DRAFT PRESS STATEMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87B00858R000200170023-1
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 140
• Document Creation Date: December 22, 2016
• Document Release Date: September 23, 2010
• Sequence Number: 23
• Publication Date: April 10, 1984
• Content Type: REPORT

Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Iq
Next 5 Page(s) In Document Denied
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
CHAIRMAN
DR HENRY A. KISSINGER
COMMISSION MEMBERS
Mn. NICHOLAS F. BRADY
MAYOR HENRY G. CISNEROS
GOV. WILLIAM P. CLEMENTS. JR
DR CARLOS F. DIAZ-ALEJANDRO
MR WILSON S. JOHNSON
MR LANE KIRKLAND
MR RICHARD M. SCAMMON
DR JOHN SILBER
JUSTICE POTTER STEWART
AMB ROBERT S. STRAUSS
DR. WILLIAM B. WALSH
EXECUTIVE DIRECTOR
AMB. HARRY W. SHLAUDEMAN
THE NATIONAL BIPARTISAN COMMISSION
ON CENTRAL AMERICA
SENIOR COUNSELLORS
REP MICHAEL D. BARNES
SEN LLOYD BENTSEN
REP WILLIAM S. BROOMFIELD
SEN PETE V. DOMENICI
SEN DANIEL K. INOUVE
REP JACK F. KEMP
AMB JEANE KIRKPATRICK
MR WINSTON LORD
SEN CHARLES MCC. MATHIAS
MR WILLIAM D. ROGERS
REP JAMES C. WRIGHT
January 10, 1984
The President
The White House
Washington, D.C.
In establishing the National Bipartisan Commission on
Central America, you asked its advice on what would be
appropriate elements of "a long-term United States policy that
will best respond to the challenges of social, economic, and
democratic development in the region, and to internal and
external threats to its security and stability."
The analyses and recommendations in this report seek to
respond to that request. However, as we studied the region and
its problems -- its crisis -- we found that the long-term
challenge also requires short-term actions. In many respects
the crisis is so acute, and the time-frame for response so
limited, that immediate responses are a necessary element, of
any long-term policy. Thus to some extent we have discussed
both, though we have tried to place such short-term
recommendations as we make within the framework of a
longer-term approach.
You also asked our advice on "means of building a national
consensus on a comprehensive United States policy for the
region." Our best advice on this is, I believe, embodied less
in the specific language of the report than in its total
message, which reflects the extraordinary experience of this
Commission. Twelve members, of both political parties and of
widely disparate views, studying the situation in Central
America with intensity and-dedication over a period of nearly
six months, reached a degree of consensus at the end that I
think few of us expected at the beginning. The lesson of this
experience, I believe, is that the best route to consensus on
U.S. policy toward Central America is by exposure to the
realities of Central America.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
On behalf of the members of the Commission, I wish to thank
you for the opportunity you gave us to share this experience.
We on the Commission hope that this report will contribute to a
wider recognition of the urgency of the crisis in Central
America, and to a deeper understanding both of its dimensions
and of the opportunity it provides for a united people to help
our neighbors toward a better future.
Respectfully,
Nicholas F. Brady
Henry G. Cisneros
William
P.
Clements, Jr.
Carlos
F.
Diaz-Alejandro
Wilson
S.
Johnson
Lane Kirkland
Richard M. Scammon
John Silber
Potter Stewart
Robert S. Strauss
William B. Walsh
Harry W. Shlaudeman
Executive Director
Jeane Kirkpatrick
Winston Lord
William D. Rogers
Daniel K. Inouye
Pete V. Domenici
Lloyd Bentsen
Charles McC. Mathias
William S. Broomfield
Jack F. Kemp
James C. Wright
Michael D. Barnes
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
With great respect, we dedicate this report
to the late Senator Henry M. Jackson, who
proposed the creation of a bipartisan
commission on Central America and served as
one of its Senior Counsellors. In his life
and work Senator Jackson was devoted to the
twin goals of national security and human
betterment. These are also the goals that
have guided this report, and we hope, in his
spirit, that it will contribute to their
advancement.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
TABLE OF CONTENTS
Chapter 1
How We Learned . . . . . . . . . . . . . . . . . . . . . 2
What We Learned . . . . . . . . . . . . . . . . . . . . 3
No Room for Partisanship . . . . . . . . . . . . . . . . 5
Chapter 2
A HEMISPHERE IN TRANSFORMATION . . . . . . . . . . . . . . 7
Two Challenges . . . . . . . . . . . . . . . . . . . . . 9
Three Principles . . . . . . . . . . . . . . . . . . . . 12
Chapter 3
The Land . . . . . . . . . . . . . . . . . . . . . . . 16
The Colonial Legacy . . . . . . . . . . . . . . . . . . 17
Independence and After . . . . . . . . . . . . . . . . . 17
Rule by Oligarchy . . . . . . . . . . . . . . . . . . . 19
Stirrings of Change . . . . . . . . . . . . . . . . . . 20
Political Retrogression . . . . . . . . . . . . . . . . 21
Modernization and Poverty . . . . . . . . . . . . . . . 22
The Growth of Communist Insurgency . . . . . . . . . . . 25
The Present Crisis . . . . . . . . . . . . . . . . . . . 27
The United States and Central America . . . . . . . . . 34
U.S. Interests in the Crisis . . . . . . . . . . . . . . 37
The Future . . . . . . . . . . . . . . . . . . . . . . . 38
Chapter 4
Current Economic Conditions and Their Causes . . . . . . 41
Causes of the Recent Decline . . . . . . . . . . . . . . 43
Efforts to Address the Crisis . . . . . . . . . . . . . 45
An Emergency Stabilization Program . . . . . . . . . . . 46
A Medium- and Long-term Program . . . . . . . . . . . . 50
The Nature of U.S. Development Support . . . . . . . . . 52
Expanded Trade Opportunities . . . . . . . . . . . . . . 55
Improved Investment Conditions . . . . . . . . . . . . . 56
Accelerated Agricultural Development . . . . . . . . . . 57
Organizing for Development . . . . . . . . . . . . . 59
Appendix: Central American Financial Needs . . . . . . . . 63
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 5
HUMAN DEVELOPMENT . . . . . . . . . . . . . . . . . . . . 68
Developing Educational Opportunities . . . . . . . . . . 69
A Region's Health . . . . . . . . . . . . . . . . . . . 75
Housing . . . . 80
Humanitarian Relief 82
Chapter 6
CENTRAL AMERICAN SECURITY ISSUES . . . . . . . . . . . . . 84
The Path of Insurgency . . . . . . . . . . . . . . . . . 86
External Intervention . . . . . . . . . . . . . . . . . 87
Independent Momentum . . . . . . . . . . . . . . . . . . 87
The Totalitarian Outcome . . . . . . . . . . . . . . . . 88
The Cuban-Soviet Connection . . . . . . . . . . . . 88
Strategic Implications for the United States . . . . . . 93
The Problems of Guerrilla War . . . . . . . . . . . . . 93
The Situation in El Salvador . . . . . . . . . . . . . . 97
The Insurgency in Guatemala . . . . . . . . . . . . . . 99
Other Regional Security Problems . . . . . . . . . . . . 100
Military Assistance . . . . . . . . . . . . . . . . . . 101
Other Measures . . . . . . . . . . . . . . . . . . . . . 102
Human Rights . . . . . . . . . . . . . . . . . . . . . . 103
Chapter 7
THE SEARCH FOR PEACE . . . . . . . . . . . . . . . . . . . 106
El Salvador . . . . 109
Nicaragua 113
A Framework for Regional Security . . . . . . . . . . . 116
The Contadora Group . . . . . . . . . . . . . . . . . 119
Cuba and the Soviet Union 120
Western Europe . . . . 123
Chapter 8
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . 126
NOTES BY INDIVIDUAL COMMISSIONERS . . . . . . . . . . . . 128
* In a departure from custom, a Spanish language translation of
this report is being made available contemporaneously with
release of the English language version.
* An Appendix including materials prepared for the Commission's
use will be issued at a later date.
Executive Registry
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 1
INTRODUCTION
For the members of this Commission, these past several
months have been an extraordinary learning experience which we
feel uniquely privileged to have shared.
In this report, we present an extensive set of concrete
policy recommendations. But we also seek to share what we have
learned with the people of the United States, and, based on
what we have found, to suggest ways of thinking about Central
America and its needs that may contribute to a more informed
understanding in the future.
We hope, at the same time, to communicate something else we
developed as a result of this experience: a sense of urgency
about Central America's crisis, of compassion for its people,
but also -- cautiously -- of hope for its future.
For most people in the United States, Central America has
long been what the entire New World was to Europeans of five
centuries ago: terra incognita. Probably few of even the most
educated could name all the countries of Central America and
their capitals, much less recite much of their political and
social backgrounds.
Most members of this Commission began with what we now see
as an extremely limited understanding of the region, its needs
and its importance. The more we learned, the more convinced we
became that the crisis there is real, and acute; that the
United States must act to meet it, and act boldly; that the
stakes are large, for the United States, for the hemisphere,
and, most poignantly, for the people of Central America.
In this report, we propose significant attention and help
to a previously neglected area of the hemisphere. Some, who
have not studied the area as we have, may think this
disproportionate, dismissing it as the natural reaction of a
commission created to deal with a single subject. We think any
such judgment would be a grave mistake.
It is true that other parts of the world are troubled.
Some of these, such as the Middle East, are genuinely in
crisis. But the crisis in Central America makes a particularly
urgent claim on the United States for several reasons.
First, Central America is our near neighbor. Because of
this, it critically involves our own security interests. But
more than that, what happens on our doorstep calls to our
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
conscience. History, contiguity, consanguinity -- all these
tie us to the rest of the Western Hemisphere; they also tie us
very particularly to the nations of Central America. When
Franklin Roosevelt proclaimed what he called his "Good Neighbor
Policy," that was more than a phrase. It was a concept that
goes to the heart of civilized relationships not only among
people but also among nations. When our neighbors are in
trouble, we cannot close our eyes and still be true to
ourselves.
Second, the crisis calls out to us because we can make a
difference. Because the nations are small, because they are
near, efforts that would be minor by the standards of other
crises can have a large impact on this one.
Third, whatever the short-term costs of acting now, they
are far less than the long-term costs of not acting now.
Fourth, a great power can choose what challenges to respond
to, but it cannot choose where those challenges come -- or
when. Nor can it avoid the necessity of deliberate choice.
Once challenged, a decision not to respond is fully as
consequential as a decision to respond. We are challenged now
in Central America. No agony of indecision will make that
challenge go away. No wishing it were easier will make it
easier.
Perhaps the United States should have paid more attention
to Central America sooner. Perhaps, over the years, we should
have intervened less, or intervened more, or intervened
differently. But all these are questions of what might have
been. What confronts us now is a question of what might
become. Whatever its roots in the past, the crisis in Central
America exists urgently in the present, and its successful
resolution is vital to the future.
Before discussing what we learned, we believe it would be
helpful to indicate something of how we learned.
The Commission held 30 full days of regular meetings in
Washington, plus another 12 special meetings. In all, we met
in the United States with nearly 200 people who had something
particular to contribute to our deliberations. These included
President Reagan, Secretary of State Shultz, all three living
former Presidents, four former Secretaries of State, members of
Congress, the Joint Chiefs of Staff, and an exceptionally wide
range of organizational representatives and private individuals
with knowledge of the region and of the kinds of problems
encountered in the region.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
During nine days of foreign travel -- six days in Central
America, and three in Mexico and Venezuela -- we heard from
more than 300 officials and other witnesses and briefers. On
its trips abroad, the Commission met not only with heads of
government, cabinet members and legislative leaders, but also
with leaders of the political opposition, journalists,
educators, business and labor leaders, military experts, church
officials, Indian leaders, representatives of private
organizations, experts on health and social services,
economists, agronomists -- anyone who could broaden our outlook
or deepen our understanding, including ordinary citizens from
many walks of life. Similarly in this country, we sought the
views of a wide variety of people and organizations,
representing a wide variety of backgrounds and disciplines.
We sent detailed questionnaires to 170 selected outside
experts. More than 230 other individuals and groups provided
written materials, many of them extensive, for the Commission's
use. All members of the Commission participated in the
selection of those solicited for their views.
The entire operation amounted to an intensive seminar on
Central America, conducted by what was probably the largest and
most distinguished "faculty" on Central American issues ever
assembled. Although we certainly did not become experts on the
region in the same sense in which many of those we consulted
are experts, we believe that we did become unusually
well-informed laymen. And, in the process, we found that many
of our perceptions changed.
What we have tried to bring to this report is essentially
that well-informed layman's perspective, as influenced by the
particular combinations of experience and values that, as
individuals, we brought to the Commission. We have sought to
apply that experience and those values to what we found in
Central America, and to what we learned about Central America
and the relationship between the crisis there and the larger
world.
In the chapters that follow, we present our findings and
recommendations in detail.
Chapter 2 places the Central American crisis within its
larger hemispheric context, with particular emphasis on the
twin challenges of rescuing the hemisphere's troubled economies
and establishing principles of political legitimacy.
Chapter 3 places the crisis in historical perspective,
tracing the background of the nations of Central America and
the ways in which the crisis developed.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 4 examines the economic crisis in the region, and
presents specific recommendations for measures that can be
taken to meet it -- both emergency short-term measures and
others for the medium and longer term, together with a means of
ensuring that economic, political and social development go
forward together.
Chapter 5 focuses on what we call "human development" needs
-- particularly in health and education -- and on what must and
can be done to meet them.
Chapter 6 explores the security dimensions of the crisis,
including Soviet and Cuban involvement, the problems of
guerrilla war, the situation as it is today, what can be done
to meet it, and what we recommend that the United States do to
help.
Chapter 7 examines the diplomatic aspects, including routes
which could be followed in seeking a negotiated solution.
Certain common threads run through all the chapters.
* First, the tortured history of Central America is such
that neither the military nor the political nor the economic
nor the social aspects of the crisis can be considered
independently of the others. Unless rapid progress can be made
on the political, economic and social fronts, peace on the
military front will be elusive and would be fragile. But
unless the externally-supported insurgencies are checked and
the violence curbed, progress on those other fronts will be
elusive and would be fragile.
* Second, the roots of the crisis are both indigenous and
foreign. Discontents are real, and for much of the population
conditions of life are miserable; just as Nicaragua was ripe
for revolution, so the conditions that invite revolution are
present elsewhere in the region as well. But these conditions
have been exploited by hostile outside forces -- specifically,
by Cuba, backed by the Soviet Union and now operating through
Nicaragua -- which will turn any revolution they capture into a
totalitarian state, threatening the region and robbing the
people of their hopes for liberty.
* Third, indigenous reform, even indigenous revolution, is
not a security threat to the United States. But the intrusion
of aggressive outside powers exploiting local grievances to
expand their own political influence and military control is a
serious threat to the United States, and to the entire
hemisphere.
[190b" WIS"
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* Fourth, we have a humanitarian interest in alleviating
misery and helping the people of Central America meet their
social and economic needs, and together with the other nations
of the hemisphere we have a national interest in strengthening
democratic institutions wherever in the hemisphere they are
weak.
* Fifth, Central America needs help, both material and
moral, governmental and nongovernmental. Both the commands of
conscience and calculations of our own national interest
require that we give that help.
* Sixth, ultimately, a solution of Central America's
problems will depend on the Central Americans themselves. They
need our help, but our help alone will not be enough. Internal
reforms, outside assistance, bootstrap efforts, changed
economic policies -- all are necessary, and all must be
coordinated. And other nations with the capacity to do so not
only in this hemisphere, but in Europe and Asia, should join in
the effort.
* Seventh, the crisis will not wait. There is no time to
lose.
No Room for Partisanship
If there is no time to lose, neither is the crisis in
Central America a matter which the country can afford to
approach on a partisan basis.
The people of Central America are neither Republicans nor
Democrats. The crisis is nonpartisan, and it calls for a
nonpartisan response. As a practical political matter, the
best way to a nonpartisan policy is by a bipartisan route.
This Commission is made up of Republicans and Democrats,
nonpolitical private citizens and persons active in partisan
politics. It has members from business and labor, the academic
world, the world of private organizations, former members of
the executive, legislative and judicial branches of government;
a former Senator and a former Governor, both Republicans; a
Democratic Mayor and a former Democratic National Chairman;
among the Senior Counsellors joining its deliberations have
been members of both Houses of Congress from both parties. We
are immensely grateful for the contribution made by those who
served as Senior Counsellors, though we wish to point out that
the conclusions we have drawn are those of the Commission
itself and do not necessarily reflect the views of the Senior
Counsellors.
We have approached our deliberations in a nonpartisan
spirit and in a bipartisan way, and we believe that the nation
can and must do the same.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 .. .... . ...
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Because the Commission has twelve members, each with strong
individual views, there obviously are many things in this
report to which individual members would have assigned
different weight, or which they would have interpreted somewhat
differently or put differently. Such is the nature of
commissions. But these differences were personal, not
partisan. This report, on balance, does represent what all of
us found to be a quite remarkable consensus, considering the
often polarized and emotional nature of the debate that has
surrounded Central America. Among ourselves, we found a much
greater degree of consensus at the end of our odyssey than at
the beginning. This in itself gives us hope that the nation,
too, as it learns more about Central America, its crisis and
its needs, will find its way to a united determination to take
and support the kind of measures that we believe are needed in
the interests of the United States and of the hemisphere, and
for the sake of the sorely beleaguered people of Central
America.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 2
The Commission has been asked to make recommendations on
Central America. We recognize that our mandate has this
geographic limit. But as we examined the isthmus it became
apparent that the crisis which gave rise to this Commission is
a part of a broader reality and that United States policy in
Central America must reflect a clear understanding of its
hemispheric framework.
The hemisphere as a whole is in flux. Central America's
difficulties are enmeshed in the Latin American experience,
which is different from our own.
Central America's present suffering is to an important
degree the product of internal conditions which can also be
found in Mexico and South America. Much of Latin America has
an Indian heritage; most of it was colonized by Spain. In
Central America, the mark of that experience has remained on
attitudes, political processes and ways of doing things, as it
has throughout the hemisphere to this day. The conflicts in
the isthmus derive in part from social and economic structures
whose origins, as in South America and Mexico, lie in the
sixteenth, seventeenth and eighteenth centuries.
The crisis in Central America is also partially the result
of events and forces outside the region. The soaring costs of
imported energy, the drop in world coffee, sugar and other
commodity prices, recession in the developed world, the
explosion of international interest rates, have undermined
economic progress. International terrorism, imported
revolutionary ideologies, the ambitions of the Soviet Union,
and the example and engagement of a Marxist Cuba are
threatening the hopes for political progress.
Throughout history, the U.S. policies toward the nations of
the Americas that have succeeded have been those that related
the individuality and variety of the different countries to a
concept of the hemisphere as a whole. The Monroe Doctrine, the
Good Neighbor Policy of Franklin Roosevelt and the Alliance for
Progress shared a recognition that despite the enormous
differences among nations as ethnically, culturally,
politically and historically diverse as, for example, Mexico,
Guatemala, Costa Rica, Argentina, Peru and Brazil, there was a
commonality of interest and experience calling not for
uniformity but for coherence in our policies toward the many
individual nations of Latin America. So it is today. The
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
response of the United States to the conflict in Central
America must take appropriate account of these national
differences, but at the same time must relate our interests to
those of the entire hemisphere in a way that evokes a sense of
common purpose. Although it is beyond the scope of this
Commission to recommend policies for the entire hemisphere, we
have framed our recommendations with this broader context in
mind.
The international purposes of the United States in the late
twentieth century are cooperation, not hegemony or domination;
partnership, not confrontation; a decent life for all, not
exploitation. Those objectives must be achievable in this
hemisphere if they can be realized anywhere.
Despite our different origins, the United States shares
much with Latin America. We not only share a hemisphere, we
share a history as well. Columbus's voyage, five centuries
ago, helped shatter the old order of Europe, and opened the way
to a truly New World.
We also share cultures, ideas and values. The colonial era
and the overlapping of cultures have left in the U.S. South and
West a permanent legacy of Spanish and Mexican architecture,
customs, religion, law, patterns of land ownership, and place
names. The idea of popular revolution to vindicate the right
of people to govern themselves swept this part of the world
first -- nearly simultaneously in its English and Latin regions
-- a century and a half before the colonial empires of Africa
and Asia began to disappear. Although North and South America
followed different paths of national development, the nations
of the Western Hemisphere have been moved from the beginning of
their histories by a common devotion to freedom from foreign
domination, sovereign equality, and the right of people to
determine the forms and methods of their own governance.
We also share economic interests. Of all U.S. private
investment in the developing world, 62 percent is in Latin
America and the Caribbean. Latin America is a major trading
partner of this country, accounting for more than 15 percent of
our exports and about the same share of our imports. Our
consumers and our industries depend on the region for coffee,
iron, petroleum and a host of other goods. The Panama Canal is
a vital artery of our international commerce. The economies of
Argentina, Brazil, Mexico and Venezuela are among the most
advanced and diversified in the developing world, and also
among the most heavily burdened with debt. They are major
contributors to world trade; the way that together we deal with
their debt problems will be decisive for the future of the
international financial system.
We also share a community with Latin America. So many of
our own citizens are of Latin origin that there is a special
kinship in this hemisphere. The transcontinental sweep of
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
southern United States that stretches from Miami to Los
Angeles, and which is home to many of our fastest growing urban
areas and high technology industries, regards as a natural
element of life its shared Gulf and Caribbean sea routes as
well as a 2,000 mile land border facing south. Common time
zones and short distances facilitate flows of information and
constant travel for business, education, pleasure and
employment.
The similarities should not be romanticized. Our historic
experiences have not been the same. North America did not
begin with an essentially feudal social structure, nor was
military conquest as central to us as it was in Latin America's
early history. The Iberian cultures planted different modes of
thought, different attitudes. But despite these differences
the Americas, North and South, have tried recurringly to shape
a common destiny. The sense of interdependence and mutual
reliance was manifest from the outset of the struggles for
independence. It moved President Monroe to proclaim this
hemisphere off limits to the territorial ambitions of European
colonialism. That same sense of common destiny brought the
Americas together in the first international organization for
regional cooperation, the International Conference of American
States in 1889-90. It led them some 60 years later to design
-- under the Treaty of Rio de Janeiro -- the first mutual
security system recognized by the U.N. Charter and to organize
history's boldest venture of region-wide development in the
Alliance for Progress in 1961.
We are aware that widespread ignorance about the area in
this country is an obstacle, indeed a danger. We are also
aware that our interests, our aspirations, and our capacity to
grasp the essence of the complex reality of our age will be put
to one of their most important tests in this hemisphere. This
is the spirit with which we have approached our assignment of
dealing with the prospects of a small but integral part of this
hemisphere: Central America.
TWO CHALLENGES
The hemisphere is challenged both economically and
politically. While that double challenge is common to all of
Latin America, it now takes its most acute form in Central
America.
The Economic Challenge
First, the commanding economic issue in all of Latin
America is the impoverishment of its people. The nations of
the hemisphere -- not least those of Central America --
advanced remarkably throughout the 1960's and 1970's. Growth
was strong, though not nearly enough was done to close the gap
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
between the rich and the poor, the product of longstanding
economic, social and political structures.
But then the situation turned down. Imported energy costs
went up in the 1970's, while commodities prices fell. The
developed countries went into recession. Many Latin American
governments responded by borrowing in the hope that an early
revival would allow them to carry their newly expanded
indebtedness. Instead, the cost of servicing that debt began
to rise rapidly, as international interest rates -- spurred by
anti-inflationary monetary policy in the U.S. -- shot upwards.
The nations of Latin America -- including key countries in
Central America -- were forced to alter course sharply, cutting
public expenditures on schools, health services, and roads,
restraining growth and personal incomes, slashing imports and
raising taxes along with exchange rates. The consequence has
been that standards of living, already low in comparison to the
developed world and badly skewed, have been cut back across the
board.
What appears to the international financial system as a
debt crisis has a profound human dimension in the area of this
Commission's primary concern, as it does throughout Latin
America. Joblessness is up. Malnutrition and infant mortality
have escalated. Poverty was pernicious in Latin America even
during the growth years. Fifteen years ago, at the Conference
in Medellin, Colombia, the Catholic Church spoke of the need
for a "preferential option" to concentrate public policy and
public effort on a social ethic of responsibility for the
poor. That need is more pressing today. Poverty is on the
rise everywhere in Latin America.
No Central American policy for the United States worth its
name can fail to meet this economic, social and financial
challenge, nor can we deal with Central America in isolation
from the rest of the hemisphere. The contraction of the
hemisphere's economies, and the impoverishment of its people,
must be reversed. Real growth must be restored.
The Political Challenge
Second, the political challenge in the hemisphere centers
on the legitimacy of government. Once again, this takes a
particularly acute form in Central America.
Powerful forces are on the march in nearly every country of
the hemisphere, testing how nations shall be organized and by
what processes authority shall be established and legitimized.
Who shall govern and under what forms are the central issues in
the process of change now under way in country after country
throughout Latin America and the Caribbean.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Brazil is in mid-political passage, from almost two decades
of military rule to popular elections of a civilian chief
executive, an independent legislature, civilian ministries and
a multi-party political system.
Argentina has elected its first civilian president in
years, restoring democracy and civilian control of government.
Ecuador ended military rule and elected its own civilian
president in 1979; Peru did the same in 1980. In the Dominican
Republic, free and uncorrupted elections have become the rule.
Venezuela's own democracy remains vigorous, as was evident in
its elections of December 1983, in which 92 percent of the
eligible voters participated. Colombia's democracy is equally
strong. In fact, only a handful of nations in Latin America
today are ruled through political systems closed to the
prospects of elections.
In short, democracy is becoming the rule rather than the
exception. The nations of Central America are also, each in
its own fashion, engaged in a struggle over how a nation shall
be governed. Panama expects to elect a civilian president next
year in an open and fair process. Costa Rica made its choice
years ago and is living under an authentic democratic system --
and it is no accident that Costa Rica is the least violent
society, the nation of the region most free of repression and
the one whose relations with the United States are most
particularly warm. Honduras has held a free election, choosing
a civilian president with a strong reputation for impressive
leadership. Guatemala is attempting to arrange an election for
a Constituent Assembly this year. El Salvador is in
transition; its present provisional administration is the
result of a demonstration of popular will in 1982. In March
1984 it will elect a president under a permanent constitution.
Of the nations in the region, only the Sandinista leadership in
Nicaragua, perhaps intending to imitate the political
arrangements in Cuba, has been ambiguous about -- if not
hostile to -- what would be accepted by the international
community as open, multi-party political contests. But even
the Sandinistas face strong demands from both inside and
outside the nation, especially from nearby democratic countries
such as Venezuela and Costa Rica, that they return to the
ideals of the democratic revolution against Somoza and keep
their promise of free elections made in 1979 to the
Organization of America States.
Experience has destroyed the argument of the old dictators
that a strong hand is essential to avoid anarchy and communism,
and that order and progress can be achieved only through
authoritarianism. Those nations in Latin America which have
been moving to open their political, social and economic
structures and which have employed honest and open elections
have been marked by a stability astonishing in the light of the
misery which still afflicts the hemisphere. The modern
experience of Latin America suggests that order is more often
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
threatened when people have no voice in their own destinies.
Social peace is more likely in societies where political
justice is founded on self-determination and protected by
formal guarantees.
The issue is not what particular system a nation might
choose when it votes. The issue is rather that nations should
choose for themselves, free of outside pressure, force or
threat. There is room in the hemisphere for differing forms of
governance and different political economies. Authentically
indigenous changes, and even indigenous revolutions, are not
incompatible with international harmony in the Americas. They
are not incompatible even with the mutual security of the
members of the inter-American system -- if they are truly
indigenous. The United States can have no quarrel with
democratic decisions, as long as they are not the result of
foreign pressure and external machinations. The Soviet-Cuban
thrust to make Central America part of their geostrategic
challenge is what has turned the struggle in Central America
into a security and political problem for the United States and
for the hemisphere.
There is no self-determination when there is foreign
compulsion or when nations make themselves tools of a strategy
designed in other continents.
THREE PRINCIPLES
For most of the first 200 years of its history, the United
States turned its eyes primarily towards Europe. Tradition,
trans-Atlantic alliances, cultural ties, even the physical
location of the Eastern centers of power focused attention in
this country on relations with such nations as Britain, France,
Italy and Germany. For the United States, the Atlantic
Alliance has been the central strategic relationship.
In the years since World War II, as Asia emerged as a
center of both political conflict and economic power, the
United States began to look westward -- fighting two Asian
wars, forging Asian ties, strengthening its role as a Pacific
power. Through all this time, whether looking east or west,
the United States focused its attention only intermittently on
the South.
As a result, the ties that bind this nation to Latin
America have rarely been expressed in American foreign policy
as firmly and consistently as the reality of our
interdependence demands. We have tended to view the region
superficially, too often stereotypically; our policy has
sometimes swung erratically between the obsessive and the
negligent. The 1980's must be the decade in which the United
States recognizes that its relationships with Mexico and
Executii Rsgistry
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Central and South America rank in importance with its ties to
Europe and Asia.
And we require a design to express that interest. The
Monroe Doctrine has sometimes been challenged by our neighbors
to the south -- especially in some of its unilateral
interpretations. But they have never questioned its central
inspiration: the vision of a hemisphere united by-a core of
common commitment to independence and liberty, insulated from
other quarrels, free to work out its own destiny in its own
way, yet ready to play as constructive a role in world affairs
as its resources might permit.
In any event, the challenges of today are not the
challenges of 1823. A contemporary doctrine of U.S.-Latin
American relations cannot rest on insulating the hemisphere
from foreign influence. It must also respond in an affirmative
way to the economic and political challenges in the hemisphere;
U.S. policy must respect the diversities among the nations of
America even while advancing their common interests.
Three principles should, in the Commission's view, guide
hemispheric relations; we have sought to apply them to our
considerations of Central America.
The first principle is democratic self-determination.
The vitality of the Inter-American system lies now more
than ever before in accepting a firm commitment of its member
nations to political pluralism, freedom of expression, respect
for human rights, the maintenance of an independent and
effective system of justice and the right of people to choose
their destiny in free elections without repression, coercion or
foreign manipulation. The essence of our effort together must
be the legitimation of governments by free consent -- the
rejection of violence and murder as political instruments, of
the imposition of authority from above, the use of the power of
the state to suppress Apposition and dissent. Instead we must
do all we can to nurture democracy in this hemisphere.
The second rinci le is encouragement of economic and
social development that fairly benefits all.
The encroachments of poverty must be stopped, recession
reversed, and prosperity advanced. Adherence to this principle
involves something deeper than meeting a short-term emergency.
It means laying the basis for sustained and broadbased economic
growth. There must be encouragement of those incentives that
liberate and energize a free economy. There must be an end to
the callous proposition that some groups will be "have-nots"
forever. Any set of policies for the hemisphere must address
the need to expand the economies of its nations and revive the
hopes of its people.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The third principle is cooperation in meeting threats to
the security of the region.
The present international framework for dealing with
challenges to the mutual security of the Americas is weak.
With respect to Central America, the Inter-American system has
failed to yield a coordinated response to the threat of
subversion and the use of Soviet and Cuban proxies, which have
become endemic since the day when the instruments of
Inter-American cooperation were first drawn up.
A modernizing of the regional security system is
imperative. Just as there can be no real security without
economic growth and social justice, so there can be no
prosperity without security. The Soviet and Cuban threat is
real. No nation is immune from terrorism and the threat of
armed revolution supported by Moscow and Havana with imported
arms and imported ideology. The nations of Latin America --
and of each of its regions, as is being demonstrated in Central
America -- have authentic local collective security interests.
These should be expressed in new mechanisms for regional
cooperation and consultation, and in a commitment to common
action in defense of democracy adapted to the special
circumstances and interests of the nations affected. Otherwise
the temptations of unilateralism will become overwhelming.
In the past, other parts of the hemisphere have been the
focal points of turbulence. Today's concentration of crises is
in Central America. The chapters that follow focus on that
region, and set forth the specific political, economic and
security measures which the Commission believes are necessary.
We see no way to avoid a comprehensive effort to respond to
these issues together. The remainder of this report sets forth
the ways in which this Commission believes a consistent
economic, political and security effort, one which coordinates
the best efforts of the people in Central Ajnerica, its
neighbors, and the United States, can be maintained. The way
in which that combination of crises is addressed -- or any
failure to address it with both the urgency and the
comprehensiveness it requires -- will profoundly affect not
only our national interest but the larger interests of the
hemisphere as well.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 3
CRISIS IN CENTRAL AMERICA: AN HISTORICAL OVERVIEW
Central America is gripped today by a profound crisis.
That crisis has roots deep in the region's history, but it also
contains elements of very recent origin. An understanding of
it requires some familiarity with both.
The impact of the crisis on the people of Central America
has been shattering. Its potential impact on the hemisphere,
on the United States, and, in a larger sense, on the world, is
far-reaching.
If this crisis were a purely local matter, involving the
peoples of that region alone, it would still deserve the urgent
attention of the people of the United States as a matter of
simple humanity. Its larger dimensions give us, in addition,
strong reasons of national self-interest to be acutely
concerned about its outcome.
There has been considerable controversy, sometimes
vigorous, as to whether the basic causes of the crisis are
indigenous or foreign. In fact, the crisis is the product of
both indigenous and foreign factors. It has sources deep in
the tortured history and life of the region, but it has also
been powerfully shaped by external forces. Poverty,
repression, inequity, all were there, breeding fear and hate;
stirring in a world recession created a potent witch's brew,
while outside forces have intervened to exacerbate the area's
troubles and to exploit its anguish.
Those outside forces have given the crisis more than a
Central American dimension. The United States is not
threatened by indigenous change, even revolutionary change, in
Central America. But the United States must be concerned by
the intrusion into Central America of aggressive external
powers.
In this chapter, we will explore the origins of the crisis
and try to define its present nature. This requires a brief
excursion into the region's history. That history is complex
and in some respects controversial. We neither attempt nor
pretend to present a comprehensive, definitive treatment of
it. Rather, our aim is to give enough background to place the
crisis in perspective, and to trace through certain trends that
are important to any consideration of prospects and policies
for the future.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
This chapter deals principally with the five nations of the
Organization of Central American States: El Salvador,
Honduras, Nicaragua, Guatemala and Costa Rica. A sixth
country, Belize, is geographically within Central America but
its political, economic and cultural ties are primarily with
the Caribbean. A seventh, Panama, is affected by the regional
crisis but emerged in a different historical context. The term
"Central America" tends to be rather loosely and variously
defined -- sometimes as the five, sometimes as the seven,
sometimes rather vaguely to include other contiguous parts of
North and South America. In this report, we will generally
include the seven for purposes of economic and social programs,
while focusing our discussion of the security and diplomatic
crises on the five. With respect to the latter, we follow the
usage employed by the so-called Contadora Group (Mexico,
Venezuela, Panama and Colombia), which is assisting in the
effort to resolve the conflicts within and among the five.
The Land
A bridge linking two continents, the Central American
isthmus winds in a serpentine arc between the Pacific Ocean and
Caribbean Sea, stretching 1500 miles from the base of the
Yucatan Peninsula to the Colombian border. It is dominated by
an imposing range of volcanic mountains, whose rugged patterns
have presented obstacles to commerce, communications, and
cultivation. The mountains are punctuated by breaks in Panama,
Honduras, and Nicaragua that have tantalized travellers and
entrepreneurs with visions of a trans-oceanic passage. The
mountains, where at altitudes from 3,000 to 8,000 feet the bulk
of the Central American population lives, provide a
spring-like, salubrious climate that contrasts with the
pestilential rain forest, bush jungles, and swampy marshlands
of the two coasts.
Central America is located geographically in a high-risk
area. Three tectonic plates meet along the isthmus, pushing
against each other relentlessly and creating several major and
hundreds of minor geological faults. Earthquakes, which occur
with alarming frequency, have destroyed cities, disrupted
commerce, created human misery, and even altered political
history. Lava flows and pollution have similarly wreaked havoc
on town and farm. The Caribbean coast is in the hurricane
belt, where high winds and rains have regularly wiped out
settlements and set back efforts at tropical cultivation. The
coming of rainfall in a single season between June and November
is frequently followed by long droughts, presenting monumental
problems to agriculture, navigation, and road travel.
Fxerakive R~ns;~; __rj
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The Colonial Legacy
Both conquest and the colonial experience left marks on
Central America that have greatly hindered political and
economic development. Except in a few areas, the Spanish
conquerors imposed on the Indian peoples a semi-feudal system
based on large land holdings and the exploitation of indigenous
labor. These patterns persisted from generation to generation
into our day, with wealth, education, and political power
continuing to be shared unequally between the descendents of
the conquerors and those of the conquered.
The modern history of Central America traces back to a
"Kingdom of Guatemala," which gradually emerged in the middle of
the sixteenth century. It was a product of synthesis, growing
out of a struggle between rival Spanish conquistadores from the
vice royalties of Peru and "New Spain," as Mexico was then
called. One audiencia (judiciary/legislature) was established
in Panama under Peruvian auspices, and another was established
in Guatemala, nominally subservient to Mexico, encompassing the
present-day countries of Costa Rica, Nicaragua, Honduras,
Guatemala, and El Salvador plus the Mexican state of Chiapas.
During the three centuries of Spanish colonial rule,
roughly from the 1520's to the 1820's, Central America's
political system was authoritarian; the economy was
exploitative and mercantilist; the society was elitist,
hierarchical and made up essentially of but two sharply
distinct classes; and both the Church and the educational
system reinforced the patterns of authoritarianism. Nor did
the colonial period ever provide much training in
self-governance; the large indigenous populations were never
integrated into the political life of the colonies.
There were variations up and down the isthmus, however.
Guatemala had the most gold and silver for the Spaniards to
take and the most Indians to exploit. Hence the impact of the
Spanish colonial system was strongest in that country, leaving
a legacy of political and social structures particularly
resistant to change. Panama and Costa Rica, with small
indigenous populations, little gold or silver, and located far
from the main centers of Spanish rule, felt the Spanish
colonial impact the least. El Salvador, Honduras, and
Nicaragua occupied intermediate positions.
Independence and After
Independence from Spain brought a fragmentation of
political authority but otherwise little to alter the social
institutions and practices of three centuries. The five
nations began independent life in 1823 as one: the United
Provinces of Central America. From the outset civil wars
disrupted the effort to consolidate a central government. Just
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
15 years later the union dissolved and the five went their
separate ways. The isthmus became a region of what some have
called city-states: small countries weak and vulnerable to
outside forces, and with reduced possibility for economic
growth and diversification. Professor Ralph Lee Woodward's
widely read history of the area bears the title Central
America, a Nation Divided.
Political independence brought with it no accompanying
social or economic revolution. The new Central American
nations retained important characteristics established in the
colonial era:
* Economies based on plantation agriculture.
* A concentration of large land holdings in a few hands
(except for Costa Rica).
* Societies lacking vigorous middle classes and dominated
by the landowning elites (again, except in Costa Rica).
* Poor communications within the region and relative
isolation from the outside world.
* Habits of authoritarian government.
* Ingrained reliance on centralized state jurisdiction and
tolerance of corruption.
Politically, the five nations called themselves republics
and adopted constitutions modeled in many respects on the U.S.
Constitution of 1787 and on the liberal Spanish constitution of
1812. The resulting governments had presidential and electoral
systems resembling those of the United States. But the
substance was very different. Judicial traditions based on the
Roman civil law served primarily to facilitate state control
rather than as a bulwark of individual rights. The
difficulties that arose from trying to reconcile two systems,
one political and the other legal, with distinctly different
foundations are still apparent in Central America today.
The first 30 years of independent life were chaotic for the
five republics. As elsewhere in Spanish America, political
parties labeled as "Liberal" and "Conservative" battled over
the role of the state and church-state relations. Local
leaders -- caudillos -- at the head of armed bands contended
for power. Disorder and violent conflict afflicted the
region. Central America had repudiated its colonial
institutions, yet it had not begun to develop free institutions
to replace them.
From the 1850's to the 1880's, after the first generation
of men-on-horseback had died off, some order was brought out of
the chaos. The "Liberal" parties, with their strong commitment
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
to commerce, came to power all across Central America, and for
the most part they succeeded in establishing stable
governments. But in this climate of greater order the
landholding elites began to reconsolidate their power, while
governments remained autocratic, generally under a single
dictatorial leader.
Rule by Oligarchy
The period 1890-1930 was the heyday of oligarchic rule in
Central America. In addition to the older landed oligarchy, a
commercial import/export class had arisen. A coffee boom that
began in Costa Rica in the 1870's transformed the export
economies of Central America, providing substantial new
wealth. Middle classes began to develop. Unwritten rules were
established enabling the elites -- whether military or civilian
or, more usually, a combination of the two -- to rotate or
alternate in office. Military forces, which had largely been
bands of irregulars in the service of powerful individuals,
began to come under central authority and to develop into
regular armies. This provided an important new avenue of
upward mobility for ambitious young men, and transformed the
politics of the region as the armies increasingly grew into
autonomous institutions.
All these changes occurred under oligarchic auspices except
in Costa Rica, which built upon its earlier democratic roots.
Thus when the depression of the 1930's precipitated political
and economic convulsions, Central America had no political
infrastructure -- parties, regular elections, representative
institutions -- out of which democracy could emerge.
By the first decades of the twentieth century, common
characteristics in the economic development of the five
republics had become apparent. The cultivation of a few basic
agricultural crops for export -- coffee, bananas and sugar --
dominated their economies. Particularly after the coffee boom
of the 1870's, plantations producing for export encroached on
subsistence farming. A dual agricultural system emerged:
large plantations for export crops; small plots to raise food.
This reinforced the social divisions inherited from the
colonial period. The bulk of the population survived on
seasonal plantation labor at minimal wages, and on subsistence
agriculture. A small group of families controlling the most
productive land constituted the dominant elite.
Export-oriented growth generated pockets of modernization and
higher living standards in the urban areas. But the middle
classes remained weak.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Stirrings of Change
The period of the 1930's was terribly disruptive in Central
America. As the bottom dropped out of the market for Central
America's products, a wave of instability swept the region; for
the first time traditional oligarchic rule came under serious
challenge. In El Salvador, Honduras, Guatemala, and Nicaragua
new dictators appeared. While they typically ruled with
strong-arm methods, they also often represented previously
excluded middle classes. Having restored order, these
dictators encouraged some economic development and social
modernization, and they enjoyed a degree of popularity -- at
least for a time.
By this point, two main political traditions were operating
in Central America -- and an emerging third one.
First, there was the old authoritarian tradition. This
historically dominant force still drew considerable strength
from the difficulty of establishing democratic forms in the
fragmented, violent, disintegrative context of Central America.
Second, there was a democratic tradition enshrined in
political constitutions but of only marginal importance in
practice. The democratic preference did emerge from time to
time (in Guatemala in 1944, Honduras in 1957, El Salvador in
1972), but it lacked the practical roots democracy has had in
the United States and elsewhere in the West. Except in Costa
Rica, it was not institutionalized in the form of political
parties and workable representative structures.
The third strain -- socialism -- also appeared in a variety
of forms in Central America amid the turmoil of the 1930's and
has remained present ever since, frequently mixed into both
democratic (as in Costa Rica) and Marxist or even communist
elements.
The problem for Central America was to devise a political
formula capable of dealing with these diverse tendencies, none
of which could command absolute majority support, and each of
which was unacceptable to at least some of the main contenders
for power in these societies.
Only in Costa Rica was the final formula democratic. After
a brief but decisive civil war in 1948, regular elections have
since led to periodic rotation in power by the two dominant
groups.
Elsewhere, efforts were made to combine or reconcile the
traditional and the liberal orientations, and at times even to
hint at the socialist one.
In Nicaragua, for example, after the death of Anastasio
Somoza Garcia (1896-1956), his elder son Luis made variousr
Executive Apgistry
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
attempts to relax the harsher aspects of the old
authoritarianism -- to allow a greater sense of pluralism and
freedom. In Honduras, military and civilian parties rotated in
office or else ruled jointly in an arrangement whereby military
officers controlled security matters and acted as political
arbiters, while the civilian elites managed the economy, held
key cabinet positions, and staffed the bureaucracy. In
Guatemala, after the United States helped bring about the fall
of the Arbenz government in 1954, politics became more
divisive, violent and polarized than in the neighboring
states. But even there, there were efforts to combine civilian
and military rule, or to alternate between them, in various
shaky and uneasy blends.
In El Salvador a similar system operated from 1958 to
1972. There, a group of younger, more nationalistic officers
came to power and pursued populist strategies. They allowed
the major trade union organizations to grow and to have a
measure of political participation. The Army created its own
political party, modeled after the Mexican PRI. It held
elections regularly, in which the official candidates generally
won; on the other hand, through a system of corporate
representation within the party, most major groups had some say
in national affairs.
None of these regimes was truly democratic, but the trend
seemed to favor the growth of centrist political forces and to
be leading toward greater pluralism and more representative
political orders. This trend gave hope for peaceful
accommodations and realistic responses to the profound social
changes occurring in the countries of Central America.
Political Retrogression
The trend of the 1960's toward more open political systems
was reversed during the 1970's. Whereas in Honduras the
military sponsored moderate reform and prepared the country for
a return to democracy, a period of closed political systems,
repression and intransigence began in Guatemala, Nicaragua, and
El Salvador. In each of these three countries, resistance to
change on the part of the dominant military and civilian groups
became stronger as demands for a larger share of national
income, increased social services and greater political
participation spread from the middle class to the masses of the
urban and rural poor. The armed forces tightened their control
over the day-to-day activities of government and more harshly
repressed perceived challenges to their power from trade union
or political movements.
In Nicaragua, the political opening that had seemed to be
promised in the 1960's was now closed off by Somoza's second
son, Anastasio, Jr., who took power in 1966. His rule was
characterized by greed and corruption so far beyond even the
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
levels of the past that it might well be called a kleptocracy;
it included a brazen reaping of immense private profits from
international relief efforts following the devastating
earthquake of 1972. And as opposition to his regime increased,
repression became systematic and increasingly pervasive.
In Guatemala, the more or less centrist civilian and
military governments of the 1960's gave way in the 1970's to a
succession of extremely repressive regimes. The
administrations of General Eugenio Laugerud and General
Fernando Romero Lucas were among the most repressive either in
the recent history of the hemisphere or in Guatemala's own
often bloody past. Possibilities for accommodation,
assimilation, and further democratization thus faded.
In El Salvador, the pattern was similar. Military-based
regimes that had been moderately progressive in the early
1960's had become corrupt and repressive by the 1970's. The
annulment of the victory by civilian Christian Democratic
candidate Jose Napoleon Duarte in the 1972 election ushered in
a period of severely repressive rule. It was in this context,
with its striking parallels to the developments in Nicaragua
and Guatemala, that the present crisis in El Salvador began.
It is no accident that these three countries -- El
Salvador, Guatemala, and Nicaragua -- are precisely where the
crisis for U.S. policy is centered. While there were of course
significant national variations, all three went through a
roughly parallel process in which a trend toward more open,
pluralistic, and democratic societies gave way to oppression
and polarization, precipitating the crisis which has now spread
throughout Central America.
Modernization and Poverty: The Economic Background of the Crisis
The economic developments of the post-war period --
modernization, rising expectations, persisting poverty, and
ultimately the economic shock of the late 1970's -- also helped
set the stage for the present crisis.
The period between the coming of World War II and the early
1970's was one of sustained growth. War and the post-war boom
in the developed world revived the international markets for
Central America's commodity exports. By the middle of this
century many Central Americans had come to realize that some
form of common action by the five might help to overcome the
obstacles to modernization and development created by history
and small national size.
The idea of union had never quite died in Central America.
It was therefore natural enough that the post-war experience in
Europe and the maxims of the Economic Commission for Latin
America (ECLA) under Raul Prebisch focused Central America's
attention in the 1950's on the possibility of economic unity.;
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
On December 13, 1960, representatives of the five republics
meeting in Managua signed the General Treaty for Central
American Integration, leading to the establishment of the
Central American Common Market.
The Common Market inspired a surge of energy and optimism
throughout the region. Manufacturing for import substitution
produced significant industrialization, particularly in
Guatemala and El Salvador. Intra-regional trade grew from only
$33 million in 1960 to over $1 billion in 1980, a proportional
increase two and a half times greater than the growth in world
trade during these decades. New regional institutions, such as
the Central American Bank for Economic Integration and the
Central American Economic Council, held out the promise of
region-wide growth and development based on close cooperation
among the five nations.
The Common Market, along with the external resources
provided under the Alliance for Progress, made a substantial
contribution to what the ECLA has described as a "sustained
dynamism" in the region's economy in the 1960's. Generally
favorable and stable international prices for Central America's
export commodities also contributed to this dynamic economic
growth. The region's exports went up dramatically, rising from
$250 million in 1950 to $3.2 billion in 1978. Gross domestic
product in the region increased at a rate of 5.3 percent per
year in real terms between 1950 and 1978. Incomes calculated
on a per capita basis rose at rates all the more impressive
because they were accompanied by population growth with few
parallels in the world. The five republics had a population of
less than eight million
in
1950, and
the end of the 1970's.
income doubled.
Yet
between
of more than 20 million by
those years real per capita
Post-war growth brought a sharp increase in urbanizaton.
Capital cities doubled their share of the total population.
New highways and port facilities were built. Telephone and
electric systems were expanded. More people got access to
radio and television. Advances were made in health and
education. Old centers of social power such as the armed
forces and the Roman Catholic Church lost some of their
homogeneity in the face of new ideological currents. Central
American societies became more complex. New middle groups
emerged, especially in the mushrooming cities, but the gulf
between the rich and the mass of the very poor remained.
Although some benefitted from social change and economic
growth in those decades, many others benefitted little or not
at all. In ECLA's judgment -- and the other experts the
Commission consulted on this point were in virtually unanimous
agreement - "the fruits of the long period of economic
expansion were distributed in a flagrantly `inequitable
manner." Thus, as an example, in El Salvador in 1980, 66
percent of the national income went to the richest 20 percent
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
of the population, 2 percent went to the poorest 20 percent.
According to ECLA's data, over 60 percent of the region's
population was living in poverty, over 40 percent in "extreme
poverty." The real incomes of poor families in Guatemala were
actually lower in 1980 than in 1970.
While measures of absolute poverty are inevitably arbitrary
and subject to considerable margins of error, studies show that
in El Salvador, Guatemala, Honduras, and Nicaragua during the
1970's about half of the urban population and three-quarters of
the rural population could not satisfy their basic needs in
terms of nutrition, housing, health, and education. The
population explosion magnified the problem of inequitable
distribution of national income. As we have seen, the number
of Central Americans almost tripled in 30 years. The World
Bank projects a further increase in the region's population to
38 million by the end of the century. Except in Costa Rica,
rapid urbanization and population growth overwhelmed the
limited resources that governments were prepared to devote to
social services -- or that private organizations could
provide. This was true in all fields -- education, health,
housing, and nutrition.
In short, the economic growth of the 60's and 70's did not
resolve the region's underlying social problems. About 60
percent of the populations of El Salvador, Guatemala, Honduras,
and Nicaragua (before the revolution) remained illiterate. Ten
of every one hundred babies born died before the age of five,
and, according to reliable nutritionists, 52 percent of the
children were malnourished. Somewhere between four and five
million people in the region were unemployed or underemployed.
They and their families were often living on the edge of
starvation.
The international economic crisis that developed in the
late 1970's worsened the situation dramatically. World
inflation, including the second steep jump in international
petroleum prices in the decade, hit the five countries hard.
(Only Guatemala among them has any domestic oil production of
its own.) At the same time, the escalation in international
interest rates drove up the annual cost of servicing external
debt, a particularly stringent circumstance for democratic
Costa Rica. Economic stagnation in the developed world also
had a marked impact on Central American economies, which are
especially vulnerable to the volatility of commodity prices.
As a consequence of these factors, the region's exports now buy
30 percent less in imports than they did five years ago. By
contrast, oil-importing developing countries as a group
worldwide increased their export purchasing by more than 7
percent during this period.
The economic collapse of the late 1970's, coming as it did
after a period of relatively sustained growth, shattered the
rising hopes of Central Americans for a better life. Though
I Executive Reist
L ~_ ~~ ~Yl
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
the period of modernization by no means lifted most Central
Americans out of poverty, it did arouse expectations that the
quality of life would improve. The frustration of these
expectations, along with the disappointment of efforts to bring
about political change in the region, thus offered fertile
opportunities for those both in the region and outside of it
who wished to exploit the crisis for their own advantage.
The Growth of Communist Insurgency
By 1979, in terms of modern military capabilities Cuba had
become perhaps the strongest power in the Western Hemisphere
south of the United States. It was also the country best
prepared and most eager to exploit the intensifying crisis in
Central America.
During the preceding two decades, the Cuban revolution had
already had a major effect in Central America. Castro's
successful insurgency was studied eagerly in the universities,
where the attraction of revolutionary Marxism was already
strong. Castroism was initially seen as a dynamic deviation
from the mainstream Soviet-sponsored communist movements, and
it spawned would-be revolutionary groups in all the countries
of the isthmus.
The influence of Castroism also produced schisms in the
small Moscow-linked parties of the region. They mostly held to
the orthodox view that, in the conditions then prevailing,
armed insurgency was an unworkable strategy. But during the
1970's, as political and economic conditions worsened, that
view came under increasing challenge. At the same time,
conservatives and the military were frightened by the Cuban
revolution into hardening their attitudes toward political
change.
In the early years, the major Cuban effort to export
revolution to Central America occurred in Guatemala. There,
Castro gave support to an armed insurgency that began in 1960.
Though the Soviet Union was relatively inactive after the Cuban
Missile Crisis, Castro provided arms, financing and training to
the MR-13 guerrilla movement and later to the rival Armed
Forces of Revolution (FAR). This was not an isolated tactic.
Cuba was following the same practice in this period with
similar movements in Venezuela, Colombia and Peru. Indeed, it
was the discovery of Cuban arms landed in Venezuela which
resulted in the OAS decision to require the other members to
cut trade and diplomatic ties.
The Guatemalan Army's successful counter-insurgency
campaigns, Castro's increasing disappointment over the
factional infighting of the Guatemalan guerrillas, and his
disillusionment with the effort generally to export revolution
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
to Latin America (climaxed by Che Guevara's defeat and death in
Bolivia), greatly reduced the guerrilla threat in Guatemala by
1968.
In the succeeding years, and after Castro's decision to
support the invasion of Czechoslovakia, the Cubans seemed to
adopt the Soviet strategy of attempting to fashion normal
diplomatic and commercial relations with a variety of
governments in the hemisphere, while downplaying the
revolutionary mission. Diplomatic ties were established with
such leading countries as Argentina, Peru, Chile (before
Allende's fall), Venezuela and Colombia. Contacts were opened
with the United States and, in 1975, the U.S. cooperated in the
OAS to eliminate the mandatory nature of that organization's
sanctions against Cuba. Castro's venture into Angola put an
end for a time to the U.S. effort to establish a basis for
understanding with Cuba. But negotiations resumed two years
later and led to the opening of diplomatic offices ("interest
sections") in the two capitals. However, widening Cuban
military involvement in Africa and Castro's unwillingness to
discuss the question of Cuba's foreign interventions prevented
further movement toward normalization of relations.
In 1978 Castro disappointed those who thought he had
abandoned the export of revolution in this hemisphere. He saw
new opportunities. Guerrillas were once again in the field in
Guatemala; the elements of a promising insurgency were present
in El Salvador; and, above all, a particularly inviting
situation presented itself in Nicaragua where the Somoza
dictatorship was beginning to crumble. The United States was
still suffering the after-effects of Vietnam and Watergate. At
the same time, Castro's Soviet patrons, who had not actively
supported the armed struggle during the 1960's, were coming
around to his view that the time for guerrilla war in Central
America had arrived.
Their conversion to the doctrine of armed violence became
complete with the collapse of Somoza in Nicaragua. Although
Venezuela, Costa Rica, Panama, and other Latin American
countries assisted the revolutionaries in Nicaragua, and
although the refusal of the U.S. to supply arms helped
precipitate Somoza's fall, Cuban support was a particularly
important factor in the Sandinista triumph. It was Castro who
unified the three Nicaraguan guerrilla factions and provided
the weapons, supplies, and advisers that enabled the
Cuban-oriented comandantes to establish themselves as the
dominant group in the revolution.
Cuban and now also Nicaraguan support was subsequently
critical in building the fighting forces of the Farabundo Marti
Liberation Front in El Salvador, in maintaining them in the
field, and in forcing them to unite in a combined effort in
spite of the deep-seated distrust among the guerrilla
factions. Indeed, it was a meeting hosted by Castro in
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
December 1979 that had produced agreement among the Salvadoran
insurgent factions to form a coordinating committee, as was
publicly announced the following month.
In March 1982, the Chairman of the Intelligence Oversight
Committee of the U.S. House of Representatives stated that
there was "persuasive evidence that the Sandinista government
of Nicaragua is helping train [Salvadoran] insurgents and is
transferring arms and support from and through Nicaragua to the
insurgents. They are further providing the insurgents with
bases of operation in Nicaragua. Cuban involvement in
providing arms - is also evident." Specifically, Nicaragua's
position on the isthmus facilitated the establishment of
several guerrilla training camps and of guerrilla command and
control facilities, as well as a variety of propaganda and
covert activities and the transportation of tons of weapons.
The evidence reveals that arms flowed into El Salvador from
Nicaragua in preparation for the Salvadoran guerrillas'
unsuccessful "final offensive" of January 1981. Air supply of
arms to the Salvadoran guerrillas came from Nicaragua's
Papalonal airfield, small boats smuggled arms across the Gulf
of Fonseca, and indirect supply routes which involved the use
of Costa Rican territory were developed by the Sandinistas.
The evidence also indicates that the Salvadoran guerrilla
headquarters in Nicaragua evolved into a sophisticated command
and control center.
At this writing, there are reports that the Sandinistas
have cut back on their support for insurgency in the region,
although the evidence is far from clear. One explanation may*
be that the Salvadoran guerrillas have been able to obtain
ample arms within El Salvador. Moreover, some evidence
indicates that arms shipments to El Salvador from Nicaragua,
although reduced, continue -- particularly shipments of
ammunition. In any event, nothing we are aware of would
indicate that the Sandinistas' ultimate commitment to the cause
of the Salvadoran guerrillas -- or to the cause of armed
revolution in the region -- has diminished.
The Present Crisis
As we have seen, Central America's contemporary crisis has
been a long time in the making. By the late 1970's, the
increasingly dangerous configuration of historic poverty,
social injustice, frustrated expectations, and closed political
systems was suddenly exacerbated by world economic recession
and by intensified foreign-promoted communist insurgency. And
just as the economic collapse and political impasse offered an
opportunity for the insurgents, the insurgency aggrevated the
economic and political crisis by spreading violence and fear.
To varying degrees, but with many common elements, this crisis
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
is reflected in the situation of each of the five Central
American nations.
El Salvador. Nowhere is the link between economic decline
and insecurity more apparent than in El Salvador, once perhaps
the leading beneficiary of the Central American Common
Market. El Salvador today faces violence and destruction that
threaten economic collapse. Planting and harvesting have been
disrupted, buses and trucks burned, bridges and electric pylons
dynamited. The cumulative direct cost of the war to the
economy has been estimated at more than $600 million, with
indirect costs far higher. El Salvador's economy is now less
than three-quarters the size it was in 1978, and national
income on a per capita basis is roughly at the level of the
early 1960's.
The insurgents themselves acknowledge that destruction of
the country's basic infrastructure is a key ingredient in their
strategy to bring down the government. They seek victory
through both economic and military attrition. Although their
absolute numbers have not increased over the last three years,
and although they have not attracted the broad popular support
they hoped for, the guerrillas after four years of experience
in the field demonstrate an increasing capacity to manuever,
concentrate their forces and attack selected targets. They
maintain sporadic control over areas in the eastern provinces
and pose a hit-and-run threat virtually everywhere outside the
major urban areas. Guerrilla forces regularly attempt to
intimidate and coerce local populations with shootings,
abductions and other strong-arm tactics. And the human costs
of the war have been immense. Displaced Salvadorans driven
from their homes and leading a precarious existence within the
country number in the hundreds of thousands. Many thousands
more have left El Salvador as refugees.
On the other side, the Government of El Salvador is
severely hampered by the erosion four years of war have
produced in the country's basic institutions -- by the
difficulty it has in enforcing its authority and carrying out
its functions. For their part, the armed forces have increased
their manpower four-fold but still face problems in leadership
and the command structure, as well as the need for more
equipment and training. But the war effort suffers most of all
from the terrible violence engulfing El Salvador's civilian
population. Since 1979 more than 30,000 non-combatants have
been killed. Government security forces and the right-wing
death squads associated with them are guilty of many thousands
of murders. These enemies of non-violent change above all
threaten hopes for social and democratic reform.
There was little dispute among the witnesses appearing
before the Commission that, in the words of one of them, 'E1
Salvador needed a revolution' -- a democratic revolution. The
Executive go istry
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
coup d'etat carried out by young officers in October of 1979
put an end to the brutal regime of General Romero and opened
the way for that revolution. In the years since, even in the
midst of escalating violence, the struggle for basic reform and
a democratic transformation has continued. A sweeping program
of land reform, now affecting 20 percent of the country's
arable land, was launched; a Constituent Assembly election was
held in which about 80 percent of those eligible went to the
polls under very adverse circumstances; a new constitution has
now been written and the country is preparing to elect a
president in March.
Guatemala. Guatemala is also suffering from violence and
economic decline. Its economy is the largest and most
diversified in Central America. But it still depends on coffee
exports for more than 60 percent of its agricultural foreign
exchange earnings. With the decline in real prices for coffee
during the last few years, the economic growth rates, quite
satisfactory in the 1970's, turned negative. Insurgency and
political violence dried up sources of international credit.
Stagnation of the Central American Common Market, in which 80
percent of Guatemala's industrial exports are normally sold,
hit the industrial sector hard. Gross national product fell by
over 4 percent in 1983.
Guatemala's economic troubles affect a society long
afflicted by the most extreme social inequity. Sanitation,
potable water and proper shelter barely exist in the country's
rural areas, where almost two-thirds of the population live.
More than 50 percent of adults are illiterate, and life
expectancy is less than 60 years. Overshadowing all social
issues in Guatemala is the presence of a large and culturally
distinct Indian population. Centuries of isolation and
passivity are now giving way among the Indians to discontent
and a drive to participate in Guatemala's economy and
politics. Thus the crisis there takes on an extra dimension.
In 1982, young officers broke the political pattern of the
past, overthrowing the brutal regime of General Lucas and
installing a junta headed by the maverick General Efrain Rios
Montt, who subsequently named himself President. Under Rios
Montt the Guatemalan army made significant progress against the
guerrilla forces, combining civic action with aggressive
military action into a strategy of "beans and bullets." The
government curbed the murderous activities of the security
services in the cities, but set up secret tribunals with the
power to give death sentences; and some rural areas were
reportedly terrorized with killings designed to end local
support for the guerrillas.
A new military regime, which replaced that of Rios Montt
last year, has scheduled constituent assembly elections for
July of 1984, promised general elections for 1985 and announced
that the armed forces will stay out of the political process.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
With 20 years of experience in counter-insurgency, the
Guatemalan army has so far been able to contain the guerrilla
threat, despite the lack of outside assistance, and despite
shortages of equipment and spare parts. But violence in the
cities -- terrorist attacks by the extreme left and the use of
murder by the security services to repress dissent -- is again
growing. Insecurity thus spreads through the country.
Nicaragua. In Nicaragua the revolution that overthrew the
hated Somoza regime has been captured by self-proclaimed
Marxist-Leninists. In July of 1979 the Sandinistas promised
the OAS that they would organize "a truly democratic
government" and hold free elections, but that promise has not
been redeemed. Rather, the government has been brought fully
under the control of the Sandinista National Directorate. Only
two months after giving their pledge to the OAS and while
successfully negotiating loans in Washington, the Sandinistas
issued Decree No. 67, which converted their movement into the
country's official political party and laid the foundation for
the monopoly of political power they now enjoy. The Sandinista
Directorate has progressively put in place a Cuban-style
regime, complete with mass organizations under its political
direction, an internal security system to keep watch on the
entire population, and a massive military establishment. This
comprehensive police and military establishment not only
ensures the monopoly on power within Nicaragua, it also
produces an acute sense of insecurity among Nicaragua's
neighbors.
From the outset, the Sandinistas have maintained close ties
with Cuba and the Soviet Union. There are some 8,000 Cuban
advisers now in Nicaragua, including at least 2,000 military
advisers, as well as several hundred Soviet, East European,
Libyan and PLO advisers. Cuban construction teams have helped
build military roads, bases and airfields. According to
intelligence sources, an estimated 15,000 tons of Soviet bloc
arms and equipment reached the Sandinista army in 1983. This
military connection with Cuba, the Soviet Union, and its
satellites internationalizes Central America's security
problems and adds a menacing new dimension.
Nicaragua's government has made significant gains against
illiteracy and disease. But despite significant U.S. aid from
1979 to 1981 (approximately $117 million), its economic
performance has been poor, in part because of the disruptions
caused by the revolution, in part because of the world
recession, and in part because of the mismanagement invariably
associated with regimes espousing Marxist-Leninist ideology.
National income per capita is less than $1,000, about equal to
that of the early 1960's, and Nicaragua is plagued by shortages
of food and consumer goods, with the result that extensive
rationing has been instituted.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Under military pressure from Nicaraguan rebels who
reportedly receive U.S. support, and under diplomatic pressure
from the international community, especially from the Contadora
group, the Sandinistas have recently promised to announce early
this year a date and rules for 1985 elections; have offered a
partial amnesty to the anti-Sandinista guerrillas; have claimed
a relaxation of censorship on La Prensa, the only opposition
newspaper; have entered into talks with the Roman Catholic
hierarchy; and have issued proposals for regional security
agreements. In addition, reports from Sandinista sources in
Managua have hinted at a permanently reduced Cuban presence and
of diminished support to other Marxist-Leninist revolutionary
groups in Central America -- although we have no confirmation
that either has taken place or is likely to take place.
Whether any one of these moves reflects a true change of course
or merely tactical maneuvers remains to be seen.
Honduras. Honduras borders Nicaragua and believes itself
threatened by the Sandinistas' highly militarized and radically
revolutionary regime. In Honduras an elected government is
struggling to preserve security and maintain a democratic order
established just two years ago after the military backed a
return to constitutional, civilian rule. The government is
also struggling to restore economic growth in the face of what
President Roberto Suazo has called the worst economic crisis in
the nation's history. The Sandinista military buildup -- huge
by Central American standards -- puts heavy pressure on
Honduras to strengthen its own forces at the expense of its
development needs. The clandestine transshipment of arms from
Nicaragua across Honduran territory and over the Bay of Fonseca
traps Honduras in the bitter conflict of its neighbor.
The Suazo government has pursued national security through
closer military ties with the United States and by supporting
anti-Sandinista guerrillas operating from Honduran territory,
reportedly in cooperation with the U.S. Honduras has rejected
Nicaraguan proposals that such issues as border security and
arms trafficking be addressed on a bilateral basis, insisting
that a comprehensive regional political settlement, including
an unmistakeable commitment to democratic pluralism by all five
countries, is essential if peace is to be restored.
Honduras's economy is highly dependent on coffee and banana
exports and has suffered severely in recent years from the
weakness in the international commodity markets. High rates of
economic growth in the late 1970's have been reversed. Gross
domestic product grew by less than 1 per cent in 1981 and
declined by 2.5 percent the following year. According to the
government's own figures, 57 percent of Honduras's families
live in extreme poverty, unable to pay the cost of the basic
basket of food. Population has been growing by an
extraordinary 3.4 percent annually, and 48 percent are below
the age of 15. The mixture of extreme poverty, high
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
unemployment, steadily deteriorating social conditions and a
very young population is potentially explosive.
Costa Rica. In Costa Rica a long-established democratic
order remains healthy, but the nation's economy is in distress
and Costa Ricans are increasingly concerned that the violence
in the region will intrude on their hitherto peaceful oasis.
The international recession and the stagnation of the Central
American Common Market caused a severe economic decline.
National income per capita fell by 18 percent between 1980 and
1982. Unemployment doubled. Deterioration in the country's
trade balance -- in large part due to the drop in coffee prices
and the rise in oil prices -- led to heavy international
borrowing. Costa Rica's foreign debt is now over $3 billion.
Interest payments alone that were due in 1983 came to $500
million, or 58 percent of anticipated export receipts; arrears
currently stand at $1 billion.
The government of President Luis Alberto Monge has
responded seriously, adopting a severe austerity program,
raising taxes, increasing fuel prices and public utility
charges and freezing government employment. Efforts have been
made to establish a realistic exchange rate, to cut public
sector spending and bring the finances of autonomous agencies
under central government control. However, the Monge
administration is committed to maintaining the social and
educational programs that have been so important in the
nation's development. These programs have contributed to a 90
percent literacy rate and a life expectancy of 73 years --
among the best figures for those categories in all of Latin
America.
On its visit to Costa Rica, the Commission found great
anxiety about the situation in Nicaragua. Costa Rica has no
armed forces beyond a small civil guard and rural
constabulary. A dispute with Nicaragua over navigation on the
San Juan River and the operations of anti-Sandinista guerrillas
in the area have created a high degree of tension along the
northern border. Sandinista and Cuban propaganda campaigns
vilifying their country, and Sandinista political and
intelligence operations there, have alarmed Costa Ricans. On
November 10, 1983, President Monge declared strict military
neutrality in Central America's conflicts, making clear that
his government intended to remain unarmed and to continue to
rely on international agreements for its security. But he also
made clear that Costa Rica will not be neutral politically as
between "democracy and totalitarianism."
The common dangers. Although the current situation differs
substantially from country to country, there are many common
elements.
The region as a whole has suffered severe economic
setbacks. All five nations are markedly poorer than they were
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
just a few years ago. Intra-regional trade has fallen
drastically. The Common Market is threatened with extinction
as the resources necessary to sustain it dry up. Political
violence and the menace of the radical left have caused huge
flights of capital. Investment, even in the leading
agricultural export sectors, has come virtually to an end.
The tragedy of the homeless is one of the most bitter
fruits of Central America's conflict. Although no accurate
count of refugees and displaced persons is available, the
Commission received estimates of up to one million Central
Americans who have left their homes: Nicaraguans moving into
Costa Rica and Honduras to escape the oppression of the
Sandinistas; Guatemalan Indians fleeing into Mexico from the
conflict in the highlands; Salvadorans seeking safety in
Honduras, or a better life in the United States. But those who
must endure the worst conditions are the displaced, driven from
their homes but unable to seek refuge in another land.
Other costs are also evident. According to testimony
before the Commission, health, nutrition and educational
services that were already badly deficient are declining
further. Unemployment and underemployment are spreading -- an
overriding social and economic problem in all five countries.
The high rate of population growth magnifies these problems.
Job opportunities are vanishing, even as a quarter of a million
young people are entering Central America's job markets each
year. In a region where half of the population is below the
age of 20, the combination of youth and massive unemployment is
a problem of awesome -- and explosive -- dimensions.
The configuration of economic recession, political
turbulence and foreign intervention makes the crisis in Central
America both exceptionally difficult and exceptionally
ominous. Although turmoil has often accompanied economic
difficulty in Central America, it has never before been so
calculated to create chaos and want. This both intensifies the
conflict and accelerates the economic and political decay of
the region.
The prospect of even greater calamaties should not be
underestimated. None of the five Central American states is
free of war or the threat of war. As the conflicts intensify,
and as Nicaragua builds an armed force with firepower vastly
greater than anything ever seen before in Central America, the
threat of militarization hangs over the region. Were this to
happen, it could further warp Central America's societies and
shut off the possibilities for internal and external
accommodations.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The United States and Central America
Historical perspective. The United States has been
involved, sometimes intimately, in the affairs of Central
America for more than a century. The record of that past is a
mixed one; it must be understood if we are to address today's
crisis constructively.
After the 1848 war with Mexico, the United States developed
a keen interest in opening a secure transportation route to its
new territories on the Pacific. It took that era's sailing
ships no less than three months to get from New York to
California. A canal through Central America would serve both
safety and speed. At first, Nicaragua seemed a particularly
favorable site. The canal was eventually built in Panama more
than half a century later, after President Theodore Roosevelt
secured U.S. rights to the Canal Zone by helping to arrange a
coup that established Panama's independence from Colombia. But
it was interest in a canal that first spurred U.S. involvement
in Nicaragua and the isthmus.
For the most part, U.S. policy toward Central America
during the early part of this century focused primarily on
promoting the stability and solvency of local governments so as
to keep other nations out. This was reflected in Theodore
Roosevelt's Corollary to the Monroe Doctrine, which held that
the United States should take action to prevent situations from
arising that might lead to interventions by extra-hemispheric
powers. Theodore Roosevelt once defined the sole desire of the
United States as being "to see all neighboring countries
stable, orderly and prosperous." This formulation reflects
both a great-power interest in keeping the hemisphere insulated
from European intrigue and the concern for others' well-being
that has often animated our foreign policy. The result,
was a high degree of interventionism in Central
ver
,
e
w
o
h
America during the early 1900's.
The United States intervened
landing Marines and deposing a pr
ines r
M
ar
e
h
T
restore stability.
one
t
eturned in 1912 and, w
brief interruption, they stayed until 1933. Before leaving,
the U.S. authorities created a single National Guard with
responsibility for all Nicaraguan police and defense
functions. The immediate purpose was to provide stability; the
ultimate result was to create the instrument Anastasio Somoza
used after the occupation to impose a personal dictatorship
once the Marines left. The ability of Somoza and later his
sons to portray themselves as friends and even spokesmen of the
U.S. began with the use they were able to make of the legacy of
U.S. military occupation, thereby creating an identity between
the U.S. and dictatorship in Central America that lingers,
independent of the facts, to this day.
directly
in Nicaragua
in
1909,
esident i
n an effort
to
h
i
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Besides military interventions, the U.S. used other forms
of pressure as well. At various times these included customs
receiverships, debt refundings, and non-recognition of
governments that had come to power by force. None of these
policies worked very well, and they aroused considerable
resentment. In addition, private U.S. citizens sometimes
engaged in free-wheeling operations of their own -- such as an
invasion of Nicaragua in the late 1850's by freebooter William
Walker, or the financing of a revolution in Honduras in 1911 by
Samuel Zemurray to protect his shipping and banana interests.
The legacy of these private interventions also continues,
understandably, to color the attitudes of many Central
Americans towards the United States.
Franklin Roosevelt's Good Neighbor Policy was designed to.
signal the end of the era of intervention and to put relations
with all of Latin America on a basis of mutual respect and
friendship. But in practice -- and particularly when World War
II put an added premium on good relations with neighboring
governments -- this policy of friendship and non-intervention
had the paradoxial effect of continuing to identify the United
States with established dictatorships.
The importance of the United States to the region's
economies has also been a powerful element in shaping Central
American attitudes toward us. Beginning in Costa Rica almost a
century ago, U.S. capital developed the banana industry and
monopolized it throughout the isthmus. For decades, the United
Fruit Company was known in the area as "the octopus." It
controlled much of the region's transportation and
communications. Bananas were vital to the economies of several
countries, and United Fruit dominated the international markets
for the fruit. Since the 1950's patterns of both land
ownership and distribution in the banana industry have
diversified. United Fruit itself no longer exists; its
successor, United Brands, is widely regarded as both a model
citizen and a model employer. But the questionable practices
followed by the fruit companies in those early years, together
with the power they wielded over weak governments, did a lot to
create the fear of "economic imperialism" that to some degree
still persists among Central Americans.
A history of cooperation. This, however, is only one side
of the history of U.S. relations with Central America. The
U.S. government has also made extensive positive efforts to
advance Central American development, beginning at the turn of
the century with a public health campaign against yellow
fever. During the Second World War the Institute of
Inter-American Affairs, headed by Nelson Rockefeller, was
established. The Institute developed a system of "Servicios"
-- bilateral organizations to finance and manage projects in
health, education and housing. Through the decade of the
1950's the Servicios provided training and experience to a new
generation of Central American technicians and professionals.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
With the launching of the Alliance for Progress in 1961,
the role of the United States in Central American development
underwent a major transformation. This was a bold and
unprecedented effort to encourage comprehensive national
planning and to promote a wide array of social, political, tax
and land reforms, supported by significantly increased
resources from the United States, the newly created
Inter-American Development Bank, the World Bank and other aid
donors. The assistance from the United States, and perhaps
equally as significant, the personal identification of
President Kennedy with the program, was a critical factor in
the surge of Central American development which began in the
1960's.
U.S. assistance was instrumental in the creation of
effective central banks and private intermediate credit
institutions, and in the establishment of agricultural
cooperatives, housing projects, roads,-health centers,
population assistance, and technical training. The Alliance
for Progress also provided major funding and cooperative
planning to the Central American Common Market, which was
perhaps its most important single contribution to Central
American growth during this period.
In essence, the Alliance was a compact between our
government and the governments of Latin America. The goals of
the Alliance were three: economic growth, structural change in
societies, and political democratization. But as we have seen,
it was only in the first area that significant progress was
made. Central America's growth rate of over 5 percent per
capita during the 1960's far surpassed the 2.5 percent target
for all of Latin America laid down in the charter of the
Alliance. An impressive inventory of physical infrastructure
was constructed in the five Central American countries during
this period, including schools, hospitals, low-cost housing,
and sewage systems.
But the other two goals of the Alliance, structural change
and political democratization, proved much more difficult to
achieve.
Direct private investment in Central America by U.S. firms
also continued to grow during these years. While that
investment might seem small in relation to total U.S.
investment abroad (currently about 2.4 percent, including
Panama), it was large in Central American terms. It has
contributed substantially to the region's growth, as many
Central Americans are quick to acknowledge. At the same time,
it has been a constant target of the propaganda of the radical
left, which has played upon the theme of economic hegemony and
"imperialism."
Central America's dependence on trade with the United
States has, of course, always been high. Though the portion of
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
the region's exports that came to the United States declined
from 61 percent in 1955 to 36 percent in 1975, the U.S. still
led all other countries as a market for Central American
products and commodities. While such dependence remains a
sensitive issue, investment from the U.S. and trade relations
with the U.S. are critically important to the economies of
Central America.
Mixed results. The record of United States involvement in
Central America during these critical years is, in short,
mixed. The Alliance for Progress was a major force for
modernization and development. U.S. assistance programs have
made and continue to make an important contribution. Whatever
the mistakes of the past, private U.S. investment in the region
now plays a vital and constructive role.
It may be that U.S. diplomacy gave too little attention to
the growing problems in Central America during the past two
decades. Certainly, the U.S. has at times been insensitive, at
times interfering, at times preoccupied elsewhere. This is a
far cry, however, from saying, as the Sandinista National
Directorate and others say, that this nation's policies have
been the principal cause of the region's afflictions.
U.S. Interests in the Crisis
When strategic interests conflict with moral interests, the
clash presents one of the classic challenges to confront
societies and statesman. But in Central America today, our
strategic and moral interests coincide. We shall deal later in
the report with the specifics of those interests. But in broad
terms they must include:
* To preserve the moral authority of the United States. To
be perceived by others as a nation that does what is
right because it is right is one of this country's
principal assets.
* To improve the living conditions of the people of Central
America. They are neighbors. Their human need is tinder
waiting to be ignited. And if it is, the conflagration
could threaten the entire hemisphere.
* To advance the cause of democracy, broadly defined,
within the hemisphere.
* To strengthen the hemispheric system by strenthening what
is now, in both economic and social terms, one of its
weakest links.
* To promote peaceful change in Central America while
resisting the violation of democracy by force and
terrorism.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* To prevent hostile forces from seizing and expanding
control in a strategically vital area of the Western
Hemisphere.
* To bar the Soviet Union from consolidating either
directly or through Cuba a hostile foothold on the
American continents in order to advance its strategic
purposes.
In short, the crisis in Central America is of large and
acute concern to the United States because Central America is
our near neighbor and a strategic crossroads of global
significance; because Cuba and the Soviet Union are investing
heavily in efforts to expand their footholds there, so as to
carry out designs for the hemisphere distinctly hostile to U.S.
interests; and because the people of Central America are sorely
beset and urgently need our help.
The Future
We think this challenge can -- and must -- be met. The
Commission takes heart in the refusal of Central Americans to
succumb to despair. Everywhere we found hope for a democratic
future and a readiness to sacrifice toward that end. The high
level of sustained economic growth during the postwar period
demonstrates that Central America has the human and material
resources to develop rapidly. The region's leaders, both in
government and in the private sector, expressed their
understanding that there must be greater equity in the
distribution of economic benefits and greater justice in social
relations. If that understanding is translated into reality,
the opportunity for more balanced and sustained development
should be at hand.
We shall discuss in a later chapter what can be done to
revive the economies of the region. Let us simply note here
that the small size of these countries means that significant
but not vast amounts of outside assistance can make an
important difference -- and that with such assistance Central
America can progress.
The people of Central America have lived too long with
poverty, deprivation and violence. The current turmoil must
not be allowed to shatter their hopes for a brighter future.
They have endured too many generations of misrule to let
their aspirations for democratic political development be
dashed in this generation on the rocks of fear, division and
violence. Not least, their own security -- and ours -- must no
longer be threatened by hostile powers which seek expansion of
influence through exploitation of misery.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
-39-
The crisis, thus, poses an urgent challenge to the United
States. But that challenge in turn presents us with an
opportunity -- an opportunity to help the people of Central
America translate their dreams of a better and a freer life
into reality.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 4
TOWARD DEMOCRACY AND ECONOMIC PROSPERITY
The crisis in Central America has no single, simple cause,
but the troubled performance of the region's economies has been
a major factor. They were among the most dynamic in the world
during the 1960's and early 1970's. But that growth was
unevenly distributed and poverty continued to plague most of
the region's people. As the Final Document of the Catholic
Conference of Latin American Bishops at Puebla, Mexico
recognized in 1979, there was a "growing gap between rich and
poor," which the conference characterized as a "contradiction
of Christian existence." This contributed to a growing
political frustration in several countries, intensified by the
fact that some sectors of these societies were enjoying
economic success.
Then, in the late 1970's, production, export earnings,
incomes, profits, and consumption all began to decline. The
result was a sharp economic contraction in each country of the
region. The effects have been particularly severe for those
who were denied participation in the earlier era of rapid
growth.
Yet our meetings with the leaders and people of Central
America and our consideration of the facts put before us during
the hearings have convinced us that the Central American
economies can grow again, and that the fruits of that growth
can be more equitably shared. This will require that:
* Economic growth goes forward in tandem with social
and political modernization.
* Indigenous savings are encouraged and supplemented by
substantial external aid.
* The nations of the region pursue appropriate economic
policies.
* In particular, these policies recognize that success
will ultimately depend on the re-invigoration of
savings, growth, and employment.
The program the Commission envisions -- aimed at promoting
democratization, economic growth, human development and
security -- would break new ground. Most past U.S. development
programs have been predominately economic. We argue here that
the crisis in Central America cannot be considered in solely
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
economic or political or social or security terms. The
requirements for the development of Central America are a
seamless web. The actions we recommend represent an attempt to
address this complex interrelationship in its totality, not
just in its parts.
This chapter focuses on broad issues of economic
performance, recovery and expansion. We propose specific
programs to reinvigorate critical elements within the Central
American economies in conjunction with social and political
change and progress. We envision, in the short term, an
emergency stabilization program and, in the medium and long
term, a new multilateral regional organization to measure
performance across the entire political, social, economic, and
security spectrum, and to target external aid resources where
they can provide the most significant- impetus. In support of
these efforts, we urge a five-year commitment by the United
States to a substantially increased level of economic
assistance.
We recognize that large-scale economic aid alone does not
guarantee progress. The most successful growth efforts in the
postwar period -- including Central America's own sustained
expansion during the 1960's and 1970's -- were led by the
private sector. In these cases governments provided
appropriate incentives and eliminated roadblocks, rather than
trying to make themselves the engines of growth. This must be
done again in Central America.
Success will turn in part on the ability of the nations of
Central America to take full advantage of the enterprise,
courage, and initiative of individuals and of non-governmental
institutions and groups: businesses, voluntary organizations,
the churches and their lay organizations, trade unions,
agriculture and peasant leaders and cooperatives. All these
have roles to play.
We recognize that it is unlikely that the social inequities
and distortions that have accumulated over the last five
centuries will be corrected during the next five years. But
the groundwork for recovery should be laid as soon as
possible. To that end, bold initiatives are needed. The costs
of not meeting the challenge in Central America would be too
great, today and for generations to come.
CURRENT ECONOMIC CONDITIONS AND THEIR CAUSES.
Before presenting our policy recommendations, we turn first
to an examination of current economic conditions and of the
causes of the crisis. Adverse international economic and
financial developments, natural disasters, ineffective economic
policies within Central America, structural economic
weaknesses, and high levels of violence have combined to
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
produce inflation, a decline in economic activity, capital
flight, and problems in servicing debt. The results have
imposed particularly grim burdens on the poor.
By 1983 real per capita income in Nicaragua was 38% below
the peak level reached in 1977; the contraction in El Salvador
was 35%. Costa Rica (-23%), Guatemala (-14%) and Honduras
(-12%) have also suffered. Another way of looking at the
economic decline is to note that in Costa Rica, Guatemala, and
Honduras the absolute levels of real per capita income today
barely equal those of the mid 1970's. In El Salvador and
Nicaragua real per capita income has fallen to the levels of
the early 1960's.
GDP Decline from Peak Year Through 1983
GDP Peak Year GDP per capita Peak Year
El Salvador -25% 1978 -35% 1978
Honduras - 2% 1981 -12% 1979
Costa Rica -15% 1980 -23% 1979
Guatemala - 7% 1981 -14% 1980
Nicaragua -22% 1977 -38% 1977
The pattern of export-led growth that characterized regional
economic development in the 1960's and 1970's resulted in
economies which are highly sensitive to world economic conditions,
as well as highly interdependent. An economic shock in one
country affects all. This is particularly true of the five
members of the Central American Common Market -- Costa Rica, El
Salvador, Guatemala, Honduras, and Nicaragua. They developed a
strong trade among themselves in manufactured goods and developed
much of their economic infrastructure (e.g., transportation and
power systems) on a regional basis. One result is that, despite
the political differences dividing the region, Nicaragua remains
an essential part of the Central American economy, although the
pronounced deterioration in that country over the last several
years has undermined some of the linkages with the rest of the
region.
The contraction of the past several years has led to higher
levels of unemployment and underemployment, and increased
poverty. According to the Economic Commission for Latin America,
more than one-third of the region's population lacks sufficient
income to purchase a nutritionally adequate diet. The
consequences are poor health conditions, inadequate
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
-43-
nutrition, deficient education, and the other social problems
described in the next chapter.
Continued rapid population growth has compounded the human
consequences of the economic collapse. The population of the
Central American isthmus nearly doubled from 1960 to 1981, from
12 to 23 million. During these years, population growth rates
slowed significantly only in Costa Rica and Panama. Overall,
the regional growth rate remains around 3 percent, among the
highest in the world. Current projections are for a regional
population of 38 million in the year 2000, with population
growth averaging 2.7 percent per year; at that rate, the
population would double in 26 years.
Causes of the Recent Decline
Although the economies of the region were once among the
most dynamic in the world, they are now in decline. This
painful change can be attributed to several factors:
High oil prices, world inflation, prolonged world
recession, and weak demand and prices for commodity exports
All of the countries in the region were badly affected by
the sharp rise in oil prices during the 1970's. Oil imports in
1981, after the second round of price rises and before the
collapse of Central America's exports, cost more than one-fifth
of export revenues. The high cost of energy imports is a
continuing problem. Slack world demand for Central America's
key export products (coffee, bananas, cotton, sugar, and meat)
led to a drastic deterioration of the region's purchasing
power. As a result, Central America would have to export in
physical terms almost half again as much today as it did five
years ago to buy the same goods on the world market. The
shortfall in export earnings forced the Central American
countries to cut back imports not only of consumer goods, but
also of raw materials, spare parts, and capital goods, thus
accelerating the economic slowdown.
Intra-regional tensions and political unrest
The conflict between El Salvador and Honduras in 1969 began
a process which gradually undermined the dynamics of the
Central American Common Market. Nevertheless, intra-regional
trade, largely in manufactured goods, continued to grow until
1980. Since then the political turmoil in Nicaragua and El
Salvador, and the financial problems of all the CACM countries
have produced a sharp decline in intra-regional trade: the
value of such trade fell by almost one-third between 1980 and
1982. This collapse of intra-CACM trade -- in part because of
the accumulation of serious trade imbalances between Costa Rica
and Guatemala, which had surpluses, and Nicaragua, El Salvador,
430-367 0 - 84 - 4
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
and Honduras, which had deficits -- contributed to region-wide
economic contraction.
As well as damaging the economic infrastructure, political
conflicts led to retrenchment by commercial banks and
investors. Private sector confidence, both within and outside
Central America, has been shaken; domestic and foreign
investment has declined; and capital flight has been
substantial -- perhaps as much as $3 billion over the last
several years. These developments have seriously undermined
the prospects for future growth.
Economic management
In the past, Central American countries generally pursued
relatively sound economic policies, which contributed to strong
growth and low inflation through the 1960's and much of the
1970's. But in the late 1970's, unsuccessful attempts to
sustain domestic economic activity in the face of the second
oil shock, the sharp increase in international interest rates,
and the onset of recession in the United States led to high
budget deficits, excessive monetary growth, and sharply higher
foreign debt in almost all of these countries. In some cases
government policies resulted in disincentives, including
inappropriate tax policies, which penalized investment and
export activity. The results contributed to higher inflation
(especially in Costa Rica, where consumer prices rose 90
percent in 1982) declining investment, and economic contraction.
Excessive foreign debt
One of the legacies of the past several years is a
significant accumulation of external debt. Total debt of the
Central American countries was at least $14 billion at the end
of 1982, an increase of 240% over 1975. The size of the debt
and the burden of servicing it are highest in Costa Rica,
Nicaragua, and Panama. In Costa Rica, total external debt
equals more than 140% of Gross Domestic Product (GDP) and
scheduled debt service (interest and term amortization
payments) account for more than one-half of export earnings.
In Panama and Nicaragua foreign debt is equal to around 75% and
100% of GDP, respectively, and scheduled debt service equals
about one-third of foreign earnings in both countries.
Although the burden of these debts and their service is
less than in some other countries in the Western Hemisphere,
all of the nations of Central America are having difficulty in
maintaining timely debt-service payments. Several countries
have already rescheduled part of their external debt, and
others are in the process of doing so. Faced with these
conditions, all of the Central American countries -- except
Nicaragua -- have adopted economic stabilization programs
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
sanctioned by the International Monetary Fund (IMF). These
programs aim at reducing inflation, stabilizing the balance of
payments, and recreating the conditions for future economic
growth. Unfortunately, in the short run the programs seem to
be more successful in achieving the first two of these than in
halting economic decline.
With the beginning of the international debt crisis, the
Central American countries lost their limited access to the
international commercial banking market. Trade finance lines
were cut and public and private sector borrowers were unable to
raise new funds, thus further compounding debt-service
problems. To some extent, this reinforced the drop in imports
and the decline in economic activity, even though increased
official assistance more than offset the decline in commercial
bank credits. Any program of reactivation must address these
key factors. They lie at the heart of the region's development
problems.
EFFORTS TO ADDRESS THE CRISIS
The Central Americans, the United States, and others are
already making substantial efforts, thus preventing an even
more serious deterioration in living conditions. The Central
Americans -- as they must -- are bearing the largest part of
the burden. Exacting economic stabilization programs are now
being implemented in almost all of these countries, while
further ambitious budget, monetary, pricing, and institutional
reforms are being considered. In addition, governments are
beginning to provide incentives to encourage investment as well
as extra-regional trade. Volunteer groups, especially
religious and lay organizations, are providing valuable social
welfare services which governments are unable to finance
because of budgetary constraints.
For their part, other countries are also contributing to
Central America's economic recuperation. Mexico and Venezuela
have established a major facility to provide oil on
concessional terms. The United States is making its influence
felt in several ways:
* By its own economic recovery, which should eventually
be reflected in greater demand and better prices for
Central American exports.
* By the Caribbean Basin Initiative (CBI), which opens
up favorable prospects for new Central American
trade, and by the Generalized System of Preferences
(GSP), which extends duty free access to the U.S.
market for many Central American products.
* By its bilateral economic assistance programs, which
have been considerably expanded during the last few
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
years and, for the region as whole, totalled $628
million in the last fiscal year.
* By its contribution to multilateral agencies,
including the Inter-American Development Bank, the
International Monetary Fund, and the World Bank,
which in turn provide financial support, policy
advice, and technical assistance.
* By its support of the international coffee agreement.
* By the initiative of the thousands of United States
private citizens working in voluntary organizations
and on their own to help improve living conditions in
the region.
But the outlook, even under optimistic assumptions, is not
very promising. Even if economic stabilization policies are
consistently implemented, if official capital flows remain at
roughly current levels through the rest of the decade, if
private capital flows eventually recover, if the international
economic environment gradually improves, and if political
stability returns, unless more is done the economies of Central
America will only gradually begin to recover. The decline has
been so sharp over the past several years that any economic
recovery would probably remain fragile, even if all the
conditions already outlined were met. Without a significant
increase in the levels of foreign assistance, improvement in
the way those resources are managed and used, and the
introduction of growth-oriented economic policies, economic
activity in the region, measured on a per capita basis, would
probably reach no more than three-quarters of the 1980 level by
1990. This would mean more unemployment and continued
widespread poverty.
In short, present prospects for Central America are
unacceptable and the present effort is inadequate. The Central
American countries must improve their own economic policies and
performance. The United States and the other democracies must
provide more assistance and greater commitment. Central
America needs additional resources to finance new investments,
to rebuild its productive capacity, to utilize more fully
existing capacity, to replace damaged infrastructure, and to
maintain debt service. The latter is essential to restoring
international financial credibility.
We therefore turn to the specific elements of what must be
done.
AN EMERGENCY STABILIZATION PROGRAM
We cannot wait to check the decline in economic activity
and the deterioration in social conditions until a long-term
Exac~~ sus
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
program is in place. The Commission therefore urges the
immediate adoption of an emergency stabilization program
combining public and private efforts to halt the
deterioration. Some of our recommendations are endorsements of
existing initiatives. And, most important, it is critical that
the Central American countries continue to implement economic
stabilization programs and, especially, to pursue policies
designed to foster increased investment and trade.
The program includes eight key elements:
We urge that the leaders of the United States and the
Central American countries meet to initiate a comprehensive
approac to the economic development of the region and the
reinvigoration of the Central American Common Market.
The United States and the Central American countries should
convene a conference this year to discuss the impediments to
and opportunities for economic, political and social
development. The agenda for such a meeting should include
consideration of efforts to reinvigorate the Central American
Common Market, the role of the foreign and domestic private
sectors in seeking economic recovery, and the promotion of
balanced regional and hemispheric trade. In addition, as
discussed later in this chapter, we recommend that the leaders
consider a new multilateral organization to promote
comprehensive regional development.
We encourage the greatest possible involvement of the
private sector in the stabilization effort.
Renewed investment and lending, higher production from
existing facilities, more training, increased purchases of
Central American goods, and other initiatives would provide
immediate economic benefits. Health care professionals,
educators, labor officials, churchmen and women, and others can
provide and are providing much needed training and technical
advice. Some of the government programs described below are
designed to encourage even greater private sector efforts.
We recognize that the current climate of violence and
uncertainty discourages private sector initiatives.
Nevertheless, we believe it is imperative to increase the
private sector's involvement as soon as possible. Thus, we
recommend the establishment of an Emergency Action Committee of
concerned private citizens and organizations with a mandate to
provide advice on the development of new public-private
initiatives to spur growth and employment in the region.
We recommend that the United States actively address the
external debt problems of the region.
We urge new initiatives to deal with Central America's
serious external debt problems. Although the United States and
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
other creditor governments have agreed in principle to
reschedule part of Costa Rica's external debt, none of the
other countries of the region has formally asked for similar
treatment. They should be encouraged to seek multilateral debt
renegotiation; this would be a departure from existing practice
which is essentially reactive.
At the same time, the United States and the governments of
other creditor countries should urge private lenders,
especially commercial banks, to renegotiate existing debt at
the lowest possible interest rates. A task force of key public
and private creditors as well as debtors could be established
to facilitate these debt renegotiations and to encourage new
lending. The task force could establish general guidelines for
individual country negotiations and do everything possible to
expedite agreement between debtors and creditors. Again, the
engagement of creditor governments would be a significant
departure from current approaches.
We do not intend that our recommendations should affect the
debt negotiations of countries outside of Central America, but
we believe that the debt burden needs to be addressed as part
of the emergency stabilization effort.
We recommend that the United States provide an immediate
increase in bilateral economic assistance.
Additional economic assistance should be made available in
the current fiscal year. Total commitments of U.S. bilateral
economic assistance to Belize, Costa Rica, El Salvador,
Guatemala, Honduras, Nicaragua, and Panama in FY 1983 was $628
million; the request for appropriated funds for FY 1984 is $477
million. We recommend a supplemental appropriation of $400
million for the current fiscal year. Such an increase, if
complemented by continued improvements in the economic policy
programs of these countries and if quickly made available,
would help stabilize current economic conditions. (Forecasts
of the financial needs of the region are summarized in the
appendix to this chapter.) We also recommend additional U.S.
economic assistance in future years, which is discussed in the
proposed medium-term program.
The bulk of this additional assistance should be channeled
through the Agency for International Development (AID), with
emphasis on creating productive jobs, providing general balance
of payments support, and helping the recipient countries
implement their economic stabilization programs. The purpose
of this assistance would be to stop the continued decline in
economic activity, and to signal a U.S. commitment to helping
Central America address its deep-seated economic and political
problems. Other donors, including Canada, Europe and Japan
should be encouraged to provide similar additional help as soon
as possible.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
We recommend that a major thrust of expanded aid should be
in labor intensive infrastructure and housing projects.
Although the housing needs of the region are addressed in
the next chapter, we urge that AID use increased economic
assistance to expand infrastructure and housing projects.
Central America suffers from pressing needs for rural
electrification, irrigation, roads, bridges, municipal water,
sewer and drainage construction and repair. Such construction
projects, using labor-intensive methods, can quickly be
initiated, with considerable economic benefit.
We recommend that new official trade credit guarantees be
made available to the Central American countries.
The decline in the availability of trade finance has
critically affected the flow of imports into Central America.
A Trade Credit Insurance Program would provide U.S. government
guarantees for short-term trade credit from U.S. commercial
banks. Such a program could be administered by the
Export-Import Bank, although the existing trade credit program
is not available to Central American countries, in part because
the risks of non-repayment are viewed as excessive. Therefore,
every effort should be made to establish the program within
existing legislation or to create new legislative authority for
a program reflecting the need for special consideration in
Central America. The novelty would be that the program would
be available only for use in Central America.
We further recommend that participating U.S. commercial
banks be required, as a condition of their participation, to
renegotiate their existing long-term credits in accordance with
guidelines established by the debt task force described above.
Thus, the program would contribute to easing debt service
problems as well as to encouraging renewed commercial bank
lending (albeit with a government guarantee) in Central America.
We also urge that a program be organized to provide
seasonal credit to the agricultural sector which would meet a
critical need in the region.
We recommend that the United States provide an emergency
credit to the Central American Common Market Fund (CACMF).
The Central American countries have asked for a credit to
refinance part of the accumulated trade deficits among
themselves which have contributed to the contraction of
intra-regional trade. The United States should use part of the
increased economic aid for this purpose; the Central American
countries that have been in surplus would be expected to
transform the remainder of the deficits into long-term local
currency credits. As the Central American countries have
proposed, CACMF regulations should then be adjusted to avoid
future build-ups of large unsettled balances. Since the debts
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
that would be refinanced under this proposal are among central
banks, there should be no adverse implications for other
rescheduling efforts.
We recognize that support for Common Market institutions
benefits all members of the Common Market, regardless of their
political orientation or social and economic performance.
There is no way to isolate one or two member countries.
However, support for the Common Market would be one of the
quickest ways to revive intra-regional trade and economic
activity. Historically, economic integration has had important
political and economic benefits for the members of CACM, and
the Common Market continues to enjoy strong support among
Central Americans.
It is on this basis that we have concluded that the
benefits of an infusion of capital into the CACMF outweigh the
disadvantages. However, we are convinced that the Common
Market will have to change toward a more open trading posture.
This will require, as many Central American experts have
suggested to us, a basic reorientation of regional trade and
industrial policies.
We recommend that the United States join the Central
American Bank for Economic Integration (CABEI).
The Central American countries are opening membership in
CABEI to countries outside the region. We urge the U.S. to
join this institution and to encourage other creditor countries
to seek membership. The infusion of new resources would help
reinvigorate the bank, which could channel much-needed funds to
small-scale entrepreneurs and farmers, provide working capital
to existing private sector companies, and encourage the
development of new industries. Again, U.S. membership in CABEI
would benefit all members of the Common Market.
A MEDIUM- AND LONG-TERM
RECONSTRUCTION AND DEVELOPMENT PROGRAM
The measures we have outlined above aim at short-term
stabilization. Essentially, they are emergency economic
measures made necessary by the severity of the economic
downturn. They represent an effort to buy time to permit the
Central American nations and their friends to build a broader
structure of cooperation for the longer future. That
longer-term future is our principal mandate, and we now turn to
it.
We have already expressed our conviction that political,
social, and economic development goals must be addressed
simultaneously. We have neither the responsibility nor the
competence to design specific long-term development plans for
each Central American country. These are for the Central
Executive hek~,: t
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Americans themselves. Nevertheless, we are obliged to define
medium-term objectives which are compatible with the interests
of the United States:
* Elimination of the climate of violence and civil strife.
Peace is an essential condition of economic and social
progress. So too is elimination of the fear of brutality
inflicted by arbitrary authority or terrorism. No need is more
basic.
* Development of democratic institutions and processes.
The United States should encourage the Central American
nations to develop and nurture democratic cultures,
institutions, and practices, including:
* Strong judicial systems to enhance the capacity to
redress grievances concerning personal security,
property rights, and free speech.
* Free elections, by seeking advice from technical
experts and studying successful electoral systems,
including Costa Rica's.
* Free and democratic trade unions. The importance of
unions, which represent millions of rural and urban
workers, has been firmly established in the region.
They have been not only an economic force but a
political one as well, opposing arbitrary rule and
promoting democratic values. Labor unions will
continue to have an important part to play in
political development, as well as in improving the
social and economic well-being of working men and
women. Assuring an equitable distribution of
economic benefits will require both job-oriented
development strategies and trade unions to protect
workers' rights.
* Development of strong and free economies with diversified
production for both external and domestic markets.
During the second half of this decade the Central American
economies need to grow at per capita annual rates of at least 3
percent in real terms, which is close to the region's
historical growth rate and is necessary to absorb new entrants
to the labor force each year. This is an ambitious but
realistic goal despite today's depressed conditions and the
misfortunes of the recent past.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* Sharp improvement in the social conditions of the poorest
Central Americans.
No investment in Central America will be more productive
over the long term than that made to improve the health,
education, and social welfare of its people. This is
fundamental. We devote the next chapter to it.
* Substantially improved distribution of income and wealth.
The goals of equality of opportunity and better income
distribution require expanded access to ownership of productive
land and capital. This is also crucial for social and
political progress. The pervasiveness and depth of rural
poverty make improvement in rural incomes and living standards
especially high priorities. Agrarian reform programs should
continue to be pursued as means of achieving this.
These are ambitious goals. Their achievement will depend
primarily on the policies adopted by the Central Americans
themselves. As we have noted, efforts are already under way to
achieve them. However, these efforts need to be expanded and
enhanced; more important, they now lack the focus and framework
necessary to signal a forceful, persistent, and long-term
partnership committed to development, equity, and democracy in
Central America.
Our recommendations are divided into two groups. The first
of these involves proposals for U.S. public and private support
for Central American development efforts. The second is a
proposal for developing a new multilateral approach to address
the region's comprehensive development needs.
The Nature of U.S. Development Support
We urge a major increase in U.S. and other country
financial and economic assistance for Central America.
Unless there is a substantial increase in aid, in our view,
the prospects for recovery are bleak. The solution to the
crisis of Central America does not lie along the path of
austerity. We believe that the people of the region must at a
minimum perceive a reasonable prospect that, with sustained
effort on their part, they can reach 1980 levels of per capita
economic activity by no later than 1990, and, with
determination and luck, well before that. However, as we have
repeatedly stressed, unless economic recovery is accompanied by
social progress and political reform, additional financial
support will ultimately be wasted. By the same token, without
recovery, the political and security prospects will be grim.
Reaching that goal will require a significant effort.
External financing needs between now and 1990 have been
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
estimated at as much as $24 billion for the seven countries as
a group. (Forecasts are summarized in the appendix.) The
World Bank, the International Monetary Fund, the Inter-American
Development Bank, other official creditors, private investors,
and commercial banks are likely to provide at least half of
these funds -- especially if each Central American country
follows prudent economic policies, if there is steady social
and political progress, and if outside aggression is
eliminated. The balance, as much as $12 billion, would have to
be supplied by the United States. (As defined in the appendix,
this total financing need includes the projected financing
requirements of Nicaragua, which is not now a recipient of U.S.
assistance.)
We have already proposed that U.S. economic assistance be
increased in FY 1984 to cover part of this on an emergency
basis.
We now propose that economic assistance over the five-year
period beginning in 1985 total $8 billion. Although the
macro-economic forecasts on which we base this proposal do not
translate precisely into fiscal year federal budget requests,
this global figure would include direct appropriations as well
as contingent liabilities such as guarantees and insurance. In
effect, this would represent a rough doubling of U.S. economic
assistance from the 1983 level.
We recognize that such a proposal, at a time of serious
concern in the United States about the level of governmental
spending and the prospective size of the federal budget
deficit, may be viewed with scepticism. However, we firmly
believe that without such large-scale assistance, economic
recovery, social progress, and the development of democratic
institutions in Central America will be set back.
Because of the magnitude of the effort required and the
importance of a long-term commitment, we further urge that
Congress appropriate funds for Central America on a multiple-
year basis. We strongly recommend a five year authorization of
money, a portion of which would be channelled through the
proposed Central American Development Organization, which is
outlined later in this chapter. The balance would support
economic assistance programs administered by existing U.S.
government agencies.
Ultimately, the effectiveness of increased economic
assistance will turn on the economic policies of the Central
American countries themselves. As we have noted, most have
begun to move away from some of the policies which contributed
to the current crisis. However, we agree with what many
experts have told us: that unless these reforms are extended
economic performance will not significantly improve, regardless
of the money foreign donors and creditors provide. In too many
other countries, increased availability of financial resources
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
has undermined reform by relieving the immediate pressure on
policy makers. This must be avoided in Central America.
What is now required is a firm commitment by the Central
American countries to economic _policies, including reforms in
tax systems, to encourage private enterprise and individual
initiative, to create favorable investment climates, to curb
corruption where it exists, and to spur balanced trade. T ese
can lay the foundation for sustained growth.
The increased economic assistance we propose should be used
to promote democracy, renew economic growth, improve living
conditions, achieve better distribution of income and wealth,
encourage more dynamic and open economies, and develop more
productive agriculture. Specific programs are primarily the
responsibilities of the recipient countries themselves.
However, we strongly urge that the United States actively work
to develop and nurture democratic institutions in the region.
We recommend that the United States expand economic
assistance for democratic institutions and leadership training.
Key initiatives which either are already underway or should
be developed include:
* The encouragement of neighborhood groups, community
improvement organizations, and producer cooperatives
which provide a training ground for democratic
participation and help make governments more
responsive to citizen demands.
* The United States Information Service's binational
centers provide valuable insight into the advantages
of personal freedoms in the U.S. Significantly
expanded funding would allow the centers to expand
their library holdings, courses, and programs.
* Exchange and training programs for leaders of
democratic institutions. The International Visitors
Program of USIA and AFL/CIO's George Meany Institute
are both examples of effective programs that bring
leaders from Central America, as well as from other
regions, to the United States for training programs.
Additional programs should be established to bring
leaders of such democratic institutions as labor
unions, local governments, legislatures, and
professional associations to work and study in
counterpart U.S. organizations.
We also recommend a number of other policies and programs
for the U.S. public and private sectors in the areas of trade,
investment, and agriculture. These, too, are important
elements of a broad-based effort to help the Central American
countries prosper, and we now turn to them.
E~ecutw~ Re ~st~_
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Expanded Trade Opportunities
Rapid Central American economic growth requires increased
foreign exchange earnings. In the short run the region will
continue to rely largely on the earnings which come from the
export of commodities. The Commission considered, and rejected
as ineffective or inappropriate, proposals to stabilize
commodity prices or earnings. Thus, until demand recovers for
the commodities which Central America produces, the prospects
for significant increases in export earnings are limited.
The solution to this problem will necessarily be a slow
one. Over the medium term, the Central American countries
should try to broaden their export bases both in the
agricultural and manufactured good sectors. More diversified
exports would help to insulate the region from some of the
swings in the international economy.
Central American export-promoting policies will come to
naught, however, if the rest of the world fails to open its
markets. The United States has taken the lead in this respect
and the Caribbean Basin Initiative will provide additional
encouragement for the development of new export industries.
The Central American countries should also try to free up
foreign exchange resources by reducing energy imports. The
United States and other donor nations possess relatively
inexpensive technology that could be used in the region to
identify and explore local energy resources.
We encourage the extension of duty-free trade to Central
America by other major trading countries.
The CBI is a landmark piece of legislation and we hope that
other countries will be willing to extend similar benefits to
Central America. We urge the European Community to extend
trade preferences to Central America under the Lome Agreement,
since the U.S. is extending CBI benefits to Lome beneficiaries
in the Caribbean. Other countries of Latin America should also
be encouraged to offer special trade benefits to the Central
American countries as their own economic recovery progresses.
We urge the United States to review non-tariff barriers to
imports from Central America.
We recognize that this issue -- which principally applies
to products like textiles, sugar, and meat -- is highly
contentious, both internationally and domestically. All of
these products are affected by multilateral agreements which
partly determine the degree of access to the United States
market. We encourage the President to use whatever flexibility
exists in such agreements in favor of Central American
producers.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
We recommend technical and financial support for export
promotion efforts.
U.S. economic assistance should be used to provide
technical and financial support for trading and export
marketing companies and innovative export-oriented joint
ventures between Central American and foreign entrepreneurs.
This is already an important element of the current assistance
program; in the future this should be a top priority.
Improved Investment Conditions
The Central American countries must improve the climate for
both domestic and foreign investment. These countries could
eventually become important production centers for low- and
medium-technology goods to be exported to the United States,
the rest of Latin America, and Europe. Panamanian leaders
already are studying the experiences of Hong Kong, Singapore,
and others in an effort to imitate their success as leading
producers for export. In addition, increased investment should
be encouraged in industries which produce for local consumption.
Of course, peace is necessary before businesses will look
seriously at new investment prospects. Without peace, capital
flight will continue (although improved financial policies seem
to have considerably reduced the outflows), infrastructure will
be destroyed, credit will remain unavailable, and private
sector initiative will be discouraged. But these countries
also need to move now on changing those economic policies that
discourage investment.
Several initiatives could be undertaken by the United
States to encourage U.S. investors to consider projects in
Central America.
We encourage the formation of a privately-owned venture
capital company for Central America.
We recommend that a venture capital company -- which might
be called the Central American Development Corporation (CADC)
-- be established for Central America. This was suggested to
us by several private businessmen and organizations and
represents an innovative way to promote investment in the
region even under present difficult conditions. CADC,
capitalized by private sector investors, would use its capital
to raise funds which, in turn, would be lent to private
companies active in Central America. It would be managed and
directed by experienced entrepreneurs. Its loans would be made
to commercially viable projects in high priority economic
sectors for working capital or investment purposes. The U.S.
government could support the CADC initiative through a long-
term loan as it has for similar initiatives in other areas of
the world.
S; j;,/7
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The United States is about to join the Inter-American
Investment Corporation, which has been formed within the
Inter-American Development Bank. This new multilateral
organization will provide technical support, equity, and loans
to private sector companies which are active in the region.
This is a potentially useful initiative and we hope that the
Congress responds favorably to authorizing legislation when it
is submitted later this year.
We recommend the expanded availability of OPIC insurance in
the region.
Needed foreign investment could be encouraged through an
expanded insurance guarantee program. The Overseas Private
Investment Corporation continues to consider investment
applications, but because of current political conditions it
extends insurance in very few instances. Leading private
businessmen told the Commission that the unavailability of such
insurance is an obstacle to investment in projects that
otherwise have good prospects for commercial success. OPIC
should have the resources and the mandate to provide such
support.
We recommend the development of aid programs to nurture
small businesses, including microbusinesses.
The small business forms the backbone of these economies.
Economic aid programs specifically aimed at encouraging the
growth and formation of such businesses would assist in putting
more people to work and also give people a larger stake in
their economies. Such programs should include such incentives
as seed capital, loan guarantees, and technical assistance.
Accelerated Agricultural Development
Central America's rural areas contain the majority of the
region's poor. They also have the greatest potential for rapid
increases in production, particularly in the historically
neglected sector which produces food for local consumption
rather than for export.
Integrated programs of rural development targeted at the
food producing sector have enormous potential for improving the
welfare of large numbers of people, while increasing and
diversifying agricultural production and lessening dependence
on food imports. Such programs require a variety of
coordinated measures which would have to be undertaken by the
Central Americans themselves, either by the governments of the
region or by regional institutions. They should:
* Provide long-term credit at positive but moderate real
interest rates to make possible the purchase of land by
small farmers.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* Study the holding of idle but potentially productive land,
and programs to capture capital gains from public works for
the public.
* Improve title registration and the defense of property
rights of farmers.
* Provide short- and medium-term credit to finance the
harvesting and storage of crops, the purchase of
fertilizers and other inputs, and the acquisition of
machinery and equipment.
* Follow pricing policies for agricultural commodities that
protect farmers against unnecessary price fluctuations and
unfair marketing practices, that avoid a "cheap food"
policy which favors urban consumers and acts as a
disincentive to producers, and that discourage the
accumulation of unmarketable surpluses.
* Where appropriate, initiate programs of agrarian reform --
of "land for the landless" -- in order to distribute more
equitably the agricultural wealth of the country.
* Expand the network of rural feeder roads, storage
facilities, and rural electrification.
* Sharply increase rural research and extension services
specifically targeted to crops produced for the domestic
market.
* Clarify the legal status and use of public lands, to check
deforestation and the degradation of the environment.
These measures involve staggering administrative
requirements for governments committed to creating a
diversified rural economy in which medium and small private
farmers will predominate. That commitment, the political will,
and most of the administrative skills cannot be provided by
foreigners. Where the commitment exists, however, external
help from multilateral institutions and from the United States
and other countries could make a crucial contribution.
In particular:
We recommend that the financial underpinnings of the
efforts to broaden land ownership be strengthened and reformed.
We have argued that more equitable distribution of income
and wealth, including land holdings, is important to economic,
social, and political development in the region. In programs
of land reform, ways should be found to ensure that the
redistribution of land provides the new owners with a valid
title, that governments promptly allocate resources as they
become available to ensure that former owners are effectively
Exer,Qtiv $ev--Yr
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
compensated, and that in the end the system enhances incentives
to expand the nation's total agricultural output.
We recommend the provision of financial resources to
supplement credit and investment programs.
A key thrust of U.S. bilateral assistance should be to
supplement national and regional agriculture credit programs;
this is an element of AID's program which should be expanded in
the future. In addition, the program of seasonal agricultural
credit both for imported inputs and working capital which was
included in the emergency stabilization program should be
regularized and expanded in the medium term.
We recommend increased economic support for cooperatives.
Agricultural cooperatives have been important in both U.S.
and Central American rural development. They not only
encourage increased production through the pooling of resources
and sharing of risk, but contribute to improved distribution of
income. We recommend that the United States increase its
support for such organizations as part of its bilateral aid
program.
ORGANIZING FOR DEVELOPMENT
Our second major area of recommendations involves the
structure and form of the development effort. The proposals we
put forward in this chapter and the next are not a final
blueprint for economic and social development. This Commission
is acutely aware of its own limitations. We cannot provide
what is most vitally needed: a positive Central American
vision of the future, and a process for translating that vision
into reality. This can only be done by engaging the
initiative, the energy and the dedication of the Central
Americans themselves, in cooperation with their allies, in a
forum capable of addressing the development of the region in
all its dimensions, on a continuing basis.
We received many suggestions on how to structure such a
process. It was clear from these proposals, and from our own
deliberations, that what is required is not another institution
competitive with AID, the Inter-American Development Bank or
the International Monetary Fund. Nor should such an
international organization supersede local development bodies
and initiatives. Responsibility for the modernization of each
country must lie with its own public and private institutions.
Rather, we propose the establishment of a structure which would
do what no existing national or international body now does:
provide a continuous and coherent approach to the development
of the region, a process of review of that development, and
access to that process by those who have not before been an
integral part of it.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
What follows is our distillation of many different
proposals. We hope that it will attract the interest of
leaders, private and public, within Central America. We are
fully aware that no development organization for Central
America will have any more consequence than the people of
Central America are prepared to give it; any institution must
represent the initiative and enjoy the support of the nations
of the region or it cannot succeed, however great the
enthusiasm for it in Washington.
What will be required, therefore, is a serious examination
here and in Central America of how the essential cooperation
among nations for development can be achieved and
institutionalized. As we suggested earlier, the leaders of
Central America and of the United States should then meet to
define, together, the opportunity for comprehensive regional
development, the principles which should underlie it, and the
ways of giving organizational form and process to that common
aspiration.
From our own consideration of that issue we have distilled
the following principles, which we recommend for consideration:
* The development of Central America should be a cooperative
program. The policy issues involved should be addressed
through a process of joint deliberation among the nations
of Central America, the United States, and such other
democracies as may be willing to participate and to provide
assistance.
* The program should promote the development of Central
America in all its dimensions -- economic prosperity,
social change, political modernization and peace. Past
development efforts have focused too exclusively on
economic issues and programs. External aid should be tied
to measurable progress toward all of these agreed goals.
* The assessment of progress should be conducted by
representatives of participating nations who have access to
a broad range of information and experience from both
public and private sources. Private groups and
institutions in donor and recipient countries should be
drawn fully into the deliberative process.
* The ultimate control of aid funds will always rest with the
donors. But a multilateral body including eminent Central
Americans can most effectively -- and least offensively --
assess progress, evaluate program objectives, and measure
external resource needs. In addition, the multilateral
body should exercise some degree of control over
development funds to give its assessments added weight,
even though donors would retain a veto.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* The structure must be established on a sufficiently
permanent basis to demonstrate the long-term commitment of
both the United States and the Central American countries
to the coordination of economic development with social and
political development. The continued utility of the
organization should be assessed after five years.
These principles could be served through a variety of
organizational structures. We have developed the outline of a
structure which we have called the Central American Development
Organization, or CADO. We put it forward not as the only
design, but as a means of illustrating how the concept could be
implemented.
Membership in CADO, as we envision it, would initially be
open to the seven countries of Central America -- Belize, Costa
Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama --
and to the United States. Associate member status would be
available to any democracy willing to contribute significant
resources to promote regional development. We would hope that
the other Contadora countries would participate actively, as
well as the nations of Europe, Canada and Japan. The
organization's Chairman should be from the United States with
an Executive Secretary from Central America.
The operating body of CADO, in which each full member would
be represented, would assess the progress made by each Central
American country toward economic, political and social
objectives, as well as make recommendations on the allocation
of economic resources. It would require of its members a high
degree of integrity and judgment; they would be expected to
bring to their tasks special competence and experience in the
development process. We are convinced that the region has an
impressive store of men and women, dedicated to the future
progress of their people, who could fill these roles.
Representation should be drawn primarily from the private
sector. Each country delegation should include representatives
of a democratic trade union movement, of business and/or the
government. It would draw on a wide variety of sources for
information and for economic, political and human rights
analysis including, for example, the deliberations of the
Economic Consultative Group, now being organized by the IDB;
AID; advisory opinions from the Inter-American Court of Human
Rights; the ILO; the Inter-American Human Rights Commission of
the Organization of American States; and national monitoring
bodies and appropriate private parties.
Central American participation in the program should turn
on acceptance of and continued progress toward:
* The protection of personal and economic liberties, freedom
of expression, respect for human rights, and an independent
system of equal justice and criminal law enforcement.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* Political pluralism, and a process of recurrent elections
with competing political parties. Only nations prepared to
base their governments on the free choice of their people
should be eligible. This does not necessarily mean that
each country would institutionalize its political processes
in the same way as the United States, but it does mean that
each would adopt democratic forms appropriate to its own
conditions.
* As set out more fully in Chapter 7, a commitment to
preserve peace, independence and the mutual security of
Central American member nations by renouncing intervention
and limiting arms, as expressed in the reciprocal exchange
of mutual security undertakings.
* The establishment and maintenance of sound growth policies
in the various countries, including tax and land reforms,
and the invigoration of community trade and monetary
programs.
* The development of the human resources of the region, as
set forth in Chapter 5.
This commitment would be embodied in a charter. CADO would
be inaugurated at a summit of the participating countries, at
which the charter would be signed.
? Nicaragua would be encouraged to participate in CADO in the
interest of promoting authentic political pluralism and
economic and social development in that country in harmony with
the rest of the region. However, Nicaragua's -- or any other.
country's -- continued membership in CADO and access to aid
within the'CADO framework would be conditioned on continued
progress toward defined political, social, and economic goals.
If Nicaragua -- or any other country -- concluded that it was
unable in good faith to commit itself to permit elections and
guarantee human rights and thus failed to join CADO, it would
not, in our judgment, affect the ultimate effectiveness of the
organization.
We recommend that an economic reconstruction fund be
established within CADO and that the U.S. channel one-quarter
of its economic assistance through such a fund. Loans to
countries would be in support of development programs and
policies including the implementation of growth-oriented
economic policies, the establishment of genuine democratic
institutions, and the adoption of programs to improve social
conditions. They would be quick-disbursing, balance of
payments support loans.
Our overall objective in putting forward these
institutional proposals is substantive, not structural. The
crisis in Central America is region-wide; it cannot be resolved
piecemeal. It will require local effort and external support,
i
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
integrated into a comprehensive approach on security, economic,
political and social needs. The assessment of that effort
should be multilateral as well.
One historic model for this proposal is the Inter-American
Committee for the Alliance for Progress, or CIAP from its
Spanish-language acronym. This was a distinguished group of
persons from the hemisphere, including one U.S.
representative. They regularly reviewed and provided
independent commentary on the national economic policies and
programs of the Alliance members. Since they were mostly Latin
Americans and seen to be unbiased, their advice was accepted in
the constructive spirit in which it was given. We have been
told by former members of CIAP and former officials who figured
in the Alliance for Progress effort that a similar arrangement
for Central America would make a valuable contribution.
Governments, including that of the United States, would not
be bound to accept the judgments of CADO. The U.S. would be
free to maintain a bilateral economic assistance program in a
particular country, regardless of performance. But the present
purely bilateral process has its drawbacks. It factors
political assessments directly into economic aid decisions.
This makes the United States the prosecutor, judge and jury.
It leads to rancorous debate, sometimes poorly informed. This
Commission's proposal is an effort to explore a new process.
The responsibility for assessing development performance would
be assumed in the first instance by a respected multilateral
body, with donors retaining effective final control of their
financial resources. The process should be more effective,
more acceptable to Central America and more compatible with
present-day views of how sovereign nations should deal with
each other.
Appendix to Chapter 4:
Central American Financial Needs
Forecasts of Central America's net foreign financial needs
(which are defined as the sum of a country's balance of
payments current account deficit plus minimal foreign reserve
build-up) depend on a number of factors including the
countries' economic policies, the political climate in the
region, the ability of national and regional institutions to
use increased assistance productively, and the international
economic and financial environment. The financial requirements
also depend on the economic goal: the more rapidly these
economies grow, the greater their financial need. Faster
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
growth -- at least in Central America -- would both require and
lead to higher levels of imports; if export earnings do not
grow as rapidly, then the resulting increase in the deficit
must be financed by grants, loans, or investments.
The ultimate economic goal of an expanded financial
assistance program should be to help the Central American
countries recreate the conditions necessary for sustainable
economic growth. In practical terms, the program should focus
on helping these countries at least to reachieve 1980 levels of
per capita income by the end of this decade. Because of the
depth and duration of the economic decline throughout Central
America over the past several years, returning to 1980 levels
will be difficult, attainable only with an enormous, sustained
effort by both the Central Americans and their bilateral and
multilateral creditors. Average real growth of about 6 percent
annually (or 3 percent on a per capita basis) is an ambitious
but realistic target by the end of the decade; this would be
sufficient to absorb new entrants to the labor market and to
reduce unemployment.
There are four key sets of assumptions that underlie our
estimates of medium-term financial needs:
* Peace. Without a considerable reduction in the levels of
violence, efforts to revive the regional economy will
fail. Economic and financial incentives to invest or
even to produce would be overwhelmed by the direct and
indirect effects of political turmoil. Capital flight
would continue, draining the new financial resources
which we propose be made available. Moreover, the
continuing destruction of infrastructure in El Salvador
would raise further the cost of economic reconstruction
in that country.
* Improved Economic Policy. We assume that, over time, the
Central American countries will considerably improve
their economic performance. Public sector deficits must
be controlled through appropriate fiscal policies.
Public investment programs should be reoriented towards
maintenance and rehabilitation. A growing share of
public sector capital expenditures should be diverted to
providing credit to the private sector, in order to
alleviate the difficult financial conditions of many
firms. Export taxes and other export disincentives
should be reduced or eliminated and each of these
countries should maintain a realistic exchange rate
policy. In addition, local banking systems need to be
made more efficient, and appropriate incentives to
encourage savings and investment should be provided.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* Increased Economic Assistance: We assume that
considerably increased economic assistance will be made
available from bilateral and multilateral sources
starting in 1984. If this assistance is delayed,
economic recovery will also lag and the 1990 target will
be even more difficult to achieve.
* Improved Global Economic Environment: We assume that
international economic and financial conditions will
continue to improve. Relatively strong growth, stable or
declining interest rates, and low inflation in the major
developed countries are critical to the health of the
Central American economies. These conditions would
result in improved demand for manufactured goods and
commodity exports. If export market access improves and
if increased investment leads to greater manufactured
export capacity, the region's export revenues could
increase, despite the poor price outlook for Central
America's key commodity exports. The region's terms of
trade -- the ratio of export prices to import prices --
have fallen more than 60 percent in the last five years
and only modest recovery is expected.
Macroeconomic projections have been prepared for Costa
Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama
through 1990. The combination of peace, much improved economic
performance, increased foreign assistance, higher export
demand, and improved market access would allow these countries
to find a way out of the crisis. Export income would increase
and imports could follow. Overall per capita growth, and more
particularly consumption, could at least regain the levels of
1980 and, in some cases, the late 1970's. Unemployment would
begin falling.
In aggregate, the six countries would have a cumulative net
financing requirement of around $24 billion. Excluding
Nicaragua -- which is the only one of these countries which
today does not receive U.S. economic assistance -- the total
would be almost $21 billion.
External Financing Requirements, 1984 - 1990*
Costa Rica $ 5.1
El Salvador 5.5
Guatemala 4.5
Honduras 2.3
Panama 3.2
Sub-total 20.6
Nicaragua 3.4
TOTAL $24.0
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* Projected aggregate net financing requirements associated
with achieving 1980 per capita GDP levels in 1990. For
Panama the goal is to maintain 1982 per capita GNP, since
through last year the economy continued to expand.
These projections may underestimate the region's financing
needs by assuming that capital flight is eliminated after 1983,
commercial and financial arrears are fully capitalized,
maturing public and private debts are refinanced, and most
important, the bulk of new financial resources goes to
investment rather than consumption. None of these assumptions
is likely to be realized fully; the overall net borrowing
requirement would inevitably be greater. In addition, the
gross financing requirement would be larger by the amount of
scheduled amortization, which is estimated at about $5
billion. These debts will have to be restructured, which is a
burden on the creditors, but does not represent a new transfer
of financial resources.
This enormous financing requirement reflects the extremely
adverse economic developments of the past years, the structural
weaknesses of the Central American economies, the need to
rebuild infrastructure in El Salvador and Nicaragua, and the
likelihood that even steady progress to develop export capacity
through appropriate incentives and accelerated investment will
only gradually have a significant impact on export revenues.
At the same time, these funds will not stimulate the projected
economic recovery unless the Central American countries make a
determined effort to restructure their economies.
The bulk of the projected financing needs would have to be
met by official creditors. Over the next several years
commercial banks are likely to be reluctant to increase their
exposure in Central America. However, some $4 billion of
interest payments to banks are due during 1984 - 1990. Based
on the refinancing proposals which are being discussed or are
in place, it seems reasonable to assume that at least half of
these amounts will be reloaned. This fraction could rise as
economic performance improves. In addition, several of the
countries are likely to attract some private investment flows,
especially in the context of an improving political and
economic environment. In total these private sources could
provide as much as $6 billion of new loans or investments.
Thus, official sources would probably have to provide around
$18 billion.
For the U.S. this would mean at least $10 to $12 billion
over the seven years, assuming that World Bank, Inter-American
Development Bank, and other bilateral creditors such as Mexico
and Venezuela increase their assistance programs at least
modestly from current levels. A successful effort to increase
assistance from these organizations or to encourage European
Executive lsi y
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
-67-
and Japanese participation would reduce the share needed from
the United States.
In the short run, the financing needs in 1984 of the six
countries which now receive U.S. economic assistance are
estimated to be around $1.5 to $1.7 billion, based on forecasts
of their export earnings and internal economic activity. The
uncovered gap -- after identified lending and investment
including budgeted U.S. economic assistance -- seems to be as
much as $0.6 billion. Thus, we have recommended an emergency
increase in U.S. economic assitance to help cover this
shortfall, so that the near-term prospects of economic recovery
will not dim further.
One adverse consequence of an ambitious recovery and
reconstruction program would be a sharp increase in debt levels
in all the Central American countries unless the terms on which
new assistance is extended are highly concessional. Such an
increased debt burden would permanently mortgage Central
America's future, almost regardless of efforts to enhance
export (and, hence, debt service) capacity.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 5
HUMAN DEVELOPMENT
A comprehensive effort to promote democracy and prosperity
among the Central American nations must have as its cornerstone
accelerated "human development." Widespread hunger and
malnutrition, illiteracy, poor educational and training
opportunities, poor health conditions, and inadequate housing
are unstable foundations on which to encourage the growth of
viable democratic institutions.
In this chapter we focus on social conditions, and on
efforts which can be undertaken in both the short and medium
term to help Central Americans improve their living conditions.
The burden of action in these areas, even more than in some
others, lies primarily on the Central Americans themselves.
However well-intentioned, no foreigner can feed, educate,
doctor, clothe and house another country's people without
undermining its government or creating cultural conflicts.
However, the United States can provide some of the resources
which the Central Americans need to make their programs work,
and it can counsel on the design of those programs.
Many Central Americans with whom we met emphasized the
importance of bold initiatives to improve Central American
living conditions. In this spirit, we believe the following are
ambitious yet realistic objectives for the 1980's:
* The reduction of malnutrition.
* The elimination of illiteracy.
* Universal access to primary education.
* Universal access to primary health care.
* A significant reduction of infant mortality.
* A sustained reduction in population growth rates.
* A significant improvement in housing.
The programs we outline below are intended to help Central
Americans achieve these objectives. Such funds as they require
from the U.S. government would be part of the expanded economic
assistance program described in the previous chapter.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
-69-
Developing Educational Opportunites
Central American countries suffer from widespread
illiteracy, from insufficient numbers and inadequate quality of
primary and secondary schools, and from shortages of vocational
training opportunities. Adult literacy is lowest in Guatemala
(45% of the population in 1976), Honduras (60% in 1980), and El
Salvador (63%). Nicaragua now claims 90% literacy. Costa Rica
(90%), Panama (85%) and Belize (92%) all have high literacy
rates, although there are sharp differences between urban and
rural rates. For example, in Panama rural literacy is only 65%
compared to 94% in the urban areas.
Although over the past twenty years there have been
improvements in the system, educational quality continues to be
generally poor. Educational content often has little relevance
to the practical needs of students, and there is a mismatch in
all countries between needed skills and the supply of persons
trained in those skills. Poorly trained and motivated teachers,
as well as inadequate physical facilities, textbooks, teacher's
guides, basic educational materials and supplies are, pervasive
problems.
In general, the Central American educational system is
weakest at its base: the quality of primary education is low,
and drop-out rates are high, despite laws mandating universal
compulsory primary education throughout the region. The
problems are particularly acute in rural areas where only three
or four years of education are the norm. Only a portion of
students -- under 40% in Honduras, Guatemala, El Salvador and
Nicaragua (1975 statistics) -- is retained through the primary
level.
The problems of the primary education system extend through
the secondary, vocational and higher education systems. Less
than 50% of the eligible population is enrolled at the secondary
level in most countries of the region. Schools are overcrowded,
teacher salaries are low, and many teachers are ill-prepared.
Similarly, vocational training opportunities are relatively
limited, underfunded, and not well matched to critical skill
shortages. Universities suffer from over-extended facilities,
over-emphasis on traditional fields (such as the law) at the
expense of applied disciplines (such as business, management,
the natural sciences, engineering, and agriculture), poorly
trained instructors, and extremely high attrition rates.
Moreover, many of the universities have become highly
politicized, more concerned with political activism than with
educating students to meet the concrete needs of their countries.
We agree with the many Central Americans who told us that a
substantial improvement in the availability and quality of
educational opportunities must begin at once and proceed as
rapidly as possible. The nations of Central America clearly
understand the importance of education and have made a
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
commitment to it. Although Central American initiatives and
organizations must carry the burden of designing educational
programs and reforms, there is also a great need for financial
and technical assistance for educational reforms and training
programs. This assistance can be provided by the United States,
multilateral organizations, and other countries.
Educational advance also, very centrally, requires solving a
key health problem: malnutrition. If children are malnourished
in their earliest years, they come to school mentally and
physically underdeveloped and the learning process is almost
inevitably set back. In testimony before the Commission, Dr.
Nevin Scrimshaw, founder of Nutrition Institute for Central
America and Panama, brought the dismaying message that
malnutrition in Central America, after modest reductions, has
returned to the levels of the 1950's. In El Salvador, 73 per
cent of the schoolchildren now suffer from malnutrition. Dr.
Edward Marasciulo, Executive Vice President of the Pan American
Development Foundation, reported to the Commission that 52 per
cent of the people in the region are malnourished.
The Commission concludes that the first priority for
education in Central America should be nutritional programs
sufficient to deliver children to school in normal physical and
mental condition.
We recommend that the United States increase food aid on an
emergency basis.
Although the permanent solution to the problem lies in
accelerated agricultural development, the United States and
other donors -- including members of the European Community --
can help in the short run by providing additional food aid. The
United States now provides about $100 million annually to
Central America in such aid through the PL 480 program. This
should be expanded, and also supplemented by increased use of
the Commodity Credit Corporation program in Central America. In
addition, the food distribution system needs to be improved to
absorb increased levels of assistance effectively.
The United States and other countries can help Central
Americans improve educational training opportunities. This
should focus principally on building institutions, although in
the short run direct training programs may be needed while
institutions develop. The effort should start with a literacy
program and continue with programs to help improve the quality
and broaden the availability of formal education and vocational
training programs.
We recommend that the Peace Corps expand its recruitment of
front line teachers to serve in a new Literacy Corps.
A Literacy Corps of qualified volunteeers should be created
to engage in direct teaching and also to train Central Americans
Execetive Registry
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
to teach their compatriots. The Peace Corps has had long
experience in this function. We urge a dramatic expansion of
volunteers in the region from the current 600 to a figure five
or six times as great, largely in education. Emphasis in
recruitment should be on mature persons who speak Spanish.
Other democratic countries in Latin America should be encouraged
to offer similar groups of volunteers to help combat illiteracy.
The Literacy Corps would be a remedial effort for adults and
children over ten who received no schooling at all. To ensure
that remedial programs in literacy will not be needed beyond
1990, primary education must be made available to all children.
We recommend that Peace Corps activities be expanded at the
primary, secondary, and technical levels in part by establishing
a Central American Teacher Corps, recruited from the
Spanish-speaking population of the United States.
.Here again, we believe that other democracies in Latin
America should be encouraged to undertake similar programs, and
that the countries themselves should dramatize the education
effort by seeking local volunteers.
The primary schools are the proper focus for a wide range of
social programs. Basic public health, including nutrition, is
much easier to assure when a teacher monitors the condition of
pupils on a day-to-day basis. Inoculations can be given cheaply
and effectively as part of the school's routine.
We recommend an expanded program of secondary level
technical and vocational education.
Although both the public and private sectors are already
active in this area, there is a substantial need for additional
training programs matched to real jobs. We particularly urge
that business and labor unions develop apprenticeship programs.
Vocational training is particularly needed in agriculture,
which is the mainstay of the Central American economies.
Drawing on its own agricultural experience, the United States
can offer increased technical support to help Central Americans
improve production and productivity of both cash and food
crops. The United States should also provide both technical
support and financial assistance to national agricultural
centers. These centers can provide valuable training and
technical assistance to farmers and can form the core of
national and regional agricultural extension efforts.
Business and public administration are also crucial to the
future development of the region. Existing institutions such as
the Central American Institute for Business Administration
(INCAE) could benefit from increased support from both public
and private sector sources..
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
We recommend ex ansion of the International Executive
Service Corps (IESC).
The IESC is a private, voluntary organization of retired
American business executives. An expanded IESC effort in
Central America, perhaps with some support from the U.S.
Government, should give particular attention to training
managers of small businesses. This would strengthen the
economy, while also contributing to the development of the
middle class.
A major shortcoming of past U.S. educational assistance has
been insufficient support for Central American universities and
university students. By contrast, higher education is
increasingly a major focus of the efforts of the Soviet Union
and Cuba in the region. According to USIA, total Soviet,
Eastern European, and Cuban university scholarships to Central
Americans reached 7,500 in 1982, representing a seven-fold
increase over the last five years. By comparison, in 1982 only
391 Central American students were supported in this country by
U.S. government sponsored scholarships. Overall Central
American enrollment in U.S. universities was around 7,200.
Nevertheless, such educational opportunities in the United
States are generally limited to students from families with
relatively high incomes. The targeting of students from lower
income families and the large number of government scholarships
distinguish Cuban and Soviet educational strategy from that of
the United States.
In all the Central American countries, political and
academic leaders emphasized the long-run cost of having so many
of Central America's potential future leaders -- especially
those from disadvantaged backgrounds -- educated in Soviet Bloc
countries. We agree that a major initiative is needed and
should be an essential part of a comprehensive development
effort.
Thus, we recommend a program of 10,000 government-sponsored
scholarships to bring Central American students to the United
States.
The United States should provide 5,000 four to six year
university scholarships and 5,000 two to four year
vocational-technical scholarships. Admittedly, this is an
ambitous program compared both to current efforts and to the 500
scholarships anticipated under the CBI. Nevertheless, it is
imperative to offer young Central Americans the opportunity to
study in the United States, both to improve the range and
quality of educational alternatives and to build lasting links
between Central America and the United States.
We suggest that such a program involve the following
elements:
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
-73-
* Careful targeting to encourage participation by young people
from all social and economic classes.
* Maintenance of existing admission standards -- which has
sometimes been a barrier in the past -- by providing
intensive English and other training as part of the program.
* Mechanisms to encourage graduates to return to their home
countries after completing their education, perhaps by
providing part of the educational support in the form of
loans and linking forgiveness of loans to their return.
* Arrangements by which the Central American countries bear
some of the cost of the program.
* The availability of at least 100 to 200 of these
scholarships to mid-career public service officials and a
further 100 for University faculty exchanges.
We are aware that such a program may be viewed as too
expensive and too dramatic. Experts have testified to the
Commission that once in place, such a large-scale program would
cost about $100 million. Because of the important implications
which the training of a country's future leaders has on its
political development, we believe this would represent a sound
investment of U.S. assistance funds. We hope that such a
program would be supplemented by significant private sector
efforts. U.S. universities, faced with declining enrollments,
will have hundreds of thousands of places by 1990 and could
readily accommodate these students in existing programs. The
universities would themselves benefit from attracting additional
Central American students to their campuses.
We recommend that the United States, in close partnership
with the Central American governments and universities, develop
a long-term plan to strengthen the major universities in Central
America.
The principal thrust of this assistance effort should be to
help improve the quality of Central American universities. A
balanced program of assistance would include:
* Technical assistance to provide immediate improvements in
undergraduate teaching and curriculum.
* Selective investments in improving libraries, laboratories,
and student facilities.
* An innovative effort to recruit and train junior faculty and
young administrators.
* A complementary program of refresher training and upgrading
of existing faculty and administrative staff.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* An expanded program of pairing of U.S. and Central American
colleges and universities.
* A significant expansion of opportunities for faculty,
students, and administrators to visit the United States for
periods which may range from a few weeks to several years.
We recommend that the United States help strengthen Central
American judicial systems.
In the absence of strong legal institutions, political,
security and economic crises are magnified. This has been
particularly true in El Salvador, where the virtual collapse of
the nation's criminal justice system both reflects and
exacerbates the inability of the government to control the
prevailing cycle of violence and intimidation. In other Central
American countries, notably Costa Rica and Honduras, the legal
systems are not in a similar state of crisis. Nevertheless, the
long-term vitality of these crucial legal institutions could
benefit substantially from U.S. assistance to indigenous efforts
to strengthen them and to advance the rule of law, in particular
by improving the training of judges and investigators.
Specifically, we recommend the use of U.S. economic
assistance to:
* Enhance the training and resources of judges, judicial
staff, and public prosecutors' offices.
* Support modern and professional means of criminal
investigation.
* Promote availability of legal materials, assistance to law
faculties, and support for local bar associations.
U.S. assistance policy has failed in the past to reflect the
importance of such steps. We recommend that recent U.S. efforts
to begin a program of support for legal institutions be
formalized, expanded, and expressly funded. Much of this
training would be best supplied by U.S. universities with
appropriate legal and criminal justice programs.
Other cultural and educational activities should also be
encouraged. We should seek particularly to bridge the gap
between U.S. and Latin American cultures. For instance, a book
translation and distribution program sponsored by the U.S.
Information Agency which was once extensive but has lately been
withering away should be given support. Translation in both
directions is currently limited in scope and often in quality.
We recommend a greatly expanded effort, subsidized by the
U.S. Government through the National Endowment for the
Humanities, to train high level trans ators, to support
translations of important books from both languages, and to
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Executive Registry
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
subsidize their publication so as to make them generally
available.
The National Endowment could make an important contribution
to U.S.-Central American understanding through such a center.
A REGION'S HEALTH
If Disraeli's view that the "economic health of a nation
depends first on the health of its people" is true, then it is
vital that health conditions in Central America be improved as a
precondition for economic recovery.
The Central American people suffer from extremely poor
health conditions, although there are sharp differences among
countries. The incidence of infectious diseases, parasitism,
malnutrition, tuberculosis and infant mortality has remained
virtually unchanged for the last decade. The resurgence of
malaria and dengue fever alone will, unchecked, undo any hope of
social or economic development. Respiratory illness, diarrheal
diseases, and infectious and parasitic diseases that are
controlled or cured in developed countries are often fatal in
Central America. As discussed earlier in this chapter,
widespread malnutrition erodes the basis of health care as well
as of education.
These conditions affect infants and children with particular
severity. Although significant improvements have been achieved
over the past two decades, mortality rates for infants and
children are substantially higher in Central America than in the
rest of Latin America. Infant mortality is higher in Nicaragua
(88 per 1000 births in 1980 according to the World Bank),
Honduras (86/1000), El Salvador (75/1000) and Guatemala
(66/1000). In Belize (30/1000), Costa Rica (27/1000) and Panama
(21/1000), mortality rates are lower, reflecting the
considerably higher quality of their health care systems.
In nations where swamps provide breeding grounds for
mosquitos, where water is neither adequately available nor
potable, and where there is limited sewage disposal and poor
sanitation, the incidence of many diseases will reach epidemic
proportions. Moreover, where medical facilities are few and
medical personnel lacking, the possibilities for prevention and
cure are restricted.
Considerable effort has been made by the governments of
Central America in the support of primary health care,
environmental sanitation and population control. There has also
been substantial investment of resources in the institutional
treatment of disease. Just as in our own country, hospitals are
highly visible and their construction is responsive to the
demands of the local medical profession. This is a necessary
component of any health system, albeit the most expensive form
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
of care. The stress on primary care by international agencies
has had the effect of diverting local funding into the tertiary
care facilities. The relative lack of concern by such agencies
with the funding of health manpower training has also left the
Central American countries unable to staff their existing
facilities adequately. The low priority given to helping these
nations improve their ability to deliver a higher level of
health care has been a serious deficiency in development
assistance programs.
The United States can play an important role in supporting
Central American efforts to achieve adequate and comprehensive
health care. The immediate priorities of such a program are the
eradication of malnutrition, the provision of primary health
care, the prevention of disease, the improvement of health care
delivery systems, the development of adequate secondary and
tertiary back-up institutions (improving those that already
exist -- building anew only when essential) and the training of
health manpower.
A comprehensive program of primary health care includes both
preventive and curative medicine. Secondary and tertiary care
should be concentrated in regional centers and hospitals.
Improved communication and transportation facilities are
essential for the primary health care component which these
regional centers will support.
Management and planning for the effective use of scarce
resources are at the heart of improving curative and preventive
health services.
In order to meet this need, we recommend that existing
technical assistance programs supported by AID should be
expanded.
Broader concentration should be placed upon health care
systems, management health care planning and health economics.
These specialities are interrelated; therefore, the training of
Central American candidates for them should be carried out in an
integrated manner. A regional center for such training should
be considered in either Costa Rica or Panama, since both of
these nations have comparatively advanced health care and
institutional systems.
The present system of health care in Central America rests
on a form of government-provided medical service very different
from our own. We should not seek to impose our system on those
countries, but should seek to expand upon and improve the
structures already in place. Central America must develop a
system of health care suitable to its own needs. But from our
own experience we can advise them that what is needed is not
service alone -- more doctors, better hospitals or research,
important as these are -- but the development and expansion of
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
-77-
alternative systems of health care delivery and an expanding
effort in preventive medicine.
Voluntary private organizations must play a significant
role. They have the advantage of being clearly uninvolved in
political issues, and they can more readily gain local
confidence. U.S. government participation should be limited
primarily to providing financing mechanisms to support technical
assistance in such key areas as management and planning as well
as in the evaluation process. Administration of such funding,
as carried out by the American Schools and Hospitals Abroad
(ASHA) -- the section of AID which supports such institutions --
is a good example of public/private cooperation.
The United States government and other donors have already
expended considerable resources to promote the development and
expansion of health resources in Central America. Since the
mid-1970's the major thrust of United States government support
has been the extension of primary health care services in rural
areas and the development of village-level water systems. These
have been important efforts and have contributed to a growing
awarenesss that the emphasis of health care services in the
region must switch from the costly hospital-based central system
to an emphasis on the provision of primary health care. We
endorse this approach and urge its expansion, using a portion of
the increased economic assistance which we have recommended be
made available.
In addition, other measures are needed:
We recommend a resumprtion of the AID-s onsored program to
eradicate vector-borne diseases such as malaria and dengue fever.
An AID-sponsored vector control program was suspended five
years ago. However, Belize, Guatemala, Honduras and El Salvador
are currently experiencing a serious resurgence of malaria and
dengue fever. The mosquito knows no frontiers and Nicaragua,
Costa Rica and Panama will soon suffer equally unless drastic
measures are taken to eradicate the breeding grounds of the
mosquito. Nearly a century ago, malaria and yellow fever were
eradicated from areas where they had long held sway. We cannot
allow a terrible regression to the past.
Research must be supported so as to find insecticides to
which the vectors are not resistant. In the short term we can
expand the present programs of spraying with the still-effective
insecticides. We should encourage and support engineering
projects which would improve drainage and sewage disposal.
Additional professionals and volunteers to combat the diseases
must be trained.
We recommend that the Unites States support an expansion of
programs of oral rehydration and immunization so as to
reduce dramatically the incidence of childhood disease and
mortality in Central America during the next five years.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The death rate of children in Central America from diarrheal
disease is ten times higher than in the United States. Such
other childhood diseases as diptheria, tetanus, whooping cough,
measles and polio remain endemic to the region. Yet the
experience of UNICEF, AID and others indicates that these
scourges of early childhood can be virtually wiped out in a very
short time by well administered programs of oral rehydration and
immunization.
We recommend the continuation of the population and family
planning programs currently supported by the Agency for
International Development.
Overpopulation presents a serious threat to the development
and health of the region. Attempts must be made through
education and family planning to reduce the birth rate to a more
moderate level.
We recommend that Central American educational institutions
be encouraged to increase their concentration on the training of
primary health care workers, nurses, dental assistants and
personnel in the allied health skills.
The United States, through AID, should provide funds for
expanded programs in these areas to be supervised and
administered by appropriate divisions of AID, by the Peace
Corps, or by private voluntary organizations.
With the exception of Honduras, considerable progress has
been made in the training of physicians for local needs, though
external training is still required for more sophisticated
skills. The training of physicians continues to be a priority;
but the training of nurses, dentists and other allied health
technicians required for an adequate health system should be
increased.
Nursing services are sorely lacking in the region, in part
because nursing is not accorded the professional status which it
merits. High-quality nursing is an important priority for the
region. Thus, we further recommend the establishment of a
regional nurses' training unit for the purpose of granting
graduate degrees so as to establish a greater pool of indigenous
nursing educators. Such a unit could be located in either
Panama or Costa Rica.
More village health workers, who live among the people, and
who can detect illness, treat minor problems, and provide
essential education in health and personal hygiene, the
cleanliness of homes and utensils, and nutrition and family
planning, must be trained. Training at this level is more cost
effective, and has the further advantage that such trainees are
more likely to remain in their locales. With proper
encouragement and assistance, this training responsibility can
be borne by the local professionals.
Executive Re istc __,_.~.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
It is also important to address the general issue of health
care reform. At present, governments of the region claim that
health care is provided without charge. The unhappy truth is
that local facilities are often unable to provide either
medication or essential diagnostic services to the poor, because
they cannot afford them. Free service is often no service at
all. In most of the region, there is also a costly and
inefficient duplication of health services between the
Ministries of Health and Social Security. Costa Rica has
transferred all medical services to a single organization. That
pattern should be considered for adoption or adaptation
throughout the region.
Many urban centers in Central America now have well-
equipped and well-staffed private medical institutions. In
considering the development of private sector enterprises, as
well as the fulfillment of local needs, a health insurance
system could be provided so that these institutions could help
bear the load created by the rapidly growing urban populations.
The lessons of experience from Medicare and Medicaid and
from private insurance systems in the United States should be
brought to bear on the development of demonstration finance
systems. Existing social insurance programs should be extended
or modified on a country-by-country basis. This is especially
significant as the middle class becomes a larger proportion of
the population. A fundamental principle should be to ensure
equitable medical care for the indigent. This could begin to
fill a gap in existing health care systems and avoid the
unnecessary duplication of health care programs. It could also
provide for a new, local, private sector initiative where none
exists, or expand such efforts where they have already begun.
We recommend that the nations of Central America be urged to
develop methods which would integrate public and private
financing of health services.
In this effort state investment should be focused on primary
health care services for the rural and urban poor and on
environmental services for all. Specifically, care must be
taken to prevent health insurance programs funded in whole or in
part from public funds from providing excessive support to
hospital services, thereby discouraging adequate public
investment in primary care and related'preventive and
environmental interventions. In every Central American capital
city, as well as in many of the larger provincial towns, there
are well-equipped private clinics and hospitals available to
those who can afford the cost. Health care insurance could be
used to make these services more generally available.
Finally, the problems of worker health and safety and
industrial pollution must be addressed. Greater attention needs
to be paid to standards of worker health and safety. Serious
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
workplace accidents are common. Under present conditions,
environmental controls are limited. Uncontrolled waste and
indicriminate use of insecticides and fertilizers are polluting
the land, rivers and lakes.
U.S. corporations, active in the region, have a particular
responsibility to provide leadership in creating safe and
healthy conditions, as well as to introduce appropriate
standards of environmental pollution control in their own
operations.
HOUSING
Urbanization throughout Central America is rapidly
transforming the character of the region. A region wide
movement of peoples, from the countryside to the city, places a
strain on all urban facilities. National and local governments
are unable to meet the needs of their new residents. Housing
and the development of urban services are critical needs,
affecting as much as three-quarters of the population, primarily
the poor.
Currently over 40% of the region's people live in cities; in
Nicaragua and Panama, the majority of the population is urban
and, by the turn of the century, all the Central American
countries are expected to be predominantly urban. However, the
cities lack sufficient resources to cope with their existing
populations. The past two decades of growth have outpaced the
ability of the institutions and economies of the various nations
to provide the whole range of facilities and services we
associate with life and work in the modern city -- from shelter
to basic water and sanitation, electricity and phone service,
public transport, garbage collection, fire and ambulance
service, etc. Moreover, the economic collapse of the region --
which has brought sharply higher levels of unemployment and has
further reduced the availability of governmental resources to
cope with these problems -- has worsened living conditions in
the cities even more.
Housing conditions are critical. A very high proportion of
dwellings, in both urban and rural areas, are built with
non-permanent materials and lack the most elementary sanitary
facilities. This is particularly true in El Salvador,
Guatemala, Honduras, and Nicaragua. In addition, recent data
from these countries show that, on average, almost half of all
urban residences lack basic water services and more than 60%
lack sewage services. In San Salvador, over one-half the
metropolitan area households live in marginal settlements. In
1979 in the metropolitan area of Guatemala City only 44 per cent
of all households had access to piped water and two-thirds lived
in marginal settlements. Conditions in rural areas are worse.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Efforts to improve conditions have fallen far short of the
pace of rapidly growing populations; for example, between 1974
and 1978 in Honduras, almost 33,000 new urban households were
formed, but only 16,400 new apartments and houses were
constructed. Moreover, what construction occurs is primarily
for the wealthy. Eighty-six per cent of El Salvador's total
1978-79 investment in housing went into dwelling units for
households in the top 20 to 25 per cent of the income range. In
Nicaragua the figure was 88 per cent. Similar but less
exaggerated trends have existed in other countries of the region.
The prospects for the future are grim. One U.S. government
estimate indicates that the number of urban households could
increase by more than 4 million between 1985 and the end of the
century. Given recent housing construction rates of both
private builders and government agencies, less than one-quarter
of this need would be met. This inevitably would mean more
overcrowding of existing dwellings, further proliferation of
marginal and "squatter" settlements, and more pressure on
already overburdened services.
Central Americans, in both the public and private sectors,
must inevitably bear the major part of the burden of providing
adequate shelter to their people. Unfortunately, governmental
ineffectiveness and inefficiencies have compounded the
problems. Cost recovery is generally not practiced. Subsidies
are heavy and not necessarily related to income or wealth.
Interest rates are pegged at artificially low levels. Public
sector bureaucracies, including city governments, are typically
inefficient, overstaffed, and poorly managed. One typical
result is that legalization of land tenure has often lagged,
without which city services cannot be extended.
The U.S. government and other donors have made housing a
priority for many years and have probably prevented an even
worse situation from developing. These efforts have included
housing guarantee programs, support for the establishment of
housing banks and other financial associations, training,
technical assistance, and direct financial support for
construction financing. These programs should be expanded, in
close coordination with the Central Americans, as part of the
comprehensive development effort in the region. This also is
another area where the private sector, both in the United States
and in Central America, can play a valuable role in mobilizing
resources and bringing to bear the kinds of practical experience
which government organizations often lack.
There are two areas where U.S. assistance should be
concentrated.
First we recommend an enlarged housing and infrastructure
construction program.
This recommendation was highlighted in the last chapter, but
it is important to stress it again here. AID has estimated
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
that, over the next decade, required housing investment in urban
areas will cost some $700 million annually, with another $200
million in related infrastructure costs. Most of this will
eventually have to come from local resources, but an expanded
aid program could also help. In addition to the benefits from
improved housing, construction programs create productive
skilled and unskilled jobs. On average, $100 million of
additional investment in urban construction annually would
support a construction workforce of at least 20,000.
However, it is essential that such a program rely heavily on
the private sector for both design and implementation. There is
considerable unused capacity in both the U.S. and Central
American construction industries that could be harnessed to
expand the production of shelter and related infrastructure.
Second, we recommend U.S. government support for accelerated
education and training of professionals in public administration.
In our earlier discussion of educational needs and
priorities we identified such training as essential in many
fields. Improved public sector management -- through better
trained managers -- is critical to addressing the housing and
shelter problems of the region in both the short and medium
term. This should occur both through scholarship and exchange
programs in the United States and by providing resources to
national and regional public administration institutes.
HUMANITARIAN RELIEF
The tragedy of the more than one million displaced persons
in Central America -- driven from their homes by violence and
fear of violence -- is well known. Those who have found refuge
in Mexico, Honduras and Costa Rica are being adequately cared
for under the auspices of the United Nations High Commissioner
for Refugees. However, hundreds of thousands remain in El
Salvador and Guatemala living under the most miserable
conditions. These nations, whose economies have been seriously
disrupted, cannot by themselves provide adequate care or relief
for these people. The refugee camps and overcrowded cities to
which they have fled become breeding grounds for discontent and
frustration.
The Commission believes that effective relief efforts which
would assist these people would not only serve a humanitarian
purpose but would have a positive effect on the political,
social and economic future of the countries involved.
We recommend expanded support for adequate relief efforts
through the Agency for International Development and the
Department of State refugee program.
I Executive Rr i
~- G
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The Needed Commitment
The recommendations we have made in this chapter constitute
an ambitious program of human development in Central America.
They cannot be accomplished by appropriations of money alone.
Stability and security in the hemisphere depend on the existence
of democratic and economically viable nations in Central
America. In turn, this requires that their people be healthy,
educated, properly housed and free.
To achieve this requires a consensus in the United States
that the welfare of Central America is crucial to the well-being
of the United States itself, and a commitment by thousands of
corporations and individuals -- as well as by the government --
to help improve living conditions throughout Central America.
We believe that if this development effort is to succeed, it
must be supported by the educational and business institutions
of this country. Such support is clearly in our own best
interests, as well as in those of the Central American nations.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 6
CENTRAL AMERICAN SECURITY ISSUES
We ardently wish that there were no need for a security
chapter in a report on Central America. But there is.
The region is torn by war and the threat of war. It needs
peace in order to have progress. It needs security in order to
have peace.
The conflicts that ravage the nations of Central America
have both indigenous and foreign roots. Restoring peace and
stability will require a combination of social and political
reforms, economic advances, diplomatic pursuit and military
effort. In earlier chapters we dealt with the social, economic
and political aspects; in the next chapter, we will discuss
possible diplomatic measures. We hope that negotiations will
bear fruit so that the people of Central America can devote
their energies to bettering their lives. That is our strong
preference -- a vigorous, concrete and comprehensive diplomatic
effort is set forth in the next section. But even as military
measures are needed to shield economic and social programs, so
too are they essential as an adjunct to diplomacy.
Thus, in this chapter, we discuss the military and
strategic aspects -- first in their wider dimensions, and then
in terms of the specific situations now confronting us in
Central America.
We have stressed before, and we repeat here: indigenous
reform movements, even indigenous revolutions, are not
themselves a security concern of the United States. History
holds examples of genuinely popular revolutions, springing
wholly from native roots. In this hemisphere Mexico is a clear
example. But during the past two decades we have faced a new
phenomenon. The concerting of the power of the Soviet Union
and Cuba to extend their presence and influence into vulnerable
areas of the Western Hemisphere is a direct threat to U.S.
security interests. This type of insurgency is present in
Central America today.
The complexity of the political conflicts in Central
America aggravates the situation in several countries and
sometimes obscures the outlines of the different contests that
are underway.
In Somoza's Nicaragua three broad groups were involved in
the struggle for decisive control of that country: the Somoza
machine, which dominated the country's government, army and
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
economy; oppositionists who desired to establish democratic
institutions including free elections and all the associated
guarantees; and Marxist-Leninists who were tied to Cuba and the
Soviet bloc.
After 1978 those in Nicaragua who opposed the Somoza regime
joined together in a single "broad front" which eventually
overthrew the Somozas. In the ensuing struggle, the
Marxist-Leninist FSLN, with a monopoly of military power, took
control of the machinery of government. They have since used
that control effectively to exclude the democratic opposition
from power. Some of the latter continue their struggle today
as leaders of an armed insurgency against the Nicaraguan
government.
In El Salvador two separate conflicts have raged since
1979. One conflict pits persons seeking democratic government
and its associated rights and freedoms against those trying to
maintain oligarchical rule and its associated privileges. A
second conflict pits guerrillas seeking to establish a
Marxist-Leninist state as part of a broader Central American
revolution against those who oppose a Marxist-Leninist victory.
In each of these conflicts one of the parties has pursued
its goals by violence. Both traditionalist death squads and
murderous guerrillas have attacked political party, labor and
peasant leaders working to establish and consolidate democratic
institutions, killing them and dismantling their efforts to
build democracy.
The co-existence of these conflicts greatly complicates the
task of the democratic forces and their friends. Each violent
group attempts to hide behind the other. Neither group has
been willing to subordinate its desire for power to the
civilized disciplines of the democratic process. The violence
of the death squads weakens fragile democratic institutions at
a time when they are already under attack by communist
guerrillas. It wipes out democratic leaders, intimidates the
less hardy, undermines freedom, and hampers the forces of
democracy in their struggle against the armed guerrillas.
Marxist-Leninist violence imposes the economic and social
strains of war on El Salvador at the same time that it kills
Salvadorans, progressively destroys the economy, disrupts and
intimidates the democratic leaders and others, and weakens
those struggling to consolidate democratic institutions.
Both violent groups are morally and politically repugnant
to this Commission, which strongly supports the consolidation
and defense of democratic institutions in El Salvador.
In previous chapters, the Commission has proposed a number
of measures designed to encourage and assist Salvadorans in the
consolidating of democratic institutions and strengthening the
rule of law, including technical assistance for elections,
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
economic and education programs. In this chapter we recommend
"conditioning" military assistance to the government of El
Salvador on progress in the effort to bring death squads under
control.
It is not only for the sake of democratic reform and human
rights that we oppose the death squads. Their violent attacks
upon Salvadoran democrats handicap the struggle to resist the
armed insurgency of the guerrillas. This Marxist insurgency
not only opposes democracy and is committed to the violent
seizure of power, but also threatens U.S. security interests
because of its ties to Nicaragua, Cuba, anc the Soviet Union.
The policy challenge facing the United States is to untangle
these two conflicts -- to support the forces of democratic
reform against the death squads while at the same time helping
El Salvador resist subjugation by Marxist-Leninist guerrillas.
A major goal of U.S. policy in Central America should be to
give democratic forces there the time and the opportunity to
carry out the structural reforms essential for that country's
security and well-being.
Because this chapter addresses the question of security, it
will focus initially on the threat posed by Marxist-Leninist
insurgencies in Central America. It will then put forward
proposals to end human rights abuses by the death squads.
The externally-supported guerrilla insurgency that
confronts us in El Salvador and elsewhere in Central America is
really a new kind of war. It differs as much from indigenous
revolts as it does from conventional wars. It is more complex,
both in concept and in execution. By now the world has had
enough experience with it so that its nature is known and its
patterns are predictable.
An examination of any particular externally-supported
insurgency requires an understanding of a) the internal
conditions that invited it, and b) the external forces that
support it. Both are essential elements, and the interaction
between them is one of the key factors that make these wars so
difficult for governments to win and so devastating for the
people who become their victims.
The Path of Insurgency.
Cuba and Nicaragua did not invent the grievances that made
insurrection possible in El Salvador and elsewhere. Those
grievances are real and acute. In other chapters we have
discussed ways of remedying them. But it is important to bear
in mind three facts about the kind of insurgencies we confront:
Executive Registry
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* They depend on external support, which is substantially
more effective when it includes the provision-of
privileged sanctuaries for the insurgents.
* They develop their own momentum, independent of the
conditions on which they feed.
* The insurgents, if they win, will create a totalitarian
regime in the image of their sponsors' ideology and their
own.
Let us first take these three points, briefly, in order,
and then examine them more fully in the particular context of
the struggle now going on in Central America.
External Intervention. Whatever the social and economic
conditions that invited insurgency in the region, outside
intervention is what gives the conflict its present character.
Of course, uprisings occur without outside support, but
protracted guerrilla insurgencies require external assistance.
Indeed, if wretched conditions were themselves enough to create
such insurgencies, we would see them in many more countries of
the world.
Propaganda support, money, sanctuary, arms, supplies,
training, communications, intelligence, logistics, all are
important in both morale and operational terms. Without such
support from Cuba, Nicaragua and the Soviet Union, neither in
El Salvador nor elsewhere in Central America would such an
insurgency pose so severe a threat to the government. With
such support, guerrilla forces could develop insurgencies in
many other countries. The struggle in El Salvador is
particularly severe because it is there that external support
is at present most heavily concentrated.
Therefore, curbing the insurgents' violence in El Salvador
requires, in part, cutting them off from their sources of
foreign support.
Independent Momentum. If reforms had been undertaken
earlier, there would almost surely have been no fertile ground
for revolution, and thus no effectively developed insurgency.
But once an insurgency is fully under way, and. once the lines
of external support are in place, it has a momentum which
reforms alone cannot stop. Unchecked, the insurgents can
destroy faster than the reformers can build.
One reason for this is that an explicit purpose of
guerrilla violence is to make matters worse: to paralyze the
economy, to heighten social discords, to spread fear and
despair, to weaken institutions and to undermine government
authority -- all so as to radicalize the people, and to
persuade them that any alternative is better than what they
have. By disrupting order, the strategy of terror strikes at
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
the foundation of authority. By helping to provoke the use of
counter-terror, as Carlos Marighella wrote in his classic
terrorist tract, Minimanual of the Urban Guerrilla, guerrillas
can transform "the political situation in the country...into a
military situation in which the militarists appear more and
more to be the ones responsible for terror and violence, while
the problems in the lives of the people become truly
catastrophic."
None of this legitimizes the use of arbitrary violence by
the right in El Salvador or elsewhere. Indeed, the grim
reality is that many of the excesses we have condemned would be
present even if there were no guerrilla war supported by
outside forces. But this analysis does explain why political,
economic and social programs do not by themselves defeat these
insurgencies, though they address a central part of the
problem. If the reforms are to be effective, the violence must
be checked -- which means that the security situation must be
improved dramatically.
The Totalitarian Outcome. Because the Marxist-Leninist
insurgents appeal to often legitimate grievances, a popular
school of thought holds that guerrilla leaders are the engines
of reform. They characteristically reinforce this by inviting
well-meaning democratic leaders to participate in a Popular
Front, taking care, however, to retain in their own hands a
monopoly of the instruments of force. If the insurgents were
in fact the vehicles for democratic and social progress, the
entire security issue would be moot; they would no longer be
the problem, but rather the solution.
Unfortunately, history offers no basis for such optimism.
No Marxist-Leninist "popular front" insurgency has ever turned
democratic after its victory. Cuba and Nicaragua are striking
examples. Regimes created by the victory of Marxist-Leninist
guerrillas become totalitarian. That is their purpose, their
nature, their doctrine, and their record.
The Cuban-Soviet Connection
In retrospect it is clear that Castro's communization of
Cuba was a seminal event in the history of the Americas -- a
fact appreciated almost immediately by the Soviet Union. It
prompted Khrushchev to declare in 1960 that the Monroe Doctrine
had "outlived its times" and had died "a natural death".
Soviet policy in this hemisphere has followed the pattern
of Soviet policy elsewhere in the world: Moscow has exploited
opportunities for the expansion of Soviet influence. In the
aftermath of the Cuban Missile Crisis, the Soviets concentrated
on expanding their diplomatic, economic and cultural ties in
Latin America and on strengthening the influence of local
communist parties in broad electoral fronts, trade unions and
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
the universities. In this respect they differed from Castro,
who continued to support a course of armed struggle in
Venezuela, Colombia, Guatemala, and several other countries.
But later the fall of Allende in Chile and the subsequent
right-wing takeovers in Uruguay, Argentina, and Bolivia
discredited the Soviet expectation of the "peaceful path" to
communism in Latin America.
In the 1970's, a number of other developments combined to
shift the Soviet Union toward a more adventurous approach,
including support for revolutionary armed struggle in Central
America.
One of these developments was the triumph of Soviet-backed
forces in Indochina, Angola, Mozambique, Ethiopia and South
Yemen. This seemed to reward a more aggressive Soviet policy
toward the Third World generally, in keeping with the
perception in Moscow that the "correlation of forces" had
shifted dramatically against the West.
The result was a very significant strengthening of the
Soviet military capability in the Caribbean. This included a
dramatic build-up in the size and sophistication of the Cuban
Armed Forces, not least their air and naval components; an
enlarged direct Soviet military presence in Cuba, with regular
port calls by Soviet naval task forces and nuclear missile
submarines and the deployment of advanced reconnaissance
aircraft; increased numbers of Soviet military advisers; and
close operational collaboration between Soviet and Cuban
forces, as, for example, when Russian pilots were sent to Cuba
in 1976 and 1978 to replace Cuban pilots aiding pro-Soviet
regimes in Angola and Ethiopia.
This coincided with a reduction in the U.S. military
presence in the Caribbean Basin (from over 25,000 in 1968 to
under 16,000 in 1981), in the wake of Vietnam and in a climate
of public hostility to U.S. security concerns, especially in
the Third World.
Finally, the 1970's saw the sharpening of the social,
economic, and political crisis in Central America -- a
development extensively dealt with elsewhere in this report --
which made the region an inviting target for insurgency.
The success of the revolution in Nicaragua in 1979, like
Castro's own accession to power a decisive event, accelerated
the revision of Soviet policy toward revolution in Central
America. The President of the Soviet Association of Friendship
with Latin American countries, Viktor Volski, called the armed
victory in Nicaragua a "model" to be followed in other
countries, while Boris Ponomarev, the chairman of the
International Department of the Central Committee of the Soviet
Communist Party, included the countries of Central America for
the first time among Third World states undergoing
revolutionary changes of "a socialist orientation."
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Cuban and Soviet perceptions began to merge again. The new
line was quickly accepted by the Communist Party of El Salvador
(PCES), which had previously described the country's insurgent
groups as "adventurist" and "bound to fail," and had been
accused, in turn, of "decadence" and "revisionism." The PCES
now made a complete about face and turned toward armed
struggle. The Party Secretary General, Shafik Jorge Handal,
wrote in Kommunist, the theoretical organ of the Soviet
Communist Party, that the Salvadoran revolution "will be
victorious by the armed road-there is no other way."
The revolutionary strategy pursued in 1978-79 by Cuba in
Nicaragua has since been attempted in El Salvador, Guatemala,
and Honduras. Traditionally splintered insurgent groups were
required to unify as a condition for increased Cuban and other
Soviet bloc military support. This creation of a unified
military front allowed Cuba to exercise greater control over
the uprising. Meanwhile, a separate political front was
created -- a "broad coalition," led by the extreme left but
including some elements of the noncommunist opposition. Such a
political front allowed the guerrillas to co-opt some
noncommunist leaders and to neutralize them as rival
alternatives to the existing government. This objective was
also served by the insurgency itself, which undermined the
political center by sharpening the increasingly violent
confrontation between left and right. The popular-front tactic
helped the guerrillas to disarm critics by posing as
noncommunist democrats, to obtain noncommunist international
support, and to attempt to isolate the targeted government from
Western political and material help.
Cuba was in a position to back up this strategy with an
institutional capacity to promote guerrilla warfare far greater
than it had possessed during the 1960's. The principal
instrument was the Americas Department of the Cuban Communist
Party, established in Havana in 1974 to centralize Cuba's
operational control over covert revolutionary activities
throughout the hemisphere and particularly in Central America.
The Department's activities also included supervision of a
network of guerrilla training camps and indoctrination schools
inside Cuba.
The commitment to the promotion of armed struggle was
further backed up by a dramatic increase in Soviet arms
deliveries to Cuba. They grew from an average of 15,000 tons a
year in the 1970's -- roughly equal to current deliveries to
Nicaragua -- to 66,000 tons in 1981, and about the same amount
in each of the following two years. Cuba's armed forces
currently total 227,000, a fivefold increase over 1960, and
this figure does not include paramilitary and reserve
organizations of 780,000. Cuban forces are well equipped with
sophisticated weaponry supplied by Moscow, have extensive
combat experience on foreign soil, and are well trained. In
ExeOlve Re ml
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
addition, the Soviets provide a brigade of approximately 3,000
men stationed near Havana, as well as an additional presence of
2,500 military advisers and 8,000 civilian advisers.
The Cuban Air Force now has more than 200 combat jet
aircraft, including three squadrons of Mig-23's, as well as
Mi-8 helicopter gunships and Mi-24 assault helicopters. AN-26
and other transport aircraft give Cuba a logistic capability
much greater than it had at the time of the airlift to Angola
in 1975. An expansion of the Cuban Navy which began in the
1970's has continued with the acquisition of two Foxtrot
submarines, a Koni-class frigate, minesweepers, and landing
craft, and an upgrading of the naval base at Cienfuegos, which
services nuclear submarines.
All this makes Cuba no less than the second military power
in Latin America after Brazil, a country with twelve times
Cuba's population. And some experts put Cuba ahead of even
Brazil in terms of modern military capabilities. Cuba's island
geography complicates its sponsorship of subversion. But
Nicaragua suffers no such limitation. From there, men and
materiel destined for El Salvador can be transported overland
through remote areas by routes that are almost impossible to
patrol on a constant basis, or by sea to isolated beaches, or
by air at night to remote bush strips along the coast or
farther inland. Furthermore, Cuba, with Soviet aid, has built
a powerful radio communication center that is now being used to
relay the orders of insurgent leaders based in Nicaragua to
their troops in the field, thus making the Salvadoran
guerrillas far more effective than would otherwise be possible.
As a mainland platform, therefore, Nicaragua is a crucial
steppingstone for Cuban and Soviet efforts to promote armed
insurgency in Central America. Its location explains why the
Nicaraguan revolution of 1979, like the Cuban revolution 20
years earlier, was a decisive turning point in the affairs of
the region. With the victory of the Sandinistas in Nicaragua,
the levels of violence and counter-violence in Central America
rapidly increased, engulfing the entire region.
Strategic Implications for the United States
Through most of its history, the United States has been
able to take for granted our security in our own hemisphere.
We have come to think, as Walter Lippmann wrote four decades
ago, "that our privileged position was'a natural right." In
fact, it was the rivalries in Europe and the supremacy of
British seapower that allowed us to uphold the Monroe Doctrine
with minimal effort for more than a century -- until the
intrusion of communism into Cuba.
The ability of the United States to sustain a tolerable
balance of power on the global scene at a manageable cost
depends on the inherent security of its land borders. This
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
advantage is of crucial importance. It offsets an otherwise
serious liability: our distance from Europe, the Middle East,
and East Asia, which are also of strategic concern to the
United States. Security commitments in those areas require the
United States to supply its forces overseas at the far end of
trans-oceanic lines of communication whose protection can be
almost as costly as the forces themselves.
At the level of global strategy, therefore, the advance of
Soviet and Cuban power on the American mainland affects the
global balance. To the extent that a further Marxist-Leninist
advance in Central America leading to progressive deterioration
and a further projection of Soviet and Cuban power in the
region required us to defend against security threats near our
borders, we would face a difficult choice between unpalatable
alternatives. We would either have to assume a permanently
increased defense burden, or see our capacity to defend distant
trouble-spots reduced, and as a result have to reduce important
commitments elsewhere in the world. From the standpoint of the
Soviet Union, it would be a major strategic coup to impose on
the United States the burden of defending our southern
approaches, thereby stripping us of the compensating advantage
that offsets the burden of our transoceanic lines of
communication.
Such a deterioration in Central America would also greatly
increase both the difficulty and the cost of protecting these
lines of communications themselves. Under present plans, some
50 percent of the shipping tonnage that would be needed to
reinforce the European front, and about 40 percent of that
required by a major East Asian conflict, would have to pass
from the Gulf of Mexico through the Caribbean-Central American
zone. These same sea routes also carry nearly half of all
other foreign cargo, including crude oil, shipped to this
country.
The Soviets have already achieved a greater capability to
interdict shipping than the Nazis had during World War II, when
50 percent of U.S. supplies to Europe and Africa were shipped
from Gulf ports. German U-boats then sank 260 merchant ships
in just six months, despite the fact that Allied forces enjoyed
many advantages, including a two-to-one edge in-submarines and
the use of Cuba for resupply and basing operations. Today this
is reversed. The Soviets now have a two-to-one edge overall in
submarines and can operate and receive aircover from Cuba, a
point from which all 13 Caribbean sea lanes passing through
four chokepoints are vulnerable to interdiction.
The Soviet ability to carry out a strategy of "strategic
denial" is further enhanced by the presence near Havana of the
largest Soviet-managed electronic monitoring complex outside
the Soviet Union, as well as by the regular deployment of TU-95
Bear naval reconnaissance aircraft.
Exam
tire Re istry
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Now there is the added threat of an entire new set of
problems posed by Nicaragua. It already serves as a base of
subversion, through overland infiltration of people and
supplies, that can affect the entire region, Panama included.
Panama is gradually assuming full responsibility for the
security of the Canal; this means that any threat to the
political security of that country and to the maintenance of
its friendly relations with the United States automatically
constitutes a strategic threat.
As Nicaragua is already doing, additional Marxist-Leninist
regimes in Central America could be expected to expand their
armed forces, bring in large numbers of Cuban and other Soviet
bloc advisers, develop sophisticated agencies of internal
repression and external subversion, and sharpen polarizations,
both within individual countries and regionally. This would
almost surely produce refugees, perhaps millions of them, many
of whom would seek entry into the United States. Even setting
aside the broader strategic considerations, the United States
cannot isolate itself from the regional turmoil. The crisis is
on our doorstep.
Beyond the issue of U.S. security interests in the Central
American-Caribbean region, our credibility worldwide is
engaged. The triumph of hostile forces in what the Soviets
call the "strategic rear" of the United States would be read as
a sign of U.S. impotence.
Thus, even in terms of the direct national security
interests of the United States, this country has large stakes
in the present conflict in Central America. They include
preventing:
* A series of developments which might require us to devote
large resources to defend the southern approaches to the
United States, thus reducing our capacity to defend our
interests elsewhere.
* A potentially serious threat to our shipping lanes
through the Caribbean.
* A proliferation of Marxist-Leninist states that would
increase violence, dislocation, and political repression
in the region.
* The erosion of our power to influence events worldwide
that would flow from the perception that we were unable
to influence vital events close to home.
The Problems of Guerrilla War
Despite these high stakes, the debate over Central America
has been polarized in the United States. One reason may be the
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
seeming paradox in which important security questions are
raised by small conflicts in an area which we have customarily
neglected.
On the one hand, the territories involved are not large,
and neither is the number of soldiers, policemen, and
insurgents active in each country. The current amounts of U.S.
military assistance are also not significant by global
standards. In the last fiscal year, for example, U.S. military
aid to all countries in Central America combined amounted to
$121.3 million, or 3 percent of U.S. military assistance
worldwide.
On the other hand, there is the extreme intricacy of the
struggles. They proceed concurrently in the realms of internal
politics, regional diplomacy, and the global East-West
competition, including worldwide propaganda; they comprise both
guerrilla and terrorist phenomena as well as more conventional
confrontations among armed forces; and they are governed by
very complicated interactions between violence in all its forms
and the political, social, and economic circumstances of each
country.
Thus what is being tested is not so much the ability of the
United States to provide large resources but rather the realism
of our political attitudes, the harmony of Congressional and
Administration priorities, and the adaptability of the military
and civil departments of the Executive. What is more, Central
American realities often clash with our historical experience
and with the disparity between our resources and those of the
threatened countries.
The fundamental dilemma is as follows: both the national
interests of the United States and a genuine concern for the
long-term welfare of Central America create powerful incentives
to provide all necessary assistance to defeat totalitarian
guerrillas. At the same time one of the principal objectives
of the guerrilla forces is to destroy the morale and efficiency
of the government's administration and programs.
We thus labor under an immediate handicap. Unlike the
Soviet Union in Afghanistan, the U.S. cannot -- and should not
-- impose its own administration, even for such laudable
objectives as implementing political, social and economic
reforms; it cannot place its own experts in each village and
town to gather political intelligence; and it cannot supervise
the conduct of each soldier and policeman in all dealings with
the population. For all these goals, the U.S. Government must
rely on the abilities and good faith of the government under
attack.
But that government -- already fragile because of history
and structure and conflicting attitudes -- is being
systematically weakened further by the conditions of guerrilla
warfare in which it must function.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Much attention has been paid -- correctly -- to the
shortcomings of the El Salvador government. But it is
important -- and only fair -- to recall the many demands that
have been made upon it and the progress that has been made in
many fields. It carried out impressive elections in 1982,
despite severe intimidations by the guerrillas, and will
conduct another one this March. It has been going forward with
an extensive land reform program. It allows debate, freedom of
assembly, opposition and other aspects of democracy, however
imperfect. Albeit belatedly and due to U.S. pressure, it is
beginning to address the problem of right-wing violence. It
has made offers to the insurgents to resolve the conflict
through the political process. All of this has been done in
the midst of a bitter war. It is a record that compares very
favorably with El Salvador's past and with that of its
neighbor, Nicaragua.
There is, of course, a darker side as well in El Salvador.
The United States obviously cannot accept, let alone support,
the brutal methods practiced by certain reactionary forces in
Central America. Some of these actions are related to
counter-insurgency. Their common denominator is the systematic
use of mass reprisals and selective killing and torture to
dissuade. the civil population from participating in the
insurgency or from providing any help for the insurgents.
Historically, such reprisals, along with the static guard of
key installations and the occasional ambush of betrayed
insurgent bands, have often proved capable of preserving
colonial rule and unpopular governments for a very long time,
even centuries. Other violence has in fact nothing to do with
insurgency at all. It is designed to terrorize opponents,
fight democracy, protect entrenched interests, and restore
reactionary regimes.
Whatever their aims, these methods are totally repugnant to
the values of the United States. Much more enlightened
counter-insurgency models were pursued in, for example,
Venezuela and Colombia in the 1960's when military action was
combined with positive economic and political measures. The
methods of counter-insurgency developed over the last
generation by the armed forces of the United States are
consistent with such models. They depend upon gaining the
confidence and support of the people and specifically exclude
the use of violence against innocent civilians.
Yet these methods are expensive. In addition to continued
action on the economic and social fronts, they require two
forms of military action, to be carried out by two distinct
types of forces. First, local popular militias must be formed
throughout the country (with whatever minimal training is
feasible and with only the simplest weapons) to prevent the
insurgents from using terror to extract obedience. These must
include members trained as paramedics to deliver basic health
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
care, which evokes strong local support for these forces.
Since this localized protective militia cannot be expected to
resist any sustained guerrilla attack, U.S. counter-insurgency
methods also require the availability of well-trained and
well-equipped regular forces in adequate numbers. These
methods assume that the regular units will be provided with
efficient communications and suitable transport, notably
helicopters, to enable them to provide prompt help for village
militias under attack, and to allow them to pursue guerrilla
bands on the move.
The present level of U.S. military assistance to El
Salvador is far too low to enable the armed forces of El
Salvador to use these modern methods of counter-insurgency
effectively. At the same time, the tendency in some quarters
of the Salvadoran military towards brutality magnifies
Congressional and Executive pressures for further cuts in aid.
A vicious cycle results in which violence and denial of human
rights spawn reductions in aid, and reductions in aid make more
difficult the pursuit of an enlightened counter-insurgency
effort.
The combination of the tactical guidance given by U.S.
advisers and levels of aid inadequate to support that advice
creates a potentially disastrous disparity between U.S.
military tactics and Salvadoran military resources. U.S.
tactical doctrine abjures static defense and teaches constant
patrolling. But this requires the provision of expensive
equipment such as helicopters. In their absence, the
Salvadoran military abandon their static defenses for intensive
foot patrolling, only to find the stategic objective they had
been guarding destroyed in their absence.
In the Commission's view it is imperative to settle on a
level of aid related to the operational requirements of a
humane anti-guerrilla strategy and to stick with it for the
requisite period of time.
Another obstacle to the effective pursuit of anti-guerrilla
strategy is a provision of current U.S. law under which no
assistance can be provided to law enforcement agencies. This
dates back to a previous period when it was believed that such
aid was sometimes helping groups guilty of serious human rights
abuses. The purpose of the legislation was to prevent the
United States and its personnel from being associated with
unacceptable practices. That concern is valid, but, however
laudable its intentions, the blanket legal prohibition against
the provision of training and aid to police organizations has
the paradoxical effect, in certain cases, of inhibiting our
efforts to improve human rights performance. For example,
while it is now understood in the Salvadoran armed forces that
human rights violations endanger the flow of U.S. assistance,
in the police organizations there is no training to
professionalize and humanize operations. And in Costa Rica,
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
where the police alone provide that country's security, we are
prevented from helping that democracy defend itself in even the
most rudimentary fashion.
We therefore suggest that Congress examine this question
thoroughly and consider whether Section 660 of the Foreign
Assistance Act should be amended so as to permit -- under
carefully defined conditions -- the allocation of funds to the
training and support of law enforcement agencies in Central
America.
A final problem is philosophical. Our historic tendency as
a nation is to think about diplomacy and military operations as
antithetical. The fact is that the principles outlined here
will enhance the prospects of a political solution whose
characteristics are outlined in*the next chapter. Experience
suggests that a lasting political solution will become possible
only when the insurgents are convinced that they cannot win
through force, and are therefore willing to settle for the next
best option: taking advantage of opportunities for democratic
competition and participation.
In this regard, a military stalemate will not enhance but
rather would inhibit the prospects for a political solution,
since it would confirm that the government cannot prevail.
This is itself a chief goal of an insurgency that aims to
undermine a government's legitimacy. In a guerrilla war, a
stalemate is not the same as a balance of power. Moreover,
while an insurgency can sustain itself over time if it has
access to sanctuaries and external sources of support, there is
nothing to suggest that a government, especially a weak one,
can endure the cumulative toll of protracted conflict. A
successful counter-insurgency effort is not a substitute for
negotiations. But such an effort -- the more rapid the better
-- is a necessary condition for a political solution.
The Situation in El Salvador
The war is at a stalemate -- a condition that in the long
term favors the guerrillas. They have relatively little
popular support in El Salvador, but they can probably continue
the war as long as they receive the sort of external support
they are now getting.
The guerrilla front (the Farabundo Marti National
Liberation Front -- FMLN) has established a unified military
command with headquarters near Managua. The dominant element
of the five guerrilla groups making up the FMLN is now the
People's Revolutionary Army (ERP), which is active in eastern
El Salvador. ERP strategy is one of systematic attacks on the
economic infrastructure, in order to precipitate an economic
and political collapse, and military actions designed for
political and psychological effect. The ERP leaders are keenly
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
interested in the impact of guerrilla actions on international
public opinion, especially in the U.S., where they hope to
discourage further support for El Salvador's Government.
The number of guerrillas has remained basically unchanged
for the last two years: there are an estimated 6,000 front-
line guerrillas and a slightly larger number organized in
militia and support units. But these latter forces have been
increasingly well armed and involved in operations with the
front-line forces. The insurgents can now put perhaps as many
as 12,000 trained and armed fighters in the field. Currently
the Salvadoran armed forces, including defense and public
security forces, have about 37,500 men. That gives the
government less than a 4 to 1 advantage over the insurgents. A
ratio of 10 to 1 has generally been considered necessary for
successful counter-insurgency, though this ratio varies by
individual case and clearly depends upon the capability and
mobility of the government forces. In any event, the
guerrillas have been able to demonstrate an increasing ability
to maneuver and to concentrate their forces, and to react to
Salvadoran Army moves.
In 1983, as in the past, the war was characterized by a
cyclical pattern, in which the initiative swung between
government and guerrilla forces. The ebb and flow of field
operations has enabled the guerrillas to strengthen their
presence in the eastern departments over the past two years.
In the absence of significant Salvadoran military forces, armed
guerrillas operate at will throughout the countryside. They
have established the rudiments of a civil administration and
have enforced a tax regime in areas under their control.
Increasingly, they are able to mass their forces and overwhelm
isolated garrisons or ambush relief columns.
The severity of guerrilla attacks on the transportation and
electrical network in the eastern departments has resulted in
the effective isolation of much of that area. The nature and
extent of guerrilla operations have led to speculation that the
military objective of the guerrillas in the eastern departments
might be the establishment of a "liberated" zone, as a prelude
to the extension of the war into the central departments.
The situation is not uniformly favorable to the
guerrillas. Their bases in San Vicente have been disrupted.
They have lost their infrastructure in western El Salvador and
have been unable to reconstitute their support network in the
cities. But although the military situation continues to be
essentially a stalemate, the guerrillas' campaign of economic
disruption and sabotage has helped to devastate the Salvadoran
economy. In large part due to the violence, the country's
gross domestic product has declined 25 percent in real terms in
the last four years. In eastern El Salvador, the economic
decline has been even more precipitous.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
In part, the Salvadoran military's difficulties in
containing the guerrilla threat are related to manpower
problems -- their training, their retention, their equipment,
and their development. About three quarters of the Salvadoran
armed forces are deployed in static positions that protect
fixed installations. This leaves insufficient maneuver forces
to carry the war consistently to the guerrillas.
The Commission has heard testimony that as the end of the
U.S. fiscal year approaches the Salvadoran armed forces husband
ammunition and equipment until the scale of congressional
appropriations for U.S. assistance becomes clearer. At present
assistance levels there are critical shortages of basic
equipment, including communications, medical equipment and
airlift assets.
The Salvadoran armed forces have also suffered from
inadequate command and control, coordination and leadership. A
recent major reorganization of the military command structure
is designed to achieve needed improvements in command and
control and coordination, and to lead to a more aggressive
prosecution of the war. But to end the stalemate will require
much more in equipment and trained manpower.
The Insurgency in Guatemala
The insurgency in Guatemala is at a much lower level.
There are about 2,500 guerrillas in four groups loosely
organized under an umbrella organization. The guerrillas lost
critical ground in the fall of 1982 and have not yet
recovered. The guerrillas engage in harassment and terrorism
but make no attempt to hold ground or to engage military units
in sustained combat.
The Guatemalan Army continues to apply counter-insurgency
tactics developed through 20 years of experience in the field.
At the heart of these tactics is aggressive and persistent
small-unit patrolling in areas of guerrilla activity. A key
feature of the counter-insurgency effort has been the
organization of about 400,000 campesinos and Indians into Civil
Defense Forces. These forces are poorly armed -- only about
one in ten men in some units is armed with a gun, usually an
M-1 rifle -- but they provide security for villagers, go on
patrol regularly and have taken heavy casualties in contacts
with insurgents.
The positive aspect of the counter-insurgency program is
civic action, in which the Guatemalan Army has a long
tradition. Under Rios Montt the armed forces provided food
and housing materials to villages participating in the Civil
Defense program. The Guatemalan government's financial crisis,
however, has led to a slowdown of the civic action efforts.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The Guatemalan armed forces have been able so far to
contain the insurgency without assistance from abroad. This
relative success is due to a number of factors: long
experience in counter-insurgency; the greater geographical
difficulty the guerrillas have in obtaining supplies from
Nicaragua, as contrasted with the Salvadoran case; and the more
favorable conditions for counter-insurgency operations
prevailing in the less densely populated backlands of
Guatemala. But financial restrictions on the Guatemalan
government and shortages of military supplies and spare parts
could soon begin to limit the effectiveness of the Guatemalan
counter-insurgency effort.
An even more serious obstacle in terms of the ultimate
containment of armed revolt in Guatemala is the brutal behavior
of the security forces. In the cities they have murdered those
even suspected of dissent. In the countryside, they have at
times killed indiscriminately to repress any sign of support
for the guerrillas. Such actions are morally unacceptable.
They are also self-defeating -- as long as they persist, the
conditions in which insurgency can appear and reappear will
continue.
Other Regional Security Problems
Security problems of a different order exist elsewhere in
the region. Cuban and Nicaraguan efforts to foment insurgency
in Honduras have so far failed. But on its visit to
Tegucigalpa, the Commission found a deep anxiety over the
extraordinary military buildup in Nicaragua. The Sandinista
armed forces far outnumber and out-gun those of Nicaragua's
northern neighbor. The advantage of the aging Honduran air
force would quickly disappear if the Sandinistas acquired a few
high performance aircraft. Although it is questionable whether
Nicaragua as yet has the logistical and other capabilities
needed to mount a conventional cross-border attack, the buildup
points in the direction of their acquiring such capabilities.
In the absence of a regional political settlement, Honduras
will feel compelled to strengthen and modernize its armed
forces.
Although the government of Costa Rica has proclaimed a
policy of strict military neutrality in the region's conflicts,
we found in that country, too, a sense of foreboding over the
Nicaraguan military buildup. Costa Rica has no armed force,
only a small civil guard and a rural constabulary. These
police forces must patrol a dangerous border and guard a
democracy threatened by Central America's turbulent political
currents. The provisions of U.S. law under which no aid can be
provided to police organizations create a particularly absurd
situation for Costa Rica. Because of these provisions, we are
unable to furnish badly needed assistance to forces dedicated
to the safeguarding of democracy. I
Executive Rem
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
-101-
MILITARY ASSISTANCE
While important U.S. interests are engaged in El Salvador,
and while we pay a high political price at home and abroad for
assisting the armed forces there, the United States has not
provided enough military aid to support the methods of
counter-insurgency we have urged. At the same time, the United
States cannot countenance the brutal alternative methods of
counter-insurgency which wreak intolerable violence upon the
civilian population. In our judgment, the current levels of
military aid are not sufficient to preserve even the existing
military stalemate over a period of time. Given the increasing
damage -- both physical and political -- being inflicted on the
economy and government of El Salvador by the guerrillas, who
are maintaining their strength, a collapse is not inconceivable.
The Salvadoran Government's National Campaign Plan combines
military operations with follow-up civic actions to restore
agriculture and commerce. The plan is designed to provide
secure areas within which the Salvadoran campesino can grow,
harvest and market his crops, and where industry can again
operate. The plan assumes that sufficient security can be
established countrywide to reduce the insurgency at least to a
low level within two years. But the government's forces must
be significantly and quickly strengthened if the plan is to
succeed. Their requirements include:
* Increased air and ground mobility, to enable the
government forces to reach and assist static positions
under attack and, eventually, to seek out and engage the
guerrillas.
* Increased training to upgrade the forces tactically and
to generalize further the use of modern, humane, counter-
insurgency methods, including civic action as such. This
last includes not only road building and basic
engineeering projects, but especially the provision of
basic health care by paramedics.
* Higher force levels, to enable the government forces both
to protect important installations and to carry the war
to the guerrillas; at present the choice is between
allowing the destruction of vital infrastructures, or the
indefinite prolongation of the war.
* Greater stocks of equipment and supplies to support a
consistent war effort.
* Improved conditions for the troops in order to retain
trained personnel, particularly by providing medical
evacuation; at present, for the lack of evacuation
helicopters, the fatality rate is very high.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
There might be an argument for doing nothing to help the
government of El Salvador. There might be an argument for
doing a great deal more. There is, however, no logical
argument for giving some aid but not enough. The worst
possible policy for El Salvador is to provide just enough aid
to keep the war going, but too little to wage it successfully.
As we have already made clear in this report, the
Commission has concluded that present levels of U.S. military
assistance are inadequate.
We are not in a position to judge the precise amounts and
types of increased aid needed. We note that the U.S.
Department of Defense estimates that it would take
approximately $400 million in U.S. military assistance in 1984
and 1985 to break the military stalemate and allow the National
Campaign Plan to be carried out. The Department believes that
thereafter assistance levels could be brought down to
considerably more modest levels.
The Commission recommends that the United States provide to
El Salvador -- subject to the conditions we specify later in
this chapter -- significantly increased levels of military aid
as quickly as possible, so that the Salvadoran authorities can
act on the assurance that
needed
aid
will be forthcoming.
The training and improvement of the Salvadoran forces to
the point where they can effectively wage counter-insurgency
will take time. Indeed, given the complexity of the internal
as well as external problems confronting El Salvador, the
situation there will remain precarious, even with increased
military assistance. Such assistance alone cannot assure the
elements of national unity and of will that are necessary for
success. But it is the Commission's judgment that without
such aid the situation will surely deteriorate.
The Commission has not undertaken an equally detailed study
of the defense requirements of Honduras. Based on the
testimony we have had, it is our judgment that increased U.S.
military assistance to Honduras is needed for training and
equipment in order to build a credible deterrent and to meet
renewed efforts at insurgency. The Administration should
submit to the Congress an appropriate program in that regard.
Under suitable conditions, assistance to Guatemala to
enable that country to pursue a more consistent and humane
counter-insurgency strategy would be advisable. This question
is treated below.
To be effective, U.S. military assistance programs require
greater continuity and predictibility. As we have seen, local
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
commanders are now uncertain whether an adequate supply of such
critical support items as ammunition will be on hand. The
result in El Salvador has all too often been a less than
vigorous prosecution of the war. The Commission believes the
Administration and the Congress should work toget er to achieve
greater predictibility. That could be most effectively
achieved through multi-year funding.
Additional issues the Commission believes require attention
but which we have not had the opportunity to examine in detail
include:
* The length of the service tours of our military people in
El Salvador.
* The development of greater area expertise by selected
U.S. military personnel.
* Organization and command structure in the Pentagon and
the field.
* Prospects for closer cooperation among the nations of
Central America in defense matters.
* The possibility of a strengthened role for the
Inter-American Defense Board.
We believe the National Security Council should conduct a
detailed review of these issues.
HUMAN RIGHTS
The question of the relationship between military aid and
human rights abuses is both extremely difficult and extremely
important. It involves the potential clash of two basic U.S.
objectives. On the one hand, we seek to promote justice and
find it repugnant to support forces that violate -- or tolerate
violation of -- fundamental U.S. values.. On the other hand, we
are engaged in El Salvador and Central America because we are
serving fundamental U.S. interests that transcend any
particular government.
Our approach must therefore embrace, and pursue, both
objectives simultaneously. Clearly, sustained public and
international support rests heavily on our success in
harmonizing our dual goals. Against this background, we have
stressed the need to make American development assistance
strictly conditional on rapid progress towards democratic
pluralism and respect for human rights, as well as economic
performance. Respect for human rights is also of great
importance to improved security in Central America, as well as
to the self-respect of the United States. We recognize,
however, that how the problem is addressed in this regard is
vital because Central America is crucial to our national
security.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
While the objectives of security and human rights are
sometimes counterposed against each other, they are actually
closely related. Without adequate military aid, Salvadoran
forces would not be able to carry out the modern
counter-insurgency tactics that would help keep civilian losses
to a minimum. Were military aid to be cut off, it would open
the way for the triumph of the guerrillas, an eventuality that
no one concerned about the well-being of the Salvadoran people
can accept with equanimity. Such a development would be
unacceptable from the standpoint of both human rights and
security.
The Commission believes that vigorous, concurrent policies
on both the military and human rights fronts are needed to
break out of the demoralizing cycle of deterioration on the one
hand and abuses on the other. We believe policies of increased
aid and increased pressure to safeguard human rights would
improve both security and justice. A slackening on one front
would undermine our objective on the other. El Salvador must
succeed on both or it will not succeed on either.
The United States Government has a right to demand certain
minimum standards of respect for human rights as a condition
for providing military aid to any country.
With respect to El Salvador, military aid should, through
legislation requiring periodic reports, be made contingent upon
demonstrated progress toward free elections; freedom of
association; the establishment of the rule of law and an
effective judicial system; and the termination of the
activities of the so-called death squads, as well as vigorous
action against those guilty of crimes and the prosecution to
the extent possible of past offenders. These conditions should
be seriously enforced.
Implementation of this approach would be greatly
facilitated through the device of an independent monitoring
body, such as the Central American Development Organization
spelled out in Chapter 4.
As an additional measure, the United States should impose
sanctions, including the denial of visas, deportation, and the
investigation of financial dealings, against foreign nationals
in the United States who are connected with death-squad
activities in El Salvador or anywhere else.
It is the Commission's judgment that the same policy
approach should be employed in the case of Guatemala. The
existing human rights situation there is unacceptable and the
security situation could become critical. Although the
insurgency in Guatemala has been contained for the time being
at a relatively low level, military assistance could become
necessary. Military aid and military sales should be
authorized if Guatemala meets the human rights conditions
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
described in this chapter. In terms of regional and U.S.
security interests, Guatemala, with its strategic position on
the Mexican border, the largest population in the Central
American area and the most important economy, is obviously a
pivotal country.
The Commission has concluded that the security interests of
the United States are importantly engaged in Central America;
that these interests require a significantly larger program of
military assistance, as well as greatly expanded support for
economic growth and social reform; that there must be an end to
the massive violation of human rights if security is to be
achieved in Central America; and that external support for the
insurgency must be neutralized for the same purpose -- a
problem we treat in the next chapter.
The deterioration in Central America has been such that we
cannot afford paralysis in defending our national interests and
in achieving our national purposes. The fact that such
paralysis resulted from the lack of a national consensus on
foreign policy in the United States would not mitigate the
consequences of failure. We believe that a consensus is
possible, and must be achieved, on an issue of such importance
to the national security of the United States.
We would hope, moreover, that a clear U.S. commitment to
such a course would itself improve the prospects for successful
negotiations -- so that arms would support diplomacy rather
than supplant it.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 7
THE SEARCH FOR PEACE
Americans yearn for an end to the bloodshed in Central
America. On no issue in the region is there a stronger
consensus than on the hope for a diplomatic solution that will
stop the killing and nourish freedom and progress. The
Commission shares this deeply felt goal.
Yet simply to endorse a wish for peace is futile. Our duty
is to try to define the means to achieve it.
U.S. diplomacy toward Central America can be neither
conducted nor considered in a vacuum. -It must reflect the
larger realities of the hemisphere and of the world. It must
also clearly embody a sustainable strategy for promoting U.S.
interests in the region for the long-term. That strategy will
involve many factors. What precise measures should be adopted,
what trade-offs made, what balances struck, what
responsibilities assumed by us and by others are proper
subjects for debate. But we must be clear on:
* The context of our diplomacy.
* The nature of our objectives.
* The constancy of our policy.
History and experience both teach that effective diplomacy
requires the coordination of many elements. Incentives for
progress are essential. So are penalties for failure. Often,
friendly forces need to be bolstered by both economic and
security assistance. Aggressors must be made aware that
unacceptable behavior carries risks. They must also know that
a different pattern of behavior can bring significant benefits.
A successful political strategy in Central America must
have certain basic underpinnings. It requires:
* Significant resources to promote economic progress.
* Vigorous efforts to advance democracy and social retorm.
* Other inducements and penalties, short of force, to
reinforce our diplomacy.
At the same time, there is little doubt that the projection
of U.S. power, in some form, will be required to preserve the
E~ecutire RogisnY
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
interests of the United States and of other nations in the
region. A nation can project power without employing its
forces in military encounter. However, a basic rule of
statecraft is that assessment of risks is the solvent of
diplomacy. In this case, we can expect negotiations to succeed
only if those we seek to persuade have a clear understanding
that there are circumstances in which the use of force, by the
United States or by others, could become necessary as a last
resort.
Successful diplomacy must also look beyond tomorrow's
headline, next month's military setback, or next season's array
of political contests. It must be based on support that can be
maintained politically in the United States, as well as in
other countries whose aid might be essential. Designing a set
of policies which can command bipartisan backing in the United
States is thus an essential foundation for diplomatic
strategy. Without such support, we risk being mired in
uncertainty, and caught up constantly in emergency assessments
of what is politically possible in the United States rather
than what is diplomatically attainable in Central America. In
addition, unless U.S. strategy takes full account of the views,
interests, and capacities of other affected nations in the
area, we will not be able to forge the cooperation based on
mutual respect which is the essence of the new approach we will
outline here.
The general strategic objective that should animate U.S.
diplomacy in dealing with the present threats in Central
America can be simply stated: to reduce the civil wars,
national conflicts and military preparations there at least to
the dimensions of the Central American region.
As a nation we are certainly not opposed to indigenous
reform in Central America. In Chapter 4 the Commission has put
forward a program to encourage such reforms. Nor are we
threatened by indigenous revolutions that use local resources
and appeal to local circumstances.
What gives the current situation its special urgency is the
external threat posed by the Sandinista regime in Nicaragua
which is supported by massive Cuban military strength, backed
by Soviet and other East bloc weapons, guidance and diplomacy,
and-Integrated into the Cuban network of intelligence and
subversion.
In considering the requirements for successful diplomacy in
the region we should learn from our experience since 1962. The
euphoria surrounding the resolution of the Cuban missile crisis
in that year seemed to open the prospect that the Cuban
revolution would at least be confined to its home territory.
As President Kennedy put it in his news conference of November
20, 1962, "... if all offensive weapons systems are removed
from Cuba and kept out of the hemisphere in the future, and if
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
-108-
Cuba is not used for the export of aggressive communist
purposes, there will be peace in the Caribbean."
This was more than an expectation. It was a declared
policy objective of the United States. Obviously, it has not
been achieved. The problem has been that it was eroded
incrementally. This often made it difficult to see the erosion
clearly, and, as a practical matter, made it even more
difficult to halt at any given point. The increases in the
Cuban threat were always so gradual that to stop them would
have required making a major issue of what was, at the time,
only a small change. The total effect of such small changes,
however, has been -- over five Administrations of both
political parties -- an enormously increased military power and
capacity for aggression concentrated on the island of Cuba, and
the projection of that threat into Central America (as well as
into Africa and the Middle East).
This is not to assess blame. It is to sound a note of
caution. Mutual restraint, settlement and peace are among the
highest aspirations of mankind. But progress toward such goals
can be difficult to measure. Words like "offensive weapons"
and "aggression" are slippery. They can be made to mean
different things in differing circumstances. And negotiators
cannot anticipate the exact circumstances of the future.
Any agreement in Central America must be verifiable.
Equally important, it should also avoid any possible loophole
that would permit the Soviet Union and Cuba to argue that
whatever is not specifically prohibited is allowed. We should
make sure that any agreement we reach is unambiguous. We
should also remember that language and legalisms alone, however
well crafted, will not provide airtight assurances in future
cases not foreseen in the drafting. It will be important to
give clear expression to the spirit of whatever obligations are
undertaken, and to monitor continually how that spirit is
respected. We must guard carefully against a gradual erosion
of our position in any agreement worked out in Central America.
Finally, we need constancy in the pursuit of our goals. If
we keep altering course with every shift in the wind, our
adversaries will have no incentive to negotiate seriously.
Doing so invites them to procrastinate; it also invites
continual pressure on us to improve our offers. If, however,
they find themselves confronted by a steady, persistent United
States, holding firmly to a position that is reasonable,
coherent and consistent, they will be more likely to calculate
that time is not on their side. They will therefore be more
prepared to make concessions that produce a reasonable
agreement.
In sum, we believe that there is a chance for a political
solution in Central America if the diplomacy of the United
States is strategic in conception, purposeful in approach, and
steadfast in execution. Our broad objectives should be:
' 1973
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
_109-
To stop the war and the killing in El Salvador.
* To create conditions under which Nicaragua can take its
place as a peaceful and democratic member of the Central
American community.
* To open the way to democratic development throughout the
isthmus.
El Salvador
Obviously, the future of Central America will depend in
large part on what happens in El Salvador. That nation most
immediately faces critical choices about the course of its
internal politics; it is wracked more severely by internal
strife and conflict than any of its neighbors; it most requires
intelligence and subtlety in the day-to-day conduct of U.S.
diplomacy.
The dilemma in El Salvador is clear. With all its
shortcomings, the existing government has conducted free
elections. But it is weak. The judiciary is ineffective. The
military is divided in its concerns, and in the degree of its
respect for human rights. Privileged Salvadorans want to
preserve both their political and economic power.
We have described in other chapters the economic, social
and security measures we believe are necessary to make progress
in economic development.
In the political field two broad options have been
presented: either elections, or what is commonly referred to as
power-sharing.
The government of El Salvador has consistently stated that
a solution to the conflict "must be essentially political and
democratic." This means that a political solution must result
from the free choice of the Salvadoran people expressed through
elections. The political parties represented in the
Constituent Assembly, from the center-left Christian Democrats
to the right-wing ARENA party, have formally endorsed this
view. The United States has supported this position.
The Salvadoran Peace Commission was established last year
-- again in consultation with the political parties -- for the
"purpose of promoting the incorporation of all social and
political sectors in the democratic pr-ocess." The Commission
has offered to discuss with the guerrilla fronts, the FMLN/FDR,
the conditions under which the left could take part in the
elections scheduled for March 25, 1984. The issues of security
guarantees, access,to the media and freedom to campaign would
be included in such discussions.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The insurgents have-rejected this offer. They assert that
their security could not be assured. In any event, they hope
for a collapse of American support, and eventually for a
military victory. They evidently want to maintain unity among
the various guerrilla groups, which they perceive would be put
at risk by rifts over tough political decisions. They may well
judge that a contested election would reveal their low level of
popular support. So they seem to have cast their lot with
continued military struggle unless the government is prepared
to abandon the scheduled elections and install a coalition
government.
The insurgents most recently set forth their formal
position in September of last year, following contacts with
Ambassador Richard Stone and the Salvadoran Peace Commission.
In a document entitled The Situation of Human Rights in El
Salvador in Light of the Geneva Convention" and under the
heading "Prospects for a Political Solution", the
Political-Diplomatic Commission of the FMLN/FDR stated: the
Salvadoran people need a negotiated settlement between the
government and the FMLN/FDR -- to bring about peace; they do
not need elections." The document went on to detail the
FMLN/FDR position calling for comprehensive negotiations on the
following agenda:
a) Composition of a provisional government.
b) Restructuring the armed forces.
c) Structural reforms.
d) Salvadoran foreign policy.
e) Mechanisms for future elections.
f) The process to achieve a ceasefire.
This is more than a refusal to campaign under the currently
insecure conditions in El Salvador. Evidently the insurgents
do not view power-sharing as merely an interim measure needed
in order to hold elections in which the left could participate
with security. Rather, it is a means of scrapping the existing
elected governmental structure and armed forces and creating a
provisional civil and military authority in their place in
which the rebel leadership would have a major role -- and in
which they would eventually gain a dominant position well
before the electoral "mechanisms" were in place.
Therefore, the Commission has concluded that power-sharing
as proposed by the insurgents is not a sensible or fair
political solution for El Salvador. There is no historical
precedent suggesting that such a procedure would reconcile
contending parties which entertain such deeply held beliefs and
political goals, and which have been killing each other for
r
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
-111-
years. Indeed, precedent argues that it would be only a
prelude to a take-over by the insurgent forces.
To install a mixed provisional government by fiat would
scarcely be consistent with the notion that the popular will is
the foundation of true government. It would tend to inflate
the true strength of insurgent factions that have gained
attention thus far through violence and their ability to
disrupt the functioning of government. It would provide
openings for them and their foreign supporters to forestall
democratic politics. The likely final outcome of power-sharing
would be the imposition on the people of El Salvador of a
government unwilling to base its authority on the consent of
the governed.
We believe that a true political solution in El Salvador
can be reached only through free elections in which all
significant groups have a right to participate. To be sure,
elections do not solve a nation's problems. They can be the
beginning, but cannot be the end, of political development.
This is particularly true in El Salvador, which is threatened
by a fragmentation of political life affecting most, if not
all, of its institutions.
How elections are conducted will be crucial. Given
prevailing conditions in El Salvador, all factions have
legitimate concerns about their security. Neither supporters
nor opponents of the regime can be expected to participate in
elections so long as terrorists of the right or the left run
free. No political efforts at reconciliation can succeed if
the Government of El Salvador itself aids and abets violence
against its own people. Unless it effectively curbs the
actions of the death squads -- unless it provides basic
security for teachers, editors and writers, labor and religious
leaders, and generally for the free and secure expression of
opinion, the political process recommended here will break
down. A secure environment must be established for all who
wish to take part, whether leftists, centrists or rightists.
The U.S. Government - to be credible - must insist that these
conditions be met.
Thus the El Salvador Government must take all appropriate
measures to make the March 25 elections as safe and open as
possible. This should include the introduction of outside
observers to help insure the security and fairness of the
process.
The political process should not -- indeed cannot -- stop
after the March elections. Following the elections, basic U.S.
strategy for El Salvador should include firm support for the
newly elected legitimate government. Along with providing
military assistance, we should encourage it to pursue
negotiations and reconciliation with all elements of Salvadoran
society that are prepared to take part in an open and
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
democratic political process, to promote rapid progress towards
the protection of human rights, to strengthen civilian
authority, and to undertake comprehensive reform of both
political and military institutions. Such reform is essential
to the creation of a stable, democratic government and for the
reconciliation of disparate elements within Salvadoran
society. U.S. economic assistance should be a key instrument
in helping to secure these ends.
Even if the insurgents do not take part in the March
elections, their participation in subsequent elections -- at
least participation by those prepared to accept'the results of
the balloting -- should be encouraged. The Commission believes
that a proposal along the following lines -- which amplifies
the government's approach -- would constitute a genuinely fair
chance for all to compete peacefully for political power in El
Salvador. The basic principle would remain that of consulting
the popular will, not imposing a government on the people
through power-sharing. It would test the intentions of the
insurgents.
We understand that El Salvador contemplates holding
municipal and legislative assembly elections in 1985. The
elements of the following approach could be applied to that
process.
1. The Salvadoran government would invite the FDR-FMLN to
negotiate mutually acceptable procedures to establish a
framework for future elections. Although the details of the
framework would have to be worked out by the parties to the
talks themselves, the United States would energetically support
their efforts and encourage other appropriate arrangements for
elections in which all parties could participate as a first
step toward a peaceful settlement of the conflict.
2. As part of this framework a broadly representative
Elections Commission would be established, including
representatives of the FDR-FMLN. The Salvadoran Government
would thus be inviting participation by the political front of
the guerrilla movement in the conduct of elections. The
Commission would help ensure that all parties could compete
openly and safely and that all citizens could receive political
literature, attend meetings and rallies, discuss partisan
issues freely, and cast their ballots. without fear or
intimidation. The insurgent opposition should have a
significant voice and vote both in the Elections Commission and
in developing security arrangements for the campaign and.
election. But this should not become a subterfuge for the
sharing of power with regard to the responsibilities of
government, which we have rejected in this report.
3. Violence should be ended by all parties so that mutually
satisfactory arrangements can be developed among the
government, pro-government parties, the different opposition
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
groups and insurgent groups for the period of campaigning and
elections. To that end, certain developments are needed. The
Salvadoran security forces and guerrillas should cease
hostilities against one another. Guerrilla terror against
military, government, and economic targets should end.
Civilian and military violence of the right should also end.
4. A s stem of international observation should be
established to enhance the faith and con idence of all parties
in the probity and equity of arrangements for elections. This
might include senior advisers to the Elections Commission drawn
from the OAS, Contadora nations or third countries agreed upon
by all parties to the conflict.
In sum, the United States should make a maximum effort to
help El Salvador to create a self-sustaining society dedicated
to open participation in its political process, to social
justice, and to economic freedom, growth and development. An
El Salvador that works toward these goals deserves our
continuing support. This should include adequate levels of
economic and military aid, which in turn can produce pressure
for a politically negotiated end to the fighting.
What happens in El Salvador will have important
consequences in the other nations of Central America. If the
shaky center collapses and the country eventually is dominated
by undemocratic extremes, this will lead to increased pressures
on El Salvador's neighbors. For Guatemala and Nicaragua, the
experience of El Salvador could carry a clear message: the best
means of earning the support of the United States, and of
promoting political, social, and economic development, lies in
adopting both the form and the substance of democracy.
In addition, events in El Salvador will have a major impact
on developments in Nicaragua and on Nicaragua's relations with
its neighbors. It is to these factors that we now turn.
Nicaragua
The basic threat posed by Nicaragua has been examined in
previous chapters. The Sandinista military forces are
potentially larger than those of all the rest of Central
America combined. The government in Managua volunteered to
this Commission an intelligence briefing which left no
reasonable doubt that Nicaragua is tied into the Cuban, and
thereby the Soviet, intelligence network. The Commission
encountered no leader in Central America, including democratic
and unarmed Costa Rica, who did not express deep foreboding
about the impact of a militarized, totalitarian Nicaragua on
the peace and security of the region. Several expressed the
view that should the Sandinista regime now be consolidated as a
totalitarian state, their own freedom, and even their
independence, would be jeopardized. In several countries,
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
especially those with democratic traditions, we met leaders who
expressed regret and outrage that the revolution against Somoza
-- which their own governments had supported -- had been
betrayed by the Sandinistas.
For all of these reasons, the consolidation of a
Marxist-Leninist regime in Managua would be seen by its
neighbors as constituting a permanent security threat. Because
of its secretive nature, the existence of a political order on
the Cuban model in Nicaragua would pose major difficulties in
negotiating, implementing, and verifying any Sandinista
commitment to refrain from supporting insurgency and subversion
in other countries. In this sense, the development of an open
political system in Nicaragua, with a free press and an active
opposition, would provide an important security guarantee for
the other countries of the region and would be a key element in
any negotiated settlement.
Theoretically, the United States and its friends could
abandon any hope of such a settlement and simply try to contain
a Nicaragua which continued to receive military supplies on the
present scale. In pratical terms, however, such a course would
present major difficulties. In the absence of a political
settlement, there would be little incentive for the Sandinistas
to act responsibly, even over a period of time, and much
inducement to escalate their efforts to subvert Nicaragua's
neighbors. To contain the export of revolution would require a
level of vigilance and sustained effort that would be difficult
for Nicaragua's neighbors and even for the United States. A
fully militarized and equipped Nicaragua, with excellent
intelligence and command and control organizations, would weigh
heavily on the neighboring countries of the region. This
threat would be particularly acute for democratic, unarmed
Costa Rica. It would have especially serious implications for
vital U.S. interests in the Panama Canal. We would then face
the prospect, over time, of the collapse of the other countries
of Central America, bringing with it the spectre of Marxist
domination of the entire region and thus the danger of a larger
war.
The notion that the United States should cope with a
Marxist-Leninist Nicaragua, militarily allied to the Soviet
Union and Cuba, through long-term containment assumes an
analogy between conditions in post-war Europe and the present
circumstances of Central America. The experience of the
post-war period, however, shows that containment is effective
as a long-term strategy only where U.S. military power serves
to back up local forces of stable allies fully capable of
coping with internal conflict and subversion from without. In
such circumstances, the United States can help to assure the
deterrence of overt military threats by contributing forces in
place, or merely by strategic guarantees.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
On the other hand, where internal insecurity is a chronic
danger and where local governments are unable to deal with
externally supported subversion, a strategy of containment has
major disadvantages. It would risk the involvement of U.S.
forces as surrogate policemen. Any significant deployment of
U.S. forces in Central America would be very costly not just in
a domestic political sense but in geo-strategic terms as well.
The diversion of funds from the economic, social, medical, and
educational development of the region into military containment
would exacerbate poverty and encourage internal instability in
each of the countries that became heavily militarized.
Furthermore, the dangers facing the other Central American
countries might actually grow if each each side perceived that
the other was tempted to use its increased military power. And
the creation of garrison states would almost certainly
perpetuate the armies of the region as permanent political
elites. The hopes of true democracy would not be enhanced.
Therefore, though the Commission believes that the
Sandinista regime will pose a continuing threat to stability in
the region, we do not advocate a policy of static containment.
Instead, we recommend, first, an effort to arrange a
comprehensive regional settlement. This would elaborate and
build upon the 21 objectives of the Contadora Group. (For
these, see the annex to this chapter.) Within the framework of
basic principles, it would:
* Recognize linkage between democratization and security in
the region.
* Relate the incentives of increased development aid and
trade concessions to acceptance of mutual security
guaranteees.
* Engage the United States and other developed nations in
the regional peace system.
* Establish an institutional mechanism in the region to
implement that system.
The original peace initiatives of Nicaragua have given
little cause for optimism that we could move toward these
objectives. The latest of the Sandinistas' formal proposals
were presented to the United States Government and to the
United Nations in October, 1983, as. four draft treaties
purportedly prepared "within the framework of the Contadora
process." The treaties would bind the parties to refrain from
sending arms from one country to-another in the region, and
otherwise to end intervention, "overt or covert," in the
internal affairs of other nations of the region.
Significantly, these Sandinista proposals.would prohibit
exercises and maneuvers of the type United States and Honduran
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
forces have carried out, while deferring the question of
foreign advisers for later discussion.
More recently, after the U.S. actions in Grenada, Managua
has hinted at some accommodations in its external and internal
policies. The Commission is not in a position to judge the
sincerity and significance of these various signals. But
clearly they would require extensive elaboration and more
concrete expression before they could give solid grounds for
hope.
The Commission believes, however, that whatever the
prospects seem to be for productive negotiations, the United
States must spare no effort to pursue the diplomatic route.
Nicaragua's willingness to enter into-a general agreement
should be thoroughly tested through negotiations and actions.
We must establish whether there is a political alternative to
continuing confrontation in the region. Every avenue should be
explored to see if the vague signals emanating from Managua in
recent weeks can be translated into concrete progress. Our
government must demonstrate to the people of the United States
and the peoples of the region that the U.S. earnestly seeks a
peaceful settlement.
It is beyond the scope of this Commission's
responsibilities to prescribe tactics for the conduct of these
negotiations. As a broad generality, we do not believe that it
would be wise to dismantle existing incentives and pressures on
the Managua regime except in conjunction with demonstrable
progress on the negotiating front. With specific reference to
the highly controversial question of whether the United States
should provide support for the Nicaraguan insurgent forces
opposed to the Sandinistas now in authority in Managua, the
Commission recognized that an adequate examination of this
issue would require treatment of sensitive information not
appropriate to a public report. However, the majority of the
members of the Commission, in their respective individual
judgments, believe that the efforts of the Nicaraguan
insurgents represent one of the incentives working in favor of
a negotiated settlement and that the future role of the United
States in those efforts must therefore be considered in the
context of the negotiating process. The Commission has not,
however, attempted to come to a collective judgment on whether,
and how, the United States should provide support for these
insurgent forces.
A Framework for Regional Security
The Commission believes that a comprehensive regional
settlement could be based on the principles enumerated below.
Such a settlement would not imply the liquidation of the
Sandinista Government or the formal abandonment of its
revolutionary ideals, but only that it submit itself to the
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
legitimating test of free elections. It is therefore not
beyond the realm of possibility that Nicaragua, and the other
nations of the region, would in the end embrace it. The basic
framework would be an agreement on Central American security
negotiated among the Central American "five" (Costa Rica, El
Salvador, Guatemala, Honduras and Nicaragua), containing these
key elements:
* Respect for the sovereignty, independence, and integrity
of all Central American countries.
* A broad and concrete commitment to democracy and human
rights.
* A verifiable commitment by each nation not to attack its
neighbors; nor to transfer arms overtly or covertly to
any insurgents; nor to train the military personnel of a
Central American country; nor to practice subversion,
directly or indirectly, against its neighbors.
* A verifiable commitment by each country not to possess
arms that exceeded certain sizes, types, and
capabilities. The total permissible scale of military
forces in each nation could be stipulated as not to
exceed an agreed level substantially lower than now. No
military forces, bases, or advisers of non-Central
American countries would be permitted.
* United States respect for and cooperation with the
agreement. This would include a readiness to support the
Central American military and security arrangements, and
a commitment to respect whatever domestic arrangements
emerge from legitimating elections, as long as there is
continuing adherence to the basic principles of pluralism
at home and restraint abroad.
* Commitments by all countries to pluralism, to peaceful
political activity, and to free elections in which all
political parties would have a right to participate free
of threat or violence. Particularly, the pledges by
Nicaragua of July 1979 to the OAS, and reaffirmed by the
Contadora group, would be fulfilled. All insurgent
groups would stop military activity.
* Permanent verification. The United States would be
prepared to offer technical assistance to ensure
effective verification. The Contadora countries could
play a major role.
* The Central American nations that are parties to the
agreement could invite other countries to be associated
with it. They could also request that others in the
hemisphere undertake mutual pledges of non-interference.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
* Adherence to the agreement would be a condition for
participating in the development program outlined in
Chapters 4 and 5. The Central American Development
Organization would, as suggested there, maintain a
continuing audit and review of compliance with the
commitments to nonintervention abroad and democratization
at home.
* Foreign and other ministers of the Central American
members, together with the United States, Mexico, Panama,
Colombia, and Venezuela as observers, would meet
regularly to review the arrangement and compliance with
it. The council would develop procedures for
conflict-resolution among member states.
A program along these lines would end any reason for
Nicaragua to continue to depend on Cuba for its security. It
would open the way for Nicaragua to participate in a vastly
expanded, integrated development program. It would also bar an
American military base in Honduras. The Nicaraguan insurgents
would be able to participate in Nicaraguan elections. The
insurgents in El Salvador would continue to be free to
participate in elections there.
A settlement of this nature would bring peace and stability
to Central America. It would insulate the region from great
power rivalry. Dilution of its terms would carry risks. A
failure of negotiations because not every term was fulfilled
would carry other risks. These considerations will have to be
weighed in the negotiating process itself, which is properly
the responsibility of the U.S. Government, not of this
Commission.
In any event, we recognize that to negotiate such an
ambitious arrangement will take imagination, patience, and
perseverance. We cannot expect a sudden solution to the
security problems of Central America, just as we cannot expect
democracy and pluralism to bloom overnight. But we can measure
progress. We can expect long and arduous negotiations. But
the stakes are too high, and the alternatives too bleak, to shy
away from the most determined efforts to succeed.
These efforts will be critically dependent on inducements
for agreement and compliance. It is partly for this reason
that the Commission has proposed the major financial and
commercial incentives set forth in Chapter 4. We conceive of
these new programs in trade, aid, investment, employment,
health and education as an integral element in the search for
peace in the region. Such incentives have the added value of
demonstrating to the peoples in the region the benefits of
productive relations with the United States and the West in
general.
At the same time, this diplomacy must carry with it
penalties for failure to comply with any agreement reached.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
These would include at least the loss of shared economic
benefits -- such as a major drop in external aid flows and
denial of access to special trade advantages.
Finally, as part of the backdrop to diplomacy, Nicaragua
must be aware that force remains an ultimate recourse. The
United States and the countries of the region retain this
option. There are, of course, non-military measures available
that we have not yet used -- for example, economic restrictions
and reduction of diplomatic contact. As for the military
option, the precise circumstances in which it might be
considered essential to U.S. security are beyond the
Commission's mandate. But we do urge that direct U.S. military
action -- which would have major human and political costs --
should be regarded only as a course of last resort and only
where there are clear dangers to U.S. security.
If Managua proves responsive to serious negotiations,
hopeful vistas open up for the beleaguered peoples of Central
America, including those of Nicaragua. This is the course that
we would strongly prefer. We do not seek confrontation. We
prefer to resolve the conflicts in the region peacefully. We
would like to get on with the formidable challenge of improving
the lives of everyone in the region, including Nicaraguans.
The Contadora Group
The United States has a strong interest in encouraging the
nations of Central America to assume greater responsibility for
regional arrangements. Our involvement will be more acceptable
if it reflects a regional consensus. When countries of the
region take the lead, when we are not perceived as imposing
regional goals, the prospects of a constructive evolution based
on shared purposes will increase. Thus, a key objective for
the United States should be to promote the development of an
independent system of regional relations, backed up by
commitments of U.S. economic resources, diplomatic support, and
military assistance. In the final analysis, for any regional
arrangement to be lasting it must be able to count on U.S.
support. But for it to be supported it must elicit the
cooperation and good will of our sister republics to the south.
Successful regional diplomacy within Central America must
be based upon the interests of the Central American countries
themselves. These interests will have to be reflected in
broader regional arrangements that impose mutual obligations,
create shared incentives to respect national rights, and
provide both for verification of compliance and penalties for
violation.
The four neighboring Contadora countries -- Colombia,
Mexico, Panama and Venezuela -- have been active and creative
in trying to develop a regional diplomacy that can meet the
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
needs of Central America. Their role has been constructive in
helping to define issues and to demonstrate the commitment of
key Latin American nations to pursue stability and peaceful
evolution within the region.
To be sure, the interests and attitudes of these four
countries are not identical, nor do they always comport with
our own. The Contadora nations do not have extensive
experience in working together, and the Contadora process has
not yet been tested in terms of crafting specific policies to
provide for regional security. Thus the United States cannot
use the Contadora process as a substitute for its own
policies. Experience has shown that the process works most
effectively when the United States acts purposefully. When
our policy stagnates, the Contadora process languishes. When
we are decisive, the Contadora process gathers momentum.
Within this framework, the United States should actively
encourage the Contadora process. We should continue to consult
genuinely and regularly with its members. We should continue
to support its 21-point program while urging a more specific
settlement. Given the size and complexity of the task, it is
not surprising that progress is often gradual and on a general
level. As already noted, the principles of the regional
framework set forth in the previous section are fully
consistent with the Contadora program. Indeed these principles
seek to give greater concreteness to that program. And
whatever the role of the Contadora group in the actual
fashioning of settlements, it will certainly be central in
their implementation and supervision.
The Contadora countries are engaged in a bold new
experiment. They deserve the gratitude and encouragement of
all the nations in the hemisphere.
Cuba and the Soviet Union
Both the role played by the Sandinista regime in Central
America and the threats in neighboring countries gain added
importance for the region and for the United States because of
Cuba's active engagement. As we have seen, Cuba has long been
committed to revolutionary violence as an essential part of its
ideology; indeed, that commitment is reflected in its national
constitution. In turn, Cuba is closely allied with the Soviet
Union and other communist bloc states, gaining support from
them and promoting their interests in the Caribbean Basin
region.
Over the years, Cuban conduct in the region has taken on
forms never foreseen at the time of the Cuban missile crisis of
1962. In his proclamation of October 23, 1962, President
Kennedy declared that:
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
the United States is determined to prevent by
whatever means may be necessary, including the
use of arms, the Marxist-Leninist regime in Cuba
from extending, by force or the threat of force,
its aggressive or subversive activities to any
part of this hemisphere, and to prevent in Cuba
the creation or use of an externally supported
military capability endangering the security of
the United States.'
In this section of the proclamation, President Kennedy was
in fact quoting a Joint Resolution of the Congress which had
been passed only a few weeks before.
Clearly, these goals have not been achieved. Since then,
Cuba -- supplied, trained, and supported by its Soviet mentors
-- has grown into a power with major offensive capability, as
outlined in the previous chapter. Propped up economically and
militarily by the USSR, Cuba has been able to bankroll, train,
advise, and participate in insurgent movements in Guatemala,
Nicaragua, Honduras, El Salvador, Bolivia, Venezuela, and
elsewhere in the hemisphere.
Thus President Kennedy's vision of 1962 has given way to a
vastly different reality in 1984. In 1962 the United States
hoped that, by the exercise of American will and the projection
of American strength, Cuba would be neutralized as a threat to
Central and South America. More than twenty years later the
threat is still there -- and in guises that are arguably more
dangerous to the stability of the region than the IRBMs of the
1960's.
The United States has a clear interest in reducing Cuba's
role as a surrogate for the Soviet Union in the hemisphere.
Yet because of their mutual dependence -- Cuba in gaining arms,
economic aid, and diplomatic support; the Soviet Union in
gaining greater access to the region -- it is not likely that
the United States will be able to separate Moscow from Havana
under present circumstances. As in the past, Moscow may at
times seek to limit particular acts of Cuban adventurism within
the region when such acts impose excessive risks, conflict with
other Soviet objectives, or offer little opportunity. But
Moscow is unlikely to be either able or willing to require Cuba
to abandon its revolutionary principles and activity.
Should Havana, for whatever reason, change its basic
attitude and be prepared for genuine coexistence with the
United States, we, in turn, should be prepared to negotiate
seriously. Such coexistence would have to involve an end to
Cuban support for insurgency in Central America and promotion
of revolutions elsewhere in the world. We, in turn, should
then be prepared to live with Cuba and lift existing
restrictions.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
In the meantime, the United States has a dual task: to
create those economic conditions in Central America that thwart
the export of revolutions and to make clear the risks of
expanded violence. Social reform, economic advance and
political stability in Central America will discourage Cuban
adventurism in the region. But we must also bring home to
Havana a due appreciation of the consequences of its actions.
As for the Soviet Union, it has been pursuing a strategy of
progressively greater involvement in the Western Hemisphere,
particularly in reaching beyond Cuba to Central America and the
Caribbean. It has employed gradualism, ambiguity, and
proxies. For Moscow, this strategy has entailed few risks,
either military or political; except in the case of Cuba, it
has been inexpensive; and it has held the potential for
significant gains. Soviet objectives, beginning with Cuba in
the early 1960's, have been to end unchallenged U.S.
pre-eminence within the hemisphere and possibly to see other
"Cubas" established, to divert U.S. attention and resources
from other parts of the world that are of greater importance to
Moscow, to complicate our relations with our West European
allies, and to burnish the Soviet Union's image as a
revolutionary state.
Preserving U.S. interests in Central America and the
Caribbean against the Soviet challenge will be a significant
concern for years to come. We reject the proposition that the
establishment of a Soviet military base in Central America is
the sole, or even the major, threat to U.S. interests. Unless.
current Cuban-Nicaraguan designs are checked, long before
Moscow feels ready for such a move the turmoil in Central
America will have reached a point of crisis that could not be
contained in Central American dimensions. In designing a basic
policy toward the region, we must make the Soviet Union
understand the limits of its activity, especially before its
practice hardens into precedent. Moscow must be forestalled
from making gains that would give it major advantages either
within the region or in wider aspects of East-West relations.
Excluding Soviet involvement in Central America altogether
-- extending to trade, diplomatic relations, and the gaining of
some influence in individual countries -- is no doubt
impossible. At the other extreme, clearly any Soviet
involvement in the region that poses a strategic threat to the
United States is unacceptable. The policy questions are,
first, to decide at what point between these two extremes of
Soviet involvement the balance point of U.S. interests lies;
and second, to take those actions necessary to preserve those
interests.
The United States cannot accept Soviet military engagement
in Central America and the Caribbean beyond what we reluctantly
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
We will also need to define specific situations as
precisely as possible and to make those definitions clear to
Moscow. At the same time we must avoid the inference that
Soviet actions we have not proscribed are thus acceptable to
us. If we do challenge directly any particular Soviet military
activity in the region, we must be prepared to prevail.
On the other hand, some Soviet involvement in Central
America and the Caribbean is likely to fall into grey areas.
Except where a Soviet position of dominance is either imposed
or preserved through force of arms, Moscow depends for its
opportunities on conditions both within the region and within
individual countries. Where political, social and economic
programs forestall violent revolution, Soviet ability to fish
in troubled waters is severely limited. Where we can agree
with countries in Latin America that Soviet actions pose a
threat to hemispheric interests, we can share leadership in
opposing those actions. Where countries of the region can
agree on mutual security and the pooling of benefits,
collective actions can reduce Soviet opportunities.
Against this backdrop, the Commission sees little promise
in negotiating with the Soviet Union over Central America. The
Soviets would almost certainly use negotiations to legitimize
their presence in the region. They would welcome discussion
about superpower spheres of influence, which would prompt
Soviet assertions of primacy and the need for U.S. abstention
on the Soviet periphery, in such places as Eastern Europe and
Afghanistan. For the United States, however, such a concept of
spheres of influence is unacceptable. Should the United States
now accept. that concept, the Soviet Union would reap
substantial gains.
In sum, the United States cannot eliminate all Soviet
political involvement and influence within Central America and
the Caribbean. But we must curb Soviet military activity in
the hemisphere. And we can reduce Soviet opportunities and
increase the incentives for others to abstain from forging ties
with Moscow that damage U.S. and regional interests.
Western Europe
In developing a basic strategy toward Central America, we
also need to take into account the policies and interests of
our West European allies. Spain has important historical,
cultural and economic ties to the region. Other European
countries have modest economic concerns in the region and only
occasional residual involvements, such as the British military
presence in Belize. But none of them has vital stakes in the
Western Hemisphere.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Their fundamental interest derives from our own, and it is
not inconsiderable. As was seen in the previous chapter, the
ability of the United States to fulfill its commitments to the
Western Alliance would be adversely affected by developments in
Central America that threatened the security of the Caribbean
sea lanes (through which Europe would be resupplied in the
event of a crisis) or that required a redeployment of U.S.
forces to protect interests in this hemisphere. The European
security interest in Central America is thus significant, even
if it is indirect.
Unfortunately, this interest is not always well-appreciated
in Europe. Some European governments and political
organizations have taken actions inimical to U.S. -- and
indeed, to European -- security, such as supporting the
Sandinista government or the Salvadoran insurgents. At the
same time, some European governments have shown understanding
of the difficult problems facing the United States in Central
America.
The differences between the United States and Europe over
Central America have diverse causes. In part they derive from
differing views concerning the management of East-West and
North-South relations. In addition, some Europeans see
domestic political advantage in distancing themselves from us
on issues in this hemisphere. In some instances, there is also
political solidarity with revolutionary forces in the region.
Recently, allied expressions concerning Central America
have been muted. This is partly due to a growing, though still
inadequate, awareness by our allies that this region is of
great political and security concern to the United States and
therefore to themselves as well. They also are beginning to
see that while there are some advantages in disassociation from
U.S. policy in Central America, there are also costs in public
disagreement with us. Not least, their recent restraint is
also due to the increasingly widespread awareness in Europe
that the Sandinistas have betrayed their revolution and
threaten their neighbors.
The United States obviously cannot grant our European
allies a veto over our policy decisions on Central America. At
the same time, it is important that we regularly discuss our
policies with them, and also discuss with them the rationale
and factual basis for such policies. We should seek their
political and diplomatic support where this is possible, and
their restraint where it is not. We should strongly discourage
their aiding the Sandinista regime, until it fundamentally
changes course. And we should encourage their economic
involvement in the region to help promote political, economic
and social reform, both bilaterally and through multilateral
institutions.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The Broader Efforts
The prospects for security and progress in Central America
will turn on the efforts both of the nations of the region and
of the United States. For the longer term, the primary
emphasis must be upon the progressive reform of societies, the
strengthening of political processes, and the improvement of
economic conditions. To embrace these goals and provide the
needed resources will not by itself assure security and
progress. But without these broader efforts, no diplomatic
strategy can be successful or endure.
There are no easy answers for the United States in Central
America. There will be no early end to our domestic debate
about the best course to follow. We must, nevertheless,
vigorously pursue diplomatic and political approaches --
together with the other strands of our policy -- to foster a
regional framework for security, peace, development and
democracy.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Chapter 8
CONCLUSION
We
have
concluded this exercise persuaded that Central
America
is
both vital and vulnerable, and that whatever other
crises
may
arise to claim the nation's attention the United
States
cannot afford to turn away from that threatened region.
Central
America's crisis is our crisis.
All too frequently, wars and threats of wars are what draw
attention to one part of the world or another. So it has been
in Central America. The military crisis there captured our
attention, but in doing so it has also-wakened us to many other
needs of the region. However belatedly, it did "concentrate
the mind."
In the case of this Commission, one effect of concentrating
the mind has been to clarify the picture we had of the nations
of Central America. It is a common failing to see other
nations as caricatures rather than as portraits, exaggerating
one or two characteristics and losing sight of the subtler
nuances on which so much of human experience centers. As we
have studied these nations, we have become sharply aware of how
great a mistake it would be to view them in one-dimensional
terms. An exceptionally complex interplay of forces has shaped
their history and continues to define their identities and to
affect their destinies.
We have developed a great sympathy for those in Central
America who are struggling to control those forces, and to
bring their countries successfully through this period of
political and social transformation. As a region, Central
America is in mid-passage from the predominantly authoritarian
patterns of the past to what can, with determination, with
help, with luck, and with peace, become the predominantly
democratic pluralism of the future. That transformation has
been troubled, seldom smooth, and sometimes violent. In
Nicaragua, we have seen the tragedy of a revolution betrayed;
the same forces that stamped out the beginnings of democracy in
Nicaragua now threaten El Salvador. In El Salvador itself,
those seeking to establish democratic institutions are beset by
violence from the extremists on both sides. But the spirit of
freedom is strong throughout the region, and the determination
persists to strengthen it where it exists and to achieve it
where it does not.
The use of Nicaragua as a base for Soviet and Cuban efforts
to penetrate the rest of the Central American isthmus, with El
Salvador the target of first opportunity, gives the conflict
Executive Ru ist
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
there a major strategic dimension. The direct involvement of
aggressive external forces makes it a challenge to the system
of hemispheric security, and, quite specifically, to the
security interests of the United States. This is a challenge
to which the United States must respond.
But beyond this, we are challenged to respond to the urgent
human needs of the people of Central America. Central America
is a region in crisis economically, socially and politically.
Its nations are our neighbors, and they need our help. This is
one of those instances in which the requirements of national
interest and the commands of conscience coincide.
Through the years, there has been a sort of natural
progression in this nation's ties with other parts of the
world. At first they were almost exclusively with Europe.
Then, without diminishing those ties with Europe, we expanded
our trans-Pacific bonds. Now the crisis in Central America has
served as a vivid reminder that we need to strengthen our ties
to the south, as well as east and west.
Our response to the present crisis in Central America must
not be a passing phenomenon. The United States was born of a
vision, which has inspired the world for two centuries. That
vision shines most brightly when it is shared. Just as we want
freedom for ourselves, we want freedom for others. Just as we
cherish our vision, we should encourage others to pursue their
own. But in fact, what we want for ourselves is very largely
what the people of Central America want for themselves. They
do share the vision of the future that our ideals represent,
and the time has come for us to help them not just to aspire to
that vision, but to participate in it.
Our task now, as a nation, is to transform the crisis in
Central America into an opportunity: to seize the impetus it
provides, and to use this to help our neighbors not only to
secure their freedom from aggression and violence, but also to
set in place the policies, processes and institutions that will
make them both prosperous and free. If, together, we succeed
in this, then the sponsors of violence will have done the
opposite of what they intended: they will have roused us not
only to turn back the tide of totalitarianism but to bring a
new birth of hope and of opportunity to the people of Central
America.
Because this is our opportunity, in conscience it is also
our responsibility.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
NOTES BY INDIVIDUAL COMMISSIONERS
(Where these notes are addressed to specific issues in the
Commission report, brackets indicate the pages of the report on
which that issue is discussed.)
Henry G. Cisneros
The Commission report is a major contribution to U.S.
thinking about its relations with the nations and peoples of
Central America. I am in support of the vast majority of
recommendations in the Commission report. There are however
several fundamental issues which in my opinion require the
statement of an alternate view. The following notes are my
views on the issues discussed in Chapter 7, The Search for
Peace.
[pp. 111-112] Strong steps must be taken to convince
FDR/FMLN moderates with backgrounds of peaceful political
struggle to take part in discussions concerning participation
in a security task force to arrange security provisions for all
participants on election processes. Many elements of the FDR,
especially Social and Christian Democrats, actively contended
for political power in elections as legal parties during the
1970's and their UNO coalition (which included both parties)
ran Jose Napoleon Duarte and Guillermo Ungo as the
presidential-vice presidential ticket in 1972 and won. It is
important to note that a military coup prevented Duarte from
taking office, that electoral fraud denied another UNO
coalition ticket its rightful presidential victory in 1977, and
that representatives of major FDR components, including Mr.
Ungo, took part in the October 1979 reform junta strongly
supported by the United States. Violence should be ended by
all parties so that mutually satisfactory arrangements can be
developed among the government, progovernment parties, and
opposition groups for periods of campaigning and elections. As
part of such security arrangements the Salvadoran security
forces and the guerrillas should agree to a complete cease fire
and cessation of hostilities. Such discussions on the details
of security arrangements and election matters are intended to
determine the extent to which meaningful dialogue on coalition
approaches and structural reforms can proceed.
[pp. 115-116] Nicaragua in October announced initatives
that suggest some possibilities for movement on negotiations
concerning key aspects of relations among the countries in the
region. More recently, Managua has taken other actions which
should be encouraged to further internal conciliation. The
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
Sandinista regime should be encouraged to intensify dialogue
with the hierarchy of the Nicaraguan Catholic Church, the
private sector, and the opposition parties; expand its offer of
amnesty for anti-Sandinista rebels; introduce details of
legislation to permit the free functioning of political parties
and the promise of elections in 1985; eliminate censorship of
the press; fulfill its recent promises to the opposition
newspaper La Prensa to acquire newsprint; and reduce the
numbers of Cuban advisers and Salvadoran rebel elements from
Nicaragua. I believe further accommodation by the Nicaraguan
regime to its internal opposition and to its neighbors can be
encouraged through vigorous diplomacy by the United States.
The United States should raise the standing of efforts to
engage in diplomacy with Nicaragua as the most immediately
hopeful means toward peaceful resolution of differences.
The United States should suspend "covert" aid to the
anti-Sandinista rebels. The period for aid suspension should
be through the year 1985 so that the Sandinista government can
demonstrate its capacity to move toward pluralism and to
fulfill its promise to hold free and fair elections in 1985.
Such a step is intended to be matched by significant movement
on the part of the Nicaraguan government to change policies
which have aroused apprehension among its regional neighbors
and is intended to reduce the risk of war between Nicaragua and
Honduras. Success in changing Nicaraguan policies on external
advisers, aid to Salvadoran insurgents, and the level of their
military build-up should diminish the need for large increases
in U.S. military aid to Honduras and El Salvador.
William P. Clements, Jr.
[pp. 107-108] I became convinced from the commission's
examination of the 1962 Kennedy-Khruschev exchanges that those
exchanges did not produce a meeting of the minds. I also
believe that our policies since then have too often placed
undue reliance on those exchanges as though they were a
comprehensive agreement governing all aspects of U.S.-Cuban
relations. I am convinced that there was no understanding or
agreement.
Carlos F. Diaz-Alejandro
As the introduction to this report wisely indicates, no
document crafted by twelve persons will be completely
satisfactory to each of them. While proud to associate myself
with our report, I must go beyond that introductory caveat and
register two points of fundamental disagreement.
[pp. 115-116] I believe that the type of covert support
given by the United States government to Nicaraguan insurgents
on balance hurts the chances of reaching the goal of a truly
democratic Nicaragua. The net effect of such support is more
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
likely to strengthen the most extremist sectors of the
Sandinista leadership, and to allow them to claim patriotric
motivation for bringing Nicaragua into closer military alliance
with Cuba and the USSR. U.S. support to some insurgents is
used by Managua to brand all dissidents as pawns of a foreign
power, eroding the legitimacy of dissidence within Nicaragua,
especially among the nationalistic youth, while giving Managua
a handy excuse for economic failures and further political
repression. The possibility of accidental war along the
Nicaraguan northern border is also increased by these covert
operations. Thus, rather than creating pressures for
negotiations, U.S. support to Nicaraguan insurgents has made
successful negotiations less likely. Under present
circumstances, U.S. support to Nicaraguan democrats, if
requested, should be overt and channelled primarily via the
newly created Democracy Endowment and similar mechanisms.
[p. 55] In another crucial area, the timidity of the
report in recommending a further opening of the U.S. market to
Central American exports sharply contrasts with statements
about the strategic importance of that region to the U.S. I
believe that, under foreseeable circumstances, the most
effective single policy for advancing long-term U.S. strategic
interests in Central America would be to offer complete and
unimpeded access to the United States market to exports from
Central American countries joining the Development
Organizations proposed in the report. Even with generous
adjustment assistance to displaced U.S. workers and
entrepreneurs, which I would favor, this policy would remain
more cost-effective, over the long run, than direct economic
and military aid.
Henry A. Kissinger
Nicholas F. Brady
John Silber
[p. 102] We strongly endorse the objectives of the
conditionality clause. We are also convinced that the United
States extends military assistance to El Salvador above all to
serve vital American political and security interests. We hope
that both goals can be served simultaneously. We wish to
record our strong view that neither the Congress nor the
Executive Branch interpret conditionality in a manner that
leads to a Marxist-Leninist victory in El Salvador, thereby
damaging vital American interests and risking a larger war.
This report of the National Bipartisan Commission on
Central America reflects valuable work done over the past
months. The report provides the basis for continuing national
debate about the best course for U.S. policy towards Centra
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
America in the years ahead. Its basic thrust is sound: that
fundamental U.S. interests are at stake in Central America;
that we must continue to be deeply engaged; that we need to
develop a basic strategy that includes diplomatic, economic,
and military elements; and that, to be sustainable, any U.S.
approach must first earn and then command broad bipartisan
support.
I file this note not in dissent to the report but because
in my view in many Central American countries the creation
and/or preservation of pluralistic government depends as much
or more on a basic restructuring of internal political and
social institutions as on military assistance. My concern is
that this report, while not saying otherwise, might incorrectly
be interpreted to the contrary.
William B. Walsh
[p. 102] I am proud to have been a member of this
Commission. The report represents the objective and serious
conclusions of twelve members of diverse social and political
background, whose prime concern was to suggest solutions for
the Central American problem in an atmosphere of peace.
It is my feeling that conditionality must apply equally to
all nations in the region. The proper revulsion with the
activities of the "death squads" in El Salvador may give the
reader the impression in this document that more severe
restrictions have been placed upon that nation in qualifying
for increased assistance than upon any other.
It is appropriate to recall that El Salvador has had a
democratic election participated in by 80 percent of its
population. More significantly, a second election is scheduled
to be held on March 25, which will doubtless have the same
media attention and international supervision as did the last
election. Trade unions are functioning and political parties
are permitted freedom of association and assembly with highly
diverse views and actually participating in the electoral
process. Concrete steps in response to demands by the Reagan
Administration have been taken to reduce the activity of the
death squads and to discipline those responsible for this
activity. Participation of the extreme left has been invited
in both the activities of the electoral commission and the
political process. The left has rejected this opportunity in
part because of fear, but primarily because of their belief
they cannot win and because of their dedication to a military
victory. No group dedicated to a Leninist philosophy can
realistically be expected to participate in an electoral
process which they cannot control. History is replete with the
evidence for such a conclusion.
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
The government of El Salvador has a way to go -- but the
process has begun. Such progress should be acknowledged and
encouraged, and must be taken into account in applying
conditions for the provision of military aid. Pluralism in the
electoral process, personal freedom, and individual dignity are
equally important in all nations in the region. Progress
towards these objectives applies to all equally as a precedent
for assistance.
Executi_ r_ e Registry
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
NATIONAL BIPARTISAN COMMISSION ON CENTRAL AMERICA
CHAIRMAN
Dr. Henry A. Kissinger
Ms. Chris Vick, Personal Assistant to Dr. Kissinger
EXECUTIVE DIRECTOR
Ambassador Harry W. Shlaudeman
Mr. Gerald M. Sutton, Deputy Executive Director
CONGRESSIONAL RELATIONS
Mr. Tom C. Korologos, Director
Ms. Jonna Lynne Cullen, Assistant Director
PUBLIC AFFAIRS
Mr. Herbert E. Hetu, Director
Mr. Charles A. Black, Jr., Assistant to Director
Mr. Joshua B. Bolten, Executive Assistant
Mr. John Cavallaro, Administrative Officer
Ms. Coleen Getz, Research Analyst
Mr. Robin Little, Assistant Research Officer
Ms. Diane Maimone, Secretary to Director
Ms. Sharon Mussomeli, Staff Assistant
Ms. Barbara Rangel, Secretary to Deputy Director
Mr. Timothy Stater, Assistant Research Officer
Mr. J. Raymond Walser, Research Officer
MILITARY AIDES
Maj Edward J. Robarge
CMSgt Gary Glaeser
MSG Roger Goodman
YNC Jerry Zarecky
YN1 Paul Heine
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402
U.S. GOVERNMENT PRINTING OFFICE : 1984 0 - 430-367
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
 Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1
NATIONAL BIPARTISAN COMMISSION
ON CENTRAL AMERICA
Henry A. issinger, Chairman
ZL"~
Nicholas F. Brady
Potter Stewart
William B. Wal.r
Sanitized Copy Approved for Release 2010/09/23: CIA-RDP87B00858R000200170023-1