[SANITIZED]LATIN AMERICAN TRENDS: STAFF NOTES MAY 12, 1976 - 1976/05/12

• Document Type: SPECIALCOLLECTION
• Collection: Argentina Declassification Project - The "Dirty War" (1976-83)
• Document Number (FOIA) /ESDN (CREST): 06628139
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 7
• Document Creation Date: April 3, 2019
• Document Release Date: April 12, 2019
• Publication Date: May 12, 1976

Approved for Release: 2018/10/02 C06628139
Latin American Trends
STAFF NOTES
_Stiffer 3.5(c)
1 4
No. 0699-76
May 12, 1976
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LATIN AMERICAN TRENDS
This publication is prepared for regional specialists in the Washington com-
munity by the Western Hemisphere Division, Office of Current Intelligence,
with occasional contributions from other offices within the Directorate of
Intelligence. Comments and queries are welcome. They should be directed to
the authors of the individual articles.
CON7'ENTS
May 12, 1976
vr
Argentina: New Economic Program 3
Argentina: Terrorist Threat Against
Foreign Business
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LiDentina: New Economit Pto tam
The junta has begun implementing an economic
policy that constitutes a reversal of most Peronist .
economic thinking. The plan is designed to strengthen
the private sector--particularly agriculture--while
disciplining labor, long favored by the Peronists. It
also aims at fiscal and monetary reforms.
Among the measures already begun or about to be
undertaken are the following:
--cutting the number of government workers, which
had grown 24% in the last three years;
--lifting most price controls while strictly
limiting wage increase,
--planning to reduce state ownership of production
facilities over tile long ,erm and to encourage
foreign investment
Farm Policy
3.5(c)
The new government has correctly singled out agri-
culture as the chief hope for producing the foreign ex-
change needed to meet the country's huge financial obli-
gations and to underwrite long-term growth. To stimulate
output, the regime has sharply raised farm prices and has
eliminated the marketing monopoly, of the state grain and
meat board, which had bought from farmers at a fraction
of world prices. These low domestic procurement prices,
while benefiting urban workers, led to widespread black-
marketing and to a drop in agricultural output and in-
vestment.
As further encouragement for the farm sector, the
government intends to lower export taxes gradually and to
give a favorable exchange rate for products moving through
May 12, 1976
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official export channels. To spur output of wheat,
the most promising export, the government has set up an
interagency committee to provide special credits and
other direct support to wheat farmers.
Labor Policy
The regime has not yet announced an overall labor
policy. Some observers abeculateithat this omission is
deliberately designed to prevent coalescence of labor
opposition. Various labor leaderSare jockeying for the
advantage of becoming labor's spokesman vis-a-vis the
government.
In handling labor problems on a day-to-day basis,
the government has stressed labor iscipline and has
curtailed the scope of union activities. Government
administrators have been assigned to most major unions.
The regime called in troops last month to halt an incip-
ient auto workers' strike and has 'jailed some labor
leaders, It does not permit wage negotiations with em-
ployers. The junta has granted a token wage increase and
will consider further hikes as productivity rises.
Recent revisions in the Peronist labor contract law
increased employer rights and curtailed labor rights.
Reduction of generous Peronist maternity benefits pre-
sumably will make employers less reluctant to hire women.
Fiscal Reform
With a ballooning budget deficit approaching 15 per-
cent of GDP, the new regime plansikto slash the number of
government workers--up 34,000 sifFgp 1972, to 1.7 million
--by half a million. It has alre5BY fired 5,000. Most
personnel cuts will be intadminiirtation, primarily in
provincial and municipal governments. The junta will
transfer some workers to the private sector by denational-
izing state enterprises, perhaps rrst in the food-
processing industries.
May 12, 1976
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The government has extensively revised the tax
system, pending a complete overhAl. Tax receipts
were covering only 20 percent of expenditures. An
important feature of the ad hoc package is tax index-
ing as an incentive to pay promptly. With last year's
335-percent inflation rate, delayed payment of taxes
was the cheapest source of credit.
Prospects
The government faces great difficulties in restoring
economic equilibrium. It is impossible to predict how
soon output and claims on output can be brought into
balance. Inflation has continued almost unabated during
the junta's first six weeks. Sharp drops in absenteeism,
however, should boost production, and court action against
companies that raise prices excessively should discourage
speculation. Maintaining the austerity measures necessary
to revitalize production requires labor support. If the
regime does not get this support4it will have either to
become more repressive or, like the 1966-73 military
government, to capitulate to labor demands and let the
economic program collapse.
The Videla government is in a stronger position than
the preceding military government. The economy had dete-
riorated so far before the recent coup that military inter-
vention was widely welcomed. Moreover, no charismatic
leader is now on the scene to offer a populist alternative
to the tough program of the military.
With favorable weather the agricultural policy will
stimulate grain and meat exports. The labor unions will
cooperate for the time being, for want of any option.
Labor, however, will press wage demands in view of the
squeeze on real wages. The government, as part of its
anti-inflation strategy, will itself decide the tempo of
money wage increases needed to keQp real wages from
dropping too far.
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Chances for rapid reduction in the budget deficit
are poor. Abolition of the state marketing monopolies
and lowered export taxes will reduce revenues. Payroll
cuts can be made only gradually Wholesale firin9s
actually would raise expenditures 'initially, since the
govern ent promises generous severance pay and retraining
aid.
3.5(c).,
- May 12, 1976
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3.5(c)
Argentina:
Terrorist Threat Threat Against Foreign Business
The terrorist threat to execu ives of foreign-owned
business firms remains high. *
In less than two months the guerrillas have sent
threatening messages to ten or more US based companies.
One Fiat official was killed on May 4 and the bodyguards
of a local Bendix executive were recently gunned down.
Defending their actions in nationalistic terms,
the terrorists seek to drive out the foreign firms, which
have been warmly embraced by the new junta. In this
effort, the guerrillas aim to hurt the new government
economically as well as politically.
In general, the terrorists seek to present themselves
defenders of the interests of the workers. Indeed,
some of the threats have come in response to dismissals
or disciplinary action by the comPinies against workers.
Some, but by no means all, the threats may emanate from
union thugs not directly tied to the leftists. All firms
receiving such threats are currentl being urged to take
them quite seriously.
May 12, 1976
3.5(c)
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