LATIN AMERICA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01184R000201000001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 22, 2016
• Document Release Date: October 22, 2010
• Sequence Number: 1
• Publication Date: June 15, 1984
• Content Type: REPORT

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.tE?~~f~~ Directorate of j ~ ~, ~ ~~~~ ~ ~ ~
Latin .America
Review
15 June 1984
--Seerer-
ALA LAR 84-011
I S June 1984
Copy 3 91
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I,atgn Aanerica
Review 25X1
United States.
Brasilia has followed up on its aggressive penetration of Middle
Eastern arms markets by greatly expanding collaboration with its
Arab clients, but the secretness of many such transactions could
facilitate the transfer of Western technology to states hostile to the
threats.
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The dramatic events in Grenada last Qctober reemphasized to the
small states of the region the need to develop a capability to defend
themselves, and local leaders are now considet?ing the possibility of
creating a unified force to protect against foreign or domestic
the Cabinet.
Army Commander Bouterse's refusal to contemplate democratic
and economic reforms is causing strains in the ruling coalition and
could lead Prime Minister Udenhout and other moderates to leave
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Uruguay: Resurgence of Labor( ~ 1S
Uruguay's once-powerful labor movement has reemerged-wearing
its old leftist stripes-and has the potential to influence the
transition to civilian rule because of its ability to use economic
grievances to mobilize large numbers of people.
Guatemala-Belize: Status of the Territorial Dispute) 19
Although talks resumed last month in the latest effort to resolve
Guatemala's longstanding claim of sovereignty over Belize, domestic
constraints in both countries probably will prohibit either
government from making the concessions necessary to reach an
Dominican Republic: IMF Talks Suspended
23
23
24
Mexico: New Governor Makes Good
Costa Rica: Power Shortage
Articles have been coordinated as appropriate with of{ter offices within CIA.
Comments and queries regarding this publication may be directed to the Chief
Production Staff Office of ,gfricnn and Latin American Analysis,
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fry Aims ~r?d~acti?~
In recc;nt years, Brazil has followed up on its
aggressive penetration of Middle Bastern arms
markets by expanding collaboration with Arab clients
to include design, manufacture, and technical support.
This practice has brought new investment capital as
well as additional weapons sales. Moreover, in our
view, cooperation with Iraq in rocket production could
provide Brazil with an incentive to apply some
technology acquired in its space launch activities to
military use. Brasilia's willingness to sell arms to
almost all comers, on the other hand, probably is
increasing the weapons inventories of Libyan-backed
insurgent groups in the Western Sahara and possibly
Chad, and it could provide a conduit for Western
technology to states hostile to the United States, such
as Libya.
Thcsc developments have added implications for the
United States in light of recent agreements with
Brazil for collaboration on space and military matters.
This cooperation offers the possibility of greater US
influence over some Brazilian arms sales, but the
secretiveness of many such transactions would make
adherence to US r?cquircments on technology transfer
difficult to verify.
The Arms lndaestry
Since the 1970x, Brazil has become aworld-class
producer and exporter of war materiel In little more
than a decade, Brazil emerged as the largest
manufacturer of armored cars outside the Warsaw
Pact. Its aeronautical firm, F,mbraer, is now the sixth
largest general aircraft manufacturer in the Western
world and is increasingly moving into the
international market for military aircraft as well.
'T'hree factors have contributed to this rapid growth:
Brazil's weapons are dependable and use established
rather than advanced technology.
? The government often is willing to accept trade
arrangements in place of hard currency.
a Brazil, like many other arms exporters, allows its
customer?s to use and resell its weapons without
restriction.
Iraa~~--A ~peoial I3~E~t>!onsh>ip
Brazil's extensive ties with its most important arms
client data back to 1972, when Brasilia refused to
participate in a boycott of Iraqi petroleum. By the late
1970x, Iraq had become Brazil's principal oil supplier.
In addition, Brasilia contracted to explore for oil in
the Middle Eastern country and discovered the
significant Majnoon oilfields, which, in our judgment,
cemented the economic relationship.
Arms have been among Brazil's principal exports to
Iraq. Weapons agreements were first documented in
1978 at $108 million, and soon thereafter deliveries of
almost 300 armored vehicles began. After the
outbreak of war with Iran in late 1980, Iraq sought
new arrangements with Brazil and, in late 1981,
signed an agreement to import more than $500
million in Brazilian arms. Since then, Brazil has
continued to deliver armored vehicles, ammunition,
and rockets under existing contracts.
The largest cooperative project so far-a $500 million
deal for the manufacture of the Astros multiple
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surface-to-surface rocket launching system
Plagued by technical and financial problems, the
program is running a year behind schedule. Brazil
soon may be able to send two prototypes to Iraq for
testing, however, and the first production models
could be ready for shipment as early as the end of this
year.
Iraq is also searching for more powerful missiles and
has shown an interest in Brazil's space program.
Libya
Libya-the second-largest purchaser of Brazilian
awns--is also playing a greater role in the design of
specific weapons systems. Last year,
negotiations for the sale of
180 Jararaca armored vehicles to Libya. Soon
thereafter the press announced that Gngesa would
eUuip the vehicle to fire antitank missiles and would
install a filtering system to enable it to operate in a
nuclear, biological, or chemical ~~arfare environment.
We believe these modifications were undertaken
specifically to accommodate the Libyan order,
although the identity of the end user-Libya, Iran, or
one of Tripoli's insurgent clients- remains unclear.
Libya already may have transferred some of its
Brazilian-made weapons to insurgent associates
rockets, and aircraft.
Late last year, a
Libyan official signed protocols ~f intent to buy from
Brazil over $1 billion worth of tanks, artillery,
Libya or another Arab country may be involved
secretly in the development of th~~ ET-1 Osorio-a
Brazilian tank now under develo}~ment-which the
Brazilians claim will be comparable to the German
Leopard or British Chieftain in firepower, mobility,
and range. A protocol signed in late 1983 reportedly
provided for the possibility of Libya's buying over 200
of these 40-ton tanks from Brazi! when they become
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~ecrct
available in 1985-86. }Zecent press reports indicate
that last year Libya also offered to finance
development of the Osorio. The president of the firm
making the tank, however, claims to have signed a
contract worth over $2 billion with Saudi Arabia to
develop and produce the vehicle, suggesting that the
Saudis also may be involved in the program. Even if
"Tripoli is not the main backer, the firm's president
continuing on the project,
L?cal Arms I~/Ianufactua~e and Technical Cupp?rt
Arab arms clients have spurred a new development in
the Brazilian arms industry-the export of entire
factories for weapons assembly and technical support.
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remains optimistic regarding sales to Libya and Iraq,
Syria and >[~uwait
Damascus reportedly has approached Brazil with a
request to buy 50 to 100 armed helicopters for itself
and lran. This deal involves at least one configuration
with antitank missiles fitted to Brazil's French-
designed Esquilo helicopters. Progress has been
impeded, however, by political uncertainties in Syria
Another Brazilian firm reportedly has negotiated a
contract with Kuwait for 422 Urutu armored cars,
which are to be mounted with none-man turret
equipped with an integral TOW antitank missile
According to press and
Brazil will sell 10 Brazilian-built Tucano trainer light
ground attack aircraft to Egypt, which then will
assemble at least 110 more under the auspices of
Cairo's Arab Organization for Industrialization.
Eighty of these are destined for Iraq, and the
remaining 40 are for the Egyptian Air Force. The
$100 million package, the first substantial transfer of
weapons technology abroad by a Brazilian firm,
includes training, flight simulators, and an option for
the purchase of an additional 60 Tucanos.~~
We believe the Arab connection also may have
improved the ability of Brazilian technicians to
service and support Soviet and Western equipment in
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Third World countries. The Brazilians already arc
familiar with a wide range of US armored vehicles,
Prospects
Brazil's shortage of capital and the Arab states'
continued interest in purchasing Brazilian weapons
point to further cooperation in arms production.
Although the size of recent Arab arms deals may
strain Brazil's ability to produce and deliver some
kinds of weapons, the largest aviation and armored
vehicle firms have established records for reliability
and would probably be able to fill most contracts on
time.
Brazilian defense firms' heavy dependence on Middle
Eastern markets and sources of investment carries
several risks, in our view. Libya's commercial
relations often have been erratic, and trade with Iraq
is contingent on a number of variables:
? Baghdad may not be able to pay, or to persuade the
Saudis to pay, for arms imports.
? The end of the Iran-Iraq war would dampen
demand.
? Improved ties with the Soviet Union could lessen
Baghdad's overall interest in Brazilian arms.
Aggressive sales efforts in Latin America and Africa
are attracting new customers, but these markets are
limited and could not compensate for the loss of
Middle Eastern clients. Given Brasilia's financial
woes, the armed forces likewise would be unable to
pick up much of the slack.
Implications for the United States
We believe the continued expansion of Brazil's arms
industry poses both problems and opportunities for the
United States. On the positive side, Brazilian weapons
producers could contribute to US interests by arming
states that the US supports but for a variety of
reasons, is unwilling to sell to directly. Moreover,
some Brazilian weapons-simple, light armored
vehicles, for example-present attractive alternatives
to equivalent Soviet equipment because of their
simplicity, reliability, and low cost. Their purchase by
technicians in a particular country.
Third World countries could not only displace Soviet
materiel but also reduce the number of Soviet
In areas where Brazilian and US-interests diverge,
however, the secrecy, export orientation, and clientele
of Brazil's arms industry are likely to pose problems
for Washington. Improved cooperation in military
production could enhance the ability of the United
States to influence Brazilian arms sales, but carries
the risk that aspects of US techn?logy could be
transferred to hostile states such as Libya-or their
terrorist or insurgent associates-by means of derived
or imitative Brazilian technology.! The growth of
cooperative projects such as the joint rocket program
with Iraq, moreover, carries the potential for the
introduction into regions of conflict of longer range
weapons incorporating advanced technology. In
addition, because only a fraction of Brazilian arms
production is used domestically, US technological
cooperation probably will help improve the
competitive edge of Brazilian weapons manufacturers
more than it will contribute directly to the
modernization of Brazil's armed f'orces.~
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~.asd~rn C~ribbean> Reba?na~
~ecut?ity A~?ike~ ~re~ada
T'he dramatic events in Granada last October
reemphasized to the small states of the Eastern
Caribbean the need to develop a capability to defend
themselves against foreign or domestic threats to their
security. Several now believe the two~year~old
Regional Security System (RSS) ought to be
expanded significantly, and local leaders also have
been discussing a new concept of a Caribbean Defense
Force. There is no consensus, however, on the
composition or role of this force, or how it would ba
funded. The RSS has been heavily dependent on
fiinding Crom the United States, in addition to support
ft?om the United Kingdom and Canada, and the
envisioned Defense Force would be more so. That and
the lack of agreement among member states almost
ensure that present plans will have to be scaled back
to reflect financial a,nd political realities.
Mission and ?rganization ?f 12SS
The Regional Security System was created as a result
of the memorandum of understanding signed in
October 1982, by Barbados, Antigua, Dominica,
St. Lucia, and St. Vincent. It was designed to fill the
security gap left by Britain's departure after many
Eastern Caribbean states gained independence. The
agreement provides for the development of a self-
defensc capability by its members and enables any
state to call upon the others to help put down a threat
from a foreign or extralegal group. Other functions
include drug interdiction, maritime search and rescue,
and coping with natural disasters.
The newly independent island state of St. Kitts-Nevis
was admitted to the RSS last February, and there are
plans to invite Montserrat and possibly Anguilla and
the British Virgin islands when they become
independent. Grenada is also expected to join the RSS
sometime after national elections are held. Five of the
RSS members pay $40,000 each annually, 55 percent
of the total cost, and Barbados provides the remaining
45 percent or $175,000. Barbados also serves as the
administrative headduarters of the RSS, and its
~arbad'os Defense F'orceo
? Army includes 275 active-duty personnel and equal
number of reserves, equipped with rifles and
machineguns.
? Coast Guard, with 90 personnel and no reserves,
has one 1 ~5 foot patrol boat, one 65 foot patrol
boat, two 75foot shrimp trawlers, and three 41 foot
patrol craft.
?Police force o9~ 350, of which 60 are in Special
.Security Unit.
,4rttigaa Defense ~"orceo
a Army of 60 with few reserves.
? Coast Guard with 10 to 1 S personnel, no reserves,
and one 65 foot patrol boat.
? Police force of 350; 60 in Special Security Unit.
Domanaca:
? Coast Guard with one 65 foot patrol boat.
? Police force of 325; 80 in ,Special Security Unit.
St. Laciae
? Coast Guard with one 65foot patrol boat.
? Police force of 375, of which 80 are in Special
Security Unit.
St. Fitts-[Navas:
a Police force of 275; 40 in Special Security Unit.
St. i'ancent<
Coast Guard with 20 to 25 personnel, no reserves,
and one 65-foot patrol boat.
? Police force of 325, of which 65 are in Special
Security Unit.
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commander of the Barbados Defense Force
Under the original agreement, each member provides
40 personnel to the RSS for a total force of 240. Only
Barbados and Antigua have regular defense forces to
draw on. The other states have 40- to 80-member
Special Security Units composed of police personnel
with paramilitary training. Approximately 140
personnel from the RSS, in addition to almost 300
members of the Jamaican Defense Force, are now in
Grenada as part of the Caribbean Peacekeeping Force
US and Other Support to the RSS
Because of the limited financial resources of many
member states, United States assistance is vital to the
RSS. The United States has provided training and
material support through the Military Assistance
Program, the International Military Education and
Training Program, and the Caribbean Peacekeeping
Operation. Before the Grenada intervention, US
military assistance to the Eastern Caribbean
amounted to less than $1 million per year. In 1984 the
total funding provided by these various programs will
The Peacekeeping Operation provided $ I S million in
1984 to the Special Security Units of member
states-except St. Kitts-Nevis-for weapons,
equipment, transportation, and Training to perform
their duties in Grenada. In addition, the other two
programs provided $7 million in 1984. Three 65-foot
patrol boats, costing $100,000 each, were provided to
Antigua, Dominica, and St. Lucia in late April under
the Military Assistance Program. It will cost an
additional $100,000 per year to equip and maintain
each of these boats.
Proposals for FY 1985 funding,; now before Congress,
include $5 million for the Military Assistance
Program and $5 million for thePeacekeeping Force.
To pay the operating expenses incurred in fulfilling
their peacekeeping role in Grenada, the participating
states-not including Jamaica-have requested an
additional $10.5 million to cover the period from
25 October 1983 through 31 October 1984.
Most of this assistance over thenext five years will be
utilized to improve and strengthen the RSS. Future
priorities include air and sea transport, armored
be over $22 million.
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Secret
Pla~as,for Iirtprovi~tg the Ilegioraal
Sec~asrity ~yste~n: 1985-90
~lir and sea transport for? rapid reaction:
a Three helicopters with nr'ne-passenger capacity, or
STOI_ aircraft that can carry 12 passengers and two
jeeps (estimated cost: $70 million).
? Two landing crcd't (estimated cost: $2.4 rnillionJ.
Arma?ed ground capability to prevent ambush:
? Tivo armored personnel carriers for each member
state (estimated cost: $1.8 fnillionJ.
? Basic weapons and equipn2ent upgrade (estimated
COSt: ,~i l.5 ri2dhOnJ.
Naval patrol capabilities:
? One 110-foot patf?ol boat.for northern tier of islands
(estimated cost: $2 million).
a Replncen2ent weapons .for older patrol boats of the
Barbados and St. Vincent Coast Guard (estimated
cost: $!75,000).
ground transport, a greater naval patrol capability,
and improvements in basic weapons with an estimated
cost of over $17 million.
The United Kingdom and Canada have provided a
limited amount of assistance to the RSS, primarily for
training. Britain has furnished some $10 million in
aid, including training at Sandhurst and the Royal
Marines infantay training course. Canada has
provided a total of $13 million, most of it for a Coast
Guard training program.
New Caribbean Defense Force Concept
Leaders of RSS member states, who have been
studying the possibility of establishing a new
Caribbean Defense Force, raised the issue during a
meeting with Secretary of State Shultz last February
in Barbados. "T'he new concept envisions a land forces
clement in the RSS, which is now essentially a coast
guard force. Proponents believe that one regional
army could bette~? deal with external aggression or
mercenaries than several small national armies. They
contemplate a standing army of 1,800 personnel based
thereafter
in Barbados and commanded by Colonel Lewis-an
arrangement similar to the Caribbean Peacekeeping
Force on Grenada. Able to react rapidly to any
emergency, the force would be equipped with armored
personnel carriers, antitank weapons, and mortars. It
would also have an air wing and three 164-foot patrol
boats at its disposal. The cost of establishing such a
force would be high $170 million over afive-year
period and $27 million per year in recurrent costs
According to the US Embassy in Bridgetown,
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the composition and role of the new force as well as on
how it would be financed. Barbados Prime Minister
Adams has been the prime proponent of the proposal, 25X1
which also has the general support of the Government
of St. Vincent. St. Lucia Prime Minister Compton
told the Embassy that he regards the idea as "much
too ambitious," but otherwise supports it.
The main critic has been Dominica Prime Minister
Charles, who is against the concept of a "standing 25X1
army" as a result of her bad experiences with the
Dominica Defense Force, which she disbanded after a
coup attempt in December 1981. She is also
concerned about how to foot the bill for the new
organization once it is set up. Antigua's military
leaders already are jealous of Barbados's large role in
the RSS and want no expansion of the present
cooperative effort, according to the Embassy.
The Embassy also notes Prime Minister Adam's view
that Barbados, St. Vincent, and St. Lucia the
original nucleus of the RSS-might move ahead on
their own. ?therwise, Adams predicted, it would take
a long time for all six states to get their act together.
?utlook
In the four months since the February meeting, no
consensus has emerged among the Eastern Caribbean
leaders regarding the composition and role of the
Caribbean Defense Force or, more importantly, how
it would be funded. The United States has informed
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the leaders that it is not in favor of creating a regional
standing army and that the plan is too ambitious in
scope and cost, according to the Embassy. The United
Kingdom and Canada also do not support the concept
and, according to the Embassy, there is no chance
that they would consider assistance to a military
instead of a police force, nor would they provide airlift
support for such an organization.
According to Embassy officials, until more thought is
given to the concept by regional military planners and
political leaders, the United States will limit itself to
improving the capabilities of the RSS. Only after an
agreement is worked out by the Eastern Caribbean
leaders will the United States determine the extent of
its participation in the training and equipping of the
new Caribbean Defense Force.
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Secret
~~rf~arneo ~ra~f~ I,??m~a~g
Army Commander Boutcrse's refusal to contemplate
democratic and economic reforms, which he seas as
unacceptable threats to his power, is causing strains in
the ruling coalition and could lead to the departure
from the Cabinet of Prime: Minister Udenhout and
other moderates. The accelerated pace of economic
deterioration has added a sense of urgency to the
political iiupassc. With foreign exchange reserves
nearly depleted, the country must impose harsher
auslcrity measures regardless of the outcome of
negotiations with the IMF. The tense situation could
lead to violence and a larger role in the government
for Bouteise's leftist advisers.
The US Embassy reports that the mood of optimism
that accompanied tl~e formation of the interim cabinet
in February, following the monthlong strike by
bauxite workers, has dissipated. The diverse military,
labor, and business interests in the Cabinet have
failed to reach agreement on how to return Suriname
to democracy or to halt the nation's economic decline.
As a result, the business community is disillusioned
and the trade unions are becoming restless, according
to the Embassy.
The lconomic Sce~~e
The bauxite workers' strike further damaged an
economy already suffering from government
mismanagement and the suspension of generous
Dutch aid in December 19fi?.
the strike cost Suriname as
much as $7~ million in anticipated foreign exchange
earnings this year, forcing the government in March
to declare a virtual ban on imports
The import ban is cutting deeply into living standards.
About 70 percent of the country's consumer goods
were imported last year, and shortages of some foods
arc now occurring. The US F,mbassy reports there is
increasing talk of hoarding and evidence of price
gouging.
The loss of revenue from bauxite exports and the
suspension of planned taxes as part of the strike
settlement also widened the budget deficit this year.
Government readiness to finance most of this deficit
by borrowing from the Central Bank has dried up
credit to the private sector.
The 1MF this month is likely to recommend slashing
the budget deficit, halting Central Bank credit to the
public sector, and possibly devaluing the guilder.
Without an TMF
program, however, most Western lenders will
continue to keep their distance, and the country's
financial crisis will be prolonged.
Bouterse, Udenhout, and the Left
Bouterse has undermined Udenhout's position, and
most officials-recognizing Udenhout's lack of
influence with Bouterse-see no reason to back the
Prime Minister
Udenhout has been able to get some cosmetic reforms
by Bouterse, but the Army commander probably sees
further liberalisation as a threat to his power.
Although censorship was partially lifted last month,
private media outlets are still severely restricted.
Similarly, the Prime Minister fired several leftist
radicals from government posts, only to have Bouterse
later appoint some of the same officials to key
positions in the economic and foreign affairs
ministries. They are now in positions to block
Udenhout's efforts to obtain Western financial
assistance.
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ALA LAK 84-01I
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Bouterse probably has regained the confidence that he
lost during the bauxite strike, and his fears of a US
invasion after Grenada-reflected in his expulsion of
Cubans from Suriname last October and his
reluctance to use force against the striking workers-
probably have receded. His primary goal remains the
preservation of his power, and he may have reached
the limit of his willingness to compromise.
Bouterse's main political weakness is a lack of popular
support, which he hopes to regain with his leftist-
oriented National Unity Movement. In recent weeks,
he has intensified efforts to improve the Movement's
ability to mobilize and regiment the population. The
Movement's program calls for the establishment of an
authoritarian "revolutionary democracy" and a
centrally planned economy
Outlook
The Finance Minister will have a difficult time selling
Bouterse on an IMF package that probably will
require controversial tax increases, and deep cuts in
military spending and the public payroll. Recent
articles in the Surinamese Army journal strongly
opposed the IMF, and Bouterse recently declared he
would not allow the Fund to dictate to Suriname.
Moreover, he has asked his leftist advisers to consider
the advisability of accepting an IMF package in light
of recent riots in the Dominican Republic over
austerity measures.
The business sector is unlikely to support tax hikes
and budget cuts until the military shows more
evidence of frugality. Increasingly concerned about
the growing shortages of producer goods and the
tightening credit situation, business is likely to hedge
its bets by sending more money out of the country, or
by emigrating.
Tensions could reach a breaking point next month,
when a new budget is to be ann~~unced and after the
pipeline of imports ordered before the ban in March is
exhausted and current stocks are depleted. Moreover,
possible government moves to initiate new tax
measures or spending cuts could' spark unrest
reminiscent of the bauxite strike earlier this year.
Bouterse probably recognizes a need for the expertise
of the business sector and the political backing of the
labor unions, and has shown restraint in the past in
dealing with striking workers. Nevertheless, he is
likely to rely increasingly on the'' hardline approach
advocated by his pro-Cuban leftist advisers, while
blaming Udenhout and the moderates for any serious
unrest that develops.
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Aftex? 10 years ofrelative r`nactivity, Uruguay's once
powerful labor movement has reemerged-wearing its
old leftist stripes-as a significant force. ]lts primary
concc;rn is the improveme:at of economic conditions
for workers. "fhe abilif.y of labox? leaders to mobilize
large numbers of people to press economic grievances
also gives them potential influence over the transition
to civilian rule which., while scheduled for early next
year, is currently stalled. We believe that labor
leaders are more interested in exploiting current
t,,nsions between the military government and
civilians to advance 9:hoir own interests than in
pressing President Alvarez to proceed with the
t~?ansition.
~'he labor movement operates as a relatively
i=ixdependent politics?l force, despite its ties with
(.'omnxunists and other leftist groups. ~ he country's
two major political parties have avoided an alliance
with the unions out of fear of an eventxaal government
crackdown as well as jealousy at labors success in
projecting iiself into the political arena. For his part,
Alvarez seems not unhappy with labor activism. ~Ie
has thwarted preparations fox? the transition to civilian
rule, and he probably hopes that increased stx?ikcs and
demonstrations will persuade both t:he military and
political moderates t.o dela;y the process.
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