requesting support for the Cuban position on the unpayable Latin
American foreign debt.
At a press conference in Havana, Perez de Cuellar says that the UN will not
request the withdrawal of Cuban troops from Angola because that is a bilateral
matter.
Perez de Cuellar also says that he is very pleased with Fidel Castro's
encouragement to him about Latin America's foreign debt.
During his talks with Castro, de Cuellar says that they did not officially discuss
Radio Marti, but Castro said he felt it was an insult to name the radio station after
Cuba's national hero.
Fidel Castro, Raul Castro, and other Cuban officials take part in a ceremony at
Jose Marti International Airport where Perez de Cuellar departs for the
Dominican Republic.
Havana TV announces that spring sugarcane planting is considerably behind
schedule. Of the more than 13,000 caballerias that should be planted by now, only
8,941 have been.
The Soviet Union and Cuba sign a 1985 contract for oil supplies. Armando Marey,
representative of Cubametals and Vladimir Morozov, General Director of the
"Soyuznefteexport," sign the document.
Soviet Trade Minister Patolichev and Ricardo Cabrizas sign a trade protocol in
Moscow totaling 8.2 billion rubles, which represents significant growth over 1984
and doubles the 1970 level.
During a technical stopover in Mexico City, Isidoro Malmierca says the US-
Cuban immigration agreement will remain suspended until the provocations
transmitted over Radio Marti cease.
Ecuadorean President Febres-Cordero receives Council of Ministers Vice
President Jose Ramon Fernandez to discuss bilateral relations in education, public
health, and the cattle and shrimp industries.
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