(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00897R000100060005-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: January 12, 2017
• Document Release Date: July 19, 2011
• Sequence Number: 5
• Publication Date: September 1, 1983
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Directorate of
Intelligence
After a Year in Office
Colombia: Betancur's Prospects
An Intelligence Assessment
ALA 83-101 ~6
September 1983
295
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Colombia: Betancur's Prospects
After a Year in Office
This paper was prepared b~ ~, Office
of African and Latin American Analysis, with a
contribution by ALA. It was
coordinated with the Directorate of Operations.
Comments and queries are welcome and may be
directed to the Chief, South America Division, ALA,
Secret
ALA 83-10[46
September 1983
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Secret
Colombia: Betancur's Prospects
After a Year in Office
Key Judgments After a year in office, Belisario Betancur remains one of the most popular
/ri(ormation available chief executives in modern Colombian history. In our judgment, he has
as oJ30 August 1983 profited from consummate political skills, a reputation for honesty and
was used in this report.
integrity, his humble background, and close personal links to most sectors
of the electorate. Nevertheless, we believe that Colombia's growing
problems-especially the economy and the insurgency-will begin soon to
erode his popular standing and complicate his political position.
The economic decline presents Betancur with painful choices between his
populist preferences and the realities of the international financial situa-
tion. His expansionary policies to revive the economy are not taking hold
and are undermining his pledge to reduce inflation. Despite efforts to
restrict imports, declining exports and continuing capital flight are com-
pounding the problem of foreign bankers' reluctance to extend new loans,
thereby making debt servicing difficult. Consequently, we believe the
economy will manage only 1-percent growth this year-matching the worst
performance in 30 years-and do only marginally better, if at all, next
year. If Bogota proves unable to obtain substantial new international
loans-as seems likely-it probably will be forced to join other South
American countries in rescheduling external debt under IMF auspices,
thus forcing economic retrenchments.
Betancur's failure to curb domestic violence-earlier this year guerrilla
organizations rejected the President's generous amnesty-is causing the
flight of key foreign and domestic entrepreneurial and management talent, 25X1
according to the US Embassy. This, plus the voluntary exile of wealthy cit-
izens and their capital, is undermining foreign investor confidence at a time
when the country can ill afford it.
Betancur now recognizes the amnesty has failed and, with guerrilla vi- 25X1
olence on the increase, is considering ordering tougher military counter-
measures. 25X1
Ironically, these events are improving the President's relations with the
Colombian armed forces, an institution he has long distrusted.
the military-which regarded the President's
amnesty effort as naive and ill advised-is satisfied with Betancur's
shifting views on the guerrillas. Thus we judge that a military coup-which
has occurred only once this century-is very unlikely over the next year or
Secret
ALA 83-10146
September 1983
25X1
L~~ I
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
The President's hispanic nationalism has resulted in his implementation of
anew, Third World-oriented foreign policy designed both to demonstrate
Colombia's independence from the United States and to propel the country
to the forefront of Latin America's diplomatic ranks. Whereas Bogota
almost automatically supported US positions in earlier years, under
Betancur it has joined the Nonaligned Movement, moved closer to
Nicaragua and Cuba, and become a key regional participant in the
Contadora Central American peace initiative.
Notwithstanding Betancur's jingoism, we judge that his chief foreign
policy goal is not to alter drastically Colombia's pro-Western orientation,
but to establish that Bogota has chosen its own course instead of following
one dictated by the United States. Thus, we anticipate some opposition to
the United States in international forums and a fair amount of critical
rhetoric, but we also expect that substantive bilateral relations will
maintain a fairly even keel. Betancur will act as an independent-but not
intemperate-voice on Central American policies. Betancur's ideological
penchant for renewing relations with Cuba has been balanced by his
sensitivity to the military's distaste for Cuba and to Havana's continuing
support for Colombian guerrillas. We believe this will induce him to
continue a cautious approach to Castro over the next year, taking only slow
and incremental moves toward restoration of diplomatic ties.
On major bilateral issues, we expect Betancur to continue-but not
expand-cooperation on narcotics enforcement. More significant problems
could evolve on the economic front even though we believe US investments
in Colombia-especially participation in the El Cerrejon coal project-will
be treated pragmatically by Bogota. Further deterioration in Colombia's
balance of payments could lead to more nationalistic trade policies aimed
at reducing the $1 billion US trade surplus. Bogota could also deliberately
slow debt repayments, following the examples of Argentina, Brazil, and
Venezuela, thus reducing profits of US financial institutions.
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Secret
Implications for the United States
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
r, TF IJp$$AU
The Bahamas
' Maiti *~v....~~.,
KINGSTON
Jamaica"~~~~~ P0~7T AU SANTA t
PRINCE DOMINGO
Ga!xpe~~os Islands ~?. ,
(Ecuador)
Anligue antl eerbuda
~ DOminlu
se. vinc?ne Ana oSt. WOia
d,e Greneain?s ~ ?BarDados
Grenada
Falkland Islantls
i~/-R,l edminishred by U.K..
cleimatl by Araentin?1
Boundary representation is
nol necessarily aurhorilalive
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Secret
Colombia: Betancur's Prospects
After a Year in Office
President Belisario Betancur took office in August
1982 promising to quell insurgent violence and reverse
the country's economic decline. His lack of success to
date on both fronts has not diminished the strong
public support both for Betancur as a person and for
his new, Third World-oriented foreign policy. Ac-
cording to recent polls, however, there is a growing
gap between how the electorate views him personally
and its expectations for the overall success of his
administration.
This paper examines the potential problems Betancur
will face in reconciling popular expectations with
domestic and foreign realities; analyzes the strategies
behind his major policy decisions and posits likely
future policies and their domestic impact; and assesses
the implications of these actions on Colombia's rela-
tions with the United State
Betancur is one of the most unusual, enigmatic, and-
so far-popular presidents in Colombia's history. In a
country where corruption at the highest levels of
government is the norm, he has an unparalleled
reputation for honesty and integrity. Even after a year
in office, this image, his humble origin-one of 22
children from a poor working-class family-and his
consistent concern for social justice and the plight of
the common man have combined to keep his popular
backing in the 80-percent range.
According to the US Embassy, Betancur also is a
"hispanic racist"-a man whose fervent nationalism
is reminiscent of Peronism in its pitch and approach.
Betancur does not look at problems and people in
political/ideological terms of East against West, but
rather in the context of "Latins" against "Anglos."
Several powerful domestic political circles, especially
Colombia's leftist intellectual and artistic community,
reinforce his mind set. Moreover, it is from within this
group that Betancur-a self-styled "renaissance
man"-has chosen some of his closest friends, includ-
ing Nobel Prize winner and fervent pro-Castro sym-
pathizer Gabriel Garcia Marquez.
Betancur's style is evident in how he presides over one
of Latin America's most unusual political systems.
Following a decade of civil war, Colombia's two major
political parties-the Liberals and the Conserva-
tives-agreed in 1958 to share power for 16 years in a
National Front, dividing patronage evenly and alter-
nating the presidency every four years. This political
pact expired in 1974-and two successive Liberal
presidents were elected-but many vestiges of power
sharing remain. For example, although Betancur won
office in 1982 as the Conservative's standard bearer
without any previous agreements with his opponents,
he was obliged by this longstanding tradition to grant
cabinet seats, governorships, and other high-level jobs
to members of the Liberal Party
5X1
25X1
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Nevertheless, Betancur has been very effective in
maneuvering within the limits of this system, primari-
ly because of his personal talents and his strong
support at nearly all social levels. Extraordinarily
receptive to alternative opinions and with close per-
sonal links to all parts of the political spectrum, the
President often blunts his opponents' arguments by
soliciting their views during the decisionmaking proc-
ess. This strategy may entail longer term costs, of
course, by inhibiting the formulation of a coherent
governmental philosophy. Under Betancur, policy of-
ten has been improvised and subject to change de-
pending on shifts in public opinion, which the Presi-
dent monitors closely.
Although such flexibility has appeared to many ob-
servers occasionally to border on vacillation, Betan-
cur's continued high personal popularity thus far has
effectively blunted major criticism of his government.
extraordinary public support stems both from his
populist appeal and his ability to separate himself
from unpopular domestic policy actions by using his
cabinet ministers as lightning rods. In addition, he has
preempted some traditional Liberal causes, such as
amnesty for the insurgents, economic reforms, a more
independent foreign policy, and better relations with
Cuba. As a result, few detractors have found it
politically expedient to attack the President on his
failure to fulfill major campaign promises.
All of these characteristics have had substantial bear-
ing on Betancur's efforts to accomplish his three
major goals. The first of these is his desire to establish
Colombia as an important diplomatic power in Latin
America. Motivated by Latin nationalism as well as
practical politics, he has involved Colombia in a
variety of international forums, assumed a personal
role in the search for peace in Central America, and
aligned Bogota more closely with the positions of
other Latin nations on a number of diplomatic issues.
The second goal-stemming largely from Betancur's
moral integrity and national pride-has been to end
the country's longstanding insurgency. In approaching
his third objective, economic reform, Betancur has
attempted to balance-so far without much success-
his commitment to such highly popular campaign
promises as low-cost housing and improved education-
al opportunities with the need for austerity in the face
of Colombia's worst economic recession since the
1930s.
A New Foreign Policy
From the earliest days of his administration, Betancur
stressed the need for a new, independent foreign
policy. According to the US Embassy, this quest has
been influenced by Betancur's historical perspective
that "Latins" have lost virtually every confrontation
with "Anglos" over the last 300 years. Thus, the
President regards the United States as the primary
antagonist of Latin America. He believes that close
relations with Washington-particularly those estab-
lished by his predecessor, former President Turbay-
have isolated Colombia from other developing coun-
tries and have fostered an image of the country as a
US satellite. Moreover, he argues that, by challenging
Cuba's pursuit of a UN Security Council seat in 1979
and by refusing to ask the OAS to invoke the Rio
Treaty during the Falklands conflict, Colombia lost
touch with the Latin American consensus.
Colombia's entry into the Nonaligned Movement
(NAM) last March is the most visible symbol to date
of the President's drive to distance his country from
the United States. In part for this reason, the initia-
tive played well domestically. The move was consist-
ent with Betancur's desire to better his government's
relations with the Colombian left. At the same time,
conservative critics were mollified by the administra-
tion's stated intention to stand as a voice for modera-
tion within the NAM.
Closer relations with Cuba and Nicaragua have be-
come an important feature of the new foreign policy.
Overtures to these nations reflect, in our judgment,
Betancur's belief that Colombia cannot become a
major force in Latin America if it does not communi-
cate with all countries of the hemisphere. Moreover,
new ties to Nicaragua already have provided practical
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Secret
benefits. The conciliatory policy-friendly rhetoric,
expanded trade on amost-favored-nation basis, and a
$50 million line of credit to Managua-has apparent-
ly led the Sandinistas to refrain from publicly pressing
their claim to the San Andres and Providencia archi-
pelago area.' In a similar vein, Colombian support for
Nicaragua's bid for a UN Security Council seat last
year was rewarded when Managua backed Bogota's
successful application for NAM membership.
tions.
problems in Central America. As one of the principal
architects of the Contadora peace initiative-which
includes Venezuela, Mexico, and Panama as well as
the five Central American nations-Betancur has
successfully projected a new international image of
Colombia as a major regional peacemaker. The
group's failure thus far to find ways to alleviate
tensions in the area has not yet reflected badly on
Colombia, which we judge is winning new respect
from its Latin colleagues for its role in the negotia-
In principle, Betancur favors restoring diplomatic ties
with Cuba, which have been suspended since 1981 Betancur also has displayed an activism on regional
following revelations of Cuban support for Colombian economic concerns-including the debt issue--that
guerrillas. We believe that, although Betancur is has contributed to his enhanced prominence in the
motivated primarily by personal ideology, practical hemisphere. Blaming developed countries for the
political considerations also play a part. global recession, he has called for more financial
assistance to Latin America. For example, during
rapprochement with Cuba would help modify the
traditional oligarchic, pro-US image of the ruling
Conservative Party, thus making it appear more
"progressive" in the eyes of voters. On the other hand,
the administration's knowledge of Castro's continued
backing of Colombian subversive groups has undercut
Betancur's hope that his informal moves toward rap-
prochement would prevent Cuban interference in
Colombia's internal affairs, something that most mili-
tary officers have doubted all along.
Under these circumstances, according to the US
Embassy, Betancur has concluded that it is best not to
resume formal, diplomatic connections in the near
future. Instead, he reportedly is studying the possibili-
ty of allowing the Cubans to open a commercial office
in Bogota. Under this arrangement, Havana would
once again have an official representation in Colom-
bia, and the President could claim some credit for a
progressive foreign policy initiative.
Greater Colombian involvement in regional initiatives
marks another dimension of Betancur's higher profile
foreign policy. The administration has devoted most
of its time and energy to seeking a solution to the
The dispute over ownership of these Caribbean islands is long-
standing. In 1928 a bilateral treaty recognized Colombian sover-
eignty, and Colombia currently occupies the islands. The dispute
has periodically flared in recent years, and in December 1979 the
Sandinista government publicly repudiated the treaty on the
grounds that it was negotiated under duress during the US
President Reagan's visit last December, he urged the
United States to promote a modernized "Alliance for
Progress." In early 1983 he proposed the creation of a
Latin American version of the IMF and a $40 billion
emergency fund to help sustain world development. In
his message last June to the sixth session of the UN
Conference on Trade and Development (UNCTAD
VI) in Belgrade, Betancur attacked developed coun-
tries' protectionism and called for a new round of
negotiations within the framework of the General
Agreement on Tariffs and Trade (GATT). Because of
his willingness to speak out on the debt issue, a group
of Latin American economists meeting in May under
the auspices of the Economic Commission for Latin
America (ECLA) commissioned Betancur to convey
the continent's viewpoints-summarized in the Decla-
ration of Bogota-to the Williamsburg Summit part-
ners.
At the same time, the President's efforts to have
Colombia join the ranks of such traditional Latin
leaders as Mexico and Brazil have caused him some
embarrassment. Reflecting his belief in consensus
politics and personal relationships, in our view, Betan-
cur has shown a penchant for attempting to resolve
intractable regional problems by convening meetings
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
In January 1983, President Betancur abruptly ended
his nation's passive role in Central America by
publicly announcing Bogota's willingness to serve as a
mediator. Shortly therectfter, the "Contadora Four"
initiative was born, and it has since become the
central focus ojpeacekeeping efforts in the region.
When the effort appeared stymied last April,
Betancur resuscitated it with a whirlwind 48-hour
presidential visit to the other Contadora partici-
pants-Venezuela, Mexico, and Panama. This ulti-
mately led to the first negotiating session involving
the Contadora Four and the jive Central American
nations. A similar tour by Betancur of Central Amer-
ica in late July also attempted to boost.flagging peace
prospects.
Betancur's involvement reflects his general objectives
of establishing a personal leadership role in hemi-
spheric ctflairs and organizing Latin America into a
unified bloc less dependent on the United States.
Active involvement also embodies Betancur's belie]
that Colombian interests are gravely endangered
when the region's domestic and bilateral conflicts
of heads of state. He invested a great deal of personal
prestige in amuch-publicized call for a major high-
level conference to examine hemispheric relations in
the wake of the 1982 Falklands war. By last June,
however, his fevered plans had degenerated into a
purely ceremonial gathering of Western Hemisphere
foreign ministers on the occasion of the 450th anni-
versary of the founding of Cartagena, Colombia.
Continuing Insurgent Violence
Early in his presidential campaign, Betancur prom-
ised to bring peace to a nation wracked by 40 years of
domestic political violence. He hoped to end Colom-
bia's insurgency-numerically the largest in South
America-by offering a broad amnesty to members of
the country's four most prominent guerrilla groups. In
our judgment, however, the amnesty plan was doomed
become enmeshed in East-West politics. Thus, he
aims to diminish the involvement of the superpowers
in Central America to reduce the risk ojinternation-
alizing the conflict.
Betancur's views ojspeciJ'ic Central American issues
are not as well defined, however, probably because on
most points there is some conflict between his ideals
and Colombia's national interests. He favors a nego-
tiated solution to the conflict in El Salvador, for
example, but the concept ojgovernment-guerrilla
power sharing could set a threatening precedent for
his own insurgent-plagued country. Similarly, while
he sympathizes with the revolutionary aspirations of
Nicaragua's Sandinistas, he sees their Cuban-backed
military expansionism as a potential threat to Co-
lombia's Caribbean island possessions-also claimed
by Nicaragua-and to its other regional interests.
Finally, while Betancur apparently wants to believe
Cuban denials oja major role in Central American
insurgencies, heleels personally threatened by
Havana's continuing support for Colombian terrorist
groups.
almost from its inception.
the majority of guerre a ea ers never serious y
considered laying down their arms and yarticipating
in the legal political process
Signed into law last November, the amnesty offered
generous terms, including a full pardon for all politi-
cally motivated crimes except murder outside of
combat. Betancur buttressed public support for the
amnesty when he simultaneously announced ambi-
tious rural economic development plans to eliminate
the root causes of insurgency in areas of guerrilla
activity. Unfortunately, these seeds of an effective
response fell on barren ground:
? The two smallest insurgent organizations publicly
stated even before the amnesty was passed that they
would not accept it.
25X1
25X1
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Secret
? Of the two largest insurgent groups-the Revolu-
tionary Armed Forces of Colombia (FARC) and the
19th of April Movement (M-19~the former appar-
ently never intended to abandon the armed struggle.
Although FARC representatives negotiated with
the government over terms of the amnesty, its
leaders effectively rejected the program by demand-
ing the demilitarization of all disputed areas-a
prerequisite totally unacceptable to the Colombian
military.
? The leadership of the M-19 went to great lengths
prior to the enactment of the amnesty law to give
the concept public support but ultimately rejected
the government's offer.
Since the M-19's formal public rejection of the am-
nesty last April, guerrilla violence has surged.
The M-19's refusal to lay down its arms reportedly
stunned the Betancur administration. We believe
Jaime Bateman, the M-19's leader at the time the
amnesty was proposed, seriously considered accepting
it, in part because of his personal political ambitions.
Despite the populace's general support for the Presi-
dent's initial efforts, the growing insurgent violence is
presenting Betancur with new political and economic
problems. Most important, the large number of kid-
multinational firms, is causing the flight of key
foreign and domestic entrepreneurial and manage-
ment talent. This, plus the voluntary exile of wealthy
citizens and their capital, is eroding investor confi-
dence at a time when the country can least afford
such a trend.
Betancur and the Military
Ironically, the amnesty's failure has reduced tensions
between Betancur and his armed forces. The strain in
relations, which prevailed almost from the beginning
of the new administration, stemmed from the Presi-
dent's initiation of several new policies over the
objections of the conservative military hierarchy.
These included, in addition to the amnesty for the 25X1
guerrillas, Bogota's joining the NAM, warmer rela-
tionships with Nicaragua and Cuba, and a cooling of
close military ties with the United States.
Despite these antagonisms, over the past year both
sides acted to maintain the traditional executive-
military equilibrium. For example, the President re-
fused to accede to guerrilla demands for a military
withdrawal from all insurgent-dominated areas dur-
ing the amnesty negotiations. He also promised funds
for amuch-needed force modernization. Although
rumors of coup plotting surfaced last January, these 25X1
proved groundless as military leaders continued their
historic respect for constitutional democracy and,
despite misgivings, supported every executive deci-
Sion.
the terrorists'
re~ec ion o e peace p an is now ea Ong to a growing
understanding between the President and the mili-
tary. The high command hopes that the failure of
what they saw as a noble but naive effort has sobered
the President.
We expect the Presi-
dent may approve the acquisition of additional heli-
copters, infantry weapons, and other equipment in
order to improve the military's counterinsurgency
capabilities.
The Economic Challenge
Taking office during a period of worsening economic
performance placed Betancur, the populist, in a di-
lemma. On the domestic front, economic growth had
slowed to a crawl, causing unemployment to rise,
while inflation remained at high levels. According to
IMF statistics, a falloff in exports and rising imports
and high world interest rates were pushing the current
25X1
25X1
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
d Reflects tightening of nonessential imports and accelerated month-
ly devaluation pace.
account deficit to yet another record level in 1982 at a
time when foreign financing was becoming harder to
obtain. The administration was faced with the diffi-
cult task of devisit,g an economic strategy that would
both improve the domestic economy and prevent a
payments crisis.
The Policy Response. Betancur, under heavy political
pressure to adopt more expansionary policies, has
given highest priority to reviving the economy. He has
increased public spending and granted new subsi-
dies-tolerating a higher fiscal deficit-to spur
growth. Betancur has also loosened monetary re-
straints by lowering interest rates and eased access to
credit for financial institutions, importers, and farm-
ers. Despite these stimulative policies, he has pledged
to reduce inflation.
Betancur was counting on a strong world recovery to
improve the external accounts this year. Instead,
exports headed lower and foreign financing became
harder to obtain, forcing Bogota to take steps to shore
up its external payments position. To improve the
trade accounts, for example, Betancur has authorized
increased export subsidies and lowered export taxes,
and progressively tightened controls over imports.
Bogota has also recently introduced new restrictions
to restrain capital flight and avoid losing foreign
exchange reserves.
The Roadblocks to Success. External economic fac-
tors continue to prevent Betancur's economic policies
from producing the intended results. Lackluster world
recovery has reduced export earnings, hindering an
upturn in industrial employment. Moreover, protec-
tionist moves by Colombia's Andean Pact neigh-
bors-the destination of over 30 percent of Colom-
bia's exports-are adversely affecting sales and
employment in the industrial export sector. For exam-
ple, for the first quarter of 1983 Colombian shipments
to Andean Pact countries were down 56 percent.
Difficulties in obtaining foreign borrowing are now
also hindering the development of new projects neces-
sary to boost the domestic economy.
Betancur's efforts to curry some political favor by
relaxing fiscal discipline will hinder efforts to reduce
inflation. Increased public spending is pushing the
public deficit beyond the 4.5 percent of GDP recorded
in 1982. With foreign borrowing harder to manage,
Bogota is likely to resort again to increasing the
money supply, thereby perpetuating high inflation.
The administration's policies to shore up its fiscal
accounts have been ineffective. President Betancur
declared some emergency tax reform measures to
raise revenues, aimed at reducing the government
deficit, but they were ruled unconstitutional by the
Supreme Court. This forced the President to send his
tax reform to a special session of Congress for approv-
al. During the delay, increased export subsidies and
lower export taxes widened the imbalance between
public revenues and expenditures. Even though the
measures have finally been passed, they will have no
impact on the budget deficit until next year
Some of Betancur's other ambitious plans are making
little headway as well. The President predicted, for
example, that 70,000 new jobs would be created this
year by the housing program alone. Until construction
strengthens, however, Betancur will have difficulty
reducing unemployment. The US Embassy reports
that for the first six months of 1983 the unemploy-
ment rate for the four largest cities climbed from 10.8
percent in March to 12 percent at the end of June-
the highest rate since 1974.
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Secret
Real GDP GroNth Consumer Price Inflation
Percent Percent
I11 Sp
Current Account Balance, Excluding Foreign Exchange Reserves, f;nd of tear
Official Transfers
l~S $ Million l~S $ Billion
>I10 __-i -~ S
?0197;
0 ~ 76 77
-2~0
>00
-?~0
- 1.000
1,20
I.>O(1
I,'~U
2.000
-2?~0
Z,~OU
2,'~0
i,IlUfl
7K 79
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
We expect the economy to remain in the doldrums for
the third consecutive year in 1983 despite the govern-
ment's efforts at stimulative policies. Economic
growth is unlikely to meet the 2-percent official
estimate for this year or exceed last year's 1 percent-
the worst performance since 1950. The recession will
probably further boost unemployment rates, particu-
larly in urban areas. Stimulative economic policies
will cause the inflation rate to hold near the 25-
percent level-above the official 20-percent target.
Although prices for imported goods have declined,
those of domestically produced goods have risen steep-
Simultaneously, declining exports, capital flight, and
foreign banker reluctance to extend new loans are
heightening Colombia's vulnerability to debt servicing
difficulties in 1983. The US Embassy reports most
lenders still unwilling to increase their loan exposure
in Colombia because of general unease in lending to
South America. Consequently, Bogota was forced to
draw down over $1 billion of its liquid foreign ex-
change reserves during the first seven months of this
year, leaving a balance of $2 billion, less than five
months of import cover. At this rate, liquid reserves
could be depleted by yearend. If Bogota proves unable
to obtain substantial new international lending in
coming months-as seems likely-Colombia probably
will be forced to join other South American countries
in rescheduling its external debt under IMF auspices.
Betancur's ambitious plans for Colombia, in our view,
could fuel a classic cycle of rising expectations. Thus,
we agree with the US Embassy's assertion that the
greatest danger to stability in the coming year proba-
bly will come from the President's promising, and the
public's demanding, more than can reasonably be
achieved. Betancur's image of candor, sincerity, hard
work, and decency thus far has insulated him from
the political repercussions of his policy shortcomings.
We do not believe this can continue much longer.
Colombia's worsening economic and internal security
situations almost ensure that his personal popularity
will start to erode over the next 12 months.
On the political ledger, Betancur's opponents will thus
be able to trade on tougher economic times to increase
criticism of the administration as they campaign for
the midterm elections in 1984 for departmental as-
sembly and municipal council jobs. The President also
may face tougher opposition in the Congress-where
he currently holds only narrow majorities in both
houses-as he attempts to secure passage of several
controversial political and economic reform programs.
A plan to offer more effective participation in the
political system to representatives of all political
persuasions probably will spark the most heated de-
bate, because it essentially undercuts the last vestiges
of the National Front agreement. The law would
regulate the free play of contending political groups,
guarantee equitable access to the media, strengthen
the autonomy of the electoral registrar, and provide
for the local election of mayors, rather than the
current system of appointment by the central govern-
ment.
pendent political course.
We believe the President will continue to forge the
alliances that will enable him to dominate his opposi-
tion, but his margin will narrow. For example, in a
recent cabinet reshuffle, Betancur improved the pros-
pects for his legislative proposals by reallocating seats
to garner support from a major Liberal Party faction.
At the same time, by forming his new cabinet without
prior approval from official Liberal Party standard
bearers, he has broken an important tradition of co-
governance and charted a more aggressive and inde-
Betancur will be unlikely to engineer an economic
recovery and lower inflation in 1984. Based on CIA
and OECD estimates of recovery in the developed
countries, Colombian exports will not post the strong
rebound needed to reduce the persistent current ac-
count deficit. We believe international bankers will
resist financing a large payments deficit and the loans
needed for new development projects. Simultaneously,
Bogota's unwillingness to cut public spending augurs
another large budget deficit. This will, in turn, cause
an expansion in the money supply, putting upward
pressures on prices.
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Secret
To regain banker confidence and support, we foresee
Bogota's undertaking an economic adjustment pro-
gram under the guidance of the IMF to improve the
external accounts and reduce inflation. This is likely
to entail a peso devaluation to increase exports and
steps to slow the economy to reduce import demands.
Moreover such a program would probably aim at
trying to reduce inflationary pressures by reining in
large budget deficits and generous wage and salary
increases-which would conflict with some of Betan-
cur's deepest personal political beliefs. Under this
scenario, Cuiumbia's econurnic prospects remain
gloomy. Even if world recovery begins, the economy
will suffer through yet another year of no growth,
high unemployment, double-digit inflation, and fall-
ing real wages.
Another pressing problem for the President will be the
formulation of a new counterinsurgency strategy. As
reflected in the press, most citizens tend to blame the
guerrillas rather than Betancur for the failure of the
amnesty, but many now regard the question as moot,
since insurgent rejection of the pardon appears cate-
gorical. The politically important upper and middle
classes are demanding action against the resurgence
in kidnapings and violent crime, according to US
Embassy reports. Because Betancur is so highly at-
tuned to public opinion trends, we believe that over
the next year he will permit major increases in
military counterinsurgency operations. This probably
will conflict with his deep belief in conciliation and
consensus as the best course to peace, but astepped-
up military civic action program will enable him to
rationalize the change in tactics
Such developments, moreover, probably will further
improve Betancur's previous strained relationship
with the armed forces. The only interest group capa-
ble of forcing a change in government, the military
resented the President's generosity toward the guerril-
las and his cooling of ties with the United States.
Nonetheless, we believe there was little possibility of a
coup even last January when there were rumors to
that effect, and even less chance now that the Presi-
dent is shifting his views on the guerrillas.
military, which has intervened only once in the Co-
lombian political process in this century, will continue
to support the democratic tradition under foreseeable
circumstances for at least the next year or so
We believe Betancur will persist in his campaign to
acquire greater diplomatic stature for Colombia by
maintaining ahigh-profile, nationalistic, Third
World~riented foreign policy. We judge that the
President's chief purpose is not to alter drastically
Colombia's pro-Western orientation, but to establish
that Bogota has chosen its own course rather than one
dictated by the United States. As a result, we expect
occasional strains in bilateral relations-probably
with increasing frequency on economic issues-and
continued criticism of US policy in Latin America.
On the whole, however, Colombia's position toward
the United States is not likely to become antagonistic.
25X1
The US Embassy has noted several negative effects of
Betancur's stewardship on US interests. These include
a shift away from consistent support on a variety of
international issues, especially those that have been
cast in an East-West context. For example, Colombi-
an backing for the US position on El Salvador that
characterized the Turbay government has evaporated
under Betancur. Improved relations with Nicaragua
have led Betancur to give the Sandinistas the benefit
of the doubt on some Central American questions.
Similarly, with regard to Cuba, Betancur apparently
remains committed in principle to restoring diplomat-
ic ties, although we expect little movement on this
over the next year because of the opposition of the
Colombian military.
Havana is pro-
moting unification of Colombian guerrilla groups and
offering more money and arms as an incentive will
reinforce the armed forces' view. This will help keep
Betancur's personal inclinations in check and perhaps
begin to moderate the President's thinking.
Betancur's actions on these issues have been balanced
somewhat by his moves on other matters. During the
37th UN General Assembly session, for example,
25X1
25X1
25X1
LAX"I
25X1
25X1
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Colombia voted against the position of its NAM
colleagues on the proposed expulsion of Israel and the
inclusion of the Puerto Rican question on the agenda.
The US Embassy, moreover, predicts continued Co-
lombian support in the coming year for US positions
on Afghanistan, Kampuchea, and chemical and bac-
teriological weapons use. Because, as the US Embassy
reports, part of Betancur's strategy in joining the
NAM was to ally with moderate members and steer
the organization away from its often radical policies,
Washington stands to gain some indirect benefits.
Finally, in the Embassy's view, the growing Latin
American and Third World perception of Colombia
as an independent actor means that, when US and
Colombian interests coincide, Bogota's support may
carry more weight than in the past, when its backing
for the United States was taken for granted.
Similarly, we judge that, while Betancur's efforts in
Central America will rarely be parallel to those of
Washington, both domestic restraints and increasing
diplomatic pragmatism will help keep Colombia in the
moderate camp. The concept of government-guerrilla
power sharing in El Salvador, for instance, could be a
Pandora's box for a Colombian government that is
faced with its own serious insurgency. In addition,
Betancur's practical experience through the Conta-
dora initiative may have moderated his views on
Central America. He recently, and uncharacteristi-
cally, advised US Embassy officers to note that,
although he considered US naval forces in Central
American waters to be potentially destabilizing, he
had refrained from making any public statement on
the matter
In the bilateral sphere, Betancur may indulge in
occasional public criticism of US positions. Neverthe-
less, the President has not altered Colombia's commit-
ment-begun under the previous Turbay administra-
tion-to amore aggressive and dynamic Caribbean
policy in line with the US-sponsored Caribbean Basin
Initiative. Likewise, in the field of narcotics control,
Betancur has continued in force all existing bilateral
programs. We believe, however, that he will resist
implementation of any new efforts against the drug
trade. His strong desire not to appear to be yielding to
US pressure, coupled with the widespread belief in
probably will doom any chance for a lar e-scale
herbicidal spray control program.
More worrisome implications for the United States
could occur in the event of a further deterioration in
Colombia's balance of payments. Under these circum-
stances, Betancur may shift to a more nationalistic
economic strategy, resorting to increased tariffs,
tougher import quotas, and tighter restrictions on
dividend payments or capital repatriation. For exam-
ple, according to Finance Minister Gutierrez, the
Betancur administration intends to cut imports from
countries with which it has trade deficits, and the
United States enjoys a $1 billion trade surplus with
Colombia. Bogota could also deliberately slow interest
and principal repayments to US commercial banks,
following the examples of other major Latin Ameri-
can debtors such as Brazil, Argentina, and Venezuela.
More protectionist Colombian policies are already
affecting US trade relations with Colombia. The US
Embassy reports that US exports of canned food,
wines, horses, and fresh fruit have already been
restrained, and more cutbacks can be expected as
further import controls are enforced by the cumber-
some Colombian bureaucracy
Although Betancur's foreign investment policy is sim-
ilarly nationalistic and thus carries some potential to
increase tension with US investors, we expect it will
generally be administered more pragmatically than
trade policy. In October 1982 Bogota pressured a US
company, Marathon, to increase its use of Colombian
firms in developing a promising coal-producing proj-
ect. On the other hand, the government has not
initiated any moves against Exxon, the primary
foreign participant in the giant El Cerrejon coal proj-
ect-the country's most important planned revenue-
producing project of the 1980s-because of the firm's
willingness to use local suppliers in the project.
25X1
25X1
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
[n our judgment, Betancur's sensitivity to his nation's
political realities will help moderate his nationalistic
tendencies and, in the process, keep US-Colombian
ties on a fairly even keel. Despite his intellectual
flirtation with the Colombian left, we believe the
President is well aware of the relative weakness of
that side of the spectrum in the formal political arena.
As such, we judge it is unlikely that Betancur will
jeopardize his position with powerful domestic con-
servative forces-including key elements of his own
party, the entrepreneurial elite, and the military-
that favor continued close economic and political
relations with the United States
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
 Secret
Secret
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7
Sanitized Copy Approved for Release 2011/07/19 :CIA-RDP84S00897R000100060005-7