PROPOSED NSDD AND INTERAGENCY STUDY ON U.S. POLICY TOWARD SOUTH AMERICA (NSSD 10-82)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90B01013R000300480001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 30
• Document Creation Date: December 20, 2016
• Document Release Date: February 4, 2008
• Sequence Number: 1
• Publication Date: November 5, 1982
• Content Type: MEMO

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REVIEWED
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November 5, 1982
LIMITED OFFICIAL USE
(With SECRET Attachment)
MEMORANDUM FOR MR. WILLIAM P. CLARK
- THE WHITE HOUSE
Subject: Proposed NSDD and Interagency Study on
. U.S. Policy Toward South America (NSSD 10-82)
Attached as mandated in NSDD 10--82 are a proposed
National. Security Decision Directive (NSDD) and the SIG
study on U.S. relations with South America. 'Both the
NSDD and the study incorporate the comments of the twelve
agencies and offices that participated in the NSSD exercise.
The draft NSDD is submitted for consideration by the
President. The SIG study is submitted for the record.
Kle'A
utvreta y
ec
1. Proposed NSDD.
2. SIG study.
3. Change from original
cc: OVP
ACDA
AID
CIAA
Commerce
DOD
JCS
OMB
Treasury
UNA
USIA
USTR
Mr.
Mr.
Mr.
SIG study.
Donald Gregg
Joseph Presel
Gerald Pagano
Ms. Helen Robbins
- Col. John Stanford
- LTC Dennis Stanley
- Mr. Alton Keel
- Mr. David Pickford
- Amb. Harvey Feldman
- Ms. Teresa Collins
- Mr. Dennis Whitfield
LIMITED OFFICIAL USE
. DDD
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DRAFT 10/29/82
Draft NSDD in.response to NSSD 10-82
U.S. POLICY TOWARD SOUTH AMERICA
IN THE WAKE OF THE FALKLANDS CRISIS
1. U.S. national interests in Latin America and the
Caribbean. include a region free of Soviet-dominated or
other hostile governments; the development of stable and
democratic. political systems and institutions which promote
respect for basic human rights; cooperative bilateral relations
to deal with security and other issues flowing from geographic
proximity; advancement of major U.S. trade and investment;
access to raw materials; prevention of nuclear proliferation
and maintenance of stable balances of power among the states
in the region; and receptivity to U.S. leadership.
2. The Falklands crisis strained, to varying degrees,
our relations with Latin American countries, and highlighted
the potential for instability in South America. Our policy
must address the following specific problems;
Instability and irredentism in Argentina, which
imply new opportunities for the USSR to gain
access to a strategic position in the Southern
Cone;
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Disillusionment with U.S. leadership in Venezuela
and elsewhere, which provides tempting opportunities
for Cuba to reduce its inter-American isolation;
The increased importance of Brazil as a potential
stabilizing factor in South America at a time
when mounting economic and financial difficulties
are also eroding our ties. and influence there
and in the region as a whole.
3. The highest United States priority in Latin America
continues to be the prevention of further inroads by the
Soviet Union or its client states in our immediate environs
-- Central America, the Caribbean and Mexico.
4. To restore and assert U.S. influence 'in South
America, the United States will:
Maintain its diplomatic position on the fundamental
Falklands issues as it was before the crisis,
specifically: U.S. neutrality on. the question
of sovereignty over the island`s and support for
negotiations or other peaceful efforts to resolve
this dispute;
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To preserve regional political and military bal-
ance, certify Argentina and Chile jointly as
eligible for U.S. military sales before the end
of 1982, depending on discussions with Chile
and on Argentine behavior.
Rebuild a close relationship with Brazil, to
include Cabinet-level consultations, renewed
cooperation in military training and trade, en-
hanced cooperation in science and technology,
particularly space activities, and a dialogue
on nuclear issues. To develop this process,
the U.S. will seek appropriate positive action
by Brazil in the non-proliferation area (e.g.
restraint in exports to sensitive regions and
progress in discussions on the Treaty of Tlatelolco
and safeguards) in order to resolve the fuel
supply issue and permit resumed nuclear coopera-
tion. As contacts on these issues show progress,
in order to encourage significant movement on non-
proliferation concerns, consideration will be
given to waiving Glenn/Symington to permit resump-
tion of military training cooperation. The United
States will also explore arms co-production agree-
ments. We should also review our global sugar
policy in the light of its foreign and domestic
impact.
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Use flexibility within NSDD 5 guidelines to respond
promptly to arms transfer requests. The U. S.
will seek to prevent regional'arms races, t
preserve sub-regional arms balances, and to upgrade
bilateral military ties. Measures should b
sought to lessen Peru's dependence on Soviet
arms supplies.
Promote U.S. military influence, training a
through the expansion of military exchanges
increased IMET.
Use our influence through traditional diplon
channels to promote democratic development
human rights so as to facilitate public sup
for expanded, closer relationships with the
ernments concerned;
atic
nd
ort
gov-
Seek to play a supportive role by sustaining
modest assistance efforts, to the extent our
resources permit, in such economically weak states
as Bolivia, Ecuador and Paraguay.
Pursue a more active bilateral diplomacy throughout
the continent, while seeking to turn back efiforts
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to alter the Inter-American System. We will
use a series of ad hoc bilateral cabinet-level
meetings with a substantial but not exclusive
economic focus to show that dialogue with the
U.S. is possible. The U.S. will lead with Brazil,
then Mexico and Venezuela when the time is appro-
priate.
Take measures to improve collection on Soviet
bloc and Cuban actions designed to create insta-
bility or problems in bilateral relations with
the U.S.
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U.S. POLICY TOWARD SOUTH AMERICA
IN THE WAKE OF THE FALKLANDS CRISIS
EXECUTIVE SUMMARY
The underlying lesson of the Falklands conflict
was that U.S. credibility and leverage.with Argentina
'did not match the US interests at stake. Aside from
Argentina, crisis-induced damage to U.S.-Latin American
relations has varied widely from country to country
and appears manageable on most matters. But the potential
for future conflicts and instability counsels a long-
term effort to build relationships with the major
players in South America to maintain local balances
of power, delay nuclear proliferation, and narrow
openings for the Soviet Union.
Our highest priority in Latin America should
remain to prevent instability or inroads by the Soviet
Union or its client states in our immediate environs'"
-- Central America, the Caribbean and Mexico. To
demonstrate that the Falklands conflict did not distract
us from this central purpose and to reaffirm our constancy
to friends and adversaries in this hemisphere, a number
of immediate steps are desirable in this area, where
further deterioration would directly affect U.S. security
and well-being:
-- A decisive push for Congressional approval
of the President's Caribbean Basin'.Initiative
(CBI) ;
-- Strenuous efforts to secure requested FY 82
supplemental and FY 83 foreign assistance
funds for Central America/Caribbean.
Policy toward South America must take into account
the resource limitations imposed by our Caribbean
Basin and extra-hemispheric priorities, including
the need to maintain the credibility of our global
arms transfer, non-proliferation and trade policies.
We must also avoid the impression of a knee-jerk response
to the Falklands conflict and ensure that we do not
burden our effort to secure vital Central America/Carib-
bean funds with additional controversy.
. The problems we face in South America are serious:
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ii
-- Preserving a peaceful equilibrium between
Argentina and its neighbors, especially Brazil
and Chile, in the face of Argentine rearmament,
exploration of the nuclear option, and reasser-
tion of nationalism.
-- Lessening the chances of domestic instability
or '.unfavorable policy evolution in economically
vulnerable Bolivia, Ecuador, Peru, Paraguay,
and Argentina (serious balance of payments
problems also loom in Brazil and Chile).
Limiting Soviet arms transfer opportunities,
particularly in Peru and possibly in Argentina.
Managing these problems will require a long-term
effort to enhance relations with Brazil, Venezuela,
and eventually Argentina -- the major South American
economic powers and potential arbiters of security.
Brazil is of singular importance to this objective.
Although reluctant to march in lockstep with the U.S.
and extremely cautious in exercising influence with
its neighbors, Brazil's economic, military, and,institu-
tional capabilities give Brazil formidable potential
regional influence. Judging that not to build a web
of organic relationships linking Brazil to the West
could ultimately cause significant disruptions to
our interests, the IG favors efforts to develop a
U.S.-Brazilian relationship as intense as that with
U.S. alliance partners in Europe.
Venezuela also is of immediate importance. The
resurgence of anti-Americanism occasioned by the Falklands
and the coming Venezuelan Presidential elections could
weaken our cooperation on Cuba and Central America.
Our South American policy should develop in phases:
Immediately:
-- Begin to rebuild relations with Argentina
in the context of political moves in the Falklands
acceptable to the UK and Argentina;
Develop a policy on Argentine rearmament through
third parties in consultation with the UK;
Establish a dialogue with Argentina and Brazil
on nuclear security issues, the Treaty of
Tlatelolco (Latin American nuclear-free zone
agreement), and safeguards. With Brazil,
seek concessions permitting Presidental waiver
of Symington-Glenn restrictions;
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iii
-- Nurture Cabinet-level policy consultations
with Brazil, and explore the possibility of
a Brazil-U.S. trade agreement as part of a
new round of negotiations concentrated on
the advanced developing countries;
-- Enhance science and technology cooperation,
military and civilian training and exchange
programs, democratic political action, and
high-level-U.S. visits;
-- Maintain modest assistance and other economic
relief measures to the vulnerable South American
states.
-7 Increase intelligence collection on potential
territorial disputes.
Late 1982: -
-- Certify Argentina and, if possible, Chile---
for U.S. military aid and sales with appropriate
ancillary conditions;
Early 1983:
-- If Brazilian concessions warrant, utilize
waiver authorities, first to Symington-Glenn
to permit limited military cooperation, then
later to NNPA to-'resolve nuclear supply problems;
-- Address Brazil's sugar grievances,, if possible.
Over time, we would also:
-- Seek to meet requests for arms transfers posi-
tively and promptly, within NSDD-5 guidelines;
-- Capitalize the Special Defense Acquisition
Fund (SDAF) ;
-- Explore military co-production arrangements
with Brazil;
-- Seek to re-orient Argentine grain trade from
overdependence on the USSR;
-- Oppose development of new Cuban ties in the
hemisphere.; and .
-? Work to reduce Peruvian military ties to the
Soviet Union. -
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U.S. Policy Toward South America
in the Wake of the Falklands Crisis
I. U.S. INTERESTS
U.S. interests in Latin America and the Caribbean may
be summarized as follows:
a re ion free of Soviet-dominated or other hostile
governments requiring a significant commitment of
U.S. military resources. The 1947 Rio Treaty and
our ability to maintain constructive relationships
and to isolate and constrain Cuba have enabled us to
avoid committing significant resources to defend our
southern flank.
-- stable and democratic political systems and institutions
capable of dealing effectively with local social, economic,
and security problems.
-- cooperative bilateral relations to deal with geographic
proximity (our neighbors' cooperation is essential
on issues that directly affect U.S. society, including
migration, narcotics, tourism, fisheries, border
cooperation, etc.) and to maintain effective collabora-
tion on international issues. The region's 33 votes
in the UN and othe"r fora can make a major difference
to achievement of U.S. global objectives.
-- protection of major U.S. trade, investment, and access
to raw materials. U.S. exports to Latin America (now
more than $41 billion annually) exceed those to the
rest of the Third World combined, and match those to
the European Community; imports of oil and raw materials
are important to the U.S. economy. U.S. investment
totals $38 billion, with an annual return of approximately
$7 billion.
-- prevention of nuclear proliferation and maintenance
of stable balance of power relationships to help prevent
conflicts between-hemispheric countries requiring a
commitment of U.S. personnel or resources.
-- receptivity to U.S. leadership within the hemisphere,
requiring an image of the U.S. as a friendly country
which can be relied upon to meet its hemispheric commitments
(e.g., the Caribbean Basin Initiative, support for
governments threatened by insurgencies).
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Although the President's vision of region-wide
cooperation had led us to make efforts to improve
ties to South America, including Argentina, our priori-
ties have been focused on Central America, the Caribbean,
and Mexico. For several years now, we have pursued
our South American objectives. with little sustained
engagement and. low levels of official resources.
II. ASSESSMENT
.U.S". opposition to Argentina's first use of force
was widely accepted in Latin America. Despite general
public support for Argentine sovereignty over the
disputed islands, in only one country -- Venezuela
-- did a majority (62%) approve of the Argentine mili-
tary takeover. The prevalence of territorial tensions
(e.g., among Argentina-Chile-Peru-Bolivia-Ecuador,
Colombia-Venezuela-Guyana, Nicaragua.-Colombia-Central.
America, Guatemala-Belize) puts a premium on the peace-
ful settlement of disputes. 'In addition, the rule
of law is seen as an important "equalizer" in asymmetric
hemispheric power relationships.
U.S support for the U.K.'s military campaign
to retake the islands was just as widely resented.
Our open support for an extra-hemispheric power, parti-.
cularly in the face of two 17-0-4 Rio Treaty votes
supporting Argentine sovereignty claims, reinforced
suspicions and doubts about the reliability of the
U.S. commitment to Latin America. Fortunately for
us, Argentina's reputation for arrogance, and the
collapse of its forces on the ground, helped to cushion
reactions.
We conclude that the South Atlantic-crisis impaired
U.S. interests and influence quite differentially
according to country and. issue. Underlying trade
and finance patterns, for example, are unlikely to
be greatly affected. In addition, much of the general-
ized reaction was rhetorical, and will give way with
time to renewed efforts at inter-American accommodation.
The potential for long-range negative effects
should not be underestimated, however. The IG identified
four major problems-.,-
Official state-to-state relations have been dam-
aged,'albeit unevenly. Our most severe problems
are with Argentina, and to a lesser extent with
Venezuela, Panama and Peru; Chile has attempted
to move closer to the United States; our relations
with Brazil, Mexico and the Caribbean Basin have
been little affected. In geopolitical terms,
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the South American environment is more fluid,
increasing the importance of Brazil.
Personal attitudes toward the U.S. are more criti-
cal. The perception is widespread throughout
the region that our priorities lie elsewhere
and hence that U.S. support is not entirely reli-
able.: Crisis reactions weakened trust in the
U.S. and damaged traditional concepts of U.S.-
Latin American cooperation and common destiny.
Our security interests and the stability of South
America have been eroded. The duration and inten-
sity of the fighting weakened (1) the credibility
of the U.S. ability to maintain hemispheric peace
and stability and (2) the integrity of the Inter-
American System. Both were previously assumed
to guarantee that interstate conflicts in this
hemisphere would be limited to a few days of
actual fighting.
Soviet opportunities may increase, particularly
in Argentina, where the Soviet Union has a long-
term opening to increase trade and establish
an arms relationship. In cooperation with Cuba,
the Soviets are also exploiting the conflict
to foster Latin American differences with the
U.S. on major regional and global issues.
Although the fighting has ended, the political
repercussions continue. If the U.R. attempts to deter-
mine the future status of the Falklands without refer-
ence to Argentina, U.S. association with British poli-
cies will severely hinder efforts to manage U.S. rela-
tions with key countries in South America (especially
Peru, Venezuela and Argentina).
III. ANALYSIS
A. Bilateral Relations
1. Argentina. Managing relations with Argentina
will entail many vexing problems. Our objectives
include encouraging political moderation, economic
recovery and accommodation with the UK, facilitating
modest Argentine rearmament to avoid an Argentine
military relationship with the Soviet Union, and
discouraging Argentine development of nuclear weaponry.
Our leverage is limited. Our materiel supply
to the U.R. will not be soon forgotten and could
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be used to make us the scapegoats for Argentine fail-
ures. How long this will last depends on several
factors, including internal political evolution in
Argentina, and U.R. willingness to return to the nego-
tiating table. Unless the United States is seen as
supporting a negotiated settlement, the prospects
for basic improvements in U.S.-Argentine relations
are dim.
Whether Argentina, which has Latin America's
most sophisticated nuclear program, will decide to
build a nuclear device as rapidly as possible is un-
clear. However, Argentina could develop the capability
to produce significant quantities of fissile materials
suitable for nuclear explosives not covered by IAEA
safeguards or other commitments precluding such use.
Denial of external assistance and economic constraints
could delay this development, but this could happen
by late 1985 (by violating safeguards on German and
Canadian facilities), or by 1987-90 (using indigenously
developed unsafeguarded-materials and--facil: tiesr-.
Should Argentina build a nuclear device, Brazil
would feel compelled to follow suit. Argentine or
Brazilian development of a nuclear device would have
serious implications for the Tlatelolco nuclear free
zone treaty and could stimulate other Latin American
countries to explore-a future nuclear weapons option.
Argentine conventional rearmament is likely to
take place initially with Western arms obtained through
secondary suppliers. But Argentine resistance to
a military relationship with the Soviet Union has
been weakened by isolation at a time of desperate
need; resistance would further weaken if access to
U.S. and European arms continues to be denied. A
turn to the Soviet Union for some modern weapons could
take place in the medium term despite resistance from
pro-Western economic elites and military poncern over
the training and logistical problems that would arise
from the adoption of Soviet systems.
2. Peru is the only South American country whose
principal military supplier is the Soviet Union.
Peru was also the only country to give Argentina signi-
ficant material support against the U.R. This could
open new opportunities for the Soviets to supply new
equipment to Peru to replace that transferred to Argen-
tina. Opposition to these moves by President BelauUde,
perhaps the most pro American of the South American
chiefs of state, is unlikely to be effective.
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3. In Bolivia, Argentine influence will continue
to be significant. Should a Soviet arms connection
be established with Argentina as well as Peru, Bolivia
might well follow the lead of its two traditional
regional allies.
4. Elsewhere in Spanish South America, reactions
vary greatly. Venezuela is angry at the U.S., shamed
by Argentina's collapse, and determined to find ways
to organize regional cooperation independent of the
U.S. Chile fears Argentine revanchism could worsen
Beagle Channel tensions, and sees stronger U.S. ties
as a counter to Argentina. Other countries fall in
between. Ecuador cancelled a working visit to Washington
by its President at the height of the crisis, but
is pointedly maintaining good bilateral relations.
with the U.S.
5. Brazil. In this more fluid environment,
Brazil could eme-rge as a new center of gravity---- pe.r--
haps even against its will. The crisis was a serious
setback to Brazil's efforts to encourage a strong
and stable Argentina with which Brazil could have
a non-adversary relationship. Brazil's transfer to
Argentina of Embraer 111 radar planes had the dual
purpose of tilting to Argentina and making more diffi-
cult a British attack on mainland bases. Brazilian
sensitivity to Argentine domestic political developments
and opposition to substantial Soviet inroads in South
America could lead Brazil to tilt further toward. Argentina
in an effort to encourage moderation and preempt an
Argentine turn to the USSR.
The conclusion that Brazil will emerge as the
key to the balance of power in South America is partly
negative, in that we believe neither Argentina nor
any of the Spanish-speaking countries can alone be
a touchstone of hemispheric stability. But it is
also the product of important positive considerations.
Brazil has the seventh largest economy in the free -
world, competent leadership, and a society generally
compatible with ours.
But if the South Atlantic crisis underscores
our need to enter the 21st.century with a web of organic
interrelationships that link Brazil to the West, that
goal will be impossible to attain without major efforts
on our part. Brazil. is not ready or eager to assume
the responsibilities of regional power. Brazil is .
often uncomfortable among its Spanish-speaking neigh-
bors, and has growing interests in Africa and the
Middle East. Brazilian foreign policy is commercially
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pragmatic and politically very sensitive to South
American fears that Brazil could act as a U.S. surro-
gate. Argentine instability could increase Brazilian
interest in cooperating with us, but our open support
for the British military response to Argentine aggression
increased Brazilian sensitivities to close association
with us.
From a U.S. perspective, Brazilian growth creates
explicit conflicts. with various aspects of U.S. global
economic, nuclear and even military policies. But
Brazil is also the only country in South America with
which a globally significant alliance relationship
is possible, and where the penalties of not developing
a wide range of mutually supportive relationships
would transcend bilateral issues.
6. In Central America, vested interests in ties
to the United States and cultural distance from South
America will limit effective anti-American nationalism.
Nonetheless, our ability to deal. with Nicara.gua_has_.,
diminished. Regional peace-keeping efforts in Central
America will be more difficult to organize,-with South
American participation less likely. Honduran leaders,
some of whom have close Argentine ties, have expressed
concerns about the reliability of our commitments.'
Tensions between Guatemala and Belize (the only place
.-in-the hemisphere other than the Falklands-where the
U.R. stations combat troops) will continue to fester
if unresolved. U.S. compliance with the terms of
the Panama Canal Treaties will be closely scrutinized.
7. In the Caribbean, support for the U.R. by
all English-speaking states except Grenada should
further isolate Grenada's pro-Cuba government, but
could slow cooperation with Spanish America bilaterally
and through the CBI.
B. Attitudes
The conflict fueled Latin American feelings of
inferiority and irrelevance to our global concerns..
Emotional reactions are often transitory, and in this
case were often accompanied by anger at Argentina
as well. But the widely held reaction that the U.S.
does not take Latin Americans seriously could inhibit
cooperation in support of U.S. interests.
In 'the immediate aftermath of the crisis, increased
North-South and non-aligned rhetoric is inevitable.
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This is especially true of spokesmen of the more emotion-
ally-charged countries such as Venezuela, Panama,
and Peru and those seeking to exploit any rift between
the U.S. and the Latins (e.g. Cuba and Nicaragua).
The argument that the U.S. and the U.K. acted as racist
industrialized powers cooperating to keep developing
countries in their place has powerful gut appeal.
Such Falklands-supported "lessons" as anti-colonialism,
anti-imperialism, and solidarity among the dispossessed
are a shot in the arm to pan-Latin nationalism, the
Non-Aligned Movement, and domestic nationalist-populist
movements, like Peronismo and Aprismo, and particularly
their military and leftist variants.
The lasting effects of the current mood -- which
varies greatly from country to country (with Venezuela
and Chile at opposite ends of the spectrum) -- will
depend on how the crisis evolves, and what posture
we adopt. For the moment, however, our ideological
influence is reduced. Efforts by U.S. spokesmen to
employ the "Western Hemisphere Ideal," "Pan-Ameri-
canism," or the broader "Western Civilization" themes
as proof of a common U.S.-Latin American destiny will
not prosper. In some countries our friends are not
eager to be seen offering us an abrazo; instead, they
are holding us at arms length until the emotional
level subsides. Efforts to organize Latin-only organiza-
tions that exclude the U.S. are more likely.
Although the rhetorical battle will be uphill,
Chile, Colombia, and economic elites generally will
successfully resist pressures for more statist and
nationalist economic policies. Internal political
liberalization and concern that the United States
is insensitive to its development needs could lead.
Brazil to adopt an ambiguous position. Mexican anti-
Americanism will surface from time to time, but Mexico's
unique ties to the U.S. will damp it down.
A
Argentina was clearly hurt by the international
perception of its government as a murderous dictator-
ship. However, the access and influence in Latin
America of Anglo-American human'rights organizations
-- Amnesty International, for example -- have been
damaged by the ethnocentrism of their implicit claims
that human rights concerns would block Argentine unity
on the Malvinas.
Finally, it should be noted that some regional.
leaders have privately expressed the hope that we
will not hold against them the pro-Argentine stance
they adopted at the OAS, and that they hope to see-
a return to "business-as-usual" normalcy as soon as
possible.
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C. Regional Stability
Military institutions, throughout the hemisphere
but especially in South America, have powerful new
claims to national resources. We expect that political
liberalization in the region will continue, and that
the region's serious financial balance of payments
problems will constrain military procurement. But
A he ability of governments, whether military or civil-
ian, to resist demands for modern arms has been weakened
by the crisis. This is a new and potentially destabiliz-
ing factor in a region traditionally bedeviled by
territorial disputes and military involvement in poli-
tics.
Before the Falklands crisis seven South American
countries Argentina, Brazil, Chile, Colombia, Ecuador,
Peru, and Venezuela -- accounted for some 80% or more
of Latin America's weapons procurement. The Falklands
crisis will lead to increased emphasis on all-weather
systems, maintenance, self-sufficiency and larger
stocks of precision-guided munitions. France (and
to a lesser extent the FRG, Italy, Spain, and Israel)
have the best competitive position. Soviet sales
opportunities could prove substantial in Argentina
as well as Peru. Military industries in Argentina,
Brazil, and several other countries will be stimulated.
Mexico and Central America have more limited moderniza-
tion programs and will be less affected.
Training and military doctrine will remain avenues
of influence. Service--to-service contacts with the
U.S. and other modern militaries will be highly sought
after and defended as a means of "keeping up technically."
Participation in inter-American military maneuvers
will be curtailed (in addition to Argentina, Brazil,
Ecuador, Peru, and Venezuela have already formally
pulled out of this year's UNITAS exercise), but probably
only for a year or two, given their usefulness as
a source of operational experience and resources.
D. Soviet-Cuban Opportunities
The Soviet Union's initial opportunity is likely
to be through arms transfers to Peru and Argentina.
In the 70's, Soviet subsidies enabled Peru to modernize
with SU-22 fighter-bombers and T-54/55 tanks at conces-
sional prices. Peru's ability to make heavy arms
purchases from the Soviet Union without visibly losing
internal or foreign policy flexibility may lead some
to conclude that Soviet political influence -- and
the cost in U.S. ties -- can be successfully managed.
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Argentina's massive bilateral trade imbalance with
the Soviet Union is an economic incentive to both
sides for an arms transfer relationship. According
to Soviet figures for 1981, the USSR bought $3.3 billion
-- mostly grain and meat -- from Argentina, while
Argentina bought only $42.5 million in Soviet machinery
and nuclear supplies. Moscow's interest in gaining
a military. supply position in Argentina would also
appear substantial: it would consolidate its Peruvian
foothold, threaten.Chile, and assure access to badly
needed grain imports.
Cuba also has an obvious interest in Argentina.
But Argentina's leaders remain conservative, and Cuba's
probes are likely to go unanswered unless a Peronist
government comes to power. Cuba's chief gain from
the crisis is the increase in anti-U.S. attitudes,
which could erode Cuba's hemispheric isolation. Since
.the Falklands, for example, the government of Venezuela
has begun to explore improved relations with Cuba.
IV. RECOMMENDATIONS
The IG's approach was that managing events and
preserving U.S. options for the future are more realis-
tic objectives than the often elusive goal of "improving
relations". The IG also felt strongly that our response
.should make clear that we are neither guilty of any
wrongdoing nor willing to buy friendship. Nor should
we behave in a precipitate manner that suggests we
can be blackmailed.
. The IG agreed that Congressional approval of
the President's Caribbean Basin Initiative (CBI) is
critically important to our credibility. Absent signi-
ficant additional resource flexibility, the central
thrust of our efforts in the increasingly fluid geopol-
itics of South America must now be to develop a stable
framework that will provide warning, leverage, and
cooperation to avoid similar crises in the future.
A. Bilateral Relations
1. Following through on the CBI is more vital
than ever. The CBI,. is critical to our credibility
in Central America and the Caribbean and provides
a point of contact to Venezuela and Colombia. Our
failure to live up to the expectations we have created
would fuel our critics' argument that the hemisphere
is low on our scale of priorities. In addition to
moving ahead on the CBI, we should intensify efforts
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to bridge the gaps between the Commonwealth Caribbean
and Spanish America, and we should continue to press
the U.R. to increase economic assistance and defer
new moves to grant independence to Caribbean dependen-
cies.
2. Rebuild relations with Argentina. Our immedi-
ate task is to ensure that neither side takes decisions
.that would prejudice a final resolution of the Falklands
issue. The most effective step in this direction
would be for the U.R. to resume negotiations with
Argentina over the Falklands.
We should also ensure that we are perceived in
Argentina as working to help Argentina get a basically
creditworthy economy back on track. The removal of
our economic sanctions should be exploited to demonstrate
our interest in encouraging sound economic policies,
a restoration of traditional trade patterns, and reestab-
lishment of international creditworthiness.
3-. Develop a policy toward Argentine rearmament
to preempt Soviet sales. Two options are available
to advance this objective, which should be promoted
in consultation with the U.K.: (A) Raise no objection
in principle to arms sales from Brazil, Israel, and
Western European suppliers such as the FRG, Italy,
Spain or France; (B) Certify Argentine. eligibility
for U.S. military aid and sales late this year in
the absence of renewed-hostilities, if we have reason-
able-assurance that Argentina will in-the future comply
with the agreements under which U.S. arms have been -
provided and if we can overcome problems with certifi-
cation of Chile (see 5, below). Argentina is unlikely
to rely on the U.S. as a supplier in any event, but
certification would be politically important and could
slow a turn to the-USSR. Congressional resistance
to certification on human rights grounds would be
significant, but manageable in light of recent improve-
ments.
4. Foster reduced Argentine dependence on the
Soviet grain market. The USSR has become a major
customer for Argentine grains, but is not a consistent
buyer. When the Soviet demand is high, Argentina
is assured badly needed revenue. But if the USSR
demand declines significantly and abruptly (as has
happened) the Argentines may resort out of desperation
to barter arrangements (grain for arms). Increasingly
the Soviets are seeking short-term credits from grain
suppliers to finance their purchases. This policy
has the effect of discouraging Soviet grain purchases
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from Argentina., which cannot provide financing. In
light of the Soviet Union's financial constraints,
we would expect the. Soviets to rely less on Argentine
grain in the future, which means that Argentina can
be expected to diversify its markets.
5. Chile. We have a major interest in preserving
the balance of power between Argentina and Chile.
Despite recent events, however, Argentina is easier
to certify than Chile. Special difficulties are present
in the Chilean case because of the requirement that
we certify that Chile has taken appropriate steps
to bring the Letelier-Moffitt. murderers to justice
by all legal means available, and there are greater
human rights problems. To go ahead with Argentina
but not Chile could cost us heavily with one of the
few South American states where our relations are
presently undamaged,. and would make it impossible
to influence Chilean military orientation or-human-
rights practices in return for restoring a security
relationship. Certification and the resumption of
aid and sales to Chile is our goal if Chilean conduct
permits; the timing must carefully weigh these issues.
6. Seek to delay Argentine development of the
unsafeguarded facilities that would give it a nuclear
explosives option. Continue to work with key suppliers,
especially the FRG, to minimize Argentine opportunities
to acquire nuclear technology free of safeguards.
Give priority to reaching an understanding with the
PRC, whose established nuclear relationship with Argentina
is unconstrained by the NPT qr other formal arrangements.
Although our influence within Argentina will be minimal
in the foreseeable future, we should intensify efforts
to convince Argentina that nuclear devices will degrade,
not enhance, Argentine security, and that regional
security would be enhanced by full entry ;into force
of the Treaty of Tlatelolco. A
7. Foster Brazilian influence as a complement
to our own efforts. Our long-term goal could be to
develop a relationship in which both countries act
to contain and hopefully resolve potential conflicts
-- not necessarily in concert, but with the full and
shared knowledge that stability must be maintained.
Should we fail to entice Brazil into assuming greater
responsibilities, our own role would have to be greater,
with correspondingly greater risks of overexposure
or politically undesirable commitments (e.g., Chile.).
To overcome Brazilian sensitivities to overly
close public association with.us-will require discretion
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and patience. In expanding the Brazil relationship,
moreover, we should attempt to avoid contributing
to Argentine insecurities. Key steps include:
-- consulting closely and regularly in both Washing-
ton and Brasilia on the means to maintain
a stable regional balance'of power. We would
make clear that we believe this can only be
achieved over the long haul if we do not work
at cross purposes. Brazil would welcome regular
cabinet-level consultations on a wide range
of issues as discussed between Presidents
Reagan and Figueiredo; we should agree. What
we could each do to maintain the balance between
Chile and Argentina might be an important
initial topic for exploration;
resolving_the..nuclear supply pro4lem (which
would require Brazilian acceptance of a full
safeguards regime, considered to be highly
unlikely, or changes in U.S. law which the
Administration has decided not to seek at
this time) as an important signal of our accep-
tance of Brazil as a responsible partner;
cultivating military-to-military contacts
and relationships. To reinstate IMET would
require a Presidential waiver and Congressional
support to overcome the restrictions posed
by the Symington-Glenn amendment to the Foreign
Assistance Act;
-- strengthening cooperation in science and technol-
ogy, taking advantage of upcoming discussions
on space launch vehicle cooperation and the
renewal of the bilateral S&T cooperation agree-
ment;
-- addressing Brazil's grievances over U.S. sugar
quotas, if possible. Given theiconstraints
imposed by our domestic price support program
and our GATT obligations, the only feasible
remedy is to reexamine the entire domestic
price support program in 1983.
-- seeking a more forward-looking trade relation-
ship. Brazil has resented our "graduation"
policy on GSP, although it has in fact had
a relatively light impact on Brazil thus far.
The present GSP program expires in January.
1985. There is a strong likelihood that Congress
will force large-scale or even total graduation
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of Brazil and other major beneficiaries of.
GSP. We should focus our efforts on the propo-
sal for a new round of negotiations concentrat-
ing on the advanced developing countries.
In such a negotiation, we would expect improved
access for U.S. products to the Brazilian
market, but would also be in a position to
negotiate on products of particular interest
to Brazil, and to put our trade relationship
on a basis easier to sustain in the long run.
-- on MDB graduation, developing opportunities
to reiterate at the senior levels that we
envision flexible application of the graduation
concept; in the IDB, for example, Brazil might
take on a larger role. as a donor, while continu-
ing to benefit from some borrowing on other
forms of assistance even after the IBRD gradu-
ation threshold is reached.
-- improving_and_broadening regular., intelligence
exchanges.
8. Increase U.S. cooperation in science and
technology (a) with the governments of the Andean
Pact, Argentina, Brazil, and Chile and (b) with their
private sectors. A number of countries, especially
Brazil, are ready for productive cooperation to mutual
advantage. Such a program would coincide with the
desire 'to strengthen indigenous R & D capability in
the wake of the Falklands Crisis. Existing.U.S. govern-
ment programs are spread among various agencies (NASA,
NSF, NIH, AID, Agriculture, and others). Although
affected by policy decisions, these programs often
escape policy consideration and are often not.coordi-
nated with private sector activities. The Department
could sponsor an early conference, hosted and run
by the NSF, of representatives from U.S. industries
and research institutes involved in R & Dpto consider
areas where cooperation between the U.S. and Latin
America might be expanded, including Space, Biotechnology,
Physics, Chemical Engineering, Education, Agriculture,.
Health, and the Environment. Using ideas outlined
in the conference, an expanded program could be launched.
9. Be as bilaterally responsive as possible
to individual countries. Modest assistance efforts
should be sustained in Bolivia (subject to legislative
constraints), Peru, Ecuador, Paraguay to limit the
repercussions of Argentine economic weaknesses. Economic
measures with direct negative consequences to particular
countries (e.g., silver sales and Peru) should be
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reviewed carefully on their merits. We should work
to prevent past tensions from coloring future relations
if conditions permit (Chile, Uruguay, Bolivia). We
should also be sensitive in implementing the terms
of the Panama Canal treaties to avoid their becoming
an issue.
B. Attitudes
1. Reiterate- justification for our position.
The best and only stance for us is to hold.to the
correctness of our opposition to the first use of
force, to explain our policy not as a choice between
Europe and Latin America but as one of adherence to
the rule of law, and to back that up with actions
that demonstrate commitment to Latin America. We
should avoid giving any hint that we believe that
our relationship with Latin America has been undermined.
Any indication of a sense of guilt or remorse would
simply fuel the' emotional fires in places like Caracas
and Lima. As the dust settles,- our principled support
for the rule of law will become more widely accepted.''
2. Assiduously cultivate individual leaders
to encourage symbolic ties that emphasize U.S. interest
in Latin America. The most important step would be.
a strengthened/expanded program of visits to and from
Washington by chiefs. of state and other high level
officials, including entree to-high places when Latin
leaders come. to Washington,_and travel to South America
by senior USG officials like the Vice President and
members of the Cabinet and Congress. Full use should
be made of the talents of leading private sector organizations
.like-the Americas Society.
Additional possibilities'to'emphasize symbolic
ties were discussed inconclusively. They might include:
-- Considering a mid-1983 Presidential visit
to South America, possibly in conjunction
with the 200th anniversary of Bolivar's birth
July 24, 1983.
-- Establishing Interparliamentary Commissions
with the Congresses of selected South American
countries, patterned after the Mexican model.
Possibilities include Brazils Colombia, and
further down the road, Venezuela.
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3. Increased consultations among large countries
were considered highly desirable, possibly in the
form of an informal "library group" of political/economic-
representatives from the U.S., Mexico, Brazil, Argentina
and perhaps Venezuela, Colombia and Peru. The purpose
would be to strengthen economic cooperation and'reduce
political posturing by reinserting the U.S. in a con-
structive hemispheric dialogue. Difficulties include
participation (in addition to countries, the best-
qualified individuals do not all hold similar positions),
auspices (U.S. or other, public or private, etc.),
and periodicity (one-shot, sequential, etc.).
4. Cultivate multilateral diplomacy to complement
our bilateral moves and reduce suspicions that we
are trying to "divide and conquer." Maintain an active
OAS presence, but focus initially on improving coopera-
tion with subregional groupings (the Central American
Democratic Community, the Andean Pact, the Amazon
Basin group), and on inter-American military ties..
Another option might-be to encourage initiatives,
preferably by others, on the peaceful settlement of
current territorial disputes. Still another possibility
might be to plan now fora strong U.S. role at the
scheduled Special OAS General Assembly on Cooperation
for Development (without, however, implying commitment
of major new economic assistance to the region.)
5. Strengthen ties to key political movements.
In Venezuela, for example, the Christian Democrats
and the Social Democrats both have international con-
tacts that will give their views additional impact.
But any appearance of a U.S. choice between them would
be highly counterproductive.
6. Promote exchange programs on a discriminating
and substantive basis between U.S. and Latin American
Chambers of Commerce, think tanks, universities and
other national institutions, particularly in technical
fields. Military-to-military contacts, private sector
exchanges, and special scholarship programs should
all be increased. One objective would be to recover
some of the ties between technocrats lost with the
termination of AID training programs in South America
in the 1970s. Other exchanges should have the objective
to broaden Latin American awareness of our global
concerns.
7. Move forward in a low-key fashion on Secretary
Haig's St. Lucia proposal to create an institute for
democracy. Though originally proposed as an OAS activity,
and perhaps today most practicable within the Central
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American Democratic Community, the Andean Pact, or
some other sub-regional basis, the project would be
best received if presented as part of a global initia-
tive.
C. Regional Stability
1. Meet requests for, arms transfers from the
major South American countries as positively as possible
within the policy guidelines set forth in NSDD-5.
We should not press sales to Latin America as a special
exception to our global arms transfer policy. We
must be mindful that countries in the region may have
differing objectives, and that any transfer must satisfy
U.S. interests in maintaining regional. stability.
Within this context and consistent with U.S. interests,
we should make available more advanced systems than
in the past and consider making the first introduction
of new systems into the region.
This approach would not enable us to regain our
position as the region's primary supplier in the face
of aggressive West European and Soviet marketing with
concessional financing. The attractiveness of some
of our technology (e.g., missiles, fighter aircraft)
should, however, enable us to obtain some information
and influence.. The key, except for Peru, should not
be the provision of significant security assistance
resources (we have in any case had no materiel grant
assistance to South America's key nations since 1968),
but the development of a policy that can be defended
as respectful, restrained and.non-discriminatory.
2. Actively seek Congressional approval of the
Special Defense Acquisition Fund (SDAF), with adequate
capitalization and authority to meet the needs of
the developing countries as well as the industrial
powers. (We could have sold the A-37 to-four or five
Latin countries, pre-empting more costly aircraft,
if the Cessna production line were still open.)
3. Consider co-production arrangements with
Brazil, and perhaps symbolically on some weapons with
the dean Pact. Latin America will be looking increas-
ingly to the development of its own materiel production.
Co-production-or licensing arrangements are complicated
.and controversial, and would take some years to develop,
but could enable us to short-circuit some of the cost,
leadtime, and bureaucratic delays that plague U.S.,
sales. Even if actual agreements do not result, an
offer would symbolize our interests in a working alli-
ance and give us a concrete subject for policy discus-
sions and subsequent cooperation with Brazil. Entering
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into such arrangements would require Brazilian accep-
tance of U.S. control of re-export of the end product
and of of U.S. components and technology (to, e.g.,
Libya, Iraq). One possiblity would be agreed production
for NATO plus . favorable consideration for Latin American
countries as recipients and others on a case-by-case
basis. The downside risk is that Brazil might not
agree to controls, and that resulting friction could
-create additional. strains on U.S.-Brazilian relations.
4. Expand military exchange programs. Seek
Congressional enactment of the provision in foreign
aid authorization bill (now awaiting floor action
in both houses) expanding DOD authority to provide
no-cost training in U.S. military schools to countries
providing such training to U.S. officers, thereby
facilitating expanded reciprocal training with Latin
American countries. Personnel Exchange (PEP) programs
in Latin America., for which no new legislation is
needed, should also be expanded and given higher prior-
ity. Embassies in countries where the - milit-ary-- play-
a major political role should. be directed to nominate
military officers for ICA's international visitor
program.
5. Increase IMET and expand and upgrade the
U.S. Military Schools in Panama. Promote U.S. military
training and doctrine in Latin America through an
agreed extension and revitalization of the U.S. Military
Schools in Panama and similar mechanisms (e.g., exer-
cises, unit exchanges and mobile training teams).
6. Direct the Arms Transfer Management Group
to review inter-agency procedures for responding to
arms transfer requests to reduce delays in providing
policy approval and P&R/P&A data. Prompt decisions,
even when our policy requires disapproval of the pro-
posed transfer, improve our reputation as a supplier.
D. Measures to Deal with Soviet/Cuban Inroads
1. The best defense against Soviet/Cuban exploita-
tion of the Falklands crisis is to take decisive action
to protect U.S. interests and reestablish U.S. influence
where damage has occurred, thereby reducing incentives
for a turn to the USSR. Such actions include the
whole range of recommendations included in this paper.
2. Keep the pressure on Cuba without attempting
to force a rapid denouement, recognizing that the
regional environment is not propitious to U.S. "power
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plays". One exception might be Namibia. We should.
actively oppose development of new Cuban ties in the
hemisphere.
3. Reduce Peruvian military ties to the Soviets.
Because of Peru's economic situation, concessional
financing is essential if U.S. equipment is to compete
with Soviet offers. A $30 million FMS financing pro-
.-gram, including $25 million concessional terms, has
been proposed for inclusion in the FY 84 security
assistance budget and should be assigned a high pri-
ority. While the recommended level would be five
times our FY 83 program for Peru, it is consistent
with the levels of FMS financing offered Peru in the
mid-70's. We should consider the impact of such an
increase on Peru's neighbors, and balance with increases
for other deserving friends, e.g., Colombia.
4. Argentina. See above, IV.A.3.
V. IMPLEMENTATION
A. Timing
Action on the CBI is vital immediately, but most
of the measures and goals identified in this paper
constitute a medium-term strategy to be implemented
over several years. Appropriate phasing is identified
in the Executive Summary.
B. Congressional Aspects
Our strategy in dealing with the public and Congress
should emphasize that:
-- we have an altered situation in South America
which requires steps to protect U.S. interests;
-- these steps do not involve a commitment of
significant new resources, except in the case
of Peru;
-- some mutual adjustments are required to permit
growth of cooperation that would in time provide
some restraining leverage on military-and
nuclear developments.
Arms Transfers. We would prefer to keep arms
procurement at a low level and must avoid stimulating
sales, but our interests demand that we be prepared
to assist countries in maintaining regional balances
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of power to avoid new outbreaks of hostilities and
prevent possible Soviet inroads. A key problem in
this regard is that Congress and much informed opinion
in the U.S. has traditionally opposed arms sales to
Latin America as unnecessary, counterproductive, waste-
ful, and supportive of militarism.
In the post-Falklands-environment, we believe
:that U.S. unresponsiveness would reduce U.S. influence
and prestige in matters that many South Americans
who are not military will consider-vital to their
national security. To influence procurement needs
and the related rethinking of security interests and
needs, we will need to make full use in dealing with
Latin America of-the more flexible arms transfer poli-
cies established by the Reagan Administration, and
build Congressional support for their use.
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EXECUTIVE SUMMARY
The underlying lesson of the Falklands conflict
was that U.S. credibility and leverage with Argentina
did not match the US interests at stake. Aside from
Argentina, crisis-induced damage to U.S.-Latin American.
relations has varied widely from country to country
and appears manageable on most matters. But the potential
for future conflicts and instability counsels a long-
term effort to build relationships with the major
players in South America to maintain local balances
of power, delay nuclear proliferation, and narrow
openings for the Soviet Union.
Our highest priority in Latin America should
remain to prevent instability or inroads by the Soviet
Union or its client states in our immediate environs
-- Central America, the Caribbean and Mexico. To
demonstrate that the Falklands conflict did not distract
us-from--this-central purpose and to. reaffirm ..our.. constancy
to friends and adversaries in this hemisphere, a number
of immediate steps are desirable in this area, where
further deterioration would directly affect U.S. security
and well-being:
-- A decisive push for Congressional approval
of the President's Caribbean Basin Initiative
(CBI) ;
-- Strenuous efforts to secure requested FY 82
supplemental and FY 83 foreign assistance
funds for Central America/Caribbean; and
?LConsideration of an early meeting between
President Reagan and Mexican President-elect
de la Madrid-7
Policy toward South America must.take. into account
the resource limitations imposed by our Caribbean
Basin and extra-hemispheric priorities, including
the need to maintain the credibility of our global
arms transfer, non-proliferation-and trade policies.
We must also avoid the impression-of a knee-jerk response
to the Falklands conflict and ensure that we do not
burden our effort to secure vital Central America/Carib-
bean funds with additional controversy.
The problems we face in South America are serious:
NOTE: The bracketed portion indicated above of the
SIG study (first page) was deleted,. as the two.
Presidents have now met.
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