CENTRAL AMERICAN MONTHLY REPORT #3

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R000500080001-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 22, 2016
• Document Release Date: July 26, 2010
• Sequence Number: 1
• Publication Date: October 1, 1983
• Content Type: MEMO

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Central intelligence Agency
Washington, D. C.20505
DIRECTORATE OF INTELLIGENCE
October 1983
CENTRAL AMERICAN MONTHLY REPORT #3
Summary
Tensions in the region continue to escalate as the search for
a peaceful solution goes on. The Sandinista regime has come under
intense military and economic pressure over the past month as a
result of continued insurgent attacks, but it is reacting
defiantly and calling for more military aid. In El Salvador, the
insurgents have continued their offensive actions, although their
military resupply from Cuba and Nicaragua may be reduced. In
Guatemala, Chief of State Mejia has removed one of his main
military rivals, but the security situation remains tense as a
result of both rightist and leftist violence. The Honduran
government is pushing for greater regional cooperation against the
Sandinistas
Costa Rican relations with Nicaragua have reached a new
low as a result of a Sandinista attack on a Costa Rican border
post. In Panama, President de la Espriella and General Noreiga
continue to maneuver in preparation for next year's scheduled
elections. Finally, the Contadora peace effort has produced
several draft treaties, but serious obstacles remain.
This memorandum was prepared by the Central America Branch, ALA. It was
coordinated with the Directorate of Operations. It contains information
available as of 31 October 1983. Questions and comments are welcome and
should be addressed to Chief, Middle America-Caribbean Division, OALA,
ALA-M-83-10172C
Copy C[ of 66
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Military
The most significant insurgent actions this month were
early October raids on petroleum facilities at Corinto and Puerto
Isabel, which resulted in the destruction of nearly 5 percent of
the country's storage capacity. Another sabotage attack on the
crude oil terminal at Puerto Sandino was evidently less
successful, as were raids on Puerto Cabezas and El Bluff.
The FDN continued to harass Sandinista forces in central
Nicaragua, with clashes occurring almost daily. So far there is
no evidence of the supply problems that hampered the insurgents
last spring, despite the loss of a transport aircraft early in
the month. The largest single action was the 19 October takeover
of Pantasma, a town in Matagalpa Department. By Sandinista
accounts, the insurgents killed 46 persons--mostly government
employees--and destroyed several military and government
facilities.
The Misura (Miskito Indian) guerrillas appear to control
most of the Atlantic coastal region, apart from the main towns.
The Sandinistas have responded to the insurgent activity
with large scale sweep operations by regular and reserve units
and increased use of airstrikes. They also are strengthening air
defenses around Managua, Corinto, and Puerto Sandino. The
buildup of the new territorial militia for local defense
continues
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Political
The Sandinistas have reacted to recent insurgent
attacks--and to the invasion of Grenada--by organizing mass
rallies, calling for increased civil defense measures and
revolutionary vigilance, and bracing the population for
additional sacrifices. The regime has also issued several public
warnings to the opposition.
Following insurgent attacks on both northern and southern
border posts, Defense Minister Humberto Ortega asserted that the
Sandinista military would pursue the insurgents into Honduran and
Costa Rican territory. Although those remarks were later
qualified, they indicate waning Sandinista patience with
insurgent incursions. The regime subsequently declared a new 25
mile security zone off both its coasts for air and sea traffic.
The Sandinistas apparently consider the Kissinger Commission
a US political ploy, and its visit was marred by sharp exchanges
with Foreign Minister D'Escoto and Junta Coordinator Daniel
Ortega. Ortega's meeting with Assistant Secretary of State
Motley was also strained. While professing a readiness to meet
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US security concerns, he hinted at both regionalization of the
conflict and radicalization of the revolution if insurgent
attacks continue.
Interior Minister Borge returned from his trip to seven West
European countries and Libya claiming he had received
considerable political and financial support. Nevertheless, US
Embassy reports indicate several leaders criticized the
Sandinistas' failure to keep their democratic promises. Borge's
disastrous visit to Germany reportedly resulted in a shouting
match with Foreign Minister Genscher.
Economic
Nicaragua's energy situation has become strained, but still
manageable, after recent insurgent attacks on its energy
infrastructure. The destruction of fuel tanks at Puerto Isabel
will have a severe effect on east coast energy supply. The
crucial crude oil import terminal at Puerto Sandino has been
repaired and is still functioning despite several sabotage
attacks. Getting ships to deliver crude from Mexico has become a
serious problem, however
In early October, the government raised fuel prices by 40
percent in an effort to conserve supplies and raise revenue.
Recently announced measures include cuts in rationing allocations
and reduction of the work week. The Sandinistas are attempting
to minimize popular discontent by continuing public transport
subsidies.
The government announced in late September that it will soon
set mandatory pay scales for all salaried employees in the
country. The plan will further extend state control over the
economy and the private sector, and require a large and intrusive
bureaucracy
Nicaragua announced new credit agreements with
Yugoslavia--$25 million--and the Netherlands--$5 million.
Meanwhile, new information indicates that Nicaragua has
established a joint economic commission with CEMA, the Communist
trade organ, but it did not become a full observer.
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Military
The guerrillas' joint offensive in eastern and central El
Salvador continued throughout October. Their activity in large
part has been marked by hit-and-run attacks against small towns
and isolated garrisons, sabotage of electrical facilities and
bridges, and ambushes of government relief forces. Government
units took particularly heavy losses in attacks on Tenancingo and
Nuevo Eden de San Juan. The offensive has succeeded in blunting
much of the momentum built by the Army during its summer
campaign.
The Army's optimistic outlook evident this summer has now
given way to some pessimism.
Nevertheless, the Army continues to launch sweep operations t
regain lost territory and preempt insurgent actions.
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Political
Salvadoran labor turned out for a demonstration in late
September in support of more liberal reforms in the draft
constitution currently being debated in the Assembly. Some
15,000 to 20,000 workers and campesinos staged a peaceful rally
in San Salvador that was actively supported by members of the
Christian Democratic Party.
The rally was overshadowed by a resurgence of rightwing
death squad activity aimed at ending the reform campaign.
Several union leaders and leftist intellectuals have been either
kidnapped or killed. Ultrarightist leader Roberto D'Aubuisson
charged publicly that the moderate leader of the largest
democratic campesino labor organization had ties with the extreme
left. An Assembly deputy also received a telephone threat during
legislative debate on reform articles, causing the session to be
suspended. Each of the parties in the Assembly is promoting its
own version of an article dealing with land tenure, but a
compromise is expected on the amount of land available for future
agrarian reform.
The presidential election is still on track for the first
quarter of 1984.
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There were no meetings this month between the government's
peace commission and the insurgents. The insurgents have
proposed El Salvador as the site for any future meetings. The
government is reluctant to accept this, however, and the dialogue
is at an apparent impasse.
Political
Mejia formally completed the electoral timetable by publicly
endorsing constituent assembly elections next July. He also
noted that he intends to turn power over to an elected civilian
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government in July 1985. Some 30 political organizations have
begun organizing to contest the elections, but probably less than
half of those will meet the requirements to become inscribed as
political parties. Moreover, political intimidation and human
rights abuses increased this month as the political campaign got
underway, and some new parties may opt not to participate because
of security concerns. Three Christian Democratic Party leaders
recently were murdered, and two leaders of a new left-of-center
party were abducted last month. There are indications that
organized rightwing violence--some involving security forces--is
increasing, including two separate cases involving the abduction
of Guatemalan employees of the US Agency for International
Development.
Military
During the first half of October, the insurgents kept up the
increased level of terrorist attacks noted in September. Even
so, they have not been able to make use of the political
instability to retake the tactical advantage from the military.
The military, in fact, has stepped up its operations in rural
areas, particularly in two areas along the Mexican border
considered by the Army to be major insurgent supply corridors. A
military spokesman claims that in one action the Arm ambushed an
insurgent force and inflicted 50 casualties.
The insurgents, however, have countered with some
high-visibility terrorism successes, and they appear to have
reestablished a strong urban network. The Guatemalan Communist
Party--which announced it was formally joining the guerrilla
alliance--released the abducted owner of a major newspaper after
receiving a ransom of approximately $400,000 and getting a
propaganda statement published. The guerrilla group that
kidnapped the sisters of Mejia and former President Rios Montt
also secured publication of an anti-government, anti-US statement
in exchange for their release.
Economic
Tax revenues collected during the first month under the new
value added tax--before the rate was reduced by Mejia--were far
below government projections, and shortfalls are likely to
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increase under the weakened tax formula. An IMF team will study
the impact of reduced tax revenues on Guatemala's ability to
comply with the guidelines of a $120.5 million loan agreement
signed in September.
Political
President Suazo continues to convalesce from his July heart
attack. Press reports state that he is undergoing daily medical
evaluations and working only half a day. The same reports
indicate that Gustavo Adolfo Alfaro, an economic adviser, has
taken on a substantial role in handling affairs of state. If
true, this development suggests that presidential troubleshooter
Despite his health concerns, Suazo remains an active
participant in regional issues. He was eager to host a meeting
of regional heads of state on 25 September under the auspices of
CONDECA, although the plans fell through. Tegucigalpa apparently
is anxious to promote CONDECA as a means of getting Guatemala and
El Salvador formally committed to the defense of Honduras against
Sandinista attack, but those countries are reluctant to move too
rapidly in that direction. Military represenatives from the
CONDECA countries--Guatemala, El Salvador, Honduras, and
Panama--did meet in Tegucigalpa in late October.
Military
Border incidents continue to be reported by both Honduras
and Nicaragua, although there has been no noticable increase in
their frequency. Tegucigalpa reacted strongly to Humberto
Ortega's recent statement that Nicaragua would enter Honduras in
pursuit of insurgents, stating that it would use all of its
defensive resources to repel foreign incursions.
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As an indication of its concern for border security, the
Honduran Armed Forces recently purchased two Brazilian
Bandeirante reconnaissance aircraft for delivery in mid-1984.
The Honduran Air force already has maintenance and logistic
problems stemming from the diversity of its supplies, and the
addition of Brazilian equipment will further complicate
matters.
Political
Relations with Nicaragua reached a new low this past
month. Sandinista troops attacked Costa Rican border units at
Penas Blancas on 28 September, apparently in retaliation for an
assault by Pastora's forces there earlier the same day. San Jose
reacted by recalling its Ambassador from Managua and calling an
extraordinary meeting of the OAS Permanent Council to denounce
the incident.
Officials have also stepped up security efforts in San Jose
because of a resurgence of terrorist activity in the capital. An
attack on the British Ambassador's residence on 30 September
reportedly may have involved members of the Basque ETA terrorist
group. Authorities have apprehended two more terrorists linked
to the ETA plot to assassinate insurgent leader Pastora
discovered in early September. Spain has formally requested
extradition of the Basque terrorist arrested last month, but
Costa Rica is unlikely to fulfill
the request. Most recently, a plan to kidnap government and US
Embassy officials has been uncovered. The hostages would be
exchanged for local terrorists currently imprisoned in Costa
Rican jails.
Regarding regional ties, Monge strengthened relations with
Mexico while on a 3-day trip there at mid-month. His meetings
with Mexican President de la Madrid reportedly were cordial,
although major differences in policy toward Nicaragua persist.F
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Economic
Positive economic news over the last month came in the form
of various Western aid pledges. These included a $32 million US
assistance agreement, a $15 million loan from Canada, a $9.5
million West German loan, an Italian offer to extend Costa Rica a
new $40 million line of credit, and a Norwegian donation of
$150,000 in refugee assistance. The growing refugee problem,
brought about by a continued flood of Nicaraguans, prompted San
Jose to declare a national emergency in early October. The
number of Nicaraguans in Costa Rican refugee camps may have
reached about 2,000.
Less favorable economic news included a report that Costa
Rica's foreign public debt increased by $250 million, or 10
percent, over the last year to reach a total of nearly $2.75
billion. Further, the proposed 1984 budget issued at the end of
September threatens to jeopardize Monge's austerity policies by
nearly doubling the government's deficit from last year's
figure. This and commitments specified in the 1983 agreement led
to a postponement of talks on a 1984 IMF standby agreement
originally scheduled to take place in mid-October. Resumption of
talks recently have been conditioned upon a requirement that the
government cut public spending by at least $50 million, a
prerequisite that San Jose indicates it might be able to meet
through cost cutting administrative practices rather than
budgetary revisions.
Political
The sudden withdrawal of former National Guard Commander
Paredes from the presidential race early last month created
disarray in the electoral plans of both the ruling Revolutionary
Democratic Party and its political opposition.
The idea of delaying the elections failed to attract much
political support, however, and as a result the President has
,publicly announced the election will be held as scheduled in May
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1984. Nevertheless, he and General Noriega probably have not
given up on the postponement idea, and they may attempt to revive
it in the future should circumstances permit it.
Meanwhile, the elimination of both Paredes and the
constitutionally-restricted de la Espriella from the presidential
race has cast longtime opposition leader Arnulfo Arias into the
role of frontrunner. The thrice-elected and deposed Arias--now
82--remains the most popular political figure in Panama, but the
military is having serious difficulty accepting an Arias
candidacy because of Arias' traditional animosity toward the
armed forces.
Electoral political manuevering in Panama is only beginning,
however, and both Noriega and Arias will continue to test each
other's position until the last possible moment. Despite an
apparent improvement in relations between the two recently, basic
distrust remains, and close collaboration between them seems
unlikely. Noriega--as the ultimate power arbiter in Panama--will
continue to insure the military's interests are best served in
the elections or else he is likely to intervene in the process.
Military
Noriega announced a new law late last month reorganizing the
National Guard into the "Defense Forces of the Republic of
Panama." The law establishes the President as supreme commander
of the military and creates three additional general officer
slots which will be filled as the new force grows. The law also
prohibits active service members from joining political parties
or participating in political activities, but does allow military
personnel to vote.
The restructuring of the Guard along more conventional
military force lines probably reflects Noriega's growing concern
over regional unrest and his desire to significantly upgrade
Panama's overall military capabilities. The US Embassy reports
that Noriega has requested an informal visit to Washington next
month to discuss force development projections and possible US
security assistance support. Meanwhile, the recent formation of
the first battalion-sized combat unit is being touted as the
initial step toward the assumption of full responsibility for
Canal defenses by the end of the century.
The political opposition has been highly critical of the
defense law, claiming that it will allow the military to turn
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Panama into a police state. Noriega has moved quickly to defuse
the controversy, however, by requesting that the President review
those articles of the law that its opponents find most
objectionable.
Economic
The US Embassy reports that Panama's economy now appears
headed into a deeper recession than earlier forecasts had
predicted. Panamanian officials estimate that real GDP will
decline 2.8 percent in 1983, and recovery does not appear likely
before late 1984. A local economic consultant says nationwide
unemployment is currently running at 17 percent, and one
government official has publicly stated that unemployment in the
Colon Free Zone Area--where some stores report sales down by as
much as 50 percent--is near 60 percent.
A new strike of banana workers earlier this month is adding
to the government's problems. The President has publicly termed
the strike as irresponsible, threatening to use the military to
break it up if the workers' union does not adopt a more
reasonable negotiating position. Officials of the US-owned
company say they are prepared to close some operations and lay
off as many as 1,250 workers, thereby exacerbating the already
critical unemployment situation
The Foreign Ministers from the Contadora countries--Mexico,
Venezuela, Panama, and Colombia--met in Panama on 21-22 October
to discuss implementing the "document of objectives" which the
five Central Americans nations endorsed in September. The
Ministers reportedly completed rough drafts on two bilateral
treaties--Nicaragua-Honduras and Nicaragua-Costa Rica--and a
general Central American treaty.
The Vice-Foreign Ministers of the Contadora group will
reconvene in Panama in early November for additional discussion
of the drafts.
they will also work on other treaties on arms reduction, military
advisers, and military forces. A meeting of all nine Foreign
Ministers during the mid-November OAS General Assembly in
Washington is planned.
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Meanwhile, Foreign Minister D'Escoto unveiled new Nicaraguan
peace proposals after meeting with US officials in Washington on
20 October. The Sandinista initiative apparently was intended to
maintain their emphasis on bilateral agreements and to project an
image of flexibility during the US Congressional debate on
Nicaragua. The proposals include two bilateral treaties,
Nicaragua-US and Nicaragua-Honduras, and a broad Central America
security treaty. D'Escoto stated that additional agreements
might be negotiated on foreign military advisers, the size of
military forces, and introduction of new weapons. The
Nicaraguans proposals avoid key regional concerns such as
democratization and verification measures.
The Sandinistas also presented a fourth treaty that would
end arms shipments to the government and the guerrillas in El
Salvador. This would place both sides on an equal footing
without conceding that Nicaragua is supporting the insurgents.
To get the Contadora countries to focus on El Salvador,
D'Escoto had Mexico present the Nicaraguan peace proposals at the
recent meeting in Panama. The Sandinistas apparently seek
Contadora involvement in the Salvadoran peace process as a means
of obtaining greater legitimacy for the insurgents. The other
Central American states have sought to focus on Nicaragua as the
main source of regional problems.
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SUBJECT: Central American Report #3
DISTRIBUTION
Copy # 1 - Mr. Richard C. McFarlane
2 - Mr. Donald Gregg
3 - Ambassador Shlaudeman for the Kissinger Commission
4 - The Honorable Richard B. Stone
5 - General Paul Gorman
6 - HPSCI
7 - SSCI
8 - Lt. Gen. James A. Williams
9 - Mr. Nestor D. Sanchez
10 - Mr. Constantine Menges
11 - Lt. Gen. Lincoln D. Faurer, USAF
12 - Vice Admiral Arthur S. Moreau
13 - Mr. Hugh Montgomery
14 - Ambassador Langhorne A. Motley
15 - Doug Mulholland
16 - Roger Fontaine, NSC
17 - DCI - 7D60
18 - DDCI - 7D6011
19 - Executive Director - 7D44
20 - SA/DCI/IC - 7D60
21 - Executive Registry - 7E12
22 - DDI - 7E44
23 - DDO - 7E26
24 - NIO/LA - 7E62
25 - NIC/AG - 2E49
26 - C/DDI/PES - 7F24
27 - Director, Legislative Liaison - 7D43
28 - Legistlative Liaison - 7B04
29 - DDI Rep CINCLANT
30 - PDB Staff - 7F30
31 & 32 - D/ALA - 3F45
33 - C/DDO/LA - 3C3203
34 - DDO/LALO E 3D5309
35 - C/DDO/LA 3C3203
36 - C/DDO/LA - 3B44
37 - C/LA.- 3B44
38 & 39 - ALA/PS - 3F38
40 - ALA Research Director - 3F44
41, 42, 43, & 44 - CPAS/IMC/CB - 7G07
45 - DDI/CPAS/ILS - 7G40
46 - C/MCD
47 - DC/MCD
48 - C/CA
49 - DC/CA
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50 - C/MX
51 - C/R
52 - C/CC
63 - MCD Files
64 - CA Files
65 - D/OIA - Rm. 3N100, Bld. 213
66 - CA Files
DDI/ALA/MCD/CA (31 October 1983)
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