CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A023000010001-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 13
• Document Creation Date: December 15, 2016
• Document Release Date: October 3, 2003
• Sequence Number: 1
• Publication Date: October 13, 1972
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
Secret
N2 042
State Department review completed
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No. 0246/72
13 October 1972
Central Intelligence Bulletin
BANGLADESH: Mujib acts to restore public confidence.
(Page' 1)
HONDURAS: Cruz scuttles common market proposal.
Page 2)
DENMARK: Vietnam "War Crimes Tribunal" (Page 3)
MALAGASY REPUBLIC: General Ramanantsoa given five-
year mandate (Page 3)
LAOS: Communists move on the diplomatic front
Page 4)
CHILE: Crackdown on truckers'strike (Page 4)
CANADA: Inflation and unemployment (Page 5)
MEXICO: The Trend toward Economic Nationalism.
age 6)
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BANGLADESH: Recent measures designed to re-
store public confidence in the government appear
to be having some success.
Prime Minister Mujib returned home last month,
following an operation and seven weeks of conva-
lescence in Europe, to find that public restiveness
was mounting because of government corruption and
maladministration. Mujib responded quickly, dis-
missing a number of middle- and upper-level bureau-
crats and expelling 19 allegedly corrupt legislators
from the ruling Awami League party. Under existing
regulations the 19 automatically lost their seats
in the national legislature. The government also
closed three far-left opposition journals, instituted
new antismuggling measures, and announced that the
long-delayed draft constitution would be presented
at a legislative session that convened yesterday.
Additionally, the regime stepped up its efforts to
arrest and prosecute persons accused of collabora-
tion last year with Pakistan and decreed a tough
new labor policy designed to stem growing unrest in
the small labor movement.
This activity appears to have restored a con-
siderable measure of public confidence in the gov-
ernment. Moreover, no opposition group has become
strong enough to pose a credible alternative to
Mujib.
continuing oo an c o in
snorrages, remain serious problems. Heavy criticism
probably will surface again unless the government's
performance improves.
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HONDURAS: President Cruz has scuttled at least
for t1 dpresent the most recent efforts to revive
the Central American Common Market by demanding prior
international arbitration of the disputed frontier
with El Salvador.
Cruz, whose inflexible attitude has blocked
delineation of the border for almost a year, has
now tied acceptance of his method of settlement to
regional economic problems by rejecting a proposal
for restructuring the market until the border is
settled. He did not, however, rule out Honduran
attendance at the discussion sessions scheduled to
begin on 20 November.
The rejected proposal had been drafted by the
common market secretariat in response to Honduran
complaints that the five-member market had benefited
only the more developed partners. -Many observers,
including US officials, believe the plan is a rea-
sonable basis for negotiations, but with no hope
that Honduras will sign any agreement until El Sal-
vador has given in on the border dispute, Cruz'
position may well be interpreted as diplomatic
blackmail.
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DENMARK: Convocation of the Vietnam "War
Crimes Tribunal" in Christiansborg Palace, the seat
of parliament, and the participation of Prime Min-
ister Jorgensen and other government officials
constitute a high point for pro-Hanoi activity in
Copenhagen. At the opening meeting on 10 October,
Jorgensen soundly denounced "systematic US bombing"
in Vietnam and stated that his government was pre-
paring a "substantial" assistance program for Viet-
nam after hostilities end. Other such meetings
have been held in Stockholm and in Oslo, but in
less prestigious facilities. The opposition press
has scored Jorgensen for-permitting the use of
Christiansborg, and one newspaper reminded its
readers that unlike Sweden, whose Vietnam policy
is also critical of the US, Denmark is a NATO
partner. Jorgensen is an active member of the
local group that is sponsoring the tribunal. He
is no novice in anti-US circles. His extremely
accommodating behavior toward the tribunal may be
intended to convince Danish leftists that his
attitude has not changed now that he heads the
government. F7 I
MALAGASY REPUBLIC: Philibert Tsiranana has
stepped down as president, following the over-
whelming affirmative vote in a referendum last week-
end to abolish the office of president and to give
General Ramanantsoa a five-year mandate. Tsiranana,
who held office for 14 years, had been only a figure-
head since May when student and labor demonstrators
forced him to turn real power over to the military.
Ramanantsoa has since won widespread acceptance
throughout the island by responding to popular de-
mands for political and economic reforms and by
trying to reduce Madagascar's dependence on France.
The size of Ramanantsoa's victory in the referendum
will strengthen his hand in resisting the more radi-
cal demands of the students and workers who brought
him to power.
(continued)
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LAOS: The Communists are moving ahead with
preparations for peace talks. Lao Communist leader
Souphanouvong has named Phoune Sipraseuth to lead
a ten-man negotiations delegation scheduled to ar-
rive in Vientiane this weekend. Phoune, a rela-
tively high-ranking Pathet Lao official, was also
named Souphanouvong's plenipotentiary during an
abortive attempt to get talks started in 1970.
In addition to several other Pathet Lao officials,
Souphanouvong named three "Patriotic Neutralist"
officials to the delegation--probably to give it
a broadly based appearance. Although no date has
been set for the beginning of the talks, the Com-
munists are still holding to the line that talks
can start without a US bombing halt throw hout
the country.
CHILE: The government has cracked down swiftly
on a widespread truckers' strike and may use the
challenge to extend its economic control. A state
of emergency has been declared, putting the army in
charge of the economically vital central area where
road blockades set up by the strikers had aggravated
already sensitive distribution problems. The Allende
administration averted an earlier strike threat by
making some concessions, but its response to the new
strike included threats to take over for state op-
eration some 1,500 new trucks consigned to striking
truck owners. The latter appear to be supported by
about half their drivers. Several labor and busi-
ness groups intend to stri in sympathy today. If
the government calls out the security forces as it
did against the shopowners' shutdown in Au st the
present tensions could result in violence.
(continued)
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CANADA: With the federal election less than
three weeks away, the Trudeau government has re-
ceived bad news about inflation and unemployment.
Consumer prices jumped again in September, largely
as a result of higher food prices, and have now
risen four percent since the beginning of the year.
The inflation rate for the entire year is likely
to exceed the 4.5 percent of 1969--a level that
induced the government to adopt restrictive monetary
and fiscal policies that now would be ruled out by
high unemployment. Earlier this week, Trudeau was
jolted by news that the September unemployment rate
had climbed to 7.1 percent, the highest monthly
rate in a year. Unemployment has been increasing
since June, following a slight improvement earlier
in the year..
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MEXICO: The Trend Toward Economic Nationalism
The Echeverria administration is formulating an
economic policy that favors a continued expansion of
government ownership of business firms and tighter
controls for foreign capital. The government's goal
is to maintain a high economic growth rate while at
the same time hunting for ways to attack the long-
term problems of sharp income disparities, persistent
unemployment, and serious rural underdevelopment.
Several key administration officials consider these
problems, plus a very high population-growth rate,
the main threats to successful economic development.
They also believe that solving them is the key to
maintaining political stability.
President Echeverria is telling-foreign--pre-
dominantly US--and dome$tic business interests to
use their resources more to help meet the country's
priority development needs. Many observers question
whether he has the political will or perhaps even
the power to take on the vested interests; he may
back off if the complaints become too loud and his
policies depress the business climate to the point
where his economic objectives are jeopardized. So
far, however, he seems sincere, and, by means of a
carefully measured balancing act, mixing praise with
criticism, reassurances with threats, he appears to
be getting his message across.
During the past several months the government
has been acquiring increased ownership in a number
of industries. It has acquired majority, or in some
cases complete, interest in firms in the banking and
copper industries, the national telephone company,
a major sulphur mining company, the nation's largest
newspaper chain, a leading Mexico City television
station, and a string of hotels. These take-overs
mainly have been dictated by pragmatic necessities:
firms important to the economy were suffering from
poor management or shaky finances. Needless to say,
they have caused concern in the business community.
(continued)
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Aside from these moves, recent statements by
Echeverria and other top officials also point in the
direction of more government control. They have
criticized some local businessmen, including bankers
and industrialists, for failing to have the country's
best interests at heart, but most of the tongue lash-
ing has been directed at foreign investors.
Secretary of National Patrimony Flores de la
Pena, an increasingly vocal economic nationalist,
recently lectured a group of international business
executives on the "evils" of multinational companies,
saying that Mexicans want to be partners, not serv-
ants, of foreign investors. Referring to Mexico's
mixed state - private sector economy, he said that
government agencies should take a greater share of
participation in joint ventures:in'.the future. He
gave no indication that the government would demand
such "participation" in foreign-owned enterprises,
but implied that the government should intercede in
some cases to protect private Mexican firms from be-
ing absorbed by more powerful. foreign investors.
Flores de la Pena appears to be clearly putting
forth the "rules of the game" for foreign investment
in Mexico. One measure being considered is a law
that would require foreign companies to export a
percentage of the products they produce in Mexico.
A UN study of 110 firms with foreign ties operating
in Mexico shows that 104 prohibit their Mexican out-
lets from exporting their products. Finance Secre-
tary Margain recently said that "this contradicts
President Echeverria's thesis that we must export
and is the kind of foreign investment we do not ac-
cept." One of Echeverria's fundamental goals is to
gain better treatment for Mexico as a technology
importer. One way to do this would be to change
company requirements that limit sales by foreign
firms to the Mexican market. Such a law could cause
problems for US companies established in Mexico.
(continued)
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American auto companies, for example, would be re-
quired to export completed cars manufactured in Mex-
ico.
Other officials--all sent by Echeverria to speak
before Congress--have harped on similar themes of
economic nationalism and the responsibilities of the
private sector. They are urging an end to "economic
colonialism" and to "technological dependence" on
foreign countries and exhorting foreign investors
to establish industries with a "clear sense of social
justice."
The President, in his state-of-the-nation ad-
dress last month, clearly put private capital--and
especially foreign private capital--on notice, say-
ing that the government's duty is to direct the econ-
omy and to place capital at the service of the entire
nation. For the first time, Echeverria publicly at-
tacked--albeit without identifying them--the conserv-
ative business sectors, referring to them as small
groups living in the past and defending anachronisms.
"We shall not yield to groups that conspire to pre-
vent renewal," he said.
Despite Echeverria's exhortations to foreign
and domestic investors to change their ways, it is
doubtful that he will make abrupt or radical changes
that would risk the loss of private investment--still
the principal guarantee of continued economic develop-
ment and, ultimately, of social progress. So far
during his two years in office, he has been long on
rhetoric but has done little in terms of concrete
economic reform. As in many other situations, Eche-
verria deftly balances his attack with soothing words.
In his state-of-the-nation address, for example,
after stressing his commitment to change, he quickly
commented that "economic growth should not be held
back since it makes self-sustained development pos-
sible.
(continued)
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Much of his emphasis on increasing nationalistic
controls, however, is unpalatable to those in the
business community. It also causes concern among
foreign investors, whom the government still regards
as vital but not sufficiently dedicated to solving
the country's basic social and economic problems.
These interests seem uncertain as to how Echeverria
will proceed and will be keeping a wary eye on the
President's future economic strategy.
The private sector must be aware by now, how-
ever, that Echeverria will probably not, after his
six years in office, be able to point only to the
maintenance of a high economic growth rate. He ap-
pears rather to be the kind of President who will
want it said of him that he made some progress to-
ward achieving a more equitable distribution of in-
come, raising the standard of living of the poor,
and, in general, bringing a greater degree of social
justice to the country. He may have reached the con-
clusion that the economic basis is sufficiently firm
now to allow an acceleration of social programs.
What he apparently fails to realize is that, to a
significant degree, the goals of greater justice in
the distribution of income and economic development,
at least in regard to short-range capital flows, are
mutually exclusive. He appears convinced that he
can work for both goals simultaneously, but at some
point he will be forced to trade off one objective
to achieve the other.
What he has done so far is to inform the pri-
vate sector of his desires and to get some important
businessmen to pay at least lip service to his so-
cial goals. He is, at the same time, building a
better bargaining position with the private sector
that he can use to ease conflicts over any future
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