WEEKLY CONTRIBUTIONS LATIN AMERICA BRANCH, ORE, CIA 15 FEBRUARY 1949

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01090A000200010006-3
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: November 9, 2016
• Document Release Date: July 27, 1998
• Sequence Number: 6
• Publication Date: February 15, 1949
• Content Type: SUMMARY

Approved For ReleAe 1999/09/ 79-0100A000200010006-3
Ydeekly Contributions
Latin-M, erica a2inc ,r~-Onr, CIA
15 February 19
B/IA finds, among the week's developments, two items of particular
interest. In Venezuela there is a significant increase in pressure for
a reorganization of the military junta (p. 2). US policy and prestige
are involved in the possible rejection by Panama's Assenbl4y of the pro-
posed air transport agreement (p. 4).
SUL '.'f'T
NOflTIIFRN DIVISION: The current situation in Costa Inca is reviewed in
the article section (p. 5). Panama's Rational Assembly could very rill
turn down the planned air agreement with the US (p. 4). In Panama's re-
cent financial law it is frankly acknowledged in the text that the country
has not yet recovered from recent elections (p. 2). Review of the cur-
rant situation in Nicaragua will be found in the article section (P. 7).
CMTRAL DIVISION : In Venezuela the growing opposition to the rnilitaryt
junta could have serious consequences (p. 2). A mob in lauadoor destroyed
a radio station, but no political Implications are evident in this event
(p. 2).
SOUT EI'TN DIVISION: A review of the current situation in Paraguay trill be
found in the article section (p. 9). In Argentina the need to settle the
present printers' strike may make it necessary for Peron to compromise
(P. 3).
DOCUMENT NO.
NO CHANGE IN CLASS. 0
11 DECLASSIFIED CLASS. CHANGED TO: TS S `C /
NEXT REVIEW DATE:
AUTH? t~ T -
DAT~ ` _ REVIEWER:
372044,I
Approved For Release I 999/09/ - PP79-01090A000200010006-3
 a Approved For Release 1999/091,
o
79-0109000200010006-3
Weekly Contributions 15 }+'ebruary I9Lj9
J3/L(, CIA
1. PAIA fA: it is hard for people in the US to realize than an election
M be more disturbs n~ tF
t- ian a revolution in Ls in ~3nrica.
A proposed law has been introduced into the National Assemb]y whereby
a moratorium is to be established until 31 January 1951 vcrith respect
to all financial obligations of the National Treasury pending from 1
January 1947. The preamble for the law cites three reasons therefor;
one is the fact "that peace of mind, disturbed by the electoral process
tnhich has just ended, has not yet been restored, and as a consequence
the normalcy and harmony of the Isthmian farm.,, has not been reesta-
blished".
TE*TEZUEIA : Grow n g Pressures for reor<
an3zation of the junta.
A C]J source recently repo d that the opposition within
the military (see B /LA "kly for S Feb L 9) now is apparently becoming
organized into two groups, "ost important of these is the newly ford
"Grupo Uribate", leaders of which are Colonel Ochoa Briceno, General
Celis Paredes, fnn~gel Lar.~us, and Luis Geronimo Petri. Its chief aim
is the removal of Delgado Chalbaud because of his moderate policies.
A second group may be forming about Colonel Jove Leon Rangel, who is
"suspected of conspiring with io:edina a lements" . It is now reasonably
clear that the purpose of both groups is to rid the government of all
officials tainted with Accion. Democratica influence, among whom Delgado
Chalbaud is foremost.
Student and labor disturbances r,iay play into the hands of
;he groups Who seek reorganization of the junta. US Embassy Caracas
has reported that the student disturbances at the University of Caracas
on 10 February may be followed by other such disturbances in order to
provoke the labor syndicates to declare a nation--vri.de general strike
within a few days. The report indicates that the strike would have
Cor!um ist support, It is believed that the labor syndicates will not
be stampeded into a general strike because they are not now ready for
ary such drastic action. A series of student disturbances and lrild
talk about a general strike -rill, however, strengthen the hand of the
anti-Delgado opposition, which favors a stricter labor policy and a more
rigid control of the country and population. In any reorganization of
the junta the chances are good that Perez Jimenez, who has often op-
posed US policies and objectives, will be made president of that body.
3. ECUADOR: The mob destruction of a (''uito radio station on the night of
1,2'Februa.ry +ras precipitated by the station ?s dramatization
of an invasion from Lars. There roer_e no political implications in the
rioting and tyre is no evidence that it was Communist-inspired, The
event does, hoviever, offer another dramatic incident shovr.ng the Brno-a
tional instability of Latin American crowds and their potential for
violent reaction to chance events.
Approved For Release 1999/49 ''l -R6P ' WSO &6-3 2.
 Approved For Release 199
seelc].y Contributions
B/L? ,, CIA
AIM 09' 000200010006-3
15 February 1949
4 APGENTIi A : The Peron administration faces a dilemma in attempting
Aires of newspapers since o February. If the government persists
in denouncing and jailing the conservative printers as Communists,
it will discredit this procedure, evidently intended for largo-scale
use in some other industries justification could be found in Corr
monist affiliation of workers - to resist inflationary gage demands.
On the other hand, if the government compels the publishers to want
the printers demands, it will compromise its anti-.inflationary stand
against wage increases. Such a concession in favor of the non-
Peronista printers would make the government less able to persuade
the mass of Peronista labor to limit their wage demands. Because
the skilled are difficult to replace, and since the government nor-
mally uses a large sector of the press for propaganda purposes,, it
is probable that the strike will. soon be settled through compromise
measures which may involve (1) partial concession on wage den nds,
perhaps disguised as special benefits., and (2) announcement that
subversive elements have been eliminated.
CONFIDENTIAL
Approved For Release 1999/0 ~TA-RDP79-01090A000200010006-3
 Approved For Rel"e se 1999/09 Rd'I' 79-01be0A000200010006-3
Z leekly Contributions qr
B/LA, CIA
Article 749
15 February 1949
The The Bilateral Air Tran,^port A reecaent and Panamanian Politics
Panamanian political developments have introduced complications into
the current US negotiations for an air agreement. As a result, ratification
by the National Assembly is not assured.
The successful negotiation of an agreement which will permit full itil-
ization of Panama's new and costly national airport has become a matter of
prestige for President Diaz' government, This airport, built by the preced-
ing government, now operates at a substantial loss and is not fully utilized
by commercial air carriers, who prefer Canal Zone facilities, 1,7ithout the
air agreement, co.mercial airlines will continue the existing arrangements,
and political groups opposing the Diaz government can thus point to Panama's
irmnensely costly and "deserted" airport as indicative of government inepti-
tude and incompetence. The opposition can be expected, both by innuendo and
political maneuver, to endeavor to embarrass the government by putting ob-
stacles in the path of ratification.
In particular, opposition may be expected from IIarmodio Arias, former
president, the country's most influential publisher, and a bitter personal
enemy of President Diaz, Diaz did not receive a majority of the popular
vote in the recent elections, and Arias believes that he vas elected by
fraud and deceit. T ach seeks to ruin utterly the other. Thus Arias and his
sons can be expected to throw every resource at their command against the
agreement in order to prevent Diaz from achieving any success. The influence
and connections of the Arias family among intellectual and student circles
- the hector of the National University is a brother-in-law of Arias and
possibly in debt to him -ti- will probably be utilized to arouse popular im-
dignation over the "oppressive" terms of the agreement.
The Diaz government's position before the National Assembly is already
weak. The most recent session has not approved the government's budget;
the government failed also with its bill for salary increases, with its
proposal for special fiscal powers, and with other measures in -which it de-
monstrated a special interest. On 1 February, a 15-minute riot occurred in
the Assembly gallery during which government supporters shouted "You'll be
bathed in blood".
US Hemisphere policy and prestige, rather than long-term air transport
interests, are at stake. Should the agreement fail at the hands of the
National Assembly, Canal Zone facilities will remain available to US commer-
cial airlines serving the area. Nevertheless, although long-term US air
transport interests night not be impaired, failure of the agreement, Dike
that of the ill-fated Defense Sites Agreement, might have unfortunate popular
repercussions on the concept of Hemisphere solidarity as based on unity of
l.he 21 American Republics.
-DENT
Approved For Release I 999 -RDP79-01090A0002000100d -3
 Approved For Release 199%
Weekly Contributions
B/Tli, CIA
Situation L omorandum 5-49
L p-,
P
79-01 a0A000200010006-3
15 February ].9L.9
The Current Situation in Costa Rica
(S : The Present Costa Rican Government's reform and recovery
program is opposed by politically powerful commercial and financial inter-
ests. The government does not have sufficient revenue to met pressing
financial obligations. Provisional President Figueres' commitment to
the Caribbean Legion conflicts with the country's isolationist and paci-
fic traditions. Oppositionist leader, U].ate, however, does not himself
wish to assume office at this tirm and is thus content to mitigate the
more radical measures advocated by Provisional President Figuerea by
innuendo and political maneuver.)
The military junta headed by Jose.Figueres, which now governs Costa
Rica, assumed office in I.Tay 1948, upon the conclusion of the civil war
and the ousting of the previous regime dominated by Calderon Guardia,
An agreement was made with the legally elected president, Otilio Ulate,
that Figueres, roaho had` led the military forces to victory during the civil
mar, should rule by decree for the next 1V, months, The junta immediately
undertook a vigorous recovery and reform program. It annulled the old
constitution and sponsored a free election for a constituent assembly to
pass on a suggested new one embodying its theories of social obligations
and a planned econoqr, appointed a new Supreme Court, outla-7md the Com-
munist Vas uardia Popular, decreed the nationalization of private banks
and a 10 per cent capital levy, demobilized the arnr, and, when it
realized 18 months was not sufficient to give effect to its program, ob-
tained a six-month extension of its term of office. Lack of political
acumen, arbitrary methods, and several socialistic decrees, however, re-
duced the popularity of the junta to the point where the Social Democratic
Party, identified in the public mind with junta policies, was overwhelming-
ly defeated in the January constituent assembly elections by Ulate's
National Union Party. Thus Ulate is now in a position to associate him-
self vdth any successes the junta is able to achieve and at the same time,
to attack it for its blunders and oppose the growth of a possible rival
political party against the time when he shall take office. The position
of the mildly liberal Ulatistas, representative of Costa Rica's business
and professional interests, is now such that they can make their influence
felt on junta policy.
Costa Rica is confronted rrith serious economic distress resulting from
inflation, debt, dollar and revenue shortage, and property and crop damage
caused by the recent civil war. As an effort to alleviate distress., the
government has decreed a 10 per cent capital levy and increased excise and
import taxes; has signed a new contract with the United Fruit Company that
y
Approved For Release I 999/ P79-01090A000200010006-3
 Approved For ReleYse 1999/09/Q M1t % O OA000200010006-3 Weekly Contributions Coo 15 February l949
B/L t., CIA
Situation i enorandurr. 5-49
will bring in an increased amount of revenue over the old contract; has
decreed nationalization_of private banks, monetary reforms, price and
exchange control, expansion of credit facilities; and certain wage in
creases; has :issued large Treasury drafts; and is encouraging cooperatives,
more productive govermment-owned public utilities, and increased domestic
food production. But tax returns are disappointing. The government has
not enough money to buy up the shares of the nationaliazd private banks
and pay for the Treasury drafts, and undoubtedly veill have extreme diffi-
cult in meting its unprecedentedly high $15,300,000 (at free market
rate budget for 1.949,. Business and comznercial interests are protesting
vigorously marry of the economic measures, and are threatening non-coopera-
tion. It now appears unlikely, therefore, that the junta's economic rr o-
gram will achieve substantial success unlass supported by extensive 'US
loans.
tho junta's foreign policy has encountered considerable domestic op-
position. Junta Chief F'igueres, in exchange for the assistance of the
Caribbean Legion gave him during the 19LI civil tar, eormnitted hi'self to
support the Legion, and is now harboring this group which seeks to destroy
the neighboring regime of General Somoza of Nicaragua. Costa Rica isg
however_, traditional l+lr pacific and isolationist; its present military
strength is but 615 yen, -who, as a group, have military capabilities inferior to those of the Legion. A majority of the Costa Rican people, and
specifically Ulate, are emphatically opposed to Costa Rican abandonment
of its traditional isolationist policy and are most reluctant to see the
country undertake an expensive foreign adventiwe with the Legion. Figue--
res is thus caught between his coa nitrnonts to the Legion and the desire
of the Costa 'Ideans for detachment from Central American revolutionary
.nove.rent s. At the same tine, he lacks the military- force necessary
openly to deny Costa Rican bases to the Legion should he elect to follow
an isolationist policy. The existing .impasse will thus probably cause
hi-m to pursue a policy of compromise and delay which may further impair
his popularity both 'with the Legion and the UI.a t7 seas,
Because of the multitude of serious and vexatious problems vthich now
confront the Costa Rican Government, hovover, oppositionist leader Ulate
is himself lost reluctant to assume the responsibility of public office,
It is estimated, therefore, that he will not conspire against Provisional
President Figueres to the point where the position of the latter v rill be-
cone wtenablq but will be content to seek to mitigate the more radical of
Figieres' measures by innuendo and political maneuver.
E CAB.
6,
Approved For Release 1999/0 -RDP79-01090A000200010006-3
 Approved For RelMe 1999/09/ '010A000200010006-3
Weekly Contributions
B/It1, CIA
Situation L:emorandim 6-49
15 February 19! 9
The Current Situation in Nicaragua
Despite talk of instability, the I,iearaguan political situation remains
under the firm control of Dictator Somoza, who has recently admitted his
willingness to be returned to the presidency. 73y sending 1)r. Cuadra Pasos
to Spain as Ambassador, and by forcin;- the resignation of Foreign Minister
Debayle, he has removed from poor two possible candidates of the "loyal
opposition" --- the Conservative group which was granted representation in
the government last year when a more democratic facade was desired as an
aid to recognition.
The major opposition, formed of the Independent Liberal Tarty and the
Conservative Party, and not represented in the government, is teak and un-
coordinated. General Emilio Chamorro, Conservative military leader whose
intended coup of last year was a dismal failure, is no longer a threat and
is rumored to have Iiven up active leadership. Posendo Arguello Jr., as
leader of the Caribbean Legion, represents the only military force that
might depose Sornoza. Argilello's supposed dictatorial ambitions have cost
him the support of the Independent Liberal Party within Nicaragua and have
prevented the consolidation of an effective internal anti-Somoza bloc,
Oppositionists within the country would probably hesitate to come to his
aid if he should decide to invade. At present they prefer to contemplate
the formation of sor,Ye sort of international cor nission which could effect a
peacoful and democratic solution through supervision of free elections.
The shall Partido ;ocialista de Idicaragzia (PSN), whose leaders were
arrested, and later release by omoza last year, is currently engaged in
the promotion of subsidiary Cor,nunist organizations and the expansion of
control of labor groups. Also competing for control of labor are increas-
ingly militant anti-Communist groups which look to Argentina and Spain for
ideological support. Although the PSN leaders are theoretically barred
from political activity throu^h the terms of their release, they may sup-
port Somoza in return for greater fr^eedorn of action.
ire military situation, as always, rests on the loyalty of the Guardia
Jaciotal to Somoza. Although there is obvious dissension among the poor
paia o cars stationed in provincial cities and towns, the higher officers
in '.anagua and at special posts are kept loyal through good salaries, extra
compensation, and opportunities to participate in officially sanctioned
graft. General '~omozals residence, La Curvet is also the principal arsenal
of the Guardia and only the defection of key military posts, such as the
Generals o guard or the Presidential Guard, could assure the success of
a barrack-room revolt. At present, there is no evidence of such disloyalty,
though it may develop out of the conin;; economic crisis, which may force
curtailment of military expenditures.
NAL
Approved For Release I 999/ , -RDP79-01090A000200010000;3
 sApproved For Release 1999/094
d+ okly Contributions 01
Il/LA, CIA
Situation Memorandum 6-49
-010Y0A000200010006-3
15 February 19L.9
The economic outlook for :licaragua is exceedingly dire. The coffee
crop this year is disastrously poor, possibly the worst in almost 40 years.
Dollar receipts from the curx t crop are expected to be about '`'A, 770,000,
cor:tpared to :,x,390,283 last year. The sesame exports will. also be under
those of last year, about ;:3,000, 000 compared with w;3, 557,136, Last fall
the Nicaraguan National Bank, unable to obtain further credits from the
International a onotary Fund and the Bank of Pi rica, finally obtained
2.1,551,000 through advances from the three leading Nicaraguan gold-mining
companies and through short-term credits from the Bank of London and South
America and the Grace _3ank, Those loans must be paid back through dollar
exchange earned in 19.9 from exports. Since coffee might normally be ox-
petted to supply about 40 per cent of the dollar exchange, the failure of
this crop can virtually destroy Nicaragua's credit position.
Before the failure of the coffee crop was known, the government had
already anticipated cutting import authorizations to about half the amount
authorized in 1948. Local morchants have become increasingly alarmed and
critical of the ,'overnruant's refusal to [,rant or extend import pen nits., and
some are considering returning deposits made on shipments which have not
yet left the US. Charges of political favoritism in the granting of per-
mits will grow worse as the situation deteriorates. The government, which
has lord; been relying on stringent controls to alleviate the exchange short-
age., may eventually decide to remove all restrictions, of ich will, in ef-
fect, devaluate the cordoba.
In foreign affairs, Nicaragua's current problem is that of absolving
itself from responsibility in the recent Costa Rican invasion. The condem-
nation of both countries by the COAS investigating co niittee is privately
viewed by the government as a Nicaraguan moral victory, which Somoza hopes
to convert into a rout through emphasis on Figueresf rejection of peace
offers and the continued presence of the Caribbean Legion in Costa Rica.
Under the surveillance of the COAS military corn i.ssion, the Guardia Tlacion -
al has ceased to support Costa fican revolutionaries, but th?se ems"
in. I:;anagua are permitted considerable freedom of movement and are presu:ab-
ly still in contact with those fighting; in Costa fica. Soraoza's opponents
are less pleased with the tivrork of the COAS. lIlthou-h they;- beli.c.ve that its
prompt action prevented the spread of the conflict, they hoped for severe
action which would undermine Sornozas s strength. having disassociated therm-
selves from the military factions involved, they have advanced the proposal
that an international anj be formed to supervise elections, and that na-
tional armies be reduced to purely police units,
J:-DA:F111 116
8.
l-
Approved For Release 19991 -F~6P79-01090A000200010006-3
 Approved For Rel'ase I 999/09IJ2 &t -0190A000200010006-3
weekly Contributions
A/LA, CTA
Situation memorandum 7-49
15 February 1949
The Current situation in Pa mx&
~~1^~iYrlr+I~i~w~i11^~Mir.^^:~^r?~r~1 Y~~ M ^
Recent events in Paraguay have demonstrated that political confusion
need not disrupt a primitive, low-subsistence-level economy. Political
turmoil, that has been more or less continual since the overthrow of for-
mer President 1 orfligo, reached a now climax on 30 January when. President
Gonzalez use forced to resign. The group that forced Gonzalez out was es-
sentia3.3y the same one that had previous3ysecured his nomination and
election and had 01.o aid him to assume office after t1or. fii.gors fall.
Once Gonzalez was in office,, however, this group became his principal
political opponent and ultimately caused him to resign.
Gonzalez' government was weak from its inception because the selection
of Gonzalez as president was more or less a by-product of the struggle
betvoen Mor igo and his opponents. Gonzalez, a loyal friend of riormigo,
vows backed by the militant Guinn Flo wing originally as a moans to pre-
clude Mortigo rs continuance in pavor. !Gonzalez' nomination by. the Colo-
rado, Party vas forced through b~ the Guion Rao and his election was easy
since there was no opposing candidate.- ter, the Ylo1.ista faction separ-
ated from the rest of the group. After rortiigo had been forced from of-
fice, even though it was doubted that the Eolistas would allow Gonzalez to
assume the presidency, he came into office without incident on 15 August
1949.
The equivocal attitude of the Molistas towards Gonzalez was further
illustrated 'when, after harassing Gonzalez continually during his first
month of office, they, backed by the Aswei6n police and. certain arr
units, rallied to the support of the President and put doom a revolt.
They then resumed their former attitude towards Gonzalez and appeared to
have all power in their hands by 12 January. At the crucial stage,, how-
ever, the arnpr refused to participate In a "party affair" and Gonzalez
vacs saved momentar33y and was enabled to prolong his incumbency another
two reeks.
On 30 January the bblistas, supported by DemoQColorados, the police,
and Canata were able to execute a coup quickly, efficiently and with due
invocation of constitutional processes, insofar as they referred to the
nanrtng of General Ptaimundo Rolon as provisional president.
The reaction of the general public to the change of government apparent
ly has 'boon one of relief to be rid of Gonzalez. It is estimated that the
persisting political differences will be ' difficult to resolve, and that
the military have impzovod their relative position in this maneuver and
may eventua7.ly dominate the government. Lack of unity and strong leader-
ship among the armed forces reduce somewhat the chances of such an
b T1AL
Approved For Release I 999LQ. TA-RDP79-0I 090A000200010Cb6-3
 Approved For Reuse 1999/0( X79-01'A#0A000200010006-3
Weekly Contributions
B/LA, CIA
Situation Lemorandurz 7-49
15 February 1949
eventuality but the armjy will remain a significant factor in political
developments and any government that comes into pourer must depend for its
existence on army and police support.
The change of regime has not been marked by any evidences of ideolo-i-
cal shifts or of a change of attitude toward Paraguay is neighbors or the
US. Presumably the new government will be as pro-US as the old. Both
Brazil and Argentina seem satisfied with the new regime. Brazil, perhaps.,
has made its satisfaction somewYiat more patent than has Argentina.
Paraguay's econontr, weak at all tunes, has not overcome the setbacks
caused by the 197 civil var. Recent political disturbances, however,
have had relatively slight effect. Staple food crops --- corn, beans, and
mandloca --- are expected to be sufficient for the normal needs of the pop-
ulation. The supply of animals for slaughter appears to be greater than
in 1949. Wheat and wheat flour, as usual, will have to be imported from
Argentina. 3imilar]y, `recent imports of edible oils from Tk-azil will
cover requirements until mid .;arch -ien local supplies will be available.
Paraguay is principally a 'thermittt, self-sustaining nation and foreign
trade is relatively unimportant because of the limited econordo and in-
dustrial development of the country. Recently, however, Paraguay's normal
exports of a rather limited number of products such as quobraoho,extract,
petit grain and tung oils, corned beef and soma cotton, have failed to
pay for its modest imports. The postwar pattern of an excess of imports
over exports has continued to deplete foreign exchange to the point that
an increasingly difficult situation looms.
Argentina is normally Paraguay's best customer and principal source
of supplies. This characteristic of its trade i ill probab]y remain re-
gardless of P!iraguayts political orientation. A regime favored by Peron
mould presumably facilitate harmonious trade relations and reduce Para-
guayts fears of Argentine economic pressure. The U5, Brazil, and the UK
follow in that order as other important suppliers and customers of
Paraguay.
An attempt to improve and modernize agriculture teas initiated by
former President Gonzalez. The first shipments of US agricultural equip-
ment ordered by him arrived in Asuncion last December. Although it is
not ]known whether the new government 'dill continue the program, it is
doubtful that any governmental effort will make progress in developing a
sounder Paraguayan economy. Principal obstacles are the nearly hopeless
present state of Paraguayan export industries, the prevalence of graft,
and a popular attitude that nothing can be done about the country's
econor,Zr, despite the customary facade of high-sounding measures always
IAL
Approved For Release 1999 .FIA-RDP79-01090A0002000100Q6.3