WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000080014-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 37
• Document Creation Date: December 27, 2016
• Document Release Date: May 11, 2010
• Sequence Number: 14
• Publication Date: March 21, 1975
• Content Type: REPORT

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119 VIIE
Rfltt 10 11.1-111
Weekly Review
Top Secretlci
Top Secret
March 21, 1975
Copy
N2 419
I.
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l!flf), idny morning by the
Of iice el- Current inteiligrmce. riOltS and anah):.C2Ssic,nificant
dovr-:loprrient5 of the %%reek through noon on Thursday. it fre-
quieiitly incltids material coordinated with or prepared by the
Office of Economic Research, the Office of Strategic
Research, the Office of Geo,iiri-ipilic and Cartographic...
Flosearch, and the Direclorato of Science and TecnnologY?
Topic5 requiring morn comprehensive treatment and
fhhrefore r-.npar ately as Special Reports are listed
Ihri concnt,.;.
CONTENTS (Mardi 21, 1975)
EAST ASIA
PACIFIC
EUROPE
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
A Shrinking South Vietnam
3 Portugal: Leftists Set Course
4 Cambodia: The War Drags On
5 Thailand: A Government Finally
6 Canada: Trudeau Under Fire
7 EC: A Non-Summit Meeting
8 CSCE: The End May Be Near
9 The Montreux Convention
10 Last Europe: B..ezhnev Speaks
12 Soviet Civil Aviation
14 Poland: Consumer Complaints
16 Turkey: Demirel Takes His Turn
18 Iran-Iraq: Movement Forward
19 Syria: Joint Command with the PLO
20 Ethiopia: More Insurgency
22 Mexico: Visiting the Campus
23 Panama: Seeking Foreign Support
24 Argentina: Opposing Mrs. Peron
SPECIAL
REPORT (PubIished separately)
Brazil: A Year of Change
Comments and queries on the contents of this
Publication are ..',elcome. The may be direLted to
the editor of the Weekly R OVIPW
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A Shrinking South Vietnam
Faced with major, widespread North Viet-
namese assaults and the threat of even more
dangerous attacks in the future, P -esident Tkieu
made a fateful decision late last week to hus-
band his forces by ceding large portions of the
country to the Communists. Thieu's primary
objective was to protect the larger concentra-
tions of people and the economically more im-
portant areas of the country. Many of these
priority areas are clustered in the southern half
of the country or are strung out along the
north-central coast and can be reached directly
by road or sea.
While much of the newly abandoned terri-
tory consists of uninhabited jungle mountains,
the surrender of Kontum, Darlac, Pleiku, and
Quang Tri provinces is a major military and
psychoiogical setback for the South Vietnamese.
Despite downed bridges and the lack of food
and transport, many hundreds of thousands of
people are finding their own way out to the
relative safety of government-held areas. They
will quickly become a heavy burden on the
government's diminishing economic resources.
The territorial forces, which in many cases
were left behind to protect the withdrawal of
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the regular soldiers, have fled. There are also
some signs that government local forces in other
sectors of the country are beginning to lose
confidence because of their fear that they will
not be supported when push comes to shove.
Although Thieu apparently believes that he
is trading "territory for time," his decision to
give up large tracts without a fight is quickly
putting the Communists in a much better posi-
tion than they probably had hoped to achieve as
a result of this year's military campaign. In
many areas, the mountainous no-man's-land had
provided an effective buffer between opposing
armies. Much of this former buffer will now be
occupied by the North Vietnamese and newly
reinvigorated Viet Cong local forces, which can
now move in much closer to the populated
sections.
In other z.reas, Saigon's withdrawal opens
new avenues to Hanoi's long-standing major ob-
jectives. For example, the Communists now
have an opportunity to take the ancient imperial
capital of Hue far more cheaply and quickly
than at any other time in the past.
Compounding the government's problems,
the Communists are putting additional pressure
on a wide front, incl..ding some areas where the
government is relatively strong. The military sit-
uation has become critical in the northern prov-
inces of Quang Tin and Quang Ngai, for ex-
ample, where strong Communist attacks on the
outlying district towns have resulted in near
strangulation of both provincial capitals.
To the northeast of Saigon, the Commu-
nists have overrun a district capital in Long
Khanh Province along Route 20 to Dalat, effec-
tively cutting that strategic road. Route 1 has
also been severed east of Xuan Loc. Some of the
sharpest fighting of the week took place in the
.Tay Ninh area. Although the government was
able to reopen Route 22 and move large quanti-
ties of supplies to Tay Ninh City, elements of
the Communist 9th Division, which recently
seized Tri Tam district town, overran an impor-
tant government base less than five miles east of
Tay Ninh. Reinforced government troops are
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also trying to push back advancing Communist
forces in the southern part of the province.
In anticipation of Communist attacks. gov-
ernment units have been shifting in several areas
of the northern delta, and some heavy clashes
have erupted during these moves. Commanders
in the delta are deeply concerned that Saigon is
neglecting their problems because of the govern-
ment's preoccupation with the greater difficul-
ties presented in the other three military r-
gions.
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Portugal: Leftists Set Course
In the wake of the abortive coup last week
Portugal's ruling Armed Thrces Movement has
invested a 24-man militt.iy council with wide-
ranging governmental powers. This new "Rev-
olutionary Council" has moved boldly to assert
its new authority, announcing in rapid-fire
succession the nationalization of the nation's
banks and insurance companies, the proscription
of three political parties, and the postponement
of elections for nearly two weeks.
The newly formed Revolutionary Council
replaces key decision-making bodies of both the
government and the Movement. The council's
first major action came in the economic sector,
where it nationalized all Portuguese-owned
banks and insurance companies. The national-
ization measures go far beyond the govern-
ment's moderate economic plan and strengthen
the Movement's hand in running the country's
economy by giving the government control of
credit facilities. This is a major blow to the
oligarchy that has dominated Portugal's eco-
nomic life for generations.
In its first policy statement, the council
stressed continued observance of all interna-
tional agreements and obligations as well as the
protection of foreigners and their assets. The
constituent assembly elections will still be held,
and democratic fre,doms will be protected,
according to the statement. Subsequently, it was
announced that the elections will be delayed
from April 12 to April 25.
Prime Minister Goncalves has said that he
plans to bring members of a communist-front
organization?the Portuguese Democratic Move-
ment -into his government, but so far the
expected cabinet shuffle has not materialized.
The delay suggests he is having trouble securing
suitable candidates or the approval of the
Armed Forces Movement for his choices.
The two moderate parties in the present
government, meanwhile, are beginning to show
some determination to hold their ground. Mario
Soares, who is both foreign minister and leader
of the Socialist Party, publicly questioned
Goncalves' intention to bring the Portuguese
Democratic Movement into the government and
said cabinet changes just prior to the election
were inopportune. Soares also said he hoped to
continue to serve as foreign minister.
The Popular Democratic Party, on the
other hand, has sought to outflank the leftists
by closely identifying itself with Movement
policies. It was the first party to denounce the
coup attempt last week, and it quickly ac-
claimed the bank nationalization scheme.
In a widely expected political move, the
council banned two far left parties and the
moderate rightist Christian Democratic Party
until after the election. Groups on the extreme
left have been responsible for the political vio-
lence in recent weeks, while a leading Christian
Democrat is alleged to have been involved in the
coup attempt.
It is significant that the council did not ban
the Social Democratic Center?the Christian
Democrats' election coalition partner. The
Social Democratic Center has broad appeal
among conservatives and serves as a buffer on
the political right for the Popular Democratic
Party, which feels itself threatened by leftists
intent on tagging it with the "fascist" label.
These two parties together could still do well in
any legitimate election in April, although both
have suffered serious organizational disru tion
as a result of recent leftist attacks.
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CAMBODIA: THE WAR DRAGS Gi?i
Late last week, a government task force
broke through Communist lines and reoccupied
the town of Tuol Leap. Communist artillery fire
against Pochentong airport ceased immediately,
although mobile rocket crews continued inter-
mittent attacks against the airport. At week's
end, even this rocket fire began to slacken as the
task force pushed into the marshy and wooded
"rocket belt" just northeast of Tuol Leap. For
their part, the Communists kept steady pressure
on government units near Route 5 north of the
capital and launched fre.h attacks near Route 4
in the west, apparently in an effort to divert
government troops from the Tuol Leap opera-
tion.
Fighting also continued along the Mekong
River near Phnom Penh as Communist forces
briefly penetrated an area directly opposite the
city's waterfront. The new threat forced the
government to postpone its effort to push insur-
gent mortar and recoilless rifle crews out of
range of the main navy headquarters. Commu-
nist units along the Mekong have also stepped
up rocket attacks against downtown Phnom
Penh, including the southeastern section where
the presidential palace and the US embassy are
located.
Govmunent troops outside Phnom Penh
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Farther south along the Mek )ng, the situa-
tion at the government enclave around Neak
Luong and the nearby town of Banam took a
serious turn for the worse on March 17 when
the government abandoned its floating navy sup-
port base. The base?anchored just off an island
northwest of Neak Lucng?had been the target
of close-range shelling and was in flames when
evacuated. Three navy patrol boats were lost but
all personnel made it ashore. Neak Luong itself
is the target of heavy Communist artillery fire
and casualties are mounting among the 30,000
refugees packed into the cown. The navy has
temporarily halted convoy traffic to Neak
Luong, leaving airdrops as the only means of
resupply.
The exodus of foreigne..s from Phnom
Penh increased this week. The French withdrew
their diplomatic staff, leaving behind only small
consular and cultural sections. All British per-
sonnel planned to fly out to Saigon at week's
end. The embassies of South Korea, Malaysia,
Indonesia, Japan, and Nationalist China remain
open, but with only skeleton staffs.
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THAILAND: A GOVERNMENT, FINALLY
Thailand's seven-week effort to form a par-
liamentary government is over. The National
Assembly on March 19 gave a vote of confi-
dence to tlir coalition proposed by Khukrit
Pca.m ot.
Although the new government enjoys the
support of the country's powerful vested inter-
ests, including the Chinese business community,
the bureaucrats, and the military, it is likely to
be unstable. Prime Minister Khukrit is reported
to believe that his government will not last more
than six months. The coalition rests on the
tenuous cooperation of seven political parties,
most of which are politically more conservative
than Khukrit. Though not entirely trusting him,
th: conservatives grudgingly cffered Khukrit the
clime ministership in order te attract parliamen-
tary support from the political center and left.
Khukrit's heavily conservative cabinet* is
composed largely of businessmen, political cro-
nies, and retired police and military officials?all
clearly out of step with Khukrit's more liberal
views. Such cabinet members as Deputy Prime
Minister and Minister of Defense Praman, who
owns much of Thailand's budding textile indus-
try, will probablY be less responsive than the
Sanya caretaker governmt..nt to pressure groups
demanding social, economic, and political re-
forms. The new government could therefore be-
ithukrit Pramot
come an early target of attack by student activ-
ists, intellectuals, and the press.
Khukrit is personally sympathetic to main-
taining Thailand's close ties with the US, but the
current political climate will almost certainly
restrict his efforts to do so. In response to
pressure from members of the National Assem-
bly and the press, Khukrit has gone on record as
favoring a one-year timetable for the withdrawal
cf US forces from Thaiiand.
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CANADA: TRUDEAU UNDER FIRE
Prime Minister Trudeau returned to Ottawa
this week to face mounting criticism for pro-
longing his visit to Europe at a time when
Canada faces growing labor unrest, continuing
inflation, and i-creasing unemployment. In ad-
dition, his own Liberal Party is on the defensive
following allegations that some party leaders
may have been behind an attempted cover-up of
a major financial scandal.
Trudeau had hoped his 17-day tour of five
West European capitals would produce some
firm commitments to support Canada's drive for
stronger ties with the European Community as a
counterbalance to what many Canadians regard
as an overwhelming dominance by the US. In
The Hague, Bonn, Rome, London, and Dublin,
however, Trudeau found only polite listeners.
The Europeans are still waiting for Ottawa to
define what it has in mind in its call for a
"contractual" relationship. Trudeau would go
no further than to term it a "link" providing the
means and the obligation to consult and confer.
He stressed that Canada is not seeking preferen-
tial treatmcnt ol special advantages that would
be contrary to the General Agreement on Tai iffs
and Trade.
For its part, the EC hopes to ril.,..;de by fall
on one of three possible approathes to th.?.? Cana-
dian request: a strictly commercial agreement,
an agreement establishing the framework for
industrial cooperation, or postponement of ne-
gotiations with Canada until the current multi-
lateral trade negotiations in Geneva are con-
cluded.
An obstacle to an agreement with the EC is
Canada's desire to emphasize the export of fin-
ished products rather than raw materials. The
EC countries, on the other hand, are anxious to
tap the vat mineral and timber resources of
Canada, in return for which they hope to ex-
pand markets for their finished products.
The other major goal of Trudeau's trip was
to urge Bonn, The Hague, and Rome to proceed
promptly with ratification of the Non-Prolifera-
tion Trelty. Ottawa is eager to find markets for
Canadian produced nuclear reactors. After India
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used material from a Cancdian-supplied reactor
to explode a nuclear device last year, Ottawa has
insisted that nuclear deals will not be made with
any ciation until it ratified the Non-Proliferation
Treaty and agreed to additional bilateral safo-
guard arrangements.
In Rome, Trudeau was assured by Italian
officials that ratification of the treaty was pro-
gressing rapidly and that it would soon be pre-
sented to parliament. Bonn and The Hague indi-
cated they were only waiting for the Italians to
complete the process before concluding their
own ratification.
Although Trudeau told Canadians before
he left on his trip that he did not expect to
reach any firm agreements, he is being criticized
by the press and in Parliament for his failure to
return with more concrete results. The attacks
against the Prime Minister center on the length
of his stay in Europe at a time when Canada's
domestic troubles have mounted.
Canada's unemployment rate rose in Feb-
ruary to 6.8 percent, the rate of inflatidn re-
mains a problem, and monthly trade statistics
show the nation slipping from a surplus to a
deficit in international trade. Strikes on the
Vancouver waterfront have held up vital grain
exports, and all Canadians have been directly
affected by a continuing strike of public service
workers that has disrupted transport and postal
services. In addition, the government has been
hurt by fraud charges against 12 of the coun-
try's major dredging firms, all of which have
connections to Liberal Party politicians in
Ottawa and Quebec. Moreover, several cabinet
members have come under direct attack for a
series of embarrassing gaffes over the past few
months.
Despite these troubles, Trudeau's substan-
tial majority in Parliament should enable him to
ride out the storm for the present. Elections are
not scheduled until 1978, and in the meantime
the Prime Minister is certain to employ his polit-
ical skills to revive the government's declining
fortunes.\
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EC: A "NON-SUMMIT" MEETING
The meeting on March 1 0-1 1 of the nine
EC leaders?by their own decree, not a "sum-
mit"?resolved Britain's remaining renegotiation
demands to the immense relief of London's
partners, who have grown weary trying to cope
with British "terms." Other matters, notably
energy policy and the CSCE, were discussed
briefly. The session, the first of the so-called
"European Councils," also formally inaugurated
a new style in community decision making that
stresses more frequent but less rigid exchanges
between EC leaders.
With the conclusion of London's efforts to
renegotiate certain aspects of its EC member-
ship, which has preoccupied the community for
almost a year, Prime Minister Wilson could claim
success and recommend continued EC member-
ship to Parliament this week. There are a
number of domestic roaublucks yet to be sur-
mounted, but the UK's referendum will pi ob-
ably be held as scheduled in late June.
The other eight EC members, for their
part, favor Britain's continued membership, and
they have on several occasions gone out of their
way to accommodate London. Even so, they are
not overly sanguine that the British electorate
will respond to their efforts. Despite, or perhaps
because of, the dismayina array of political,
legal, and economic problems that would
accompany a British withdrawal, there has ap-
parently bcen only a minimum of planning on
either side of the channel for the contingency of
the British electorate rejecting membership.
The future shape of the EC?if not its very
existence?may soon be in the hands of British
voters, but this did not prevent Chancellor
Schmidt from taking advantage of the new style
"non-summit" in Dublin to press for his hope of
integrating EC decision making with matters still
not within the purview of the community itself.
At Schmidt's initiative, the Nine agreed to estab-
lish an ad hoc high-level energy committee that
The White Paper on the EC
will not only handle community preparations
for the conference of energy producers and con.
sumers in April but will also coordinate com-
munity views on energy directly with the Inter-
national Energy Agency. Following the strong
recommendation of EC Commission President
Ortoli, the new committee will act within the
formal community framework, reporting to the
EC Foreign Ministers' Council rather than di-
rectly to the meeting of heads of government.
The most significant development at
Dublin may prove to have been the experience
with the new format and its potential for en-
hancing the usefulness of future top-level corn-
rnunity meetings. In the past, EC summits have
generated widespread publicity and, conse-
quently, unrealistic expectations. The Nine hope
that by holding less formal get-togethers more
frequently, and by innovations such as not is-
suing a formal communique, cooperation will be
aided and decisions facilitated.
There are a number of potential drawbacks
to the new system, such as a tendency for the
heads of government to become immersed in
matters that might have been settled at a lower
level. The new style Council also has the effect
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of emphasizing personalities, which will not
always engender smooth community function-
ing. Moreover, the Big Three?France, Germany,
and Britain?tend to dominate such meetings,
although the influence of the Commission serves
to safeguard to some extent the interests of the
smaller community members.
Nevertheless, most of the participants in
Dublin have expressed general satisfaction with
the new rocedures. The Germans and the Bel-
gians were especially pleased; a German official
went so far as to call it "the first meeting of a
quasi-European cabinet." A high EC Commis-
sion official also was moderately enthusiastic,
noting that Pie key role played by the commis-
sion president reassured those who feared that
the highly restricted meetings might weaken the
role of EC institutions.
CSCE: THE END MAY BE NEAR
The renewed Soviet push to end the Con-
ference on Security and Cooperation in Europe
this summer and the growing Western inclina-
tion to go along if certain conditions are met
hav9 produced the first real progress in the
Geneva negotiations in several months.
One of the most important issues at the
conference is close to resolution. The Soviets
have agreed to a provision allowing national
borders to be changed, in accordance with inter-
national law, by peaceful means and by agree-
ment. The West Germans have pushed hard for
such a clause so as not to preclude eventual
German reunification.
On most other outstanding conference is-
sues, however, the Soviets continue to take a
hard line. They believe that their tactics at the
security conference are succeeding and they are
gambling that, as the end of the conference
nears, they will be required to make only minor
concessions.
The Soviet delegation in Geneva has been
showing renewed vigor in pushing the talks
along. The delegation chief, after returning from
Moscow early this month, persuaded the other
representatives to take only a short Easter recess
and to begin thinking about the final stage of
the talks. Last week, General Secretary Brezh-
nev sent letters to the leaders of the UK, West
Germany, France, and Italy calling for a summit
on about June 30 to conclude the security
conference.
The letter was timed to coincide with a
discussion of the security conference by EC
leaders in Dublin I
Several at
the Dublin meeting expiessed the view that the
West should move quickly to take advantage of
Brezhnev's personal commitment to detente.
Later, however, caution set in and they con-
cluded the meeting by approving a statement
that calls for concluding the security conference
"at an early date and at the highest level," but
only if "balanced and satisfactory results" on all
agenda items can be achieved.
Subsequently, the recipients of the Brezh-
nev letter decided to baso theft replies on this
statement. Although the French reply appar-
ently came close to referring to the date men-
tioned by Brezhnev, the other recipients alluded
more vaguely to a conclusion sometime in the
summer.
Western participants are now discussing
whether to hold their own summit to discuss the
security conference prior to its actual end. They
feel that a Western summit could be used to
counter any public impression that the security
conference represents a final solution to East-
West problems. This is balanced by the fear of
adverse public reaction to allied concessions that
a Western summit might highlight. At the mo-
ment, the allies tend to believe that the disad-
vantages of a Western summit outweigh the ad-
vantaaes.
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THE MONTREUX CONVENTION
The Montreux Convention limits the pas-
sage of warships though the Turkish Straits. Its
key articles provide that not more than nine
ships totaling no more than 15,000 tons can
move through the straits at one time. An excep-
tion is made for Black Sea countries, which can
send through capital ships exceeding 15,000
tons provided they are not escorted by more
than two destroyers.
Black Sea countries must give eight days
notice of their intention to move warships
through the straits. Once the date has been
reached, the ships have five days in which to
utilize the declaration; otherwise, a new declara-
tion with the attendant eigi.t-day wait is re-
quired.
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Underway in the Black Sea
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The articles governing the inovement of
submarines are somewhat different from those
concerning surface ships. Submarines of Black
Sea nations can enter the Black Sea if they have
been purchased or constructed outside it. Sub-
marines also can leave the Black Sea for repair at
another shipyard, a right the Soviets occa-
sionally exercise. In either case, submarines
must transit one at a time on the surface during
daylight hours.
The Montreux Convention has affected the
composition of the USSR's submarine force in
the Black Sea. The submarines there are mostly
older torpedo attack boats, many of which are
laid up or mothballed. As a result, the sub-
marines in the Mediterranean Squadron are from
the Northern Fleet and require several weeks to
transit to and from station.
...And the US Navy
The US Navy recently conducted its 30th
Silver Fox mission in the Black Sea. Two de-
stroyers, the USS Turner and the USS Vesole,
took part in the operation, whic;A lasted from
March 9 to 14.
US ships have been conducting Silver Fox
missions in the Black Sea for about 16 years.
The missions, usually conducted semiannually,
are intended to exercise the right of US ships to
operate in the Black Sea under the terms of the
Montreux Convention. Soviet and 3.11garian
ships, along with Soviet aircraft, usually monitor
these missions, did over the years, there have
been several incidents.
On one occasion during the latest mission,
the US ships apr arently entered the 12-mile
territorial limit claimed by the Soviet;. A Soviet
destroyer monitoring the I lc ?2hips voirned them
of their position, and the Tur.,e; and Vesole
altered their course. This incident may have
resulted from a navigational error, but the So-
viets have lodg-d an official protest in any case.
A day earlier, a Soviet ship aimed its spot-
lights at the bridge of the USS Turner, which
responded in similar fashion. The US-USSR
Incidents at Se s e ment was intended to end
such practices.
EASTERN EUROPE: BREZHNEV SPEAKS
General Set..retary Brezhnev and his East
European colleagues?minus Romanian Presi-
dent Ceausescu?were in Budapest this week for
the 11th Hungarian party congress. The evi-
dence is not all in, but economic problems in
Eastern Europe and the need for keeping the
ideological guard up in a time of detente clearly
were major topics for discussion.
The Soviets got their allies to take the lead
on some issues of orimary concern to Moscow.
At least four East European party leaders
present called for an international Communist
confe. ence in their speeches. As in the past, the
Soviets?this time in the person of Brezhnev?
said nothing themselves. Brezhnev was also
reticent on China, not even mentioning it in his
address. The East Europeans, however, were full
of vitriol on the Maoist leadership and on
Maoism in general.
All eyes, of course, were on Brezhnev, not
only for what he had to say, but for how he said
it. Not surprisingly, observers differed on how
he looked on his first trip outside of the Sovi t
Union since December. Some thought he ap-
peared pallid and tired; others said he looked at
least as well as he did last month during Prime
Minister Wilson's visit to Moscow.
As to substance, Brezhnev presented a
sober but confident reiteration of Soviet foreign
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Brezhnev and Kadar
policy positions. Brezhnev noted that the USSR
was giving "serious attention" to consolidating
relations with the US, but otherwise said rela-
tively little about bilateral matters. Brezhnev
made no mention of President Ford or of his
own coming trip to the US.
The Soviet leader referred to progress at
CSCE and to the prospect of a "summit level"
windup in the coming months, but did not men-
tion June 30?a date he had proposed for the
summit finale in letters to Western leaders
earlier this month. Brezhnev indicated that with
CSCE out of the way, greater attention could be
given to "military detente." He referred to the
MBFR talks in Vienna and to the Vladivostok
agreements on strategic arms limitation. In this
context, he spoke of the "gradual reduction," as
well as limitation, of armed forces and arma-
ments. He added, however, that this is not a
matt" that could be decided "overnight."
For his East European audience, Brezhnev
had a few pointed reminders of the past, when
the "unity of our parties" rebuffed right-oing
and leftist "distortions." He had high praise for
his host, Hungarian party chief Kadar. Like
Kadar, he referred positively to the contribution
of the Warsaw Pact and CEMA, particularly in
enabling the East to do a better job than the
West in promoting economic growth and sta-
bility at a time of worldwide economic trouble.
At the same time, he noted that the East Euro-
peans and the Soviets would have to coordinate
their economic planning more effectively to
meet the problems raised by higher prices for
energy. The East Europeans, particularly the
Hungarians, were even more candid about cur-
rent economic difficulties. On the "crisis of cap-
italism," Brezhnev picked up the defensive
theme of some of his ideologists that the West's
economic woes strengthen the hand of reaction-
ary elements, and hence were a source of po-
ten tia I trouble for the USSR.
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d SOVIET CIVIL AVIATION
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-4144?P'oYi"t,t,,.?' 4,0?17:1V0:: -",fkl?A'?N %.041,:1,?Vil.0....14"4,4;4,74ctraPRVAits;,,PW:44,40;cirv ? liky,w44,
Flying Friendlier Skies With .AE POIJIOT
The Soviet national airline, Aero-
flot, is the world's largest. Serving
over 3,500 cities in the Soviet
Union and 68 foreign countries
over a 500,000-mile route network,
the airline carried 91 million pas-
sengers in 1974, one fourth the
world's total air passenger traffic.
Despite these far-ranging services,
Aeroflot has traditionally lagged be-
hind major Western airlines in
safety standards, quality of service,
and fleet modernization. Over the
past three years, Moscow has been
concentrating on these areas to im-
prove its relatively poor image and
to bring Aeroflot service closer to
Western standards.
Modernization
Aeroflot began acquiring new air-
craft during the early 1970s after
lagging behind Western carrier, for
two decades. Its current inventory
of high-performance jet aircraft,
which has almost doubled in the
past five years, is now approaching
1,000.
Fleet modernization has included
the introduction of the short-take-
off and landing Yak-40, the im-
proved TU-134A, the medium to
long - range TU-154, and the long-
range IL-62M, the flagship of the
fleet. Over 450 of these new air-
craft have been added to Aeroflot's
fleet in the past three years.
In addition, Soviet design bu-
reaus are developing several new air-
craft scheduled for introduction
over the next several years. These
include:
?The TU-144: Soviet officials in-
dicate this supersonic aircraft will
begin limited scheduled service
from Moscow to Tashkent and
Frunze by the end of this year.
'The 11,-76: Aeroflot has acquired
a few of the longer range cargo air-
craft and, as production increases,
the IL-76 will probably enter serv-
ice on a few domestic cargo routes
by early 1976.
? The Yak-42: The 100-passenger
Yak-42 is slated to replace the Yak-
40 on routes with growing traffic,
and may enter service by 1976.
? The IL-86 Airbus: Despite many
delays, Soviet officials intend to
move forward with production of
the IL-86?the USSR's wide-bodied
airciaft. Under the most optimistic
projections, the IL-86 could not
begin service before 1978-79.
Improved Service
The modernization program has
allowed Aeroflot to improve overall
operations by increasing the fre-
quency of flights, adhering to
schedules, and providing more com-
fortable travel. The new aircraft are
being used on almost all of Aero-
flot's internalonal services and
more than half of its domestic
routes.
The most dramatic changes in
service in recent years have oc-
curred in Aeroflot's domestic serv-
ices. These operations account for
over 96 percent of the passengers
carried, but have traditionally been
the last to receive new equipment.
Over the past few years, however,
new aircraft have been added to
domestic routes in increasing num-
bers, allowing for expanded serv-
ices.
Aeroflot's international routes
also have been upgraded and ex-
panded with newer aircraft and ad-
ditional flights. Nearly all of the
170 weekly international flights are
now served by the TU-134A, TU-
154 and IL-62M, many of which
have been put into service since
1972. Outdated TU-104 and TU-
124 jets, and in some cases IL-18s,
had been used on many of these
routes.
Since 1972, the Soviets have
focused on inaugurating routes to
sub-Saharan Africa and on expand-
ing operations to and in Latin
America. Aeroflot's efforts in
Africa have been the most success-
ful; air agreements have been con-
cluded with Burundi, Chad, Equa-
torial Guinea, Mauritania, Mauri-
tius, Rwanda, and Zaire. Aeroflot
flights were inaugurated to Chad
and Equatorial Guinea last Ducem-
ber. Service to the other five coun-
tries is likely to begin this year.
The Soviets are pressing for ex-
panded service to Latin America?
the last major gap in Aeroflot's
route network. The only countries
currently served are Cuba and Peru.
Talks have been held with a number
of countries?including Argentina,
Brazil, Colombia, Ecuador, Mexico,
Panama, and Venezuela, but most
negotiations are still in the explor-
atory stage. Two exceptions are
Ecuador and Venezuela, where
Aeroflot service may begin this
year. Elsewhere in the world, Aero-
flot has added service only selec-
tively, the most recent being to
Portugal in early March,
Safety
Aeroflot was jolted into action
on civil aviation safety after a
. ?
-771 7,77.7.
t
,
? -77 I
..47-4tV.1.V4-vrtOvid,
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TU-;54 at Moscow's Sheremetyevo International Airport
year-long series of accidents that
began in late 1972. During this
period, at least ten Aeroflot aircraft
crashed on scheduled service killing
at least 500 persons. Although poor
quality on-board avionics and out-
dated air traffic control may have
increased the chances of an acci-
dent, the principal causes of these
crashes were pilot error and incle-
ment weather. In any event, the
USSR launched a program to im-
prove safety by.
? Estiblishing Aviation Safety
Committee withitt the Ministry of
Civil Aviation.
? Upgrading operational testing of
new civil aircraft and providing for
more stringent preflight crew
checks.
? Inquiring into Western air traffic
control procedures and equipment
for possible applications to the
USSR.
The recent Soviet emphasis on
safety is genuine and has met with
success. Aeroflot had only two con-
firmed crashes involving fatalities in
1974 and none so far in 1975.
Outlook
Soviet r.:f f orts to modernize
Aeroflot's fleet and improve overall
operations will continue through
the next several years. The intro-
duction of new aircraft will provide
more efficient operations, better
quality service, and allow for some
expansion of service. The use of
more modern aircraft coupled with
better avionics and air traffic con-
trol will improve Aeroflot's safety
standards.
Despite the improvements being
made in equipment, service, and
safety, Aeroflot does not currently
pose a commercial threat to major
Western international airlines and is
unl;kely to do so in the near future.
The Soviet airline does not offer
the frequencies or route alternatives
necessary to gai ner a significant
potion of the international travel
market. Instead. the Soviets con-
tinue to seek revenue-pooling ar-
rangements with the foreign carriers
operating reciprocal service to the
USSR and jointly share revenues
generated on major international
routes. I
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POLAND: CONSUMER COMPLAINTS
Recent shortages of butter, pork, arid other
meat products have caused increased grumbling
and some minor demonstrations by Poland's
increasingly affluent and often outspoken
workers. The US embassy reports that the Polish
people are in a "bad humor" over the shortages,
and several Polish officials have admitted that
the situation is serious.
In an effort to calm the public, the regime
has attempted to eliminate the most serious
shortages. On March 6, in addresses before a
National Woman's Day gathering, party leader
Gierek and Prime Minister Jaroszewicz admitted
the seriousness of the problems. They called on
the party and government for quick act;on and
on the people for support. The party Politburo
met on March 14 to discuss the shortages and
issued an unusually long and frank com-
munique.
According to the Politburo statement,
increased supplies of pork and butter have been
delivered to the market, imports have been
increased and exports cut, and appeals have
been made to farmers to increase sales of agri-
cultural products to the state.
The mayor of Cracow said that the short-
ages would be brought under control by imports
from the Soviet Union and East Germany. As
early as March 7, in fact, the US embassy in
Warsaw reported that more meat was appearing
in stores. Whether these efforts have succeeded
wi!I probably becorro evident next week during
the Easter season. Easter is a major feast day in
Poland, and pork products are especially impor-
tant for the celebration.
The shortages reflect poor fodder crops last
year, which led to large-scale slaughtering of
hogs by farmers in the last quarter. Because
domestic storage and processing facilities are
inadequate, the resulting spurt in raw pork sup-
plies forced Warsaw to find foreign buyers.
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Shopping for food
Polish officials now concede that they under-
estimated demand and exported too much pork.
Some grumbling by the Polish workers will
continue, but the current problems are not ex-
pected to lead to widespread public rioting such
as toppled the Gomulka regime and brought
Gierek to power ;n December 1970. Unlike his
predecessor, Gierek is keenly sensitive to the
mood of the public. He aiso runs a tighter ship
than did Gomulka, and he will make sure that
the security forces do nothing to worsen the
situation. It does seem hkely, however, that his
image will be tarnished.
Over the longer run, the current situation
will further impress the Gierek leadership with
the need to keep consumer interests in mind.
Monetary incomes of Polish workers have in-
creased 44 percent since 1970, but the avail-
ability of major consumer items, such as hous-
ing, cars, and furniture, has ;tot kept pace. Thus,
much of the increased purchasing power has no
other outlet than higher quality foods. When
these items become scarce, frustration and re-
sentment can, and do, spill over into open criti-
cism of the party and government.
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TURKEY: DEMIREL TAKES HIS TURN
President Koruturk this week designated
former prime minister Suleyman Demirel, leader
of Turkey's second largest party, to try to form
a government. Demirel's center-right Nationalist
Front, which consists of four parties, falls just
six votes short of the 226 needed for a majority
in parliament.
Demirel will try to pick up additional sup-
port from dissident members of the pivotal
Democratic Party. His chances of doing so have
been reduced because of recent steps taken by
that party to reach agreement with the left-of-
center Republican Peoples Party for its support
of a government to be headed by the Demo-
cratic Party but to include technical experts and
independents. This formula may well be tried
next if Demirel fails. Earlier in the week, Re-
publican Peoples Party leader Ecevit turned
down a chance to form a government because he
did not have the required majority.
The Turkish President has previously been
reluctant to name Demirel, in part because he
believes that including in the government the
two irresponsible extreme right parties that are
part of the Nationalist Front?the fascist Na-
President Koruturk
tional Action Party and the reactionary National
Salvation Party?would soon lead to a break-
down of the government. These parties are
anathema to the leftists, and their presence in
the government might spark renewed outbreaks
of violence. This would in turn arouse uneasi-
ness among the military, who ousted Demirel in
1971 and have remained F,trongly opposed to
him.
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IRAN-IRAQ: MOVING FORWARD
Both Tehran and Baghdad appear deter-
mined to make a serioui effort to implement the
comprehensive accord that the Shah of Iran and
Iraqi strong man Saddam Husayn Tikriti reached
earlier this month in Algiers. Iraq's Kurdish
rebels, deprived of essential !ranian aid by the
accord, are striving to cope with the new reali-
ties before the cease-fire arranged last week runs
cut on April 1.
Although occasional clashes between Iraqi
and Mrdish forces have occurred since the two
sides publicly acknowledged the cease-fire on
March 13, Baghdad has halted the massive offen-
sive it had launched right after the Algiers ac-
cord was announced. The lull in the l'ighting
paved the way for the foreign ministers of Iran
and Iraq to meet in Tehran last weekend, as
scheduled, to start implementing the provisions
of the accord aimed at settling the border prob-
lems that have long disturbed relations between
the two countries. On March 17, the ministers
signed a protocol setting up joint committees to
deal with land borders, river borders, and the
infiltration of "saboteurs." The ministers agreed
to meet periodically?under Algerian auspices?
to review bilateral relations.
HIE 7.RUCE GIVES BOTH NATIONS
TIAIE 7'0 RESOLVE THEIR LONG?
STANDING BORDER PROBLEMS.
Although several thousand Kurds?it is not
clear whether they are combatants?have taken
sanctuary in Iran since the cease-fire, some rebel
leaders are talking as though they intend to keep
up the fight.
Baghdad, tor it part, seemingly intends to
mop up the Kurds after April 1, when the grace
period expires. The Baath Plrty newspaper has
"categorically and unequivocally" ruled out any
negotiations with Barzani; the army is appar-
ently preparing for a new offensive in the hope
of ending the Kurdish problem once and for all.
When the cease-fire expires, Baghdad probably
will again appeal to refugees to return?on the
government's terms?and may reaffirm its inten-
tion to carry out the program for limited Kurd-
ish autonomy that Barzani rejected at the outset
of the fighting a year ago.
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SYRIA: JOINT COMMAND WITH TH. PLO
The Syrians apparently have no clear idea
of how to implement President Asad's offer of
March 8 to establish joint Syrian-Palestinian
political and military commands. Palestinian
leaders have welcomed the proposal, but this
reflects their desire not to offend Damascus at a
time of strained ialations with Egypt rather than
any real enthusiasm for closer association with
Syria.
Fedayeen leaders have always been sus-
p;,:ious of the Syrians and are likely to drag
out?pei hops indefinitely?actual irrple-
mentation of the Syrian pi oposals. The chief
danger in such cooperation, in Palestinian eyes,
is that it might pave the way for Damascus to
seize control of the Palestine Liberation Organi-
zation. Asad, they fear, might try to use in-
creased leverage within the PLO to replace
Arafat as chairman with a Fatah member more
sympathetic to Syria or with a representative of
the Syrian-controlled Saiqa fedayeen group.
Arafat and his associates also worry that closer
association with the Damascus government
would restrict their freedom to formulate their
own policies and could result in Syrian army
control of fedayeen operations outside Syria.
Despite these reservations, the PLO will
want to keep alive the idea of closer ties with
Syria. To the relatively moderate leaders of the
PLO, including Arafat, even a notional alliance
with Sycia would strengthen the Palestinians'
bargaining position with Egypt, Israel, and the
US. It would also enable them to better endure
any showdown with their radical colleagues
from the "rejcctionist" groups, some members
of which are already being detained by the
Syrians. The radicals, for their part, have con-
demned the proposed Syrian-Palestinian coop-
eration as a subterfuge designed to pave the way
for Palestinian attendance at the Geneva peace
talks.
The Egyptians have not commented offi-
cially on the Syrian proposal. In an effort not to
Arafat
- suspicious but willing
be outdone by Syria, however, Cairo has put out
the word through unnamed "responsible
sources" that Egypt would have no objection to
participating in a unified Arab delegation at the
Geneva conference. This proposai was clearly
made without enthusiasm. A lthough Cairo prob-
ably agrees that a unified deiegation could more
easily overcome Israel's reluctance to negotiate
with the PLO, its primary concern at this time is
to counter Arab charges that Egypt is negotiat-
ing unilaterally.
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ETHIOPIA: MORE INSURGENCY
Conservative opponents of the ruling mili-
tary couns_il are increasing their insurrectionist
activity in the provinces. The fighting in Eritrea,
however, has died down during the past two
weeks. Both the government and Eritrean rebels
continue to reject Sudanese President Numayri's
proposal for a cease-fire and for direct, uncondi-
tional negotiations.
On March 14, an insurgent band led by
Berhane-Meskel Desta, an aristocrat, seized the
historic town of Lalibela, a major tourist attrac-
tion some 220 miles north of Addis Ababa. The
insurgents burned an Ethiopian airlines plane,
destroyed government property, and engaged in
some looting. A small group of US citizens in
the town was permitted to leave and has arrived
safely in Addis Ababa. Two days later govern-
ment forces regained control of the town after a
brief skirmish. The insurgents fled into the
countryside, and additional army reinforce-
ments have been sent to the area to pursue
them.
Berhane Meskel began forming his group
sever., weeks ago because of his opposition to
the military council's radical socialist policies.
The raid on Lalibela was probably a reaction to
the council's recently announced land reform
program, which will strip many Ethiopian aristo-
crats of the source of their wealth.
The government this week executed former
general Tadessa Biru, an important leader of an
anti-government group of Gana, the country's
largest tribe. Tadessa was arrested last week for
inciting a Galla rebellion in the provinces. The
government also executed one of Tadessa's lieu-
tenants, an aristocratic supporter of Haile Selas-
sie, and three persons alleged to have been
responsible for terrorist bombings in Addis
Ababa last December. The execution of Tadessa
will set back the Galla efforts to ougt the coun-
cil, but the tribesmen will be able to conduct
raids from their provincial strongholds. Govern-
ment forces are continuing to search for other
dissidents in the area west of Addis Ababa
where Tadessa was captured.
Numerous other disgruntled tribal groups,
possibly including the large Afar tribe in north-
eastern Ethiopia, are also sponsoring uprisings in
the countrysid aimed at r-.,,,rtlirowing the
council. Most of these dissident groups are in
contact with each other and are attempting to
coordinate their activities, but poor communi-
cations are a handicap.
In Eritrea, the rebels continue to stage
occasional ambushes along the main roads lead-
ing out of Asmara, but there has been only one
major clash with government forces since early
March. During that engagement, about 40 gov-
ernment troops reportedly were killed. This was
the first report of fighting outside a 75-mile
radius of the provincial capital of Asmara since
hostilities resumed in late January. The slow-
down apparently reflects the initial success of
the army's three-week-old sweep against sus-
pected rebel postions near Asmara and Keren.
Port Sudan.
SUDAN
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Red
Sea
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ef
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SAUDI ARABIA
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*Sana
ArldiS Ababa,
ETHIOPIA
Her be a
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0
Indian
Ocean
MILES 1.0
trico,re?
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The US embassy in Khartoum has :earned
that an Ethiopian delegation last week held se-
cret talks on the Eritrean insurgency with Suda-
nese President Numayri, but he was unable to
get the Ethiopians to agree to his peace pro-
posal. The Ethiopian delegation used the meet-
ing mainly to point out its reasons for rejecting
Numayri's proposal, citing the lack of a com-
mon negotiating position between the two main
Eritrean factions as a major impediment.
he Ethiopians also raised doubts about
Numayri' l ability to act as a neutral mediator,
criticizing him for allegedly allowing arms to
transit Sudan on the way to the insurgents.
Numayri has not officially sanctioned arms
shipmcnts through Sudan, but some weapons
almost certainly have reached the Eritreans by
this route, probably with the connivance of
local Sudanese officials. Most of the Eritreans'
arms have been sent from South Yemen to
points along Ethiopia's Red Sea coast.
Numayri plans to continue encouraging
both sides to begin talks. Osman Saleh Sabbe,
the leader uf one rebel faction that so far has
rejected talks, is expected to arrive in Khartoum
soon. The Sudanese are cautioning other Arab
governments that uncritical support for Eritrean
independence could harm Arab-African rela-
tions. Black African governments, many of
which face their own separatist problems, are
enerall o. sose. to itrea.
Eritrean Province near Asmara
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MEXICO: VISITING THE CAMPUS
The visit of Venezuelan President Perez
this week is momentarily drawing public atten-
tion away from the fracas last Friday when
President Echeverria visited the National Auton-
omous University. His trip to the campus on
March 1z! the first by a Mexican president since
the student jots in 1968, was intended to
symbolize the success of Echeverria's five-year-
long dialogue with youth.
As it turned out, however, Echeverria had
badly misjudged the situation. He apparently
believed that his Third World - oriented foreign
policy as president had offset the students'
memory of the casualties suffered in the riots,
for which they hold him responsible as the then
minister of government. The rough treatment he
received poked gaping holes in this notion.
Even so, the violence at the university
came from only a few hundred extreme-left
radicals who probably could not in any case be
swayed by a dialogue with the government.
Mexican security officials say that a member of
the local Communist Party played a key role in
encouraging the jeering that led to a bombard-
ment of rocks and bottles. Echeverria was
grazed on the forehead during his hasty retreat
from the campus.
Echeverria was warned that he might well
get an unfriendly reception at the school, a
long-time sanctuary of anti-government senti-
ment. It is likely, however, that he decided to
chance it in order not to be upstaged by Perez,
who had himself planned a meeting with the
students.
The President does not want a harsh crack-
down on campus troublemakers, fearing this
would damage his image as a peacemaker. He
does want the agitators quietly rounded up,
however, and all persons who took part in the
disturbance identified and eased out of the uni-
versity.
If he were not busy traveling the country-
side with President Perez, Echeverria doubtless
would be enlarging upon the considerable public
support he is already receiving from the inci-
dent. His reference to CIA manipulation of the
students was made in full awareness that to
admit publicly that the violence came from left-
ist radicals would damage his and the govern-
ment's image as the only true learierc cif filo
left.
Echeverria and Perez
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PANAMA: SEEKING FOREIGN SUPPORT
General Torrijos i5 trying to marshal for-
eign support for Panamo's position as the canal
treaty negotiations enter a critical phase. He is
concerned both about key negotiating issues,
such as the duration of a new treaty, and about
the chances for US ratification if the two sides
agree on a draft. Panamanian officials have said
that the campaign for support will include other
Latin American countries as well js all Third
World nations.
The Panamanian leader's first attempt tWs
month to mobilize international backing did not
fare well. He was unable to persuade Argentina
to withdraw its candidacy for the rotating Latin
American seat on the UN Security Council in
favor of Panama, which would then have had an
advantageous place to expound its views in a
world forum.
Torrijos is now placing his hopes on the
meeting with the presidents of Colombia, Costa
Rica, and Venezuela that he will host on March
23 and 24. Torrijos expects them to sign a
declaration affirming Panama's claim to sover-
eignty over the canal.
Although Torrijos believes that ou'side
support for his treaty stand is useful, he a,
realizes that the main effort to sell a new pact
must be directed at the Panamanians and the
US. Panamanian officials privately recognize
that there are certain basic elements the US
must have in any treaty, but they feel they must
constantly reassure Panamanians that their
country's interests are being zealc.,ly protected
in the negotiations. This difference between pri-
vate and public positions may in part explain
the recent press criticism o Secretary Kis-
singer's statements in Houston concerning US
aspirations in the negotiations.
Torrijos
the resolution by 37 US senators reasserting US
sovereignty and rights over the canal. He has
already started a campaign aimed at showing the
US public that a new treaty would benefit both
sides. Several pro-government businessmen have
presented this view in the US. Torrijos adminis-
tration officials are talking to the Panamanian
branches of organizations, such as the Rotary
Club and the Boy Scouts, in the hope that they
can influence the US affiliates. Panama's leading
cleric, Archbishop Marcos McGrath, has effec-
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his countr ' I.
?
On the other hand, Torrijos appears to be
olic bishops.
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ARGENTINA: OPPOSING MRS. PERON
The political position of President Maria
Estela Peron has weakened during the past two
months. Politicians are expressing open criti-
cism, and military officers are increasingly dis-
satisfied with the performance of her govern-
ment.
The rift in Peronist party ranks was under-
scored last week when an assemblage of dissi-
dent left-wing Peronists in Buenos Aires formed
the Authentic Peronist Party. This group,
however, is more a political embarrassment than
a threat to Mrs. Peron, and it will probably be
denied recognition.
On the other hand, growing strains within
the Justicialist coalition that brought the Peron-
ists to power may be harder to resolve. On
March 12, the group headed by former president
Arturo Frondizi issued its first public criticism
of the government's economic policies. It was
joined a few days later by another small party
that denounced the "disorder of public fi-
nances." While there ;.re no indications that
Frondizi or leaders of the other parties are ready
to pull out of the coalition, a serious economic
decline would probably force them to abandon
the government, especially as the 1977 election
draws nearer.
A recent survey of army arid navy officers
has disclosed some dissatisfaction with Mrs.
Peron's government. Contempt for her depen-
dence on Minister of Social Welfare Lopez Rega
reportedly has grown to the point where many
officers would like to see her step down volun-
tarily.
There is no effort under way to persuade
her to do so and none is anticipated, but the
consensus among the cross section of officers
surveyed is that Argentina would be better off
with another president, especially if the military
had a hand in the selection. This is a major shift
President Peron
Iii need of support
from the view held by the military just a few
months ago. At that time, it felt that there was
no alternative to Mrs. Peron.
Renewed inflation and the prospect that it
will grow are serious problems for military per-
sonnel, who are already finding it difficult to
live on their salaries. The recent devaluation will
hurt defense spending, especially the purchase
of foreign materiel.
The armed forces welcomed the govern-
ment's tough stand against terrorism, but now
many officers are upset by the failure to deal
the terrorists a decisive blow. Their frustrations
are reflected in growing cciticism of their own
leaders as well as of the government. The chief
complaint voiced against the three service com-
manders is that they have gone along with the
politicians' policies.
The armed forces are still reluctant to take
over the government again, and as long as this
attitude continues it is the best guarantee of
Mrs. Peron's serving out her term of office. If
their dissatisfaction with the political leadership
continues to grow, however, military leaders will
probably begin to press for her resianation and
to look for legal alternatives.
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DSB FILE COPY \
RETURN 10 111-1107
Weekly Review
Special Report
Brazil: A Year of Change
Secret
March 21, 1975
Copy N2 434
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tUNL I
President Geisel
In the year since President Ernesto Geisel assumed office on March 15, 1974,
significant changes have occurred in Brazil, both econornicrilly and politically. The
euphoria accompanying the economic boom of the late sixties and early seventies
has given way to uncertainty, as the country feels more and more the effects of
worsening international economic conditions and recurring domestic problems.
Foreign policy has undergone significant shifts?regarding Eastern Europe, China,
and the Middle East?designed primarily to shore up Brazil's international economic
position. Finally, there has been real, although uneven, progress in Geisel's effort to
ease the restraints on political life and seek a limited rapprochement with disaffected
sectors of society.
Special Report
-2- Marc!' 21, 1975
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Economic Problems...
For several years prior to Geisel 's pres-
idency, Brazil's economy regularly experienced
annual growth rates of more than 10 percent,
steady reduction of inflation, rapid growth and
diversification of exports, and a steady influx of
foreign capital. During 1974, however, inflation
rose again, the result of increased domestic de-
mand and rising prices for imported goods. The
balance of payments became a critical problem as
the cost of needed imports -especially oil--soared.
Foreign exchange holdings decreased by more
than a billion dollars as the bills for imports
mounted while inflows of foreign capital, reflect-
ing world conditions, decreased sharply after mid-
year.
Nevertheless, economic problems?including
the prospect of a substantial decline this year in
overall growth have not dampened the admin-
istration's public optimism. Official spokesmen
continue to stress ihe very real progress the coun-
try has made and rnntinues to make. President
Geisel, for example, in his year-end speech,
stressed Brozil's ability to reach its development
goals. He pointed to the high rate of employment,
prospects for good harvests, and current industrial
expansion. Such economic problems as Brazil has,
he said, are largely attributable to outside forces
and can be dealt with.
In addition, the finance minister and other
top planners recently emphasized how much
more growth Brazil is likely to experience this
year than most industrialized nations, whose eco-
nomies may very well stagnate or grow only
marginally. Top officials also point out that infla-
tion, which caused problems during much of last
year, was again being brought under control.
Outward optimism notwithstanding, there is
a realization among government officials that a
lowering of economic expectations is virtually
unavoidable. No longer do economic planners
predict a yearly growth rate on the order of 10
percent or, for that matter, any specific figure. In
private, some speak of growth this year of 5 or 6
percent still impressive, but a comedown for
Brazil. This year, also, the government has set no
Special Report - 3 -
specific target for the reduction of inflation, a
practice that had become almost routine in the
previous administration. Finally, in recognition of
the serious balance-of-payments situation, tight
controls have been placed on imports, a move
certain to have an inhibiting effect on growth.
President Geisel has put his own stamp on
the formulation and implementation of economic
policy. For example, he has created two organiza-
tions aimed at achieving the administrative effi-
ciency for which he is noted and at increasing his
already high degree of personal control over the
policy-making machinery. The Economic Devel-
opment Council, presided over by the President,
brings together the ministers of finance, industry
and commerce, agriculture, and interior. Geisel
has also revamped the former Ministry of
Planning and redesignated it the Planning Secre-
tariat. Both the Planning Secretariat and the De-
velopment Council have been made integral parts
of the office of the presidency. The net result is
that no single minister has achieved or is likely to
achieve the dominant status exercised in the pre-
vious administration by former finance minister
Delfim Netto.
...And Their Domestic Imppct
Since Brazil's military-backed regime bases
its claim to power largely on its abilly to deliver
on sweeping economic promises, the goiernment
is apt to be highly sensitive to any economic
setback, still more so if there is any possibility of
a prolonged, serious downturn. In the face of the
relative slowdown of the economy, the admin-
istration has included in the list of economic
priorities this year a number of items that reflect
increased attention to matters not related pri-
marily to growth. Specifically, the government
gives prominence to the need for social develop-
ment and for more equitable income distribution.
Geisel has set limits on the amount of price in-
creases permissible this year on goods zind services
provided by the public sector, and has allowed
substantial wage increases ahead of schedu'e.
These moves were designed in part to blunt
the appeal of the opposition party, which capi-
talized on rising discontent over worsening
March 21,1975
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economic conditions -particularly high prices and
tight consumer credit -in the elections last fall.
Moreover, it is probable that the t jime, with the
luster of its economit.. image slightly tarnished, is
seeking to broaden h.:: base of support, thus far
confined largely to the military hierarchy allied
with business and big agi icultural interests.
Regardless of the motivation, the moves con-
stitute a response to specific popular demands. In
this regard, the Geisel regime differs somewhat
from its predecessor, which was almost exclu-
sively preoccupied with economic expansion and
diversification rather than with st-,cial issues. In-
deed, the embassy believes that there is a good
chance that Geisel intends to do more to improve
the lot of individual citizens. The magnitude of
the balance of payments and inflation problems,
however, may force the administration to f lcus
on those two areas, to the virtual exclusion of
other, less immediate issues.
Foreign Minister Silveira
Special Report
- 4 -
Foreign Policy Shifts
The Geisel administration is still weighing
the results of the significant foreign policy shifts
that were made during the past year in Brazil's
relations with the Communist world and the
Middle East. In both cases, economic benefit was
the moving force, supported by a growing Brazil-
ian desire to become a major world actor.
Geisel, looking for expanded trade oppor-
tunities, made it clear that his administration
wanted a sharp increase in its contacts with the
Soviet Un ion and Eastern Europe. Brasilia
lowered its ideolcgical barriers substantially as the
exchange of trade missions with Communist
countries increased and legations in central
Europe were raised to embassy status. Moreover,
Brazil established diplomatic relations with the
German Democratic Republic and, hoping `o tap
a potentially vast market, moved to recognize
Peking as well.
Brazil may be disappointed, however, with
the results of its efforts. A Foreign Ministry of-
ficial has pointed out, for example, what he calls
a "difference of goals" between his country and
Communist nations. The latter, he says, are more
interested in selling than in buying. Moreover, the
Brazilians have probably greatly overrated the
Chinese market. Finally, increased dealings with
Communist countries are not without critics in
Brazil, especially among senior conservative mem-
bers of the military hierarchy.
The success of Geisel's effort to placate the
Arabs also has yet to be fully determined. Brazil's
recent adoption of a more clearly pro-Arab
stance?designed to assure continued supplies of
crude oil- -has evoked Arab expressions of sittis-
faction with Brazil's attitude. Another goal--
acquiring large amounts of petrodollars?has not
yet been met. Brazilian diplomats and other of-
ficials are sparing no effort to persuade Arab
leaders to invest heavily in Brazil. Brasilia now is
anxiously awaiting the visits of leaders from
Kuwait and Saudi Arabia, which it hopes will
produce concrete results.
Brazil has also increased its activity in black
Africa in the past year, recognizing Guinea-Bissau
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Geisel meets with Chinese delegation
very early and establishing links with the other
Portuguese-speaking areas. Brazil hopes to en-
hance its image among Third World nations by
playing down its traditionally close ties with
Lisbon and playing up its support of the decol-
onization process. To dramatize Brazil's height-
ened interest in the area, Foreign Minister Silveira
has visited Dakar, one of the few visits he has
made. Brasilia not only hopes to secure markets
but also to gain support in jointly maintaining
high prices for agricultural products that both
Brazil and Africa export.
A main concern of the Geisel government in
its relations with the US is the preservation of
access to US markets. To this end, Brasilia has
sought to avoid provoking the US while still
registering concern over the impostion of addi-
Special Report
- 5 -
tional tariffs and, more recently, the passage of
the US Trade Reform Act. Brasilia's position is
somewhat delicate, since it seeks to avoid being
lumped with other Latin nations bent on taking
the US to task, but also does not want to appear
to be yielding to Washington. Recent statements
by top officials reflect this situation. The minister
of industry and commerce, for example, has told
the press that means should be found to "permit
Brazil to discriminate against those who dis-
criminate against it." Finance Minister Simonsen
said, on the other hand, that Brazil would have to
live with the trade act. President Geisel, in a
recent speech, stressed the importance of the
"new dialogue" but pointed to "; estrictive US
trade measures" that could ultimately weaken the
"fundamentals" of relations between the two
countries.
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Opposition party President Guinthraes
Brazil's major interest in Latin America is
the preservation and enhancement of its relatively
privileged economic position, and the mainten-
ance of its influence with the ,:onservative govern-
ments of a number of neai by nations. Brazil is
particularly wary of attempts by other Latin
nations to establish themselves as competitors for
regional leadership. Until recently, Argentina had
been the main source of concern. Now, however,
Venezuela, which has championed the creation of
an exclusively Latin economic system, is emerging
as the main claimant for such a role. Foreign
Minister Silveira pointed up Brazil's reserve con-
cerning the proposed organization by saying his
country would not endorse any grouping princi-
pally aimed at confrontation with the US. Brazil
questions both the economic feasibility and polit-
ical motivation of the proposal. Moreover, it does
in fact want to avoid provoking the US, its most
important trading partner. Foreign policy
planners will want to postpone a commitment
either for or against the organization until more
soundings are taken and its potential effectiveness
Special Report
- 6 -
can be accurately gauged. Brazil's eventual
adherence cannot be ruled out.
Political Liberalization
In a speech to the new Congress, President
Geisel reiterated his intention to continue the
gradual political liberalization that has been his
goal for the past year. In customary fashion,
however, he tempered his remarks with a warning
that "malicious criticism" and "uncalled for pres-
sures" will not be tolerated. Indeed, the Geisel
administration does seem committed to an easing
of political restraints, but on a protracted basis
and on its own terms.
During the past year, there have been
numerous signs of a trend toward lessened con-
trols a process that has come to be known as
"decompression." One of President Geisel's first
acts, the selection of a cabinet, was widely viewed
as a portent of the liberalization to come because
two of those chosen are former members of Con-
gress, a body almost entirely ignored by the
previous president. The administration also
initiated a highly publicized dialogue with the
clergy, another group long at odds with the mili-
tary-backed government. The President himself
made a special effort to be seen in the company
of some of the more noted liberal church leaders.
Formal censorship of newspapers appears to have
been greatly, if not entirely, relaxed, although
unofficial guidelines are certain to remain for
some time. The administration has also dropped
direct control of a substantial number of labor
unions.
The single most significant element of the
liberalization movement was the decision to
permit open national elections last November and
then to allow the unexpectedly large gains made
by the opposition party to stand. Of the Senate's
66 seats, 22 were at stake; of these, the opposi-
tion won 16, raising its representation in the
upper house to 20. In the Chamber of Deputies,
with all seats at stake, the opposition doubled its
representation to 40 percent of the seats. It also
gained majorities in most important state legisla-
tures. The November results were all the more
noteworthy when contrasted with the indirect
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election October 14 of state governors, hand-
picked by the President and ratified, unopposed,
by lame-duck state assemblies.
When it became clear that the administra-
tion, by and large, did not intend to inhibit elec-
tion campaigning, opposition candidates began to
criticize government policies, assailing the high
cost of living, the influence of multinational com-
panies, the use of torture, and the holding of
political prisoners. The opposition's impressive
gains are generally viewed as a mass protest
against worsening economic conditions and per-
haps to some extent an expression of frustration
with over a decade of authoritarian rule.
Geisel's decision to ease restrictions does not
mean that he is fundamentally more liberal than
his predecessors or that he will proceed to "re-
democratize" Brazil in short order. Indeed, his
reputation both in military and civilian life has
been that of an austere, efficient disciplinarian
concerned principally with doing the job at hand.
Moreover, Geisel shows no signs of being disposed
to modify the vast powers he inherited from
previous presidents. He shares the military's con-
viction that the old-style politics, which it views
as corrupt and ineffectual, cannot be allowed to
return.
The President is widely known, however. Is
an intellectual and a member of the so-ca :d
?'Sorbonne group" of military men with strong
academic credentials. His chief adviser, General
Golbery do Couto e Silva, is perhaps the foremost
member of this group. Geisel and Golbery have
concluded that by allowing greater?though not
necessarily total freedom to established institu-
tions, such as the press, the church, and Congress,
Brazil in the long run will be easier to govern.
This is a decidedly more sophisticated approach
than that of previous military-backed govern-
ments.
Geisel is also conscious of the fact that the
military has been in power for 11 years, despite
the stated intention of eN,entually restoring the
country to civilian rule. Indeed, each of Geisel's
two immediate predecessors promised to restore
democracy by the end of his tenure. This
Special Report
- 7 -
Special adviser Golbery (I) with President Geisel
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Senate minority leader Montoro
awareness, as well as a desire to compensate some-
what for the relative; v lower economic prospects,
could provide further stimulus for liberalization.
Geisel's liberalization effort is running into
opposition, however, from conservative members
of the military hierarchy. Some, particularly
security specialists, feel that the President is creat-
ing an atmosphere of permissiveness that will
embolden irresponsible politicians as well as sub-
versives. The administration, in an apparent
attempt to placate these so-called "hard liners,"
gave considerable publicity to the work of se-
curity officials in moves against the Communist
party early this year. Continuing arrests of sus-
pected party members and sympathizers may be
part of an effort by conservative officers to press
Geisel still further by dramatizing the subversive
threat. The impunity with which local security
officers operate indicates that Geisel still has not
brought these services fully under his control.
Special Report
A number of these officers resent the
prominence of General Golbery, whom they view
as the principal architect of liberalization in
national policy making. They feel that he and
Geisel should have prevented the government's
poor showing in the November elections by
controlling the process much more strictly. Thus
far, however, this resentment has not diminished
either the influence of Golbery or the adminis-
tration's desire tJ continue with liberalization.
The Outlook For Libe;.alization
Opposition by some senior officers to
"decompression" will pose a continuing challenge
for President Geisel. In dealing with this situation,
he will have to be very adopt at gauging the
extent of that opposition at any given time, lest
he underestimate its effects on military unity. To
accomplish this, Geisel will look more and more
to such trusted confidants as First Army
commander General Reynaldo to interpret, and if
neccessary contain, military discom:ent.
The behavior of the new Congress and other
sectors that stand to benefit from liberalization
will have much to do with how strongly the
conservatives react to Geisel's program. Unduly
defiant attitudes among legislators, for example,
could cause disaffected officers to harden their
views still further and induce even uncommitted
officers to join the ranks of enemies of liberaliza-
tion. Leaders of the opposition party have sought
to allay the fears of conservatives by stressing
their party's intention to play a "constructive"
rather than "obstructionist" role.
At the moment, the conservative officers do
not pose a threat to the stability of the gov-
ernment. Indeed, the President retains wide
respect among senior officers. Thus, barring a
rnajor setback for the administration such as a
serious, prolonged economic downturn, the
liberalization process is likely to continue,
although its progress will be cautious and halting.
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