WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A005100110001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 52
• Document Creation Date: December 21, 2016
• Sequence Number: 1
• Content Type: SUMMARY

Approved For Release 2008/04/17: CIA-RDP79-00927AO05100110001-5
21, January 1966
OCI No. 0273/66
Copy; No.
WEEKLY .SUMMARY
CENTRAL INTELLIGENC-L
A ENCY
OFFICE ? CURRENT' INTELLIGENCE
State Dept. review completed
GROUP I; Extludd;from C1iJtdrot_
downgrading Ori deeias3ificatiQq
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(Information as of noon EST, 20 January 1966)
VIETNAM
A captured enemy document indicates that the Viet Cong
plan to initiate intense military activity immediately
upon expiration of the Tet cease-fire period on 23 Jan-
uary. Although North Vietnam continues to deride US
efforts to end hostilities, there is little doubt it
desires to encourage the longest possible cessation of
bombing to enable it to repair bomb damage and move
supplies.
'HE SHELEPIN MISSION TO HANOI
The results of the mission are not yet clear, but the
statements occasioned by the visit suggest that it has
produced little significant change in Soviet-DRV relations
or in either side's concept of how the Vietnam conflict
should be waged.
BREZHNEV'S VISIT TO MONGOLIA
The visit apparently was intended to further emphasize
Peking's isolation in the Communist world, and to en-
hance the prestige of the Mongolian leadership.
COMMUNIST CHINA'S LEADERS OUT OF PUBLIC VIEW
The protracted absence of both Mao Tse-tung and Liu Shao-
chi does not necessarily mean they have been seriously
ill, but does suggest they are slowing down.
POLISH CHURCH-STATE STRUGGLE DEEPENS
Party chief Gomulka and Cardinal. Wyszynski have exchanged
emotional speeches in the confrontation resulting from
the cardinal's attempts to open a semipolitical dialogue
with the German Catholic episcopate. However, both pro-
tagonists have retained room for maneuver.
EAST GERMANY HARDENS POLICY ON CULTURAL AFFAIRS
The regime, which relaxed its rigid cultural policies
in 1963, has begun to revert to greater restrictiveness.
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NEW SOVIET AID EXPLOITS BORDER REGIONS
New aid or offers of aid to Iran, Pakistan. and Turkey
indicate the USSR's desire to enhance its influence in
pro-Western countries on or near its southern borders.
SUKARNO AND INDONESIAN ARMY REMAIN STALEMATED 11
Despite increased student agitation and political maneu-
vering by both President Sukarno and the army, the im-
passe between the two sides continues.
COMMUNISTS CONTINUE PRESSING GOVERNMENT FORCES IN LAOS L2
Pathet Lao military activity continues in various areas
but remains concentrated on protecting the infiltration
routes in the southern panhandle.
TASHKENT DECLARATION AROUSES OPPOSITION IN PAKISTAN
Students in West Pakistan have staged violent protest
demonstrations, and several opposition leaders have
openly criticized President Ayub.
INDIA CHOOSES NEW PRIME MINISTER
Indira Gandhi. India's new prime minister, is not ex-
pected to make any immediate policy changes in trying
to solve her country's numerous domestic and international
problems.
IRAN AND IRAQ AGREE TO BEGIN TALKS
The situation which led to recent border clashes re-
mains delicate, however, and a present tendency toward
improved relations could be reversed.
ARMY TAKES OVER IN NIGERIA
The upheaval has swept away the federal power structure
dominated by the conservative Muslims. General Ironsi
is heading an interim regime, but his position is pre-
carious and a large-scale breakdown of order is still
possible.
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NOV SECRET
INDECISIVE OUTCOME OF EEC COUNCIL MEETING
The 17-18 January meeting of the Council of Ministers
found the members apparently still far apart on the
issues underlying the six-month-old EEC crisis.
Western Hemisphere
DOMINICAN SITUATION REMAINS DEADLOCKED
Military officers on both sides continue to resist
leaving the country. Meanwhile, Brazil can be expected
to back US policy on the Dominican Republic despite
misgivings.
A REVIEW OF THE DOMINICAN ECONOMY
The Dominican Republic's economy, which has never sup-
ported most of the population zibove the subsistence
level, has been floundering since about 1958. Any sig-
nificant economic growth will depend on foreign aid for
developing and diversifying agriculture, which dominates
economic activity, and on correction of budgetary im-
balance, disequilibrium in the balance of payments, and
inefficiencies in the operation of state-owned enter-
prises. (Published separately as Special Report OCI No.
0273/66B)
TRI-CONTINENT CONFERENCE IN HAVANA
The conference trumpeted the cause of national libera-
tion movements--including armed rebellion--in Asia,
Africa, and Latin America, but failed to muffle bitter
Sino-Soviet wrangling.
GOVERNMENT-LABOR RELATIONS IN BRAZIL
President Castello Branco's desire to obtain the par-
ticipation of labor--some 25 million strong--in the pro-
government National Renewal Alliance, one of two polit-
ical groups replacing the old parties abolished late
last year, is likely to meet with reserve because of
labor's widespread dissatisfaction with the government's
policies. The regime's relations with labor will become
increasingly important during the coming months as
Brazil prepares to transfer power to a new administration.
(Published separately as Special Report OCI No. 0273/66A)
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BOLIVIAN POLITICS QUIET PENDING BARRIENTOS' RETURN 23
General Barrientos is apparently holding off accepting
a formal presidential nomination until his triumphant
return from Europe--probably about 3 February--when the
political impact will be greater.
URUGUAYAN ECONOMIC DIFFICULTIES MOUNT 24
Unless strong measures are taken soon, hopes for stabiliz-
ing the economy and receiving additional foreign financial
aid and credit seem dim.
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WEEKLY SUMMARY 21 Jan 66
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An upsurge of Viet Cong at-
tacks was reported during the four
days prior to the Tet holiday
cease-fire period which began on
20 January. Mortar bombardments
were directed at the provincial
capitals of Quang Ngai and Quang
Tin provinces, and government po-
sitions near both capitals were
overrun. In Binh Dinh Province,
government forces were attacked
by an estimated battalion which,
according to a prisoner report,
was an element of the North Viet-
namese 18th Regiment. Meanwhile,
intensified enemy activity near
Saigon resulted in moderate gov-
ernment losses and high civilian
casualties.
An enemy document dated 4
January, which was captured by
allied forces in Hau Nghia Prov-
ince last week, indicates that
the Viet Cong are planning to
initiate intense military activ-
ity immediately upon the expira-
tion of the Tet cease-fire period
on 23 January. During the holi-
days, the Viet Cong apparently
will generally observe a cease-
fire with both South Vietnamese
and allied forces, although the
document revealed that a strong
anti-American propaganda campaign
will be undertaken during the
period.
Political Developments
in South Vietnam
A joint communique, issued
after Secretary of State Rusk
had met with Vietnamese Govern-
ment leaders in Saigon on 16
January, stated that the posi-
tions of the two governments re-
garding peace in Vietnam were
consistent in all fundamental
respects. The communique noted
that there were as yet no posi-
tive responses from Hanoi regard-
ing recent peace initiatives and
concluded that the South Viet-
namese Government and its allies
must continue all necessary mili-
tary measures while remaining
alert for all peace proposals.
Earlier, a second convention
of the Vietnamese armed forces--
convened by the military regime
in Saigon and attended by 1,400
officers--had pledged renewed
efforts against Communist aggres-
sion and approved the government's
domestic program for 1966. This
:program included rural construc-
tion, control of inflation,and
preparations for eventual civil-
ian participation in the govern-
ment. At the final and only
public session of the convention,
Premier Ky reviewed his first
seven months in office and an-
nounced that a civilian "democracy
building council" would soon be
established as an initial step
toward national elections sched-
uled for 1967.
There were allegations of
dissatisfaction among lower rank-
ing officers at the convention.
the rank-and-file delegates
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were not as enthusiastic as at
the first such gathering last
September. Some members were re-
portedly disappointed by the
Military Directorate's lack of
response to the delegates' recom-
mendations at the earlier conven-
tion, and others were distracted
by the forthcoming holiday and
the US "peace offensive."
Strong security precautions
apparently surrounded Ky at the
convention as a result of reports
of an assassination plot led by
retired General Tran Van Don.
Subsequently, four noncommissioned
military police officers were
arrested for involvement in the
plot, although the government has
not yet moved against the alleged
leaders.
Hanoi on US Initiatives
North Vietnamese propaganda
continued to deride US efforts
to bring an end to hostilities.
The Hanoi army daily published a
detailed critique of the US "14-
point program" and the party
daily dismissed the President's
State of the Union message as
"no different from previous US
statements." The attacks again
called the "unconditional pull-
out of US forces" the key to a
settlement and said that the US
would have to do more than allow
the South Vietnamese National
Liberation Front to present its
views on a negotiated settlement--
it would have to "recognize the
front and its program." On US
willingness to use the Geneva
agreements as a basis for nego-
tiations, Hanoi said that if
this were true the US should
accept the DRV "four points"
which are the "sum and substance
of these agreements."
There is little doubt, how-
ever, that despite their intransi-
gence, the North Vietnamese wish
to encourage the longest possible
cessation of bombing. The DRV
probably is taking maximum advan-
tage of the lull to repair bomb
damage and move supplies.
Peking Propaganda
Peking also maintained its
propaganda attack against the
US peace effort, underscoring
allegations of US "atrocities"
in an apparent effort to divert
the attention of Afro-Asian na-
tions from the adamant Chinese
stand against any negotiations
except on Communist terms. In
an editorial on 19 January de-
nouncing President Johnson's
State of the Union message, the
party daily asserted that the
US was employing a "scorched
earth" policy in Vietnam, "burn-
ing all, and destroying all.'
It also characterized the US
peace effort as a "trick" de-
signed to mask escalation of the
war.
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TUY /
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WEEKLY SUMMARY 21 Jan 66
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The Communist World
THE SHELEPIN MISSION TO HANOI
The results of Soviet party
secretary Shelepin's mission to
North Vietnam are not yet fully
clear. The statements occasioned
by the visit, however, suggest
that it has led to little signif-
icant change in Soviet-DRV rela-
tions or in either party's con-
cept of how the Vietnamese con-
flict should be waged.
If, as seems likely, Shelepin
encouraged the North Vietnamese
to give more serious considera-
tion to political alternatives,
he was apparently unsuccessful.
The terse communique released
after the visit was unusually
bland, containing only the mini-
mum to be expected in the cir-
cumstances: renewed expressions
of Soviet support for North Viet-
nam and of North Vietnamese grat-
itude for the Russian aid already
given, and the promise of further
assistance.
What the statement failed
to say is the best gauge of the
results of the private talks.
There was no reference to recent
US diplomatic probes--which was
certainly a key topic in the
DRV-Soviet talks. This omission
is probably a sign that the two
parties were unable to achieve
a consensus or even a compromise
position on a proper response to
the US peace probes.
There had been earlier in-
cations in public speeches of
differences between Hanoi and
Moscow in their attitudes toward
the US "peace offensive." The
Soviets have assumed a generally
noncommittal attitude, in con-
trast to the virulent denuncia-
tions emanating from Hanoi and
Peking.
Shelepin apparently also
ran into trouble in his attempts
to secure North Vietnamese sup-
port for Moscow's anti-Chinese
line. Missing from the communi-
que was the normal plea for Com-
munist unity in support of North
Vietnam, an obviously anti-Chinese
theme which ran through Shelepin's
public statements in Hanoi.
There is no evidence that
the Shelepin visit will bring any
drastic changes in the extent or
type of Soviet military and eco-
nomic aid. Military assistance
has thus far been primarily de-
fensive in nature, but of a
gradually increasing level of
sophistication. According to the
final communique, a new agreement
on additional, unspecified assist-
ance was signed and "specific
questions" concerning further So-
viet help for North Vietnam's
economy and defense were discussed-
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Soviet party chief Leonid
Brezhnev's visit to Mongolia
from 12 to 17 January appears to
have been intended in part to
emphasize Peking's isolation in
the Communist world. The stature
of the Brezhnev delegation--
which included Defense Minister
Malinovsky and Foreign Minister
Gromyko--and its timing--coinci-
dental with the close of the
Tashkent meeting and the Shelepin
mission to Hanoi--underscored
Moscow's campaign to check the
expansion of Chinese influence
in Asia.
The communique ending the
visit highlighted the "full
identity and community of views"
of both countries on all of the
many foreign policy positions
cited. It also called for "joint
actions in the common struggle
against imperialism," a line
aimed at China, which has openly
refused to cooperate. In a
speech on 16 January Brezhnev de-
fended the principle of "peace-
ful coexistence," stating that
Soviet foreign policy sought to
"liquidate the hotbeds of war
and to settle international con-
troversies by negotiations." At
the same time, however, he sup-
ported the North Vietnamese and
the South Vietnamese Liberation
Front positions on the question
of a Vietnam settlement but em-
phasized the need for unity.
The visit culminated with
the revision and renewal of the
20-year-old Treaty of Friendship,
Cooperation, and Mutual Assist-
ance between the two governments,
thus accomplishing its announced
purpose. The treaty, which is
general in scope, calls for in-
creased cooperation in the mili-
tary, political, economic, and
cultural fields. It includes
provisions for mutual consulta-
tion and joint measures to en-
sure the security of both coun-
tries. In contrast with the
1946 treaty, the language of the
new agreement reflects an attempt
to portray Mongolia's status as
an "equal" partner.
The high rank of the Soviet
delegation as well as the praise
heaped upon Mongolian party boss
Tsedenbal's government also re-
flects Moscow's desire to en-
hance the prestige of the present
Mongolian leadership, which has
been subject to criticism from
nationalist elements during the
past several years. One of the
major criticisms of Tsedenbal
had been his subservience to
Moscow.
Brezhnev's visit also drew
considerable Mongolian praise
for Soviet economic assistance.
Only recently the USSR wrote off
a big portion of Ulan Bator's
debt which had resulted from
sizable Soviet support of the
third five-year plan (1960-65).
The Soviets have also announced
a one-third increase in their
contribution to the current plan.
S~EC'RE '
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COMMUNIST CHINA'S LEADERS
Mao Tse-tung has not made
a public appearance since 26 No-
vember, and his deputy, Liu Shao-
chi,.was out of public view be-
tween 21 November and 20 January.
Other top leaders, including
Premier Chou En-lai, party sec-
retary Teng Hsiao-ping, and Pe-
king Mayor Peng Chen, have con-
tinued their usual round of pub-
lic activities.
Mao Tse-tung customarily re-
treats to a villa in east or cen-
tral China during the winter and
spring. Last spring he was out
of sight for two months. Liu's
absence was more unusual, however.
As chief of state, he is expected
to make frequent ceremonial ap-
pearances and to receive foreign
diplomats and many visitors. Liu
is rarely out of the public eye
for more than two weeks at a time,
and then usually in the summer.
His recent absence was the long-
est since 1957.
The regime has continued
to give heavy propaganda atten-
tion to both men, as if to give
the impression that they were ac-
tive and well. People's Daily
on 1 January broke precedent 6y
publishing an informally posed
photograph of Mao Tse-tung smok-
ing_a cigarette, plump, smiling
and obviously in good health and
spirits. New Year's Day portraits
in the past have been formal poses.
The lengths to which Peking
will go to make it appear that
Mao and Liu are active are demon-
strated by the publication on the
front page of the 9 December
People's Daily of inscriptions in
their own calligraphy commemorat-
ing an obscure and normally un-
publicized anniversary--in this
case the 20th anniversary of the
broadcasting industry.
On 11 December Liu Shao-chi
reportedly presided over a "re-
cent" conference on education, and
his name has appeared frequently
in the press in connection with
the sending and receiving of dip--
lomatic messages and the appoint-
ment of ambassadors.
The protracted absence of
Mao and Liu does not necessarily
mean they have been seriously ill.
Both are reported to have had
serious illnesses in the past,
but they seemed to be in rela-
tively good health during their
numerous appearances last fall.
Their recent apparent inactivity
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does suggest that Mao, now 72,
and Liu, 67, are slowing down,
and that younger, more vigorous
men like the militant Teng Hsiao-
ping must be playing a more ac-
tive role in determining national
policies. The simultaneous ab-
sence of the two top leaders also
underscores the possibility that
Liu, the heir apparent, might
not be on the scene much longer
than Mao. If so, this would com-
plicate the process--always dif-
ficult in a totalitarian state--
of attaining an orderly succes-
sion to leadership.
POLISH CHURCH-STATE STRUGGLE DEEPENS
Worsening church-state rela-
tions in Poland have led to a di-
rect exchange of emotional
speeches by party chief Gomulka
and Cardinal Wyszynski, but both
protagonists have retained room
for maneuver. The confronta-
tion reflects the regime's failure
to deter the Roman Catholic pri-
mate from defending the Polish
episcopate's incipient semipolit-
ical dialogue with the German
Catholic episcopate.
Coming in the wake of the
regime's ban on foreign travel
by Wyszynski, Gomulka's speech
of 14 January capped a month-long
attack against the episcopate.
Gomulka demanded political loy-
alty from the church, but hinted
that limited church-state polit-
ical cooperation was still possi-
ble if the church did not chal-
lenge the state's foreign policy.
Previously, the regime had for-
mally discouraged all church po-
litical activity in the foreign
policy sphere. Gomulka absolved
the episcopate of making conces-
sions on the Oder-Neisse frontier,
but termed the bishops' letter
of 18 November to the German hier-
archy which touched on the subject
"badly formulated."
Although Wyszynski in a sermon
oa 15 January acknowledged Gomulka's
concessions, his sharp rebuttal
of the party chief's charges may
reflect hopes that domestic and
international pressures can yet
induce the regime to temper its
antichurch stand. Vatican support
for the cardinal was contained in
a papal message read in Polish
churches on 15 January, the same
day that England's Roman Catholic
primate Heenan called for world
condemnation of the Polish regime's
antichurch drive.
There seems little popular
alarm over the church-state strug-
gle as yet. However, Gomulka's
awareness of the explosiveness
of this issue is another factor
which could lead to an elaboration
of some of the conciliatory as-
pects of his speech and a backoff
from extremes--a policy which the
regime has followed in past churc
state confrontations.
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EAST GERMANY HARDENS POLICY ON CULTURAL AFFAIRS
The East German (GDR) regime,
which reluctantly relaxed its rigid
cultural policies in 1963 and 1964,
has begun to revert to greater re-
strictiveness. The new keynote was
sounded at the December plenum of
the party (SED) central committee
simultaneously with a propaganda
campaign. against deviating intellec-
tuals. This was quickly followed
by the firing of Minister of Culture
Hans Bentzien, the regime's scape-
goat, and of many officials in cul-
tural organizations.
The period of cultural relaxa-
tion, in the eyes of SED conserva-
tives, led to growing antiregime,
decadent, or pornographic themes in
many works of art. Writers such as
Stefan Heym and Werner Braeunig,
playwright' Peter Hacks, and beatnik
cabaret performer Wolf Biermann crit-
icized the party and life in East
Germany rather openly.' Perhaps more
important than this development,
however, was a growth in restiveness
among youth which party conserva-
tives 'linked to "Western influences"
allegedly allowed to infiltrate East
Germany during this period.
There once was a man
Who put his, foot,
His naked foot,
Into a dung heap.
He was much repelled
By that one foot.
He didn't want to take another step
With that foot.
And no water was there
With which to wash his foot;
For his one foot
There also was no water there.
60550
Encouraged by recent harsh
criticism of cultural dissidents in
the USSR and a crackdown in Czecho-
slovakia--earlier pressure from
Prague had been instrumental in the
GDR's decision to relax restraints
two years ago--regime leaders
.spelled out their grivances in de-
tail at the December plenum. Lead-
ing the way, Erich Honecker, the
number two man in the SED, criti-
cized by name several writers, lit-
erary publications, and radio-TV
and cinema productions.
Continuing attacks on Biermann
and other writers suggest the regime
will pursue its harsh line against
prominent artists as well as cul-
tural organizations. While the ar-
tists presumably will remain restive,
they have shown no ability to or-
ganize themselves into an effective
countermovement. The fawning self-
criticism now prevalent indicates
that intellectual discontent will
remain splintered and, perhaps for
the immediate future, muted.
THE PARTY'S FEET
BALLAD BY WOLF BIERMANN
Then the man took his hatchet
And hacked off that foot;
That foot he hacked off
In haste with hi:> hatchet.
His haste was so great,
He hacked off in haste
The clean foot,
The wrong foot.
Then he got mad
And made a resolve
To hack off with his hatchet
The other foot.
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WEEKLY SUMNIARY
His feet lay there,
His feet grew cold.
Before them, chalk white,
Sat the man on his backside.
The party has hacked off
So many, many feet;
So many good feet
The party has hacked off.
However, in contrast to
The man cited above,
The party's feet often
Grow back on again.
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The USSR has started its
1966 foreign aid program by ex-
tending a $290-million economic
credit to Iran. Repayable over
a 12-year period at 2.5 percent
interest, the credit is to be used
to finance the construction of a
steel plant and a machine tool
factory and for assistance in lay-
ing a620-mile natural gas pipe-
line from Iranian fields to the
USSR. Acceptance of the long-
standing Soviet offer for the
steel mill has enabled the Shah
to demonstrate that he retains
freedom of action despite his
ties with the West.
Soviet participation in the
pipeline project is limited to
engineering and technical assist-
ance for construction of the
northern section of the pipeline
and to supplying the compressors
for the entire pipeline. The Na-
tional Iranian Oil Company will
do the survey, engineering, and
construction of the major section
of the pipeline from the southern
oil fields to the Tehran area.
Iran is responsible for obtaining
the wide-diameter pipe--an item
in short supply in the USSR--as
well as the auxiliary equipment
for the project.
The credit is to be repaid
by Iranian exports of natural gas
through the pipeline, which is
scheduled to be completed in 1970.
Agreement was reached for the in-
itial sale of 6 billion cubic
meters, sufficient to meet loan
repayments, and rising to 10 bil-
lion cubic meters, thus presaging
an expansion in trade between the
two countries.
During the past year the USSR
has expended considerable effort
to enhance its influence in other
pro-Western countries near its
southern borders. By intimating
that it might offer new economic
assistance, Moscow has sought to
encourage Pakistan to pursue a
course more independent of both
the West and Communist China. In
late November the Soviet Union
boosted its $30-million economic
aid commitment to $50 million.
Additional aid may be forthcoming
for Pakistan's third five-year
plan (1965-70) after the comple-
tion next month of some feasibil-
ity studies by Soviet experts.
The gradual improvement in
Soviet relations with Turkey has
set the stage for an expanded aid
program there. Moscow has ex-
pressed its willingness to supply
factories and other installations
worth up to $200 million with re-
payment over a 15-year period at
2.5-percent interest. Soviet ex-
perts arrived in Turkey in late
September to undertake preliminary
surveys of steel, petroleum,
aluminum, glass, tractor, and
vodka factories, but final de-
cisions will be made only af-
ter the submission of more de-
tailed project reports.
SE 'RE
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SUKARNO AND INDONESIAN
Despite increased student
agitation and political maneuver-
ing by both President Sukarno and
the Indonesian Army, the impasse
between the two sides continues.
A series of student demonstra-
tions protesting soaring prices
and the inefficiency of Sukarno's
ministers rocked Djakarta this
week. Initially sponsored by the
army, the demonstrators demanded
a cabinet reshuffle and a ban on
the Indonesian Communist Party
(PKI). Handbills with slogans
aimed at Sukarno appeared.
Sukarno's response was a call
for his supporters to "gather your
forces, form your ranks, defend
Sukarno." The appeal was renewed
by First Deputy Premier Subandrio,
who stated that the President's
long-anticipated "political solu-
tion" to Indonesia's crisis would
be unveiled shortly.
The palace is trying to or-
ganize a "Sukarno Front" of work-
ers, peasants, youth, and women,
but the move has so far had lit-
tle success. Members of the left-
ist-dominated National Front--
virtually inactive since the abor-
tive coup--have been asked to mo-
bilize in expectation of orders
from the President. However, a
"roll call" staged to voice sup-
port for the President was attended
only by a small, lethargic group.
The army apparently first
launched the protests in an effort
ARMY REMAIN STALEMATED
to blame Sukarno for Indonesia's
economic malaise, which has been
largely unrelieved by recent stop-
gap measures. When student demon-
strators battered down the gates
of Sukarno's palace on 15 January,
however, the army apparently feared
that that activity might get out
of hand. Djakarta's military com-
mander subsequently banned fur-
ther demonstrations in the capital
on the grounds that they had been
"exploited by'imperialists and
Communists." However, students
defied the ban and continued to
rally in Djakarta and Bandung.
Although army forces and police
are on the scene, the army ap-
parently plans no action against 25X1
the unauthorized demonstrations.
The army is plagued by dif-
ficulties on a variety of other
fronts. Military discipline is
apparently slackening in Djakarta
and other areas. Moreover,
cracks are appearing in the
makeshift coalition opposing
Sukarno. Army leaders histori-
cally distrust civilian-politi-
cians, and there are signs of 25X1
rivalry between Muslim and
Christian anti-Communist groups.
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COMMUNISTS CONTINUE PRESSING GOVERNMENT FORCES IN LAOS
Communist military activity
in Laos continues to be focused
in the panhandle area. On 13
January, government forces were
pushed from Ban Thateng, on the
Bolovens plateau some 20 miles
south of Saravane. No significant
new action has been reported in
the area since then, but the at-
tack raises the possibility that
the Pathet Lao, with the support
of North Vietnamese elements,
intend to try to bring the pla-
teau under their control. At a
minimum the Communists can be
expected to react sharply to any
government operation which threat-
ens the infiltration corridor
there.
strategically along the road to
repair damage caused by air
strikes.
If true, this movement rep-
resents a substantial increase
over the one or two southbound
trucks per day reported to have
moved on Route 92 during the dry
season last year. The report
also appears to jibe with an in-
creasing number of truck sight-
ings reported by US pilots fly-
ing interdiction missions in the
panhandle.
The Communists evidently are
moving considerably more trucks
in the southern section of the
panhandle during the current dry
season than they did last year.
According to a Pathet Lao defec-
tor, some 10-15 trucks were mov-
ing south nightly along the re-
cently completed Route 96 as late
as mid-December. He claimed that
the trucks were carrying rice,
ammunition, and men destined for
South Vietnam.
The defector has also Indi-
cated that it took the trucks 3-5
days to negotiate the 45 miles
between Ban Bac and Chavane be-
cause of precautions taken to
evade air attack. He said that
small labor crews were placed
In she Mu Gia Pn.ss area, sub-
-;tantial numbers of trucks con-
tinue to be reported moving soutL'
on the newly completed Route 91i.
Some 500 southbound trucks have
been counted by the roadwatch
team on the northern section of
the road in 14 days of coverage
since late December. To the west,
southbound truck traffic on Route
23 has averaged eight trucks per
day since the road was opened in
early November 1965, compared
with 17 per day during the last
dry season.
In northern Laos, the Com-
munists are continuing to harass
government guerrilla positions
around Na Khang, south of Samneua
town. Government troops have lost
some positions to enemy clearing
operations north of Luang Prabang.
SECRET
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SECRET
La
k +.N.
S
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SECRET
Public reaction to the Tash-
kent Declaration has been split
along geographic lines in Paki-
stan. Most of East Pakistan ap-
parently received the settlement
with relief, feeling that a sec-
ond round with India had been
prevented. In West Pakistan,
however, violent student demon-
strations against the declara-
tion and against President Avub
erupted on 13 and 14 January.
These were probably stimulated
by a joint statement of several
opposition leaders criticizing
Ayub for "buying peace at the
cost of national honor."
The government now has muf-
fled open opposition by arrest-
ing students--over 200 in Lahore
alone--closing schools, banning
the assembly of more than five
persons, and launching an "en-
lightenment campaign" on Tashkent
in the controlled press. There
remains considerable disenchant-
ment with the government, however,
particularly among students and
lawyers, and this appears to be
developing into open criticism
of Ayub's heavy-handed efforts
to control public opinion.
Ayub has taken special pre-
cautions to retain the support
of the army. While there has
been grumbling among senior of-
ficers over the outcome at Tash-
kent, reports indicate the top
commanders are resigned to accept-
ing Ayub's continued leadership.
The Country Team in Rawalpindi
tends to discount an earlier un-
confirmed report that on Ayub's
return from the meeting with Shas-
tri several senior generals pre-
sented him with an ultimatum de-
manding "action" on Kashmir.
Army Chief of Staff Musa sent a
letter to commanders of all prin-
cipal units strongly defending
the Tashkent agreement. Another
order to the army--presumably
reflecting reports of widespread
bitterness among junior officers
--prohibits any discussion of
the declaration within the army
or between army personnel and
civilians.
The adverse reaction to the
agreement may aid the career of
Foreign Minister Bhutto. He de-
livered only a perfunctory defense
of the declaration in a speech of
15 January, and is widely believed
to be opposed to recent trends in
Ayub's foreign policy. Reports
that he will resign persist. Should
he choose to leave the cabinet
at this time, he could emerge as
a political martyr and even a po-
tential leader of forces oppos-
ing Ayub.
Indira Gandhi, India's new
prime minister, is not expected
to make any immediate policy
changes in trying to solve her
country's numerous domestic ana
international problems.
The selection of Mrs. Gandhi
was largely a matter of politi-
cal expediency. Although offi-
cially chosen by secret ballot
of' the Congress Party's parlia-
mentarians on 19 January, her
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NWOV SECRET w
election was virtually assured
some days before when key state
and national political leaders
rallied behind her as a "con-
sensus" candidate. Few of these
leaders regarded Indira as their
favorite candidate, but they
agreed with powerful party presi-
dent Kamaraj that she was the
contender most likely to stop a
strong bid by right-wing former
finance minister Morarji Desai,
a long-standing foe of the "syndi-
cate" of leaders who brought
about Shastri's succession to
Nehru. As Nehru's daughter she
also enjoys a national image
which will be advantageous in the
1967 general elections.
Following Kamaraj's endorse-
ment, all other contenders stepped
down except Desai, who at age 70
saw this party election as his
last chance to capture the top
government position. His rela-
tively strong showing--about 33
percent--probably reflects to a
considerable extent the tendency
of some party backbenchers to
vent secretly their pent-up dis-
gruntlement at the sometimes
heavy-handed machinations of the
party leadership. Desai himself
--above all a good party man--
will probably be a graceful loser
and not a troublemaker within
the party.
Some cabinet
changes may be made, but many in-
cumbents, such as Agriculture
Minister Subramaniam and Defense
Minister Chavan, will probably
be retained. The return of left-
ist V. K. Krishna Menon--onetime
defense minister and close ad-
viser to Nehru--to a government
position does not appear likely.
He has been publicly discredited,
has made many powerful enemies
within the party, and reportedly
has recently lost the favor he
once enjoyed with Mrs. Gandhi.
tial to assure continuation of
outside aid, both economic and
military.
On foreign affairs, Mrs.
Gandhi is reported to have stated
she would do nothing to antagonize
India's "Western friends." She
probably recognizes that main-
tenance of good relations with
both West and the USSR is essen-
Although she has expressed
hope for good relations with In-
dia's neighbors, Mrs. Gandhi
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SE CR E T
recently referred to Communist
China as a "threat" and any im-
provement in relations with
Peking appears unlikely.
Mrs. Gandhi has pledged
publicly to carry out the recent
Tashkent Declaration. The death
of Prime Minister Shastri has
given this agreement a certain
sanctity in India and produced
a nationwide determination to
proceed with the peace efforts
of the late revered leaders.
Meaningful concessions on Kash-
mir, however, remain unlikely.
The new administration will
be facing the gravest economic
problems to trouble India in
many years. India's fourth
five-year plan, originally sched-
uled to begin in April, has been
shelved temporarily in favor of
an emergency one-year plan. Mrs.
Gandhi's doctrinaire socialism
is looked upon with suspicion
by the conservative business
community and may make it dif-
ficult for her to obtain the
vital support of that sector.
Iraq's proposals to discuss
settlement of problems with
Iran--and Tehran's acceptance
thereof--indicate a willingness
on both sides to relax the ten-
sions which led to border clashes
earlier this month. The situa-
tion remains delicate, however,
and the tendency toward improved
relations could be reversed.
Iranian Foreign Minister
Aram, who was in India when
Prime Minister Hoveida accepted
the Iraqi proposals, is furious
that the Shatt-al-Arab question
was not specifically mentioned.
Despite the Shah's reluctance
to press the Iraqi Government
too far, Aram's anger may in-
crease Iranian pressure to re-
negotiate the status of the
Shatt-al-Arab River, which forms
the southernmost portion of the
Iraqi-Iranian border. The pres-
ent boundary generally follows
the low-water line on the Iranian
side. Iraq has in the past re-
jected Iran's attempts to reopen
the boundary problem.
Baghdad will probably press
for a halt to Tehran's support for
the Kurdish rebels in northern
Iraq. Iran has already agreed to
an Iraqi suggestion that it pull
back its troops from the border
area.
Iioveida reportedly hopes to
begin talks with the Iraqis in
Baghdad in late January, but the
timing will depend on ability to
La_p_,rec on an agenda.
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ARMY TAKES OVER IN NIGERIA
Nigeria's 10,000-man army has
taken control of Africa's most
populous country following a bloody
coup d'etat initiated on 15 January
by lower echelon officers. The up-
heaval, apparently triggered by
army unhappiness over the continu-
ing tribal turmoil in Western Ni-
geria, has swept away the old
federal power structure over which
conservative Muslim northerners
had been steadily tightening their
grip. It could culminate in an
early large-scale breakdown of
order.
The situation remained fluid
and uncertain for days after the
coup was initiated with the vir-
tually simultaneous assassinations
of the premiers of the Northern
and Western regions. The federal
prime minister was abducted from
Lagos, the national capital, and
has been reported killed. Within
hours a "revolutionary military
council," headed by a Major Nzeogwu
and evidently backed by most of
the army units in the north,
emerged as the effective govern-
ing authority in Kaduna, the re-
gional capital. Nzeogwu told the
US consul the same day that the
coup was engineered by younger of-
ficers who wanted to eliminate es-
tablished politicians and parties
because of "corruption and tribal-
ism."
Later on 15 January it was
announced in Lagos that Major
General Ironsi, the army command-
er who was first reported under
restraint and then as leader of a
successful countermove by "loyal-
ist",troops, had assumed tempo-
rary supreme authority at the in-
vitation of federal cabinet mem-
bers. Shortly thereafter Ironsi
.announced a sweeping "suspension"
of offices and institutions at both
the federal and regional levels and
promised a new constitution "pre-
pared in accordance with the wishes
of the people." Ironsi, a southerner
(as apparently are most of the lower
ranking officers who spearheaded the
coup), thus in effect moved to take
over the revolt.
Ironsi now has apparently se-
cured acknowledgment of his authority
by the commanders of all army units
deployed in the regions, including
those controlled by the coup leaders
in Kaduna. In a 19 January press
conference, Nzeogwu, who had con-
firmed earlier that he was negotiat-
ing with Ironsi, formally announced
his "allegiance" to the new central
regime and his transfer of "all
power" to the officer--Major Katsina
--whom Ironsi had named military gov-
ernor of the north the day before.
Katsina and his three counterparts
in the south are all members of the
predominant tribe in their assigned
regions. This reflection of re-
gional and tribal realities is pre-
sumably designed to help hold the
country together in this emergency
and forestall the tribal unrest
widely feared in the wake of the
coup.
In Lagos Ironsi's interim gov-
ernment is beginning to function
through continuing civil service
channels and he is reported trying
to set up a small executive council
w:tth substantial civilian member-
ship. His personal position still
seems rather precarious, however.
A subordinate officer reportedly
made an attempt on his life on 17
January and subsequently there have
been many unconfirmed reports of
arrests and even summary.executions
of dissident army personnel in the
Lagos area. Ironsi has a poor
SECRET'
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e ria%
reputation both as an officer and an
administrator--much of it earned when
he headed the UN force in the Congo--
but a successor who could command as
much authority would probably be dif-
ficult to find.
No unfavorable public reaction
to the new regime has yet been re-
ported. It has, in fact, been quickly
acclaimed by various elements of Ni-
gerian society, including two major
southern political parties, labor,
youth, and student groups, and some
prominent northerners. Such elements
are surely all hoping to play an in-
fluential role in a basic political
restructuring of Nigeria.
ze`,
tc-d C H AD
Serious intertribal violence, es-
pecially in the Northern Region, or a
breakdown of discipline within the army,
which reflects the country's tribal
and regional divisions, remain real
possibilities as knowledge and under-
standing of what has happened spreads.
So far, however, the regional capitals
and the countryside have remained gen-
erally quiet on the surface, except
for the parts of the Western Region
which have been experiencing unrest
since last October. New disturbances
occurred in Ibadan, the Western capital,
shortly after the coup but, follow-
ing the virtual imposition of martial
law by the army, the security situa-
tion there has reportedly improved.
&xr-jEl 1" uRET'
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SECRET
The 17-18 January meeting
of the EEC Council of Ministers
found the members apparently still
far apart on the issues under-
lying the six-month-old community
crisis.
French Foreign Minister Couve
de Murville offered a set of "ten
commandments" to govern the role
and activities of the EEC Commis-
sion. The total impact of these
proposals--which also implicitly
criticized the council for giv-
ing the commission too much au-
thority--would be to deprive the
commission of the independent
role the EEC treaty envisaged.
Combined with the clear French
intention to replace present com-
mission personnel and to prevent
any future decision on important
issues by majority vote, the
French package would in effect
end the further supranational
development of the community and
probably even its effective func-
tioning.
While some of the ten points
concerning the commission were
evidently acceptable to France's
partners, several of the key ones
were not. On majority voting,
Belgian Foreign Minister Spaak--
reportedly supported by the Ital-
ians and the Dutch--offered a
compromise formula which would
restrict or delay application of
the majority rule in certain vi-
tal issues, but not preclude its
possible use for the future. The
discussion was inconclusive, how-
ever, with the French indicating
that Paris would submit counter-
proposals. Moreover, when Couve
subsequently introduced a time-
table for community action--con-
ditional on settlement of the po-
litical issues and focusing on
matters primarily of concern to
France--German Foreign Minister
Schroeder angrily left the con-
ference room and was followed
shortly thereafter by the dele-
gates of Italy and the Benelux
countries.
The council meeting, which
was later suspended, is scheduled
to resume on 28 January after
preparatory talks at a lower level
in the middle of the week. Some
community sources believe the
French have already pulled back
considerably from their initial
demands concerning the commission's
powers, and they do not exclude
the possibility that some vague
formula can be worked out. Some
quarters believe that Paris will
also concede on majority voting,
provided it can obtain agreement
to reconstitute the commission's
personnel with "nonpolitical
types." Another school of thought
maintains, however, that the ma-
jority vote is a question of
principle for De Gaulle, whose
simple criterion for a settlement
remains whether France will have a
permanent veto.
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Western Hemisphere
The Dominican situation is
still in an impasse, with rebel
leader Caamano demanding unreal-
istic concessions before he agrees
to leave, and the regular military
leaders refusing even to discuss
their departure until he goes.
Caamano has demanded assur-
ances before he leaves that most
of his military followers, in-
cluding about 100 not on active
duty when the rebellion began in
April, will be quicly integrated
into the armed forces. Pending
this, Caamano wants them moved to
a location in downtown Santo Do-
mingo. Garcia Godoy has rejected
this latter demand. He appears,
however, to underestimate regular
military opposition to rebel in-
tegration.
The military is reportedly
developing elaborate plans in
case of a possible Inter-Ameri-
can Peace Force (IAPF) move to
force its leaders to leave, al-
though it does not really expect
such a move to develop. Minis-
ter of Defense Rivera will prob-
ably accept an assignment as at-
tache in Washington if Caamano
goes on acceptable terms, but air
force chief De los Santos and
army chief Martinez are under con-
siderable pressure from hot-
headed subordinates to stay.
Page 21
A new note of uncertainty
was introduced when Leon Bosch,
son of the Dominican Revolution-
ary Party leader, was wounded on
19 January under circumstances
that are unclear. Earlier in the
week Juan Bosch had complained
to Latin American legislatures
of the "chaotic situation" in the
country and made press statements
attacking "persecution" by police
and military forces. If the wound-
ing of his son can be atrributed
to rightist elements,Bosch is sure
to reiterate his charges of an
organized attempt to eliminate or
intimidate "constitutionalists."
The incident may also increase
the likelihood of Bosch's boycott-
ing elections on the grounds that
the provisional regime cannot guar-
antee his safety.
Many Brazilians, particu-
larly military personnel, have
continued to feel that the Garcia
Godoy regime does not take a
strong enough position against
the leftist elements and have
not been happy with the restraints
put on the IAPF by the OAS--and
implicitly by the US.
Because of its close ties
with the US, however, Brazil can
be expected to continue to back
the US policy despite any mis-
givings.
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TRI-CONTINENT CONFERENCE IN HAVANA
The Cuban-sponsored Tri-
Continent Conference in Havana
from 3 to 15 January trumpeted
the cause of national liberation
movements--including armed rebel-
lion--in Asia, Africa, and Latin
America, but failed to muffle
bitter Sino-Soviet wrangling.
Havana was chosen as the interim
headquarters of the secretariat
of a new People's Solidarity Or-
ganization for Asia, Africa, and
Latin America, and a Cuban was
named secretary general. A 12-
member committee, including the
USSR, China, and Cuba, was cre-
ated to "promote, increase, and
coordinate national liberation
and fighting movements" and lend
them "moral, political, and ma-
terial aid."
Vietnam was clearly the first
order of business. A special
subcommittee drafted resolutions
expressing full support for Hanoi
and the National Liberation Front.
Latin America got second prior-
ity. Revolutionaries in Colombia,
Venezuela, Peru, Ecuador, and
Panama were called upon to co-
ordinate their efforts. Solidar-
ity was expressed for the people
of Guatemala and their "armed
struggle," and the US was con-
demned for its Dominican policy.
In Africa, the Portuguese colo-
nies, South Africa, and Rhodesia
were the principal targets.
Cuba vainly attempted to
prevent Sino-Soviet polemics, and
to refurbish its image as a major
leader of revolutionary movements.
Most sessions were secret, but
press reports indicate that a
Sino-Soviet deadlock caused at
least one all-night session.
Three days after the conference
ended, Radio Havana was still an-
nouncing special resolutions that
had been adopted but had not men-
tioned a "special resolution on
peaceful coexistence" which Mos-
cow news services earlier claimed
had been passed. Soviet report-
ing, which covered earlier pro-
ceedings extensively but gave
only brief treatment to the con-
clusion, suggests some dissatis-
faction with the outcome.
China has editorially hailed
the final resolutions and the
statements supporting the "Viet-
namese people's struggle." The
Chinese, however, were generally
forced to accept compromise so-
lutions. China will still ap-
parently host the 1967 meeting
of the Afro-Asian People's Soli-
darity Organization (AAPSO). The
Chinese are deeply concerned,
however, that a permanent tri-
continental body to be created
the following year in Cairo will
eventually absorb AAPSO, in
which they have long exerted a
considerable influence. Peking
is undoubtedly playing for time,
and at the AAPSO meeting will
probably seek some formula which
would preserve AAPSC separate
from the Cuban-dominated tri-
continental organization.
Fidel Castro, in his speech
at the closing session in Havana,
urged an audience of nearly 500
representatives of revolutionary
groups from the three continents
"to implement revolution" both in
word and in deed. In Latin Amer-
ica, he said, "the battle will
take on the most violent forms"
for almost all the people. It
SEC. ET
Page 22 WEEKLY SUMMARY
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SECRET
was his most explicit call for
armed revolution since he report-
edly agreed in late 1964 to sup-
port the Soviet-backed Communist
parties in Latin America.
Following the conference,
the Latin American delegates met
separately, and on 18 January
Cuba announced formation of a
Latin American Solidarity Organi-
zation with headquarters in Ha-
vana. A nine-member committee
was created to cooperate with the
"most active anti-imperialist
groups with extensive popular
roots," and to plan the organiza-
tion's first conference for 1967.
This development presages re-
newed Cuban interest in insurgent
activities throughout the hemi-
sphere. 25X1
BOLIVIAN POLITICS QUIET PENDING BARRIENTOS' RETURN
General Rene Barrientos
Ortuno is expected to return from
Europe about 3 February to be-
gin his campaign for the presi-
dency in the 3 July national
elections. Barrientos resigned
as junta co-president on 4 Jan-
uary under heavy military pres-
sure to respect a constitutional
requirement that presidential
candidates resign from office
six months before the election
date. He then left for Europe
for medical attention and a rest.
The government has been func-
tioning smoothly. The tin mine
workers, weary of being used by ex-
tremists for political ends, are
indisposed to violence at this
time. The military is probably
more united now than it has been
for several months. The junta
president, General Alfredo Ovando
Candia, has made no known move
to prevent Barrientos from re-
turning, nor is he known to have
tried to undercut Barrientos'
popular or military support. Ap-
parently Ovando is anxious that
Barrientos return and get on with
the electoral process.
Political activity, dormant
since Barrientos' resignation,
should pick up after his return.
.His small, four-party political
vehicle, the Bolivian Revolution-
ary Front (FRB), has publicly
acclaimed him its presidential
candidate, but in a telegram
from Zurich, Barrientos declined
to commit himself, stating that
;z is health "temporarily prevents
me from making a decision." Bar-
_cientos apparently wants to hold
off accepting the nomination un-
til his triumphant return, when
the political impact will be
greater. The longer he procras-
tinates, however, the greater
the danger that the FRB will dis-
integrate and Barrientos lose
popular appeal.
Bolivia's major political
parties--the rightist Bolivian
Socialist Falange, the Nation-
alist Revolutionary Movement,
Juan Lechin's National Leftist
Revolutionary Party, and the
Christian Democratic Party--are
still stumbling about in quest
of electoral alliances and pacts
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of convenience. All are handi- An agreement among the four, or
capped by differences over whether significant factions thereof,
to seek an accommodation with could pose a serious threat to
Barrientos and the FRB, or try to Barrientos' candidacy as well as
gain power through insurrection. to political stability.
Chronic budget deficits in
recent years have resulted from
expanded subsidies to inefficient Poor management of the re-
state enterprises and social cently adopted single fluctuating
security and public welfare funds exchange rate has caused another
and from increased salary pay- decline in wool export commit-
ments to the huge bureaucracy ments. By means of the new rate
without compensating tax revenues. and severe import restrictions
The relatively small budget deficit; the government was able to pro-
expected in 1966 is predicated on duce an estimated $25-million
holding the inflation rate down trade surplus for 1965. It was
to 30 percent, which, if achieved, achieved, however, at the cost
would be almost miraculous. of limiting imports to a bare
Major factors in Uruguay's agitation by disgruntled public
soaring cost of living, which employees. The attempt to extend
rose 33.5 percent in 1963, 38.5 this policy to the private sector
percent in 1964, and somewhere I has so far been unsuccessful.
between 70 and 98 percent in 1965, Some unions have received in-
have been inflationary deficit creases as high as 89 percent,
financing and unrestricted pri- and the government does not seem
vate credit expansion. determined to enforce any real
private wage policy.
Government action to pro-
vide a comprehensive credit con-
trol program has been hampered
by inefficient administration,
and no effective policy has been
instituted. A comprehensive
price control program as a com-
panion to credit control has
not been introduced, although
prices of some basic foodstuffs
are controlled.
Leapfrogging wages and prices
have pushed the cost-of-living
spiral higher. The government
has held the wage line in the pub-
lic sector this year by keeping
wage hikes to about 30 percent
despite prolonged strikes and
subsistence level which cannot
be indefinitely maintained.
I All of these economic prob-
lems have come during an elec-
tion year when the government
seems more interested in waging
an election campaign than an un-
popular stabilization program.
Unless strong measures are taken
soon, hopes for stabilizing the
economy and receiving additional
foreign financial aid and credit
seem dim. Communists and left-
ists would appear to be the only
beneficiaries of the government's
inability to halt the economic
i deterioration.
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21 January 1966
Copy No. 1132
GOVERNMENT-LABOR RELATIONS IN BRAZIL
OFFICE OF CURRENT INTELLIGENCE
GROUP I Excluded from automatic
downgrading and declassification
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President Castello Branco is seeking participa-
tion by labor, students, and intellectuals in the
progovernment National Renewal Alliance, one of two
political groups being formed to replace the old
parties which were all abolished late last year.
In terms of numbers alone--Brazil has some 25 mil-
lion workers--labor is obviously the main target.
However, Castello Branco's efforts to broaden his
political base and lessen the regime's dependence
on the military are likely to encounter skepticism
among labor. There is widespread dissatisfaction
with the government's policies among workers and
union leaders. Furthermore, athough the extreme
left has little chance at this time.of regaining
the influence it once enjoyed in the labor movement,
Communist activity is on the rise again. The re-
gime's relations with labor will become increasingly
important during the coming months as Brazil pre-
pares to transfer power to a new administration. Con-
gress will elect a new president sometime before
3 October 1966 and the new administration will take
office the following March.
Causes of Disagreement
The difficulties between
the regime and the workers are
partly a result of historical
factors, including continuous
political exploitation--and some-
times coddling--of the unions by
a succession of governments be-
fore Castello Branco came to
power. At the same time, much
of the responsibility for the
current difficulties must be at-
tributed to the present govern-
ment's ineffective labor policies
and neglect of worker problems.
Two main causes of popular
discontent are the rising cost
of living and poor social con-
ditions. The absence of adequate
unemployment compensation and
effective welfare programs are
other contributing factors. The
most recent wage adjustments
have been below increases in the
cost of living and only one ad-
justment per year is authorized.
Soon after it took power
the government enacted wage leg-
islation placing stringent norms
on adjudication of wage disputes
involving public employees, and
has extended this wage guideline
to the private sector. The
harshness of this policy in the
workers' eyes is contrasted with
former president Goulart's prac-
tice of decreeing frequent wage
increases of up to 100 percent.
Aside from a small number
of enlightened union officials,
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I flFLRTIOfl
in
BRRZIL
100
90
80
70
60
50
40
1964
1965
21 Jan 1966
60454
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few workers seem to show any
sympathy for the administra-
tion's efforts to curb infla-
tion by using austerity meas-
ures. Workers complain that
they are bearing the brunt of
the belt-tightening programs.
They especially cite the policy
of holding down wages despite
the continuing rise in the
cost of living as the main
cause of the workers' plight.
The administration agreed to a
60-percent boost in the mini-
mum wage in 1965, but union
leaders argue that salaries lag
so far behind the cost of liv-
ing that workers' purchasing
power has been declining stead-
ily. The unions have been cir-
cumscribed as channels of pro-
test by new laws that prohibit
political strikes by the unions
and strictly limit the use of
the strike as a tool Of pro:-
test. There thus have been few
strikes of any consequence un-
der the present regime.
Government Policy
Castello Branco has done
little during his 20 months of
rule to help labor. Adminis-
tration policies in this area
have been generally weak and in
many respects nonexistent. Cas-
tello Branco seems to regard la-
bor problems, along with stu-
dent problems, as of secondary
importance at most. Arnaldo
Sussekind, the labor minister
until November 1965, was a weak
figure in the administration,
and more influential cabinet
members such as Planning Minis-
ter Roberto Campos gave little
priority to improvement of work-
ers' conditions. The present
labor minister, Peracchi Bar-
cellos, has not had time to
demonstrate an understanding
of his responsibilities, al-
though he has expressed an in-
tention to alleviate working
conditions.
On the other hand, the ad-
ministration has shown strength
and determination in the aus-
terity policies it has ad-
vanced. Castello Branco is
willing to endure a period of
unpopularity in expectation
that the anti-inflation pro-
gram will eventually demonstrate
that it benefits everyone. Ad-
ministration officials have
been convinced that to abandon
the policy of holding the line
on wages would lead to further
increases in the cost of liv-
ing, which was held to a rise
of 45.4 percent in 1965, com-
pared with 87 percent in 1964.
The rate in 1964 would have
been about 140 percent had
Goulart remained in office.
Planning Minister Campos, the
main architect of the austerity
program, has privately admitted
the reduction in real wages
attending stringent application
of the wage policy, but he
fears that any loosening of
the wage formula would lead
to a hopeless erosion of the
current wage policy.
The labor code gives the
federal government ultimate
control over the unions and
almost total responsibility
for worker welfare. Only the
federal government can legis-
late in labor matters. The
imposto sindical (labor tax)
system under which every worker
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contributes one day's pay per
year to a government-supervised
fund is a strong instrument of
control since it is the main
source of income for the unions.
However, Labor Minister Barcel-
los stated recently that the
government plans to eliminate
this tax gradually over the
next two or three years and to
give unions complete control
over their funds.
The Labor Ministry is le-
gally all-powerful in the labor
management field. It determines
how the unions will function,
how elections will be adminis-
tered, what working conditions
will prevail, how grievances
are settled, and who can be dis-
missed from employment. Paternal-
ism has substituted for collec-
tive bargaining, and grievances
are handled by labor courts.
The unrest in labor is
facilitating the work of the
Communists, who have made the
nearly 3,000 unions in Brazil
the focus of their subversive
efforts. At the time of Gou-
lart's overthrow in April 1964
the labor movement was under
strong Communist influence, with
the Communists dominating the
leadership of four of the coun-
try's six national labor con-
federations. The extreme left
coordinated strikes and demon-
strations through the Communist-
influenced General Command of
Workers, an illegal but active
national labor organ. Ultimate
control of organized labor then
as now rested with the govern-
ment, but Goulart was willing
to cooperate with Communist un-
ion leaders in exchange for their
support. The National Confed-
eration of Credit Institution
Workers, for example, was given
Goulart's approval to affiliate
with the Latin America Bank
Workers Confederation (CADEB),
a Communist front group.
Almost immediately after en-
tering office the Castello Branco
regime carried out a purge of
Communist labor officials and
their allies, and federal ad-
ministrators were appointed to
run some 400 unions. Among the
labor organizations brought un-
der direct federal direction
were most of the important in-
dustrial unions in Sao Paulo and
Rio de Janeiro.
A few such administrators,
notably in Santos and Salvador,
used an iron fist in dealing with
union officials. In most of the
locals the interventors replaced
elected officers, a number of
whom were placed under detention.
The long delay in lifting the in-
tervention--many unions were not
freed until late 1965--became an
additional irritant in labor-
government relations.
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Communist activity is on
the rise again in the labor move-
ment, but the extreme left has
little chance of regaining the
degree of influence it once en-
joyed because of government re-
strictions. Renewed Communist
strength is evidenced by results
of several important elections
during the past several months.
Communist-backed slates won over
progovernment rivals in the large
Guanabara metal workers' union
and in key Sao Paulo locals rep-
resenting metal workers and bank
employees. Although the govern-
ment has sought to keep known
Communists off the ballots, the
Communists formed tickets with
lesser known party members and
sympathizers. Another tactic
has been to organize unity slates
with ostensibly "independent"
candidates. In at least one in-
stance the government annulled a
union election after subversive
candidates had won. The present
policy is to require police clear-
ances of all candidates.
In the Sao Paulo area the
pro - Chinese Communist Party of
Brazil, a small dissident group,
apparently has begun organizing
some support among labor groups.
The regional labor delegate
for Guanabara--the federal gov-
ernment's representative--re-
signed in protest against the re-
turn of extreme leftist influence
in the labor movement there. The
Labor Ministry became concerned
over the outcome of union elec-
tions in Guanabara, the majority
of which won either by unity
slates containing subversive ele-
ments or by opposition slates.
Page 5
Many of the government-
sponsored programs that would
most benefit labor have yet to
advance much beyond the planning
stage. Progovernment candidates
in union elections thus have had
few administration achievements
to which they can, point in their
campaigns. One prominent labor
lawyer has criticized the ad-
ministration's failure to explain
its policies to the public as
the reason for the election re-
sults.
Leadership Gap
The lack of a positive gov-
ernment policy toward labor dur-
ing the past two years has com-
pounded what has long been one
of the most pressing problems
for the unions--the lack of a
system that develops capable and
responsible democratic leader-
ship. Even those democratic
labor leaders who privately ex-
press support for the government's
economic stabilization program
usually denounce many of the
measures because they feel that
it would jeopardize their support
to do otherwise. In some areas
it has become extremely difficult
to find responsible trade union-
ists who are willing to be candi-
dates for union offices.
The government faces over-
whelming problems in the rural
labor field, where unemployment
is high, benefits are few, and
social conditions are extremely
bleak. The church and other or-
ganizations are engaged in im-
provement projects but little
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has been accomplished by way of
land reform, and real wages
have declined. Employers often
do not comply with the minimum
wage law. Since Castello Branco
has been in power abuses by em-
ployers in rural areas, particu-
larly in the northeast sugar
zone, have frequently gone un-
checked. Shortly after the over-
throw of Goulart, conditions be-
came especially bad as landown-
ers committed flagrant abuses
"in the name of the revolution."
Agricultural unions have
been ineffective in developing
mass support and only recently
have they shown any sign of per-
forming a constructive role.
There no longer is widespread
agitation among the peasants
in the northeast such as existed
when extreme leftist Peasant
Leagues leader Francisco Juliao,
now in exile, sucessfully
mustered his followers for po-
litical demonstrations. The
army has maintained a close
watch over peasant activities
in that region.
Outlook
The government will con-
tinue to be under great pres-
sure to come up with a long-
promised comprehensive reform
of the labor code and with in-
creased benefits for workers.
There are some signs that the
administration is beginning to
recognize the danger of continued
labor dissatisfaction. The low-
cost
been
year
housing program
that
had
stalled for more
than
a
is being revived
and
50,000
scholarships are to be provided
workers' children.
In the government's favor
is the likelihood that the cost
of living will be held to
gradually smaller increases in
the coming months. The anti-
inflation program may eventually
produce visible results that
will persuade the general pub-
lic, including labor, of the
value of Castello Branco's aus-
terity measures. The govern-
ment will be racing against
time to achieve results before
summer, when the disrupting ef-
fects of congressional and pres-
idential election campaigning
can be expected to dominate the
political scene.
As long as the regime re-
tains the support of the armed
forces it should have little
difficulty in preventing any
serious provocation by the unions
despite renewed Communist ac-
tivity among them. Castello
Branco's main problem in trying
to win labor participation in
the progovernment political bloc
will be to overcome dissatisfac-
tion among the workers so that
labor leaders will feel that
they can support the government
without losing the confidence
of the rank and file.
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21, January 1966
OCI N"a. 0273/668
wWi
Copy No. 5 3
SPECIAL
REPORT.
,A REVIEW OF THE DOMINICAN ECONOMY
CENTRAL INTELLIGENCE AGENCY
O F F : 1 C _ E O F R : E S E A R C H A N D R E P 0 R T :S
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GROUP I Excrvded`prom autortaatic
downgrading and-dedassificatlon
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The economy of the Dominican Republic, which
has never supported most of the population above
the subsistence level, has been floundering since
about 1958. In 1964, per capita gross national prod-
uct (GNP) was only at about the 1957 level--far be-
low the average for Latin America. The economy has
failed to keep pace with the increase in population
--in part because of a drop in levels of investment.
The probable depletion of domestic savings makes the
re-establishment of any significant economic growth
dependent on foreign economic assistance for the de-
velopment and diversification of agriculture, which
dominates economic activity, and on the correction
of budgetary imbalance, disequilibrium in the balance
of payments, and inefficiencies in the operation of
state-owned enterprises.
In large measure, the po-
litical instability and recur-
rent breakdowns in public order
that have plagued the Dominican
Republic since the assassination
of Trujillo in May 1961 reflect
the prolonged influence of de-
pressed economic conditions and
gross inequities in distribution
of income. In a Latin American
population which is generally
inadequately fed, clothed, housed,
educated, and doctored, the Do-
minican people rank among the
lowest. In terms of per capita
food intake and per capita,GNP,
Dominicans rank 20 to 25 percent
below the Latin American average.
The normally low level of
personal welfare was worsened
severely following the outbreak
of revolution last April. The
almost total. disruption of eco-
nomic activity in the capital,
and in varying degrees throughout
the country, led to breakdowns
in normal marketing activities.
To fill this vacuum the US Food
for Peace program was converted
into a massive emergency relief
activity, reaching some 17 per-
cent of the population at its
peak during the middle of the
year.
Agricultural Dominance
The country's inability to
provide more than a bare level
of subsistence for most of the
population is caused in part by
the weakness of the agricultural
sector which dominates the econ-
omy. Agriculture directly con-
tributes about 40 percent to the
country's GNP, and normally em-
ploys nearly two thirds of the
labor force. Agricultural prod-
ucts--primarily sugar, coffee,
cocoa, tobacco, and bananas--are
the source of about 90 percent of
the country's foreign exchange
earnings from exports. The sugar
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S E L E C T E D ECONOMIC DATA
3.6 million Population (0965) increasing 3.55 annually
1.8 million in labor force (..trmated:965)
64% in agriculture
>
ll
ion +~..
19,332 square miles r::-7 mi
65 in government
46% agricultural land
3% in manufacturing industries
mountains
47% forested mountains
7% waste and urban
272 in all other activities
Unemployment: more than 25% of labor force in 1965
Gross National Product (GNP) in 1964 at current prices:
Cost of living increases:
1962
1963 1964/65
U.S. $870 million
101
8% Generally stable
U.S. $250 per capita
Bela nce-of -payments data (). mrflion# of U.S
1963 . c I.rs) 1964
1962
Trade balance 37.3 16.4 -12.0
-55.7
Balance on current account' ?13.5 -22.8
17.7 5.9 -36.2
Net foreigp assets"
*Balance of trade and of service Payments--including grout aid, profits remittances, tourism, and freight and insurance charges
**Claims by Dominicans ogoinst foreigners minus foreigners' claims against Dominicans
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industry alone accounts for more
than half.
Despite important gains in
the output of sugar, tobacco,
bananas, rice, and peanuts, al-
most all of agriculture produc-
ing for the domestic market and
that producing coffee and cocoa
for export has stagnated since
the early 1950s. Terrain and
rainfall limit the amount of new
land that can be brought into
production, and government pol-
icies have done little to in-
crease productivity on that al-
ready under cultivation.
Mountainous terrain excludes
agriculture from about half of
the total land area. Moreover,
climatic conditions, ranging from
semiarid to arid in the agricul-
tural regions of the western half
of the country, contribute to low
levels of productivity.
Levels of output are further
limited by the low levels of tech-
nology, particularly among farmers
who produce for domestic consump-
tion. In part, the low level of
technology reflects the large
number of very small landholdings
as well as the high rate of il-
literacy among the rural popula-
tion.
About 86 percent of the
farmers operate on plots less
than 12 acres in size which con-
stitute only 19 percent of the
farmland. The small size of these
plots means a subsistence standard
of living and prolonged periods of
economic inactivity for the major-
ity of the nation's farmers.
At the other end of the
,distribution schedule, one per-
cent of the farms account for
54 percent of the total farmland.
About half of this area was con-
fiscated from the Trujillo family
and associates following the dic-
tator's assassination and is still
owned by the state. Much of this
land, however, is inefficiently
managed and inadequately used.
Recent stagnation in agriculture
is directly attributable to the
inept management of state-owned
farms.
The value of total agricul-
tural output is also limited by
the heavy commitment of land and
capital resources to permanent
crops. In 1960, about 46 percent
of the country's land in crops
was being used to produce sugar
cane, coffee, and cocoa. Because
of the heavy fixed investment in-
volved, the lower world prices
for these three crops since the
mid-1950s have not led to any
substantial reallocation of land
to more valuable crops.
Industry and Services
Industrial activities in
the Dominican Republic are se-
verely limited. Minerals and
metals resources are few, con-
sisting principally of bauxite,
nickel, salt, gypsum, and lime-
stone. The most significant min-
ing activity is a bauxite mine
near Pedernales on the southwest
coast. The Aluminum Company of
America, which has a 55-year con-
cession, has an investment of
about $15 million in this mine,
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DOMINICAN REPUBLIC:
Gross National Product
Per Capita GNP
(U.S. dollars in 1950 prices)
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A
GNP Range
90% f
dwwWW" 3.3% r estimate
Average annual rote of growth
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and contributes about $10 million
annually to export earnings. The
country also has substantial iron
ore reserves of premium grade,
but these have apparently not
been exploited since the end of
1960. No commercially exploit-
able petroleum deposits have been
discovered, and the country im-
ports virtually all its mineral
fuels.
Manufacturing activities
are limited to a few large-scale
agricultural processing and chem-
ical industries and a wide range
of small food-processing, textile,
and building materials establish-
ments. The milling and further
processing of sugar cane dominate
manufacturing activity, constitut-
ing an estimated half of the
value added of all industrial
activity.
A good primary road system
links all major economic regions,
but the feeder system linking
farms to their principal markets
is inadequate. The sugar mills
maintain an extensive railroad
network in the southeastern
coastal plain, but there is only
one single-track, narrow-gauge
public railroad of about 70 miles
linking the interior city of La
Vega to Sanchez on the east coast.
The telecommunications system is
small but modern.
Economic Performance
Recent economic performance
is divided roughly into two pe-
riods. From the end of 1950
through 1958, the economy gen-
erally grew steadily at an aver-
age annual rate of about 6.2 per-
cent, a very respectable rate
for a Latin American country.
On a per capita basis, GNP ex-
panded about 2.5 percent annually
during the period. The most im-
portant factors in this sustained
rapid economic growth were the
high rates of public and private
investment and the steady expan-
sion in exports. Trujillo's
ability to assure political sta-
bility, to hold down private con-
sumption by restricting increases
in wage rates, and to squeeze the
profits of the nation's farmers
was a major factor permitting the
high rates of investment.
From the end of 1958 through
1964, annual changes in GNP fluc-
tuated widely. GNP has expanded
at an average annual rate of only
3.3 percent, or less than the an-
nual population increase of 3.5
percent. Per capita GNP in 1964
was slightly less than in 1957.
Even the steady increase in
exports after 1953 failed to keep
pace with imports,especially of
:nonconsumer goods, which.were
stimulated by steady economic
expansion. A sharp drop in the
normally positive trade balance
in 1958 led the government to
introduce austerity measures in
:its budget and to impose import
restrictions in 1959. These
measures slowed business activity
Ln general and hit investment
activity particularly hard. The
maintenance of these measures
through 1961, along with a dete-
rioration in the political cli-
mate, largely explains the gen-
eral stagnation experienced
through 1961. There was a spurt
in activity in 1960, resulting
from the US reallocation of part
of the Cuban sugar quota to the
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Dominican Republic, but Trujillo
banked much of the revenues abroad.
The economic policies of al-
most all Dominican governments
since the beginning of 1962 have
done little to end this stagna-
tion and, on balance, have prob-
ably led to a deterioration in
the bases for sustained long-term
growth. The permissive wage pol-
icies of most of Trujillo's suc-
cessors led to an estimated 50
percent increase in real wages in
the two years following 1961.
This lowered business profits and
savings and limited investment.
Although expanded consumer demand
growing out of the wage increases
led to a jump in economic activity
in 1962, domestic producers were
unable to meet the increased re-
quirements and prices rose ap-
preciably in 1962 and 1963 fol-
lowing a prolonged period of gen-
eral price stability under Tru-
jillo. Despite the upheaval in
1965, there are no indications of
significant price increases. In-
creasing demand combined with
higher domestic prices also led
to a sharp jump in imports fol-
lowing 1961. Only high levels
of foreign assistance, beginning
in 1962 and amounting to probably
more than $125 million in dis-
bursements through 1964, avoided
considerably greater inflation-
ary pressures.
The drop in output in 1965
was probably on the order of 10
to 20 percent. This decline was
largely a result of the disrup-
tion to business activity in
Santo Domingo caused by the revo-
lution. It also reflects a con-
tinuing fall in world sugar
prices from the low level reached
in 1964 and a sharp drop in world
cocoa prices.
Problems and Prospects
The immediate prospects for
the Dominican economy depend
heavily on levels of foreign as-
sistance. The best that can be
expected in 1966 is recovery to
levels of about 1964. Bases for
long-term growth cannot be laid
until long-standing political,
social, and economic problems are
solved.
Viewed broadly, the basic
problems of the economy are the
current low levels of savings
stemming from a prolonged period
of high consumption and the lim-
ited stock of physical capital
resulting from six years of low
investment.
A re-establishment of high
levels of investment will be
needed to lay the bases for any
future growth. Heavy foreign
economic assistance will prob-
ably be necessary because of the
lack of domestic savings and do-
mestic business confidence. More-
over, export earnings, which
could generate future savings,
are not expected to increase sig-
nificantly.
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If needed foreign assistance
is received, it would appear nec-
essary to direct the bulk of the
investment funds into agriculture.
The extension and rehabilitation
of irrigation systems, improve-
ments in rural marketing facili-
ties, including storage and trans-
portation, and an over-all rise
in the level of technology will
be necessary to increase output
through advances in productivity.
A vigorous agrarian reform pro-
gram designed to promote fuller
employment of human and land re-
sources also will be an essential
component of any development plan.
Finally, as world prices for
several of the country's major
export crops are expected to re-
main low for several years, diver-
sification of agriculture for both
export and domestic purposes is
necessary. All forms of live-
stock activity, as well as output
of winter vegetables, cotton, and
rice, among others, could probably
be increased efficiently. Because
of limited natural resources, in-
dustrial development will tend to
be directed to wider use of avail-
able agricultural raw materials
and continued expansion of such
basic services as electric energy.
The ability of the Dominicans
to allocate development funds to
the most efficient uses is severely
restricted by the lack of trained
personnel or a meaningful develop-
ment plan as well as by political
considerations. The shortage of
skills in government is matched by
an equal, if not more severe, ab-
sence of managerial and other
skills in most of the private sec-
tor.
Even with proper allocation
of investments, benefits-which
accrue to the economy would probes
ably be wasted in the support of
inefficiently operated state en-
terprises. An illustration of
such inefficiency is the govern-
ment-owned Dominican Sugar Cor-
poration, which lost more than
$18 million in 1964. As a re-
sult of the confiscation of
properties owned by Trujillo and
his associates, the government
owns about one-fourth of the
country's farm land and an esti-
mated half of the country's in-
dustrial capital. Apart from
Cuba, this percentage of state
ownership is the highest in the
non-Communist world.
The government's ability to
provide necessary and efficient
government services and to
promote development also is re-
strained by the existence of a
large budget deficit and the coun-
try's foreign exchange position.
Planned budgetary expenditures
of almost $254 million in 1966
probably will result in a deficit
on the order of $100 million, or
about $70 million higher than
any deficit recorded prior to
1965. The Dominicans will hope
to finance about $75 million of
the deficit through foreign a rants
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