PRINCIPAL CHALLENGES CONFRONTING US SECURITY INTERESTS IN 1984

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87R00029R000300600008-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 7
• Document Creation Date: December 21, 2016
• Document Release Date: December 10, 2008
• Sequence Number: 8
• Publication Date: December 19, 1983
• Content Type: MEMO

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LUnrILJLNI TALI
The Director of Central Intelligence
Washington, D.C. 20505
National Intelligence Council
NIC 9077-83
19 December 1983
1. Nuclear Proliferation
India-Pakistan
Prospects for stability in South Asia will depend in part
on the pace of Pakistan's determined effort to build a nuclear
bomb. Both India and Israel are monitoring this effort, while
China may still be assisting it. While we don't expect
Pakistan to succeed in building a bomb in 1984, or for India to
undertake a second upeacefulu explosion, the nuclear programs
of both countries will continue to carry the potential for
adversely affecting US security interests in the region.
Argentina-Brazil, International Safeguards
The recent announcement by Argentina that it has gained
the capability of enriching uranium raises some difficult
issues which will be addressed during 1984. Aside from adding
a second potential route toward future production of fissile
material, the announcement will (a) put pressure on Brazil to
match this capability at a time when Brazil can ill-afford such
an expenditure, and (b) undercut, once again, the effort by the
U.S. and others.to put comprehensive safeguards on such
programs.
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
THROUGH : Harold P. Ford
National Intelligence Officer at Large
FROM : David B. Low
National Intelligence Officer at Large
SUBJECT : Principal Challenges Confronting US Security
Interests in 1984
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2. Chemiral and Biological Warfare
UNCODED
The intrinsic difficulties of collecting CBW intelligence--whether
for capabilities estimation, proliferation monitoring, use
documentation or treaty monitoring--are among the most acute the
Community faces. Starting with Soviet military assistance, the
proliferation momentum in this arena is growing (for example, the
reported use in the Iraq-Iran conflict in 198. In addition, the
disparity between Soviet and-Western capabilities for such warfare
increases the need for vigilance.
3. LDC Debt Crisis
With respect to this topic, I would call your attention to an
excellent distillation of Community news which is contained in the 23
November 1983 Warning Report written by the Assistant NIO/LA (copy
attached).
I agree thoroughly with the three basic conclusions thereof,
namely:
(a) In 1984 we are likely to see a growing political
dimension to the crisis as domestic tolerance for
continued austerity wanes and popular resentment of
the IMF and US banks grows,
(b) the refusal of US banks to put up new money or agree
to more reasonable terms could spark a financial
crisis just as easily as some action taken by one of
our neighbors to the south, and
(c) this, in turn, could lead one or more Latin American
countries to call a unilateral moratorium on payment
of interest and principal.
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Looking beyond Latin America, the deteriorating financial
situation in the Philippines takes on particular importance in light
of the regional strategic significance of a stable Philippines.
Attachment:
As Stated
STAT
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The refusal of US banks to put up new money or agree to more
reasonable terms could spark a financial crisis just as easily as some
action taken by one of our neighbors to the south.
The Director of Central Intelligence
NIC 8437-83
23 November 1983
National Intelligence Council
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MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
FROM: 25X1
Assistant NIO for Latin America
SUBJECT: November Warning and Forecast Meeting: The Debt
Crisis in Latin America
1. The November Latin American Warning and Forecast Meeting focused
entirely on the political and economic dimensions of the debt crisis. The NIO
for Economics participated in the lively and productive exchange, in the
course of which three basic themes emerged:
-- In 1984 we are likely to see a growing political dimension to the
crisis as domestic tolerance for continued austerity wanes and popular
resentment of the IMF and US banks grows.
This, in turn, could lead one or more Latin American countries to call
a unilateral moratorium on payment of interest and principal. 25X1
Political Fallout
2. During the past year, international cooperation has averted any major
default in Latin America, but there have been costs for the IMF, the debtor
countries, and the industrialized nations. Although many economic observers
assert that economic recovery in the United States will pull Latin America out
of the current crisis, we are more pessimistic. In 1984 we expect a series of
continuing crises and growing political dimension to the conflict. Mexico,
Brazil, Argentina, Chile, and Peru all have adopted harsh austerity programs
with cumulative negative effects on their domestic populations. Political
leaders 'in most of these countries have only limited or fragile mandates.
They will have great difficulty accommodating demands for more growth-oriented
economic policies at the same time they try to meet IMF conditions and
petition commercial bankers for additional financing on more lenient terms.
CL BY SIGNER 25X1
DECL OADR
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3. Mexico and Argentina are particular concerns. In Mexico, the ruling
party has been embarrassed by its losses to the conservative opposition
parties in elections in several important cities within the past year. As the.
government tries to limit additional losses to the opposition, the potential
for political violence may increase. President de la Madrid's harsh economic
initiatives. are likely to become major issues. Recent polls show that most
Mexicans believe that their economic situation will improve over the next
year, and they may not have the patience to endure two or more years of
austerity. In Argentina, the newly elected Radical administration may also
find itself caught between trying to accommodate unrealistic popular
expectations and negotiating an economic program acceptable to the IMF. (C)
Reluctant Banks
4. Under any circumstance, Argentina, Chile, Brazil, and Mexico will
have to seek additional new money in 1984 to service their financial
obligations. Most US regional banks, however, are unlikely to provide any
money for overseas debtors, preferring to invest instead in the US economic
recovery. As a result, pressure will grow on money center banks to expand
their lending--a load they are increasingly reluctant to carry. As one
participant observed, New York bankers no longer view themselves as "voluntary
lenders" in Latin America, but as responsible "alumni" paying their allocated
share to keep the institution functioning. The debtor countries can
demonstrate that their people have suffered in order to put the international
economic house back in order and they believe money center banks should share
some of this burden. If these banks demur or because of new regulations
relating to foreign loans, a financial crisis could result.
Unilateral Moratorium
5. While unlikely, most analysts view. unilateral moratoria on interest
and principal payments a continuing possibility in Latin America. Brazil just
completed a successful round of negotiations with the IMF, but there are
indications--mostly ambiguous--that it could be preparing down the road to
declare a unilateral moratorium: oil supplies are being rebuilt, foreign
exchange reserves are rising, and large money transfers out of US banks have
been noted recently. Although the Alfonsin government in Argentina appears
willing to cooperate with the IMF, domestic pressures and the nationalistic
streak in the new leadership could provoke a falling out--particularly if
negotiations prove erratic or pschological factors overwhelm the economic
issues at hand. Peru will almost certainly fall out of compliance in 1984 and
it could declare a moratorium given the severity of its problems. If the
Hererra government in Venezuela appears headed for an ignominious defeat in
the December elections, he might also opt to salvage some support for the
party at the last minute by repudiating their debt. It is not certain that
most Latin American countries would follow suit if one country declared a
unilateral moratorium. Much would depend on the specific circumstances; the
reactions of US banks and the US Government; and, to a lesser extent, how the
West Europeans and the Japanese respond.
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