GUATEMALA: PROSPECTS FOR THE NEW GOVERNMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90T00155R001300030002-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 27, 2016
• Document Release Date: August 26, 2013
• Sequence Number: 2
• Publication Date: February 1, 1986
• Content Type: NIE

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Director of
Central
Intelligence
.?????
MASTER FILE COPY
BO_NOT GIVE-OUT
01,1 MAR! ON
Guatemala: Prospects for
the New Government
National Intelligence Estimate
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NIE 82-86
February 1986
Copy 473
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--Starr'
NIE 82-86
GUATEMALA: PROSPECTS FOR
THE NEW GOVERNMENT
Information available as of 30 January 1986 was used
in the preparation of this Estimate, which was
approved by the National Foreign Intelligence Board
on 13 February 1986.
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CONTENTS
SCOPE NOTE
KEY JUDGMENTS
DISCUSSION
Page
1
3
7
The Economy 8
Civilian Military Relations 11
The Insurgency
Foreign Policy
Implications for the United States
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SCOPE NOTE
The recent inauguration of President Vinicio Cerezo Arevalo in
Guatemala has brought to power the first civilian leader of the country
in almost two decades. The new President is faced with serious
economic problems, a delicate political relationship with the armed
forces, a persistent leftist insurgency, and continuing political violence.
In the foreign policy area, Cerezo has given early indications that he
will take an active role in regional affairs, as well as expand Guatemala's
international ties in an effort to attract greater foreign aid. This
Estimate will address the prospects for the new government over the
next year or so, beginning with internal economic, political, and
military problems and then examining how its foreign policies are likely
to evolve. It will also discuss the implications to the United States of var-
ious alternative outlooks.
A more highly classified annex to this Estimate, -Foreign Support
to the Insurgents,- is being published separately.
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KEY JUDGMENTS
The inauguration of President Vinicio Cerezo and the installation
of a new civilian government is a decisive step toward the US goal of a
stable democratic system in Guatemala, but continued progress toward
that goal is far from assured. Cerezo will need all the support he can
marshal if he is to solve the serious economic and political problems he
will face over the coming year. Although there is a reasonable chance
that Cerezo will be able to manage effectively the problems he
confronts, miscalculations?particularly on economic matters or rela-
tions with the military?could jeopardize the long-term prospects not
only of his government, but also of the democratic process.
Guatemala is suffering its worst economic crisis in half a century,
and the economy will be Cerezo's most pressing problem. The President
will need to implement an effective domestic economic austerity
program to attract increased foreign assistance and to halt the severe
economic decline. Needed reforms will entail increased taxes and
reduced public subsidies, probably resulting in considerable public
opposition. We believe that there is a better-than-even chance that he
will adopt an economic adjustment program, but there is considerable
risk that, through excessive compromise, Cerezo will undercut the
effectiveness of his austerity program, leading to further stagnation.
Furthermore, there is some evidence Cerezo lacks confidence in the
private sector; therefore, another less likely possibility is that he might
pursue a more antibusiness economic policy of widespread price
controls, substantial wage increases, and greater public spending. This
would probably make it difficult for Cerezo to attract sufficient foreign
economic support to prevent an accelerated economic decline.
The maintenance of positive relations with the military will be an
important political priority for Cerezo. The armed forces?which
strongly supported the return to civilian rule?will be relatively tolerant
of the new administration but will be firmly opposed to any attempt to
bring the military to account for past human rights violations.' Cerezo,
for his part, is likely to take a careful approach to this issue, ruling out
retribution against the armed forces as a whole for past abuses but
supporting investigations by the Supreme Court into specific allegations
of disappearances or homicide. Other issues, such as the conduct of the
counterinsurgency and the military budget, will be potential sources of
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friction, but we believe both civilian and military leaders will work to
keep disagreements within manageable limits. As a consequence, we
judge that there will be only a small chance of a coup over the coming
year
The size and effectiveness of the radical leftist insurgency has been
reduced substantially since 1982, and it does not now constitute a
serious threat to the government. We do not expect a substantial
resurgence in guerrilla activity in 1986, but the insurgents are likely to
receive sufficient external support, particularly Cuban and Nicaraguan,
to remain a viable military force. The Guatemalan military is capable
of keeping the insurgency contained but will not be able significantly to
increase pressure on the guerrillas without additional foreign military
aid. The armed forces suffer important mobility, maintenance, and
communications deficiencies, which continue to limit their effective-
ness. Although Cerezo is likely to extend an amnesty offer to the
guerrillas, a negotiated end to the guerrilla war in 1986 is unlikely. We
see little enthusiasm among the insurgents, the military, or even with
Cerezo himself for such talks.
We believe Cerezo is unlikely to effect dramatic changes in
Guatemalan foreign policy in his first year, but the direction of his
efforts may cause some friction with the United States. He will seek,
particularly in his rhetoric, to establish his independence from the
United States, and his policy of active neutrality may put him at odds
with the United States on various issues?particularly Nicaragua.
Cerezo is not pro-Sandinista, but he is relatively optimistic about the ex-
tent to which diplomatic pressure can induce the Sandinistas toward
moderation. Therefore, he will probably cultivate greater contacts with
Managua, and publicly criticize US assistance to the anti-Sandinista
armed resistance. Under Cerezo, Guatemala probably will take a more
active role in the Contadora process, and Cerezo will strengthen
relations with other Christian Democratic parties and governments in
Central America?including that of Salvadoran President Duarte.
We see little danger that Guatemala will be drawn into the Soviet-
Cuban orbit over the coming year. Cerezo has raised the possibility of
establishing relations with Cuba, although we do not believe that this is
motivated by any sympathy for Cuba or that he regards this as an
important priority. Instead, he is likely to make improved relations with
Mexico a top priority and eventually move to resolve Guatemala's long-
standing dispute with Belize.
Beyond the development of democracy and foreign policy, US
interests will be principally engaged in Guatemala on questions of aid
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and human rights. Cerezo will probably solicit US support in debt
rescheduling and discussions with the IMF. Guatemala will also contin-
ue to make gradual progress on human rights, although we do not
expect this issue to recede in importance and visibility. In addition, we
judge that narcotics trafficking could become a more important bilater-
al issue during 1986.
We are cautiously optimistic that Guatemala will make progress in
consolidating its democratic institutions in 1986. However, the system
will remain fragile and vulnerable to internal and external develop-
ments beyond its control, such as a new world recession or an inability
to attract necessary foreign assistance. Thus, while we expect no
significant adverse developments in Guatemala during the coming year,
we are not equally confident about the long-term prospects for the
democratic system.
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DISCUSSION
1. The inauguration of President Vinicio Cerezo
and the installation of a new Congress on 14 January
marked the successful fruition of a three-year transi-
tion from military to civilian rule in Guatemala. The
general elections of November 1985 provided Cerezo
and his center-left Christian Democratic Party (DCG)
an unexpectedly strong victory. In a field of eight,
Cerezo captured 39 percent of the vote, while second-
place finisher Jorge Carpio Nicolle of the moderate
National Centrist Union (UCN) managed 20 percent.
Further, the DCG gained an absolute majority in the
100-member congress, winning 51 seats. Cerezo's re-
sounding 68-percent victory over Carpio in the
8 December presidential runoff election capped the
DCG's successes
2. The open and honest elections will provide the
new government a greater degree of domestic and
international legitimacy than previous governments.
The armed forces, under former chief of state General
Mejia, maintained a strict neutrality in the electoral
process, and the balloting was peaceful and fairly
administered. Rightist parties did poorly, winning only
13 congressional seats and suffering surprising defeats
Figure 1
Representation in the Congress
Party or Coalition
Social Democratic Party ?
Left
Christian Democratic Party ?
National Centrist Union
Democratic Party of National
Cooperation/Revolutionary
Party a
National Renewal Party
2 (Number of Seats)
Political Orientation
National Authentic Center
National Liberation
Movement/Institutional
Democratic Party
a Jorge Serrano, leader of the Democratic Party of National Cooperation,
reportedly is forming a new "moderately conservative" party called the
Social Action Movement.
Right
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in their eastern Guatemala strongholds. Cerezo's main
formal political opposition will be from the centrist
UCN rather than the right. The widespread accep-
tance of the electoral results and his clear majority in
Congress should place Cerezo's government on a firm
political footing.
3. Cerezo will need all the domestic and interna-
tional support he can marshal, as he will face serious
economic and political problems at the outset of his
term. Guatemala is confronting its worst economic
crisis in half a century. Cerezo's task of restoring
economic growth will be made more difficult by the
failure of the previous government to take timely and
effective economic adjustment measures. He will be
forced to make critical?and potentially unpopular?
economic decisions early in his term or risk further
economic decline. Moreover, although the armed
forces fully support the transition, many officers will
be apprehensive about the influence of antimilitary
elements within the DCG. Cerezo will be constantly
challenged by the need to avoid excessive friction in
his relations with the military. Finally, Cerezo will be
tested by Guatemala's tenacious insurgency and con-
tinued political violence. A failure to continue to
contain the insurgency is likely to hinder Guatemala's
economic recovery and cause increased friction with
the rightist political parties and the armed forces.
The Economy
4. The most pressing problem the new government
will face is a deteriorating economy. With Central
America's largest resource base and population, Guate-
mala has the potential to be the most dynamic econo-
my in the region. Per capita GDP, however, has fallen
by nearly 20 percent from its 1980 peak, a decline
unprecedented in the lifetime of most Guatemalans.
As with most less developed countries, Guatemala's
economy was hit hard by the sharp rise in oil prices in
1979, the ensuing world recession, and worsening
terms of trade as commodity prices fell. The situation
was exacerbated by domestic and regional turmoil?
tourism earnings plummeted while the Central Ameri-
can Common Market (CACM) was seriously disrupted.
The failure of successive military governments to take
necessary adjustment measures also contributed to
economic decline.
5. The situation Cerezo inherits is serious but prob-
ably can be turned around if the government acts
decisively to implement a comprehensive economic
stabilization program. Guatemala is experiencing sig-
nificant external imbalances, mounting arrears, and a
growing fiscal deficit. Foreign exchange reserves are
exhausted:
? The GDP, which declined about 1.5 percent in
1985, will probably remain sluggish.
? Guatemala is experiencing unprecedented infla-
tion?the rate rose at least 30 percent in 1985
compared with less than 4 percent in the previ-
ous year. Inflation is likely to increase in 1986
unless the government restores fiscal and mone-
tary discipline.
Guatemala: Balance of Payments
Million US $
1983
1984
1985a
1986b
Current account balance
?224
?377
?285
?245
Trade balance
36
?50
29
125
Exports (f.o.b.)
1,092
1,132
1,123
1,275
Imports (f.o.b.)
?1,056
?1,182
?1,094
?1,150
Net services
?290
?356
?336
?400
Net transfers
30
29
22
30
Capital account balance, errors and omissions
313
92
99
?30
Net change in international reserves (excludes stock of arrears)
89
?285
?186
?275
Estimated.
b projected.
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? The unfinanced balance-of-payments gap, ex-
cluding the stock of arrears ($500 million), to-
taled $186 million in 1985 and will worsen
substantially in 1986 without a significant change
in economic policies. As a result, the local curren-
cy?the quetzal?will remain under severe
pressure.
? Debt service obligations will peak this year, rising
to some 50 percent of export earnings unless
some relief is provided.
6. If Cerezo is to establish the basis for a long-term
recovery and obtain increased foreign assistance, he
will have to implement economic adjustment and
austerity measures. These, however, will have a signif-
icant potential to provoke public protest. An important
first step in an adjustment program would be the
unification of the exchange rates for the quetzal?in
effect, a devaluation. Cerezo will also be pressed to
eliminate fuel subsidies, increasing the domestic price
of gasoline and of fuel-dependent public services such
as electricity and transportation. When the Mejia
government attempted to increase bus fares in
September 1985, the resultant furor threatened Mejia's
position and caused him to rescind the increases. These
measures would be inflationary in the near term,
cutting living standards for Guatemala's poor and
lower middle classes?the principal constituency of
the DCG?thus adding to the political costs of auster-
ity measures.
7. An effective adjustment program would require
that Cerezo reduce the fiscal gap; this would involve
significant improvement in Guatemala's extremely
inefficient tax system. Tax receipts as a percentage of
GNP are among the lowest in the hemisphere and
have been declining. The private sector is unlikely to
support any rise in taxes unless the government also
relaxes price controls and adopts other reforms. Mejia's
imposition of export taxes and increased import duties
and value-added taxes in April 1985 met with a
firestorm of protest from the business community.
Mejia responded by withdrawing the increases and
removing the Minister of Finance. The private sector,
which is concerned about the influence of antibusiness
elements within the DCG, will be Cerezo's most
important political adversary and a chief obstacle to
some economic reforms. There is some evidence that
Cerezo lacks confidence in the business community.
However, if Cerezo and his economic team continue
to consult the business community, as they apparently
have since the election, the private sector will be less
of an obstacle than previously.
8. Another immediate concern for Cerezo will be a
severe foreign exchange shortage, particularly in the
first six months of 1986. To alleviate this problem,
Cerezo is seeking to gain a substantial increase in
foreign aid. Although he will rely heavily on the
United States, Western Europe, and Japan, Cerezo will
also look to Venezuela and Mexico to assure the
continued supply of oil. Guatemala will be hard
pressed to meet immediate debt obligations unless it
can obtain relief from official and commercial credi-
tors. To be successful in obtaining increased assistance
and debt relief will require that Guatemala develop an
adjustment program endorsed by the IMF.
9. There is a wide range of potential outcomes for
the Guatemalan economy over the course of Cerezo's
term, and we believe that his actions over the first year
will have a critical impact on long-term economic
developments. Thus far, Cerezo has publicly indicated
he will pursue necessary adjustment measures and will
avoid radical departures in economic policy.
We believe political con-
ditions over the first six months of his administration
would permit implementation of an adjustment pro-
gram acceptable to the IMF. If Cerezo follows appro-
priate policies over the next two years or so, we believe
the economy will stand a good chance of returning to
positive per capita GDP growth.
10. However, we are uncertain as to the depth of
Cerezo's commitment to an austerity program and his
ability to enforce such a plan. Although his economic
team is counseling decisive actions, he has yet to detail
his economic policies. There is some evidence that he
underestimates the stringency of actions he will need
to undertake to obtain substantial foreign aid. He is
likely to attempt to strike a balance between compet-
ing priorities, such as a reduction in the deficit versus
maintenance of public subsidies. Excessive compro-
mises of an adjustment policy will run the risk of
undercutting its benefits, limiting chances of reaching
an agreement with the IMF and threatening to pro-
long economic stagnation.
11. A less likely possibility is that Cerezo may
abandon austerity and pursue a populist agenda. The
role of the small but increasingly influential labor
movement could be important in pushing Cerezo to
take such steps. The principal labor group, the moder-
ate leftist Confederation of Guatemalan Syndicalist
Unity (CUSG), is reportedly inclined to grant Cerezo
time to establish his economic program, but some
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Figure 2
Guatemala: Selected Economic Indicators
Real GDP Growth (Percent) Consumer Price Growth a (Percent)
4
30
2
I
20
I
0
10
?2
Manufacturing (Index 1980=100) Budget Deficit as a Share of GDP (Percent)
100
8
80
6
60
4
40
2
20
Agriculture Output (Index 1980=100) Real Minimum Wages (Index 1980)
100
100
80
80
60
60
40
40
20
20
Savings and Investment b (Percent) Per Capita GDP (Index 1980=100)
20
Savings
[?Investment
15
10
5
100
80
60
40
20
1980 81 82 83 84 85c 1980
a Average annual.
b Gross national savings and gross capital formation as a share of GDP.
c Estimated.
81
82
83
84
85c
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public employee unions could initiate strikes early in
the administration. If Cerezo is unable to show pro-
gress on the economy, labor actions are likely to
increase as the year progresses. There will then be a
growing chance?though still less than 50-50?that he
will accede to union and leftist calls for large wage
increases and more radical economic policies. Should
he do so, the consequences for the economy would be
sharply negative. Such populist policies, in our assess-
ment, would be counterproductive, possibly leading to
a debt moratorium, increased capital flight, deprecia-
tion of the currency, explosive inflation, and sharper
economic downturn.
Civilian Military Relations
12. The military has been the dominant political
institution in Guatemala for the past 30 years and until
recently had generally regarded Cerezo as a potential-
ly dangerous radical. The maintenance of positive
relations with the military will clearly be an important
priority for Cerezo. His task will be made easier by the
extent of his electoral victory and the fact that the
armed forces are anxious to relinquish the responsibil-
ities of government. The appointment of General
Hernandez?a moderate, apolitical, and unassuming
officer?as Minister of Defense will further facilitate
smooth military relations with the civilian govern-
ment. We believe there has been a broad attitudinal
shift within the armed forces in favor of civilian
government and the democratic process. Although this
sentiment is largely grounded on institutional self-
interest, it does reflect a greater reluctance to involve
the military too deeply in politics. Therefore, we
expect the military to be relatively tolerant of the new
administration, at least initially.
13. There will be, nevertheless, clear limits to the
military's tolerance. The issue with the most potential
for causing civilian-military tensions over the coming
year will be human rights. The armed forces will be
firmly opposed to any attempt to bring military
personnel to account for past violations. At the same
time, Cerezo will be under some pressure internation-
ally and from domestic organizations such as the
Catholic Church and the Mutual Support Group
(GAM)?comprising relatives of missing persons?to
resolve what they consider to be politically motivated
homicides, abductions, and disappearances. So far
Cerezo has handled the issue judiciously, ruling out
extensive investigations of military involvement in past
crimes but indicating that those committing abuses in
the future will be brought to justice. Somewhat more
ambiguously, he has stated that he will abide by legal
The Guatemalan Military
With a strength of about 33,000, the Guatemalan
Army is spread among 20 active military zones, each
containing at least one infantry battalion. The Army is a
well-trained and competent counterinsurgency force. A
principal asset is its highly motivated and relatively
young officer corps; the proportion of senior officers is
small, and lieutenants and captains comprise over 80
percent of the corps. Principal arms suppliers include
Western Europe, Israel, and Argentina. Guatemala
produces its own small arms ammunition but has
experienced shortages in larger munitions, including
mortar and artillery rounds. Other deficiencies include
inadequate communications and mobility and insuffi-
cient engineer equipment
The Air Force inventory consists of about 100 air-
craft, including 32 helicopters?most of US origin?and
10 A-37B light attack jets. The cutoff of US military aid
in 1977 severely affected the maintenance of US-
supplied aircraft. The operational availability of heli-
copters, even by relatively loose Guatemalan standards,
is probably less than 50 percent. The A-37s often lack
functioning safety equipment, such as ejection seats.
Despite this, the Air Force has provided effective
tactical support to the Army. The small Navy, consist-
ing of 11 patrol craft, an amphibious craft, and two
hydrographic survey ships, can provide local security
but cannot effectively monitor Guatemala's coasts.
actions conducted by the Supreme Court, suggesting
that he would not block investigations of past violence
and disappearances on a case-by-case basis.
14. We judge that the military would, at most,
acquiesce in disciplining individual junior officers for
violations perpetrated after the inauguration of the
new regime. The military granted itself an amnesty
just before leaving office that is currently under
review by the new Congress. Nevertheless, Cerezo
appears to understand the military's sensitivities, and
he is unlikely to seek the removal or trial of senior
officers or press for a broad investigation into previous
abuses. Were he te do so, the armed forces would
strongly resist, and we believe the chances of a coup
would rise significantly.
15. Another issue that could sharply divide Cerezo
and the armed forces will be the conduct of the
counterinsurgency. The military opposes the disband-
ing of the Civil Defense Force (CDF) or moves to
place the CDF under more direct civilian control and
supervision. Nevertheless, Cerezo has proposed local
referendums to determine the status of CDF units, and
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Political Violence in Guatemala
Violence has long been embedded in Guatemalan
political culture. Since at least the 1950s, politically
motivated murders and abductions have been carried
out by insurgents, government security forces, political
factions, and private individuals. The country's reputa-
tion for violence, however, reached its peak under the
government of Gen. Romeo Lucas Garcia (1978-82). As
the insurgency gained momentum in 1981, the govern-
ment responded with a campaign of violence against
the presumed supporters of the guerrillas in the coun-
tryside?especially against the largely Indian popula-
tion of the central highlands. Moreover, Lucas con-
doned?and in some cases probably directed?a policy
of eliminating leftist opponents of the government,
including labor leaders and moderate leftists not con-
nected with the insurgency. During this period, a
number of DCG political organizers were killed, and
Cerezo himself was the target of at least three assassina-
tion attempts.
The excesses of the Lucas government produced a
backlash within the armed forces, resulting in a coup
that brought retired Gen. Efrain Rios Montt to power.
Rios Montt and his successor moved with some success
to reduce the level of violence. Gauging the extent of
this success is extremely difficult because it is often
impossible to identify the perpetrators of political vio-
lence or even to differentiate between political and
criminal violence. Nevertheless, US Embassy figures
suggest that politically motivated violence has been
significantly reduced and is now on the order of 8
percent of what it was in 1981.
We do not believe that the armed forces are system-
atically pursuing a policy of repression in the country-
side. For example, the -poles of development--model
villages in the highlands?have been attacked by some
human rights groups as concentration camps, but exten-
sive investigation has failed to
substantiate these charges. Abuses in the field, however,
do remain a serious problem, though we judge that
these are largely carried out by junior officers and
isolated detachments. A key difficulty is that the mili-
tary fails to prosecute the offenders. Officers guilty of
serious violations are generally reassigned to positions
where they can be more easily controlled by their
superiors.
From an institutional point of view, the National
Police (PN) probably poses the most serious human
rights problems. The PN is notoriously corrupt, and
some officers are suspected of having operated as hired
killers. The police agency responsible for criminal
investigations, the Department of Technical Investiga-
tions (DIT), has the worst reputation of violence. Cerezo
has vowed to reorganize the police and abolish the DIT,
and we believe that the professionalization of Guatema-
la's police organizations would ultimately yield signifi-
cant improvements in the human rights environment.
We expect that, though Cerezo will move cautiously
in addressing the problem of political violence, he will
be able to make gradual progress in further curbing
human rights violations. Two key factors that could
frustrate his efforts will be the economy and insurgent
strategy. A continued deterioration of the economy
would probably produce some increase in the level of
violence conducted by leftwing and rightwing extrem-
ists. In particular, there is already some evidence of
reemergence of rightwing violence, probably intended
as a warning to Cerezo over his economic policies.
Additionally, political violence would be greatly exacer-
bated were the insurgents to adopt a strategy of inten-
sive urban terrorism. Such a strategy could provoke a
harsh response by the security forces.
this is likely to be a continuing point of contention. In
addition, we judge the armed forces would accept
surrender and amnesty discussions with the guerrillas
but would reject negotiations involving any govern-
ment concessions such as a cease-fire, the recognition
of -liberated zones," or the granting of any political
advantages to insurgent organizations. For his part,
Cerezo has downplayed the idea of peace talks. He has
accepted in theory unconditional discussions with the
insurgents but on at least one occasion has stated that
he would put them off for a year while he consolidates
his political position.
16. There will be other points of civilian-military
contention, but we do not expect them to have a
critical impact on the new regime?especially in its
first year. The military budget, for example, could be
an area of dispute. In the past, the armed forces have
been able to augment their funds by tapping the
budgets of other ministries. Cerezo will seek to prevent
this and gain greater control over military spending.
Another sensitive area will be the internal administra-
tion of the armed forces, particularly such key matters
as retirements, promotions, and duty assignments. The
military hierarchy will strenuously protect these pre-
rogatives from civilian intrusion. In none of these cases
do we believe that Cerezo will be inclined to take
drastic actions.
17. Both the armed forces and Cerezo are likely to
work to keep any disagreements within manageable
limits. There are circumstances that could trigger
coup-plotting, most notably should Cerezo reverse
himself and attempt to exact retribution for past
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human rights offenses or other wrongdoing by the
military or should the government interfere with the
military's corporate interests or professional autono-
my. We do not expect widespread public disturbances
over government policies, but should public order
deteriorate, the potential for a coup would increase if
the armed forces felt that Cerezo mishandled the
situation or lost control. We believe that over the next
year, however, these are unlikely eventualities and
that there will be only a small chance of a military
coup.
? There is a somewhat greater probability that,
through a series of gradual missteps, Cerezo
could over the longer term compromise his posi-
tion with the military and provoke some senti-
ment for a coup. Should it occur, a coup would
almost certainly intensify domestic political po-
larization and violence and result in an adverse
international reaction.
The Insurgency
18. Guatemala has had an insurgency problem
since the 1960s, but a number of factors?corruption
and repression under the Lucas government, the suc-
cess of the Sandinistas, and increased Cuban support to
regional revolutionaries?led to a dramatic increase in
guerrilla activity beginning in 1979. Insurgent forces
grew from fewer than 1,000 combatants to about
3,000, and by early 1982 the three principal guerrilla
organizations threatened to wrest control of key north-
ern and western departments from the government.
The Army responded with a more aggressive?and
sometimes brutal?counterinsurgency effort that drove
many Indians into refuge in Mexico.
19. In March 1982 a military coup spearheaded by
reformist-minded officers brought to power retired
Gen. Efrain Rios Montt, who rapidly implemented a
new civic action program while continuing the em-
phasis on maintaining the tactical initiative. This
"bullets and beans" strategy?continued by General
Mejia?relies on an estimated 900,000-man Civil De-
fense Force to more directly involve the civilian
population in the establishment of local security,
military civic action companies to bring to rural areas
tangible benefits of cooperation with the government,
and "poles of development"?rebuilt and newly built
model villages?to revitalize the largely Indian-popu-
lated central and western highlands.
20. The implementation of this strategy, comple-
mented by an amnesty, has reduced insurgent forces
to about 1,500 and has severely undercut their popular
support. The guerrillas are restricted principally to a
belt about 50 miles wide along the border with Mexico
and are generally isolated from key population cen-
ters. The insurgents do not now present a critical
threat to public security, but they remain a viable
military force. The three major insurgent groups are
well organized, reasonably well armed, and able to
make use of safehavens on Mexican territory. The
level and scope of combat operations is?and is likely
to remain?limited, although the guerrillas have been
able to inflict more casualties on government forces
than they themselves have suffered during the past
year, due to greater guerrilla reliance on mines, booby
traps, and ambushes.
21. Insurgent capabilities were buttressed by Cu-
ban, Soviet, and Nicaraguan support in the form of
training, financial aid, and some military supplies in
the early 1980s, and we believe that this continues,
particularly in the areas of training and financial
assistance. The insurgents capture insufficient supplies
for their own needs and require some external support.
The guerrillas have received some M-16s?which were
traced to former US stocks in Vietnam?Soviet-style
grenade launchers, and other small arms. There is
good evidence that, historically, arms have arrived via
Cuba and Nicaragua, and we suspect that this pattern
continues. In addition, arms and supplies are also
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received from insurgent support units in Mexico and
Belize. Cuba and Nicaragua have also played a central
role in attempting to unify the insurgent movement
under an umbrella organization, the Guatemalan Na-
tional Revolutionary Unity (URNG).
22. Over the next year, we see little chance for a
dramatic growth of the insurgency. The guerrillas will
probably play a waiting game, preserving their forces
in the hope that over the long run their prospects will
improve if Cerezo proves unable to cope with Guate-
mala's problems. The insurgents will retain the capa-
bility to mount small ambushes and harassing attacks
against the military. In addition, we expect that the
guerrillas will continue to use terrorism, assassinations,
and sabotage against economically important targets.
We expect that the insurgents will seek to strengthen
their urban terrorist networks, which so far have been
effectively neutralized by government security forces.
Although we believe that most insurgents will support
these tactics, some rebel leaders may try to adopt a
two-track strategy like that used by the FMLN in El
Salvador. This strategy would include the continuation
of military pressure while seeking direct negotiations
with the government. The guerrillas are also likely to
step up their political efforts, particularly through
attempts to subvert labor unions and human rights
groups.
? On the whole, however, we believe the insur-
gents?who lack popular support and urban or-
ganization?will remain only a peripheral politi-
cal force and will not pose a critical threat to
public security through Cerezo's first year.
23. On the other hand, we do not expect a substan-
tial reduction in the insurgency in the next 12 months.
The armed forces are currently stretched to the limits
of their resources and will have a difficult time
increasing their counterinsurgency efforts. The princi-
pal limitations of the military are transportation,
communications, and logistics. The lack of mobility
has been a serious handicap because a key element of
the government's counterinsurgency tactics is the rap-
id movement of troops to seek out aggressively and
maintain contact with insurgent forces in their remote
operating areas. The magnitude of this task becomes
clearer when we recognize that the Guatemalan
armed forces are responsible for securing an area over
five times larger than El Salvador but with 10,000
fewer troops than their Salvadoran counterparts.
Foreign Policy
24. Guatemala began to emerge from its longstand-
ing diplomatic isolation in 1982 after the Rios Montt
coup. Since then, greater efforts have been made to
improve Guatemala's international image and reduce
its international isolation resulting from its poor hu-
man rights record. Mena's attempts to stem political
violence and support the electoral process laid the
foundations for improvements in Guatemala's diplo-
matic relations. This was exemplified by the reestab-
lishment of relations with Spain, which had been
ruptured in early 1980. Guatemala also began to take a
more active role in regional matters with its participa-
tion in the Contadora talks:
? Guatemalan policy, traditionally anti-Commu-
nist, has been supportive of broad US policy
goals, but on specific Contadora issues this sup-
port has often been tentative, cautious, and
limited. This has stemmed in part from the
military's resentment of the United States over
human rights issues and the cutoff of US military
aid in 1977. It has also reflected a tendency to
draw closer to Mexico's position on Contadora, as
Guatemala has become more dependent on Mex-
ican oil assistance, and has sought cooperation on
refugee and other border issues.
25. We do not expect that Cerezo will effect dra-
matic changes in Guatemalan foreign policy, especial-
ly in his first year. His principal goal will be to
improve Guatemala's international image and its
standing with potential Western aid donors. Cerezo
appears strongly committed to a regional political
solution to Central American problems. Along with his
support for the Contadora process, he has suggested
the creation of a Central American Parliament, in-
cluding the Sandinistas, as a mechanism for resolving
economic and political problems. He also sponsored a
meeting of most Central American leaders, including
President Ortega of Nicaragua, immediately after his
inauguration.
26. Cerezo has stated he will follow a policy of
-active neutrality,- which probably reflects a desire to
establish?in principle?his independence of the Unit-
ed States and of East-West conflict. This will lead to
somewhat more of a nonaligned tone in foreign policy
rhetoric and increased friction with the United States
on some issues. But there will be important counter-
weights to any neutralist tendencies. Cerezo is neither
viscerally anti-US nor ideologically opposed to US
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policy objectives in Central America. He also recog-
nizes a political kinship with fellow Christian Demo-
crat Jose Napoleon Duarte, President of El Salvador.
Further, he has some appreciation of the dangers
posed by the consolidation of a Marxist-Leninist re-
gime in Nicaragua. We believe this constellation of
attitudes will result in a policy of continued support
for the United States on most Central American issues
but disagreements on some key points, particularly
Nicaragua
27. Guatemalan relations with Nicaragua are likely
to reflect an interplay of countervailing tendencies.
On one hand, the military and most of the DCG
hierarchy, including Cerezo, regard the Sandinistas
with some suspicion. Vice President Roberto Carpio,
for example, has stated in private to the US Ambassa-
dor that the regime in Managua is a permanent threat
to peace in the region and should be overthrown. On
the other hand, Cerezo has some hope that through
diplomatic pressure the Sandinistas could be induced
to democratize the Nicaraguan political system. We
expect that to maintain diplomatic leverage he will
cultivate increased contacts with the Nicaraguan lead-
ership and the democratic opposition but is likely to
avoid harsh public criticism of the Sandinistas. We
doubt, however, that Cerezo will move toward sub-
stantially closer relations with Managua unless he
perceives evidence of a significant liberalization of the
Nicaraguan regime.
? Consistent with his hopes for a peaceful evolu-
tion toward democracy in Nicaragua, Cerezo will
not?at least publicly?be supportive of any
military moves against the Sandinistas and will
be openly critical of US assistance to the anti-
Sandinista armed resistance. This could change if
Managua is revealed to be providing substantial
direct assistance to Guatemalan insurgents, if the
Sandinistas take more aggressive actions against
their neighbors, or if they impose significantly
tighter totalitarian controls on the domestic polit-
ical system.
28. Cerezo has raised the possibility of establishing
diplomatic relations with Cuba, but we have no
indication that he regards this as an immediate foreign
policy priority. We are uncertain of his motivation for
this suggestion, but we do not believe that it represents
any sympathy for Cuba or its goals. He may regard the
initiation of relations as a means of demonstrating
Guatemala's neutralist policy as well as moderating
Cuban policy toward Guatemala. In any event, we see
little danger that Guatemala will be drawn into the
Soviet-Cuban orbit over the coming year.
29. Guatemalan relations with Mexico will be a
major foreign policy preoccupation for Cerezo. We
judge that for both countries the maintenance of
positive relations will be a clear priority. The status of
Guatemalan refugees in Mexico, the use of Mexican
territory by Guatemalan insurgents, and the provision
of Mexican oil to Guatemala will continue to be the
central bilateral issues. Mexican President de la Ma-
drid has, according to a recent report, expressed
concern over the influx of foreigners?mostly Guate-
malans?illegally entering Mexico across its southern
border. There are perhaps 45,000 Guatemalan refu-
gees currently in Mexico, and they are viewed as a
potential security threat by the Mexican military.
Although the refugee problem will be a sensitive
matter, we believe that it will remain manageable.
Cerezo and de la Madrid will strive to contain dis-
agreements on the issue, and we doubt that it will
produce sharp frictions between the two countries.
30. A more volatile issue will be Guatemalan guer-
rilla use of Mexican safehavens. There is substantial
evidence that the insurgents use Mexican territory for
rest and recuperation, clandestine transport of sup-
plies, and recruitment among the Guatemalan refugee
population. Complaints by the Guatemalan Govern-
ment have led to some Mexican actions?such as the
relocation of refugee camps away from the border
area?but Mexican resources are insufficient to effec-
tively monitor the extensive border area. We believe
that Guatemala's recognition of Mexico's importance
as an oil supplier and Mexico's perception of Guate-
mala as a potential ally in the diplomatic arena will
work to limit conflict on other issues. The de la Madrid
administration also will share Cerezo's desire to con-
tain the insurgency, fearing it could further spill over
into Mexico.
Si. Guatemala's longstanding territorial claim on
Belize is not likely to surface as a major issue during
Cerezo's first year. Guatemala does not recognize
Belizean sovereignty and has officially regarded Belize
as Guatemalan territory. In past discussions with the
British?who maintain a military force in Belize?the
Guatemalan Government has scaled back its demands.
So far the talks have foundered on the Question of
territorial concessions. Cerezo will be flexible in seek-
ing a peaceful solution?he has already met privately
with Belizean Prime Minister Esquivel?but the issue
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probably does not enjoy an immediate priority on his
foreign policy agenda. To facilitate an agreement, he
will probably establish formal diplomatic relations
with the United Kingdom, but we do not expect major
developments in negotiations soon.
? A related problem will be Guatemalan insurgents
in Belize. We have some evidence that the FAR
uses Belizean territory as a logistics and commu-
nications base and possibly as a route for arms
and narcotics smuggling. There will be a small
chance that Guatemalan Army operations near
Belize will result in border incursions and inci-
dents with Belizean or British forces. However,
unless guerrilla use of Belize increases dramati-
cally?an unlikely development?we do not be-
lieve that border problems will pose major diffi-
culties for the Guatemalan or Belizean
Governments.
Implications for the United States
32. The installation of a new civilian government is
a decisive step toward the US goal of a stable demo-
cratic political system in Guatemala, but continued
progress toward that end is far from assured. We
believe that Cerezo's administration will almost cer-
tainly survive its first year in office, especially because
its task will be initially eased by a general enthusiasm
for the return to civilian rule, moderation on the part
of the military and important sectors of organized
labor, and by the disarray of the right. But the
decisions Cerezo takes?or fails to take?will have a
critical impact on the longer term viability both of his
government and of the democratic process
33. We envision three possible scenarios for the
progress of Cerezo's administration over the coming
year.
? First, there is a better-than-even chance that
Cerezo will be able to consolidate his position,
pursue an economic adjustment program, con-
tain his political opposition, and avoid antagoniz-
ing the military. Our chief concerns are that he
will fail to take all the actions necessary to
stabilize the economy or that his economic policy
will become a patchwork of compromise and
half-measures, often at cross-purposes with one
another. Nevertheless, Cerezo has so far indicat-
ed he has a good perception of potential prob-
lems and the political skills to resolve them
successfully.
? A less likely possibility is that Cerezo might
shrink from making difficult decisions or over-
play his hand. In such a scenario, we would
anticipate heightened activism by the private
sector, labor, and rightist political parties as the
economy deteriorates, with an increased likeli-
hood of public demonstrations and disturbances.
The confidence of the military in the govern-
ment's ability to preserve public order would
gradually erode, though a coup in the first year
or two of the administration would be unlikely.
The scenario with the most potential for disrup-
tion in the short term would be the aggressive
pursuit by Cerezo of a populist, antibusiness
economic policy. If Cerezo's attempts to secure
private-sector cooperation in economic reform
were frustrated, he might follow a more leftist
economic agenda. Although this scenario is much
less likely than those discussed above, it is not
implausible. In this case, Cerezo's broad base of
support would fracture, and he would lose the
center, portending a dangerous polarization of
the political spectrum. Political violence would
undoubtedly increase, and certain sectors of the
military would begin to actively consider the
possibility of a "rescue operation"?as some offi-
cers have termed previous coups
34. Beyond the development of democracy and
foreign policy, US interests will be principally engaged
in Guatemala on questions of aid and human rights.
Cerezo will look to the United States for increased
economic aid, but we believe he has a realistic appre-
ciation for the level of assistance he can expect during
1986. He has not requested increased military aid, but
we expect that the military will purchase spare parts,
vehicles, and perhaps communications and engineer-
ing equipment from the United States. Cerezo will also
seek US support in rescheduling Guatemala's external
debt and reaching an agreement with the IMF. There
is no indication that he plans on taking a confronta-
tional approach to the debt issue, but surging debt
repayment requirements this year could raise pres-
sures on him to follow the Peruvian example and
unilaterally limit repayment. We expect Cerezo to
make continued progress on human rights issues,
particularly if he follows through on his stated intent
to reorganize the national police and the criminal
justice system. He will press for US assistance in police
training, and we judge that such training would
greatly contribute to raising the professionalism of the
police. We do not expect the human rights issue to
recede in importance and visibility, however
35. An issue that may emerge into greater bilateral
prominence in the next year is narcotics trafficking.
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Guatemala is well suited as a narcotics transshipment
point. It offers traffickers good access by land, sea, and
air and a relatively permissive environment, as the
security forces have a very limited capability to police
Guatemala's borders?radar coverage, for example, is
nonexistent outside Guatemala City. Though we lack
information on the extent of trafficking, we believe
that the increase in trafficking throughout Central
America could lead to a rise in transshipment through
Guatemala. There are also limited indications of insur-
gent involvement with drug traffickers. We expect
that, if the drug problem becomes increasingly signifi-
cant, Cerezo will be cooperative with the United States
on drug enforcement matters.
36. We are cautiously optimistic that Guatemala
will make progress in consolidating its democratic
institutions in 1986. However, through?and be-
yond?the time frame of this Estimate, the system will
remain fragile and vulnerable to internal and external
developments, such as a new world recession or an
inability to attract sufficient foreign aid. We also
recognize that one lesson of recent political history in
Central America is that, given unsettled domestic
conditions and sufficient external support, insurgen-
cies can grow dramatically within a short space of
time. Thus, although we do not expect significant
adverse developments in Guatemala over the coming
year, we are not equally confident about the long-term
prospects for Guatemalan democracy. The depth of
the country's economic problems, the fragility of the
emerging political system, the tenacity of the insurgent
threat, and the political violence will render Guatema-
la of continuing concern to the United States for some
time to come
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