DDCI REMARKS ON LATIN AMERICA AT WORLD BUSINESS COUNCIL OCEAN REEF CONFERENCE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP99-01448R000301390005-8
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 17
• Document Creation Date: December 27, 2016
• Document Release Date: July 27, 2012
• Sequence Number: 5
• Publication Date: February 5, 1986
• Content Type: MISC

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DDCI REMARKS ON LATIN AMERICA
AT WORLD BUSINESS COUNCIL
OCEAN REEF CONFERENCE
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With the news headlines these days focused largely on terrorism in
Middle Eastern and European airports, turmoil in South Africa, and
military movements in the Mediterranean, it is all too easy for the
public and the media to lose track of what's going on in Latin America.
It's too easy to forget "America's Back Yard," which is so important to
US business and strategic interests.
Latin America, as you know, is a vast and very diverse region
politically, economically, and culturally. The region is now undergoing
tremendous changes that threaten the stability of the region and
long-term US interests there.
I think that, in broad terms, there are three major problems affecting
that region today. These are economic stagnation and a crushing
external debt; the growth of insurgency and terrorism; and -- to make
matters worse -- Soviet and Cuban subversion and exploitation of the
region's woes.
From the business perspective, the most significant issue clearly is
Latin America's economic difficulties -- especially its huge and growing
debt. Many of you are no doubt more familiar than I with the massive
debt problems of Mexico and Brazil.
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Let me focus for a few minutes on Latin American debt.
The magnitude of the problem is striking. Over one quarter of the total
Third World external debt is accounted for by Brazil, Mexico, and
Argentina. Throw in smaller debtors like Venezuela, Chile, Costa Rica,
Jamaica, and some others, and the Latin American share of Third World
debt approaches fifty percent.
NOTE: Total debt of Brazil stands at $105 billion;
Mexico $102 billion; Argentina $46 billion; Venezuela
33 billion; Chile $21 billion; and Peru $13 billion.
As you all know, there is nothing inherently wrong with debt. Indeed,
nations normally require extensive borrowing to finance development. And
in the early 70s, economic planners throughout Latin America were
"bullish", and almost eagerly incurred debt. These economists
anticipated that their countries would be able to repay creditors easily
from steadily rising export earnings from oil, minerals, and foodstuffs.
Unfortunately, sharp reversals in the world economy torpedoed this
strategy. General recession caused sales of Latin American commodity
exports -- for example, coffee, sugar, and copper -- to fall rapidly
beginning around 1980. Simultaneously, another runup in world oil prices
hurt oil importers like Brazil, Chile, and countries in the Caribbean
Basin. Falling exports and expensive imported oil jacked up their
external debts still further.
While the ability ....
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While the ability of debtor countries to earn foreign exchange was
rapidly eroding, international lenders perceived a growing degree of
risk. Naturally, they began cutting back on funds for debt-servicing.
Borrowers now were caught with debts that could not be repaid, and called
for help.
The United States Government, in collaboration with the IMF and certain
other governments and banks, began dealing with debt readjustments on a
case-by-case basis. This process involves five key elements -- internal
economic adjustments by the debtor countries; new commercial bank
financing; government loans; IMF loans; and reliance upon global economic
recovery.
As you can imagine, the "medicine" was initially painful. As governments
imposed austerity programs, unemployment and urban unrest grew and
inflation jumped while capital fled the region.
The USG strategy, however, began showing results in late 1983. Exports
finally began to increase, and bankers provided new loans. By the end of
1984, it appeared that financial difficulties were lessening. Trade
surpluses were growing as exports soared to the economically-recovering
industrial world, especially the US. In addition, interest rates fell,
thus further easing Latin America's repayment burden. And austerity
measures imposed by IMF strengthened Latin American economies. In short,
growth started to pick up.
Unfortunately, the old....
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. Uc~fortunately, the old problems came back in 1985. Economic growth in
the industrial nations -- and particularly in the United States -- which
had fueled the Latin American export growth in 1984, once again
declined. Commodity prices fell in some cases to the lowest levels in
decades. Increasingly, protectionism blocked exports.
Even oil producers like Mexico and Venezuela were not immune. They
thought that the rising oil prices of the early 1970s was a "permanent
trend." For this reason, they lavished huge sums on social programs as
well as on economic development. Like everyone else, they were caught by
surprise by the world oil glut and steady decline of prices. But unlike
Saudi Arabia and the Gulf States, these countries had no cushion of
savings to fall back on when over-production forced price cuts.
As a result, 1986 looms as another economically difficult year for the
region. Argentina and Mexico may well experience a drop in GNP of 2-3
percent this year. These economic problems could easily lead to serious
political and social instability and the growth of radical movements,
there and elsewhere.
As many of you know, Castro is already trying to capitalize on these
problems by publicly urging Latin American debtor nations to refuse to
pay their debts. Castro has sponsored a series of debt conferences in
Havana to spread the word, and thus create problems and embarrassments
for democratic governments. For the moment, his pleas are falling on
deaf ears because Latin American political leaders recognize that Castro
is trying to exploit....
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. i~ trying to exploit issues for his own ends. Nonetheless, Castro has
highlighted a sensitive political is-sue that puts governments throughout
Latin America under considerable popular pressure.
I am happy to tell you that the US Government is trying very hard to help
our sister governments throughout the hemisphere meet these serious
economic problems. Last October Treasury Secretary Baker announced a new
plan, "Program for Sustained Growth," to establish a workable strategy
for dealing with international debt. The program calls for debtors to
adopt free-market reforms to strengthen economies and lay the foundation
for renewed growth, for the World Bank to support structural adjustments
of economies where required, and for commercial banks to increase lending.
Thus far, Latin American debtor countries have welcomed the US
initiative. From their perspective, they see the plan as a sign that the
US recognizes the real need of debtors to restore economic growth and
obtain new development capital.
Now the task for US intelligence is to closely monitor the economies of
key Latin American countries with special attention to their ability to
make debt repayments -- as well as to the political and social
repercussions of their financial difficulties -- in order to assess any
adverse impact on our national security. The stakes are large::
A major consideration here is that American commercial banks have a major
exposure in Latin America. By mid-195 US banks had lent almost $100
billion to Latin America....
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b411ion to Latin America. As you are no doubt aware, default could
seriously hurt some US banks, and would injure the US banking system
generally.
Perhaps even more importantly, though, the inability of these countries
to honor their debt repayment agreements would also have a strongly
negative impact on sustaining economic recovery in the industrial world.
LDC's are important customers for industrial nations' products, but
financial strains and rigorous austerity programs would again force them
to curb imports, especially of US goods.
I mentioned a moment ago that there is a close connection between
economic stagnation in Latin America and the growth of political
radicalism and its two ugly manifestations: insurgency and terrorism.
Indeed, the spread of these problems in Latin America during the last
five years has been alarming.
In several Latin American states, small numbers of revolutionaries --
disdainful of the electoral process and unable to win popular support
through the ballot box -- have succeeded in subverting the climate of
opinion from one that respected parliamentary debate into one that
encourages blows and counter-blows, violence and counter-violence. This
has resulted in gradual weakening of parliamentary institutions and
democratic processes in several countries.
As we speak, there are leftist-backed insurgencies -- occasionally
punctuated by acts of wanton terrorism -- active in Peru, Chile,
Colombia, E1 Salvador,....
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C?lombia, E1 Salvador, and Guatemala, and several island nations of the
Caribbean.
Radical groups see in terrorism the potential for obtaining concessions
from established governments that can never be obtained by traditional
political means. One common terrorist objective is to provoke a violent
reactionary response and thus discredit political moderates and alienate
people from their government. Such a motivation was behind the recent
bloody seizure of the Palace of Justices in Colombia. If the
decision-making process can be disrupted, confidence in the workability
of democratic institutions can be eroded, and -- unless Latin American
governments deal effectively with terrorism -- their stability will be
seriously weakened. Polarization is a desired goal of Chilean
terrorists, especially.
Terrorist methods are becoming increasingly sophisticated.
Assassinations and seizures of hostages for maximum impact on audiences
in target countries are two favorite means used by terrorists to draw
media attention to their cause. Moreover, nowadays, many of the risks
associated with terrorism are greatly diminished by the involvement of
outside governments in the financing, training, documentation, and
providing of safehaven for terrorist groups.
With help from a sponsoring state like Cuba, Nicaragua, or Libya, these
terrorist groups are able to use more sophisticated techniques because of
state-funded training programs, and more violent, more deadly, more
difficult-to-detect....
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difficult-to-detect equipment and arms. They also receive intelligence,
and get official travel documents, which they sometimes use as diplomatic
cover to hide their true identities. This support makes it easy for
terrorists to mask their movements and munitions deliveries -- and then
find safehaven in the sponsoring state after an attack. So the backing
of radical governments enormously escalates the scope and power of this
growing threat.
Part of the potent subversive threat we face in Central America is
stimulated by outsiders who are well-versed in terrorism. For example,
Italian Prime Minister Craxi [KRAHK-SEE] stated early last year that
Nicaragua hosts 44 of Italy's most dangerous terrorists. His statement
is corroborated in part by a former Red Brigade terrorist who said that
at least six of his former comrades now serve as non-commissioned
officers in the Sandinista army.
Parenthetically, I'd like to add that Nicaragua receives substantial aid
from Qadhafi's Libya and played .host to Iranian Prime Minister Musavi
[M00-SAH-VEE]. For those of us in the intelligence business, it is not
surprising that the same names and faces keep turning up whenever we look
broadly at the subject of international terrorism.
Clearly, the Soviet Union and its allies have grasped the enormous
potential of terrorist movements and insurgencies for disrupting
societies, particularly in the Third World. Clearly, they have
recognized that in Africa, Asia, and Latin America there are many weak
governments with low....
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governments with low levels of political legitimacy and high levels of
instability. To a degree far greater than is generally realized, some
Latin American governments are vulnerable to disruptions by terrorists or
insurgents and are, therefore, tempting targets for leftist campaigns.
In providing terrorist movements with arms, training, and political
support, the Soviet Union and its allies, the radical states, have
discovered a highly cost-effective way of making the point that in
today's world, it is not safe to practice democracy.
I'd like now to turn briefly to the rather murky area of collusion
between the drug producers and narcotics traffickers and the terrorists,
leftist guerrillas, and their backers.
Drug dealers see their interests as being the corruption and manipulation
of an established regime -- such manipulation to include the buying of
policemen, security agents, judges, members of parliament, and even
premiers. Money is the means and also the objective for narcotics
pushers.
Terrorists and insurgents, on the other hand, are out to destroy the
existing system. If they had their way, they would not corrupt the
policemen and judges -- they would kill them. Moreover, money is useful
for buying weapons, paying operational expenses, and buying intelligence
and other information. The terrorist or insurgent is, above all,
ideological. He is committed to overthrowing the established regime;
that is his objective....
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that is his objective. He needs money to do this, and narcotics dealers
can provide the money.
This said, there is a degree of cooperation between some terrorists and
narcotics traffickers for at least tactical reasons. For example, a
symbiotic relationship has grown up in Colombia between narcotics dealers
in jungle areas and along the Caribbean coast and the leftist
Revolutionary Armed Forces of Colombia. Neither group, ordinarily, would
have much to do with the other. But the drug merchant needs a secure
transit point for his goods to reach the US markets. One such transit
point is Cuba and the waters around Cuba. And the terrorists need arms.
In the past, the Cubans funneled arms and money to the guerrilla groups
through the drug merchant channels, so there is compatibility and
complementary interest. Although Fidel Castro loudly denies having
dealings with drug merchants when speaking with American journalists, in
fact we've caught him red-handed. By helping drug dealers push cocaine
and marijuana, Castro gains improved access to the Cuban community right
here in South Florida, contributes to crime and disorder in the US, and
aids his revolutionary offspring in Colombia.
Since we're on the subject, I would now like to direct your attention to
broader Soviet-Cuban moves in the Caribbean and Central America.
You are all undoubtedly familiar with the fact that in July 1979 a
popular revolution overthrew the Somoza dynasty in Nicaragua. There is
no question that....
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no question that this revolution was supported widely throughout
Nicaraguan society at the time. What you may not know, however, is the
extent to which the "popular" nature of the revolution was subverted by
pro-Cuban and pro-Soviet elements within the Sandinist National
Liberation Front. Sandinistas now have a monopoly on power in Nicaragua,
and have essentially replaced the Somoza dictatorship with one that is
every bit as repressive.
From the perspective of the US, really only one thing has changed and
that is Nicaragua's orientation in the protracted struggle between the US
and the Soviet Union.
I could go on at some length about the repressive nature of the
Sandinistas and the remarkable parallels that exist between the events
following the Sandinista seizure of power in 1979 and those events which
took place in Castro's Cuba twenty years earlier.
But my main point this evening is to impress upon you~the nature of
Nicaragua's threat, as we see it, to its immediate neighbors, and
ultimately to the United States.
The key to the problem is Nicaragua's incredible military build-up -- a
build-up that was not possible without Soviet and Cuban arms deliveries
of massive proportions. You may be surprised to know that Nicaragua has
more troops and equipment than all the other Central American countries
put together:
Not to bore you....
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Not to bore you with statistics, but you should know that they have not
only the strongest, but the best-equipped military forces in the region.
The Sandinist People's Array currently has an active strength of some
65,000 and a fully mobilized strength, including militia and reserves, of
nearly 120,000. .These forces are equipped with Soviet tanks, armored
vehicles, state-of-the-art attack helicopters, coastal patrol boats, and
an increasingly comprehensive air defense system. This gives the
Sandinistas a military capability far beyond that of any other Central
American nation.
Today, Cuban and Nicaraguan military forces together are four times the
size of those of Mexico and they are equipped with vastly superior
weapons. Today, with armed forces larger and better equipped than the
rest of Central America combined, Nicaragua could walk through Costa
Rica, which has no army, to Panama. Cuba could threaten our vital sea
lanes in the Caribbean, thereby seriously impairing our ability to
reinforce NATO and Europe if we had to.
In addition to military hardware in Nicaragua, there are now an estimated
6,000-7,500 Cuban military and civilian advisors and several hundred
other Communist and radical Arab personnel who are assisting the
Sandinistas in their military build-up and consolidation of power. Under
Cuban direction and guidance, the Sandinista security service helps the
regime establish control over the media, create and spread propaganda and
disinformation, and neutralize or expel those who oppose the Sandinista
dictatorship.
Over the past year,....
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Over the past year, the American Intelligence Community has unanimously
concurred in five National Estimates on the military build-up in
Nicaragua, the Marxist-Leninist consolidation of political power, and the
strategic objectives of Soviets, Cubans, and Sandinistas in Nicaragua and
Central America and the prospects of possible insurgency.
If I boiled the many intelligence judgements in these documents down to a
single sentence, it would be this: The Soviet Union and Cuba have
established and are consolidating a beachhead on the American continent,
are putting hundreds of millions of dollars' worth of military equipment
into that beachhead, and have begun to use it as a launching pad to carry
their style of aggressive subversion into the rest of Central America and
elsewhere in Latin America.
On top of that, we see Nicaragua becoming to Central America what Libya
is to the Middle East -- the focal point for international and regional
terrorism. Managua's support for the training of Central American
subversives is well documented -- they support Salvadoran Communists,
Guatemalan Communists, radical leftists in Costa Rica, and radical
leftist terrorists in Honduras to promote revolutionary violence there.
More recently, we have observed some Nicaraguan support for several South
American terrorist groups and development of contacts with other
international terrorist groups.
At this point,....
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At this point, let's ask ourselves what all this means -- the economic
reversals, the urban unrest, the upsurge in terrorism and insurgency, and.
the massive Soviet-Cuban sponsorship of subversion throughout the region.
In my view, there are several implications.
First, if the economic situation worsens, political instability
aggravated by economic dislocation could weaken some governments to the
point of collapse. Certainly it will spawn or aid the growth of radical
movements and groups. The Soviets and Cubans are sure to exploit this.
Second, the weakening of confidence in democratic institutions will make
it easier for terrorists and insurgents to coerce established governments
and, perhaps, even to seize power in some capitals and foment coups.
America's influence, strategic interests, and commercial stake in Latin
America could be jeopardized in an increasingly chaotic region.
Third, the growing Nicaraguan military capabilities enable the Soviets
and Cubans to threaten the Panama Canal in the short term and Mexico in a
somewhat longer term.
Fourth, Cuba will renew its efforts in the Caribbean islands to develop
clients like the ousted Maurice Bishop regime in Grenada. This will be
made easier by endemic poverty in the Leeward [LEE-WERD] Islands, and
soft aluminum prices that will undercut the Jamaican economy.
Fifth, the Soviets....
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Fifth, the Soviets are likely to use arms deals and aid packages to buy
influence with certain South American countries. US policy, as you know,
is to discourage arms sales to economically vulnerable countries.
The Soviets, on the other hand, offer arms on unusually favorable terms
in order to curry favor. They are not concerned if the buyer cannot feed
its own people before buying weapons.
Sixth, if the debt problem is not resolved soon, it could become an
irreversible slide into bankruptcy and default that would shake the US
banking system. There is a great danger to t!S lenders who continue to
lend money solely to ensure that immense debts are classified as
"producing." This causes US dollars to be drawn into a financial "Black
Hole" from which there may be no return.
Seventh, drug pushers will make a greater effort to ship narcotics to the
US from Mexico, Colombia, Peru, and Bolivia despite those governments'
efforts to combat the flow. The drug trade is now a X50 billion illegal
industry which siphons money away from legitimate investment. Also,
narcotics trafficking indirectly aids leftist guerrillas and terrorists.
And, lastly, I would like to mention the plight of the refugees. Every
country that has fallen under Communist control since World War II has
sent refugees streaming over its borders. In the late 40s and early 50s
millions of refugees fled from the Soviet-occupied countries of Eastern
Europe. Then, in the....
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~~ Europe. Then, in the 1960s, we witnessed a refugee flow from Cuba. And
more recently the refugee flow was stimulated by Communist tyranny and
disorder in Vietnam and Afghanistan. But the potential influx from
Central America is even higher than from any of these.
Since 1980, some 200,000 Salvadorans have fled Communist-initiated
violence. and entered the US illegally.
Illegal movement from Mexico has increased, with some one million
Mexicans illegally entering the US in 1983 alone. In 1984, the
Bipartisan Commission on Central America -- which Henry Kissinger chaired
-- warned that a Communist Central America would likely be followed by
the destabilization of Mexico. This could result in many millions of
additional Mexicans fleeing into the US.
The future for Latin America does not look bright. Yet, with courage and
understanding of Latin America's many problems, and the willingness of US
business to help where it can, there may be hope.
For if we do not act soon, events will take their own course, and the
security of our country and our hemisphere may be damaged beyond repair.
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