NATIONAL INTELLIGENCE DAILY TUESDAY 3 MAY 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01094R000200010137-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: July 13, 2010
• Sequence Number: 137
• Publication Date: May 3, 1983
• Content Type: REPORT

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Director of
Central
Intelligence
National Intelligence Daily
Tuesday
3 May 1983
coPr 2 8 5
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Contents
EI Salvador: Insurgent Actions ................................................ 1
Spain-Nicaragua: Financial Aid .............................................. 3
East Germany-USSR: Honecker's Visit .................................. 3
South Africa-Angola: Military Movements ........................... 4
South Korea-North Korea: Decision on Meeting Site ............ 5
USSR: Party Post Filled .......................................................... 6
USSR: Long-Term Energy Program ........................................ 6
Special Analysis
Venezuela: Gloomy Economic Outlook .................................. 7
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3 May 1983
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EL SALVADOR: Insurgent Actions
Guerrilla attacks in eastern La Union Department on Friday
demonstrate again that large-scale government operations can only
temporarily disrupt insurgent plans.
An attack on a post at the Honduran border destroyed the
customs house and damaged the Pan-American Highway bridge
linking EI Salvador and Honduras. The Honduran, military detachment
at the bridge also became involved in the action.
The other attack was on Santa Rosa de Lima, the second-largest
The Army has announced the conclusion of another sweep
against guerrilla strongholds in the Guazapa volcano area north of
San Salvador. The government claims to have killed nearly 60
guerrillas.
Comment: The attacks in La Union follow an Army sweep of the
area. In the absence of a permanent government presence, much of
northern La Union and neighboring Morazan Departments are now
under de facto insurgent control.
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SPAIN-NICARAGUA: Financial Aid
Spain agreed on 25 April to extend $45 million in credits to
Nicaragua over the next three years for the purchase of Spanish
goods. Madrid gave Managua $25 million in credits last year, and the
total of $70 million makes Spain one of Nicaragua's largest European
lenders. A Spanish diplomat in Managua told US officials that he
believes Madrid does not expect repayment.
Comment: The new credits underscore the Gonzalez
government's willingness to use public funds to increase Spain's
share of international trade with Latin America. Because they are
earmarked for the purchase of Spanish goods, the credits will help
stimulate Spain's lagging export industries. Prime Minister Gonzalez
probably hopes the credits will have a moderating effect on the
Sandinistas as well as loosen Nicaragua's economic ties to Eastern
Europe. The Sandinistas, meanwhile, will portray the credits as a sign
EAST GERMANY-USSR: Honecker's Visit
East German leader Honecker, who arrives in Moscow today for
the first visit to the USSR by an East German party or government
leader since Brezhnev's death, is likely to seek assurances of Soviet
esteem and more favorable economic terms. Honecker has met only a
few times with General Secretary Andropov, and
the US Embassy in East Berlin report that some par y o icia s are
Comment: Honecker probably will interpret his invitation to be
the first East European leader to hold formal consultations with
Andropov as a sign that the USSR regards East Germany as the most
important of its allies. A meeting with Andropov may allay somewhat
Honecker's concern that the USSR is taking East Germany for
granted in political matters. He will have difficulty, however, securing
any economic concessions. Although East Germany is the USSR's
largest trading partner, it has had little success in dissuading the
Soviets from cutting deliveries of oil at subsidized prices and taking
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3 May 1983
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SOUTH AFRICA-ANGOLA: Military Movements
South African officials told the US defense attache yesterday that a
new Angolan and SWAPO buildup is under way in southern Angola.
Comment: The South Africans apparently are augmenting their
force of between 1,700 and 2,500 troops already believed to be
operating in southern Angola. Their recent allegations of a buildup of
Cuban, Angolan, and SWAPO forces have not been substantiated.
Pretoria is increasing its
activity in the buffer zone and may launch larger attacks.
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4 3 May 1983
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SOUTH KOREA-NORTH KOREA: Decision on Meeting Site
The Council of the Inter-Parliamentary Union, which met in
Helsinki on Friday, agreed overwhelmingly to keep Seoul as the site
for the Union's annual conference in October. Following the rejection
of the motion inspired by Pyongyang to change the site, the North
Korean delegates say they will not attend the meeting in Seoul. The
South Korean National Assembly announced yesterday it will invite all
IPU members t~l, including 350 delegates from Communist
Comment: The North Koreans presumably will urge the Soviets
and others to boycott the meeting. The USSR, however, already has
attended several international meetings in South Korea, keeping open
ou orean o icials will remain concerned that the North Koreans
may resort to terrorism to show that Seoul is not safe for international
gatherings.
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5 3 May 1983
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USSR: Party Post Filled
Soviet media indicate that Yegor Ligachev, formerly a regional
Communist Party chief, has been appointed head of the party's
Organizational Work Department in Moscow. This office administers
party personnel appointments throughout the USSR. It had been
supervised by Ivan Kapitonov, who remains a member of the party
Comment: General Secretary Andropov has overall authority for
filling key posts. He has to control this position to establish his
supremacy in the party. There is no known connection between
Ligachev and Andropov. Party secretary Chernenko has been out of
public view for over a month, however, and the announcement at this
time suggests Andropov is responsible for the appointment.
USSR: Long-Term Energy Program
A Soviet economist recently told the US Embassy in Moscow that
the USSR will soon announce a 20-year energy program calling for
some changes in energy policy involving goals beyond the current
Five-Year Plan, which expires in 1985. Some investment is to shift
from current oil production to exploration for new deposits, and
investment in coal production is to rise. Future hard currency
revenues will be obtained by raising gas exports and sustaining oil
exports. To do this, the economist said gas would increasingly be
substituted for oil in domestic use and domestic allocations of oil
might be cut before oil ex orts, even though this would slow
economic growth.
Comment: The energy program is one of several new long-term
efforts the Soviets are making to focus resources on major problem
areas. It appears to be more practical than previous ones. The
program will be difficult to carry out, however, because of growing
competition for investment resources. In addition, planners are
unlikely to make large cuts in domestic oil allocations without a
reduction in exports.
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Special Analysis
VENEZUELA: Gloomy Economic Outlook
Financial mismanagement and declining oil revenues are the two
main causes of the continuing economic contraction and debt
repayment problems in Venezuela-the largest South American
trading partner of the US and the largest regional contributor of aid to
Caribbean countries. President Herrera is reluctant to make tough
economic adjustments because of the political costs. He probably will
adopt stronger policies goon, however, to gain the support of bankers
for prolonging the payments on $13 billion in debts maturing this year.
If Herrera fails to develop a coherent adjustment strategy, severe
economic disruptions are likely, and these will be even worse if oil
prices decline further. Whatever course the government takes, US
exports to Venezuela almost certainly will decline, and Caracas will
look to Washington for more financial help.
Venezuela is now paying the price for poor economic
management that has undermined the confidence of foreign lenders.
In January international bankers stopped refinancing debts that were
coming due because Caracas was falling behind in its payments on
more and more debts and because the government had no coherent
plan to cope with declining oil earnings.
Since March of last year, low confidence and persistent rumors of
an impending devaluation have led Venezuelans to transfer funds
abroad at rates exceeding $500 million per month. Venezuela's
reserves dropped by more than 50 percent, to approximately
$10 billion in only a year.
Squabbling between the President's two main economic advisers,
Finance Minister Sosa and Central Bank President Diaz Bruzual, has
thwarted efforts to carry out difficult decisions. The government's
poor handling of athree-tiered exchange rate system introduced in
late February has caused import shortages, disrupting production
without halting the capital flight the system was intended to stop
Last month Venezuela formally suspended payments of principal
on most public debts until 1 July, postponing immediate financial
problems while it negotiates with a team of international lenders to
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reschedule payment of debts falling due this year. To cultivate the
good will of bankers, Sosa has indicated that additional austerity
measures will be forthcoming, including more cuts ins ending and
imports, although he has not announced a timetable.
Oil Revenues Down
Declining oil prices are creating further difficulties. To ease the
financial impact of oil price cuts, Caracas had been maintaining oil
earnings at the level of 1982 by producing until last month nearly
2 million barrels of oil per day, some 17 percent above OPEC
production aareements. It also has been drawing down inventories for
export.
Revenues from petroleum exports account for 95 percent of the
country's foreign exchange earnings. Even without another price cut,
oil receipts probably will decline 20 percent this year, to about
$13 billion, undermining the country's capacity to pay for imports and
Tough Adjustments Needed
Bankers, having lost confidence in Herrera's ability to manage the
economy, are demanding a formal IMF agreement before they will
refinance Venezuela's debt. With the President's Social Christian
Party trailing far behind in the presidential campaign that is now
under way, however, Herrera is resisting any adjustments that would
raise unemployment and inflation in the short term. He probably will
want to dela, y entering into any IMF program until after the election in
Even if Herrera continues to avoid agreeing to the IMF's stringent
requirements, Caracas will need some type of austerity program soon
to cope with declining oil revenues. Such a program would be likely to
cause GNP to decline at least a few percentage points and
unemployment to rise to over 10 percent this year. Inflation could
more than double, to 20 percent or so, because of a rise in import
prices and the removal of some domestic price controls.
The government probably will make sufficient adjustments to limit
the current account deficit to $2 billion, an amount that could be
covered with existing reserves. In addition, Venezuela is likely to
secure the grudging support of bankers for a reorganization of its
debt to avoid more serious financial problems. If so, Caracas
robably will lift the suspension on payments by the end of the year.
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If Caracas fails to develop an adjustment strategy, or if oil
revenues plunge again, the shortage of foreign exchange and the
difficulties in obtaining trade credits will force a 40-percent drop in
imports. This would cause serious shortages of food and consumer
goods, stimulating inflation and impeding industrial production.
Venezuela's GNP could decline by about 10 percent and inflation
could surge to 30 percent.
Whether or not the government develops a tough adjustment
strategy, worsening economic conditions probably will provoke more
frequent demonstrations and strikes by labor. Domestic frustrations
are focused mainly on Herrera's handling of the economy, however,
rather than on the political system itself. As a result, military
intervention is unlikely.
Rising protectionism and a slowdown of capital investment will
reduce Venezuela's opportunities for exports to the US. The
Venezuelans are likely to seek US help-such as new trade credits or
an emergency loan-in coping with their financial dilemma. Caracas
probably will urge Washin ton to persuade US banks to refinance
Venezuela's debts.
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