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| PRESIDENT 'S SE 
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‘Papers of 
HARRY S, TRUMAN 
DISSEMINATION NOTICE 
1. This copy of this publication is for the information and use of the recipient 
designated on the front cover and of individuals under the jurisdiction of the recipient’s 
office who require the information for the performance of their official duties. 
Further 
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tion for the performance of official duties may be authorized by the following: 
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the Department of State 
b. Director of Intelligence, GS, USA, for the Department of the Army 
c. Chief, Naval Intelligence, for the Department of the Navy 
d. Director of Intelligence, USAF, for the Department of the Air Force 
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2. This copy may be either retained or destroyed by burning in accordance with 
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WARNING 
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Espionage Act, 50 U.S.C., 31 and 32, as amended. 
Its trans- 
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| 
ENT'S SECRETARY FILE 
\
Papers of 
HARRY S. TRUMAN 
| PRESIDENT'S SECRETARY FILE 
Published March 1948 
> 
SR-26 
PANAMA 
TABLE 
OF CONTENTS 
SUMMARY 
i 
SECTION I— POLITICAL SITUATION 
1. 
GENESIS OF THE PRESENT POLITICAL SYSTEM ....... 
I- 1 
2. 
PRESENT GOVERNMENTAL STRUCTURE .......+.-.- 
I- 1 
c. 
The Judicial Branch 
: 
I- 2 
3. 
POLITICAL PARTIES 
.. 
1- 3 
a. 
The United Liberal Party (Partido Liberal Unido—PLU) 
; 
I- 3 
b. The Authentic National Revolutionary Party (Partido Nacional Revo- 
lucionario 
Autentico—Autenticos—Arnulfistas) 
? 
I- 3 
c. The National Democratic Front 
d. The 
National 
Revolutionary 
Party 
(Partido 
Nacional 
Revolu- 
cionario—PNR) 
I- 4 
e. 
The Popular Union Party (Partido Union Popular) 
I- 5 
f. The Socialist Party (Partido Socialista) 
I- 5 
g. The People’s Party (Partido del Pueblo) 
I- 5 
4. 
CurRRENT ISSUES 
; 
I- 6 
a. 
The Defense-Sites 
I- 6 
b. Arnulfo Arias 
1- 7 
c. 
Racial Tension 
; 
1- 7 
OTHER INFLUENTIAL 
GROUPS 
I- 8 
a. 
The Federacion Sindical de Trabaj ederes de Peneme (FSTP) 
I- 8 
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b. CIO Local 713 of the United Public Workers of America 
I- 9 
: 
.¢. 
Frente Patriotico de la Juventud (Patriotic Youth Front) 
I- 9 
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d. Federacion 
de Estudiantes de Panama 
I- 9 
: 
6. 
STABILITY OF THE PRESENT ADMINISTRATION 
I-10 
SECTION II — ECONOMIC SITUATION 
| ” 
1. 
GENESIS OF THE PRESENT ECONOMIC SITUATION 
lI- 1 
| = 
2. DESCRIPTION OF THE PRESENT ECONOMIC SITUATION 
. 
II- 1 
3. 
Economic STABILITY
HARRY 
TRUMAN 
PRESIDENT'S SECRETARY FILE 
SECTION II— FOREIGN AFFAIRS 
SECTION IV — MILITARY SITUATION 
1. 
Gunesis or Present 
........ 
Vel 
SECTION V—STRATEGIC CONSIDERATIONS AFFECTING US SECURITY 
SECTION VI— PRESENCE OF SABOTAGE ELEMENTS IN PANAMA 
SECTION VII— PROBABLE FUTURE DEVELOPMENTS 
APPENDIX A—Map of Panama 
APPENDIX B—Population Characteristics and Statistics 
APPENDIX apts of the Republic of Panama from the Canal Zone for the Fiscal 
Years 1939-1945 
APPENDIX D—Biographical Data 
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BRARY 
HARRY 
TRUMAN 
PRESIDENT'S 
FILE 
SUMMARY 
The strategic importance of Panama to the US arises from the fact that its ter- 
ritory. adjoins the Panama Canal. As a consequence, any country that initiates 
hostile operations against the US can be expected to launch concurrent hostile opera- 
| 
tions against Panama. 
Since Panama is physically incapable of protecting itself, 
and since the US cannot afford adequate protection to the Canal in case of war 
without military control of the territory of Panama which adjoins it, the two countries 
have closely bound themselves to one another by formal treaty. 
_ 
The two countries are also closely linked economically. 
Thirty-seven to 40 per- 
cent of Panama’s national income is derived from the US Canal Zone, and the US 
takes approximately 90 percent of Panama’s exports and a her with approxi- 
mately 87 percent of her imports. 
Panama’s international position, as a result of the intimacy of these ties with the 
US, is thus that of a quasi protectorate, and this subordinate position forms the basis 
of all problems inherent in the relations between the two countries. 
Panama’s spirit of nationalism requires that any government in office —if it is 
to survive politically — deny any inference that it is a quasi protectorate of the US 
and strive to promote its position as a sovereign and independent country within the 
c 
family of nations. 
However, Panama, as the host nation of the Canal, is aware of 
the benefits to be derived from close relations with the US and is consequently re- 
luctant to press its independence beyond the point which might jeopardize the support 
for which it depends on the US. 
Somewhere between these two opposing objectives each administration in Panama 
must formulate its basic policy. 
Since the attitudes which particular Panamanian 
political parties and individuals adopt toward this dichotomy of policy is variable, the 
relationships between the two countries is not constant, but rather continuously subject 
to re-examination and reorientation according as one or the other of the two objectives 
seems more relevant to the particular ad hoc decision Panama finds itself obliged to 
make. 
Note: The information in this report is as of 1 December 1947. 
It was circulated to the IAC agencies 
for comment on 26 January 1948. 
The intelligence organizations of the Departments of State, Navy, and Air Force have con- 
cutred in this paper. 
The Intelligence Division, Department of the Army, concurs with those 
sections which have direct military implications. 
a 
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HARRY 
THOMAN' LIBRARY 
/ Papers of 
| HARRY S. TRUMAN 
| PRESIDENT'S SECRETARY FILE 
as 
SECTION | 
POLITICAL SITUATION 
1. 
GENESIS OF THE PRESENT POLITICAL SYSTEM. 
Panama was originally a province of Colombia; its status as an independent country 
dates back to 1903, when it was recognized 
as such by the US. Among the factors 
that precipitated the separatist revolt against Colombia were: (a) dissatisfaction on 
the part of influential Isthmian citizens with the remote and allegedly centralized and 
corrupt rule of the province by the authorities in Bogota; (b) these citizens’ fear that 
Colombia’s dilatory tactics would preclude the construction of a trans-Isthmian canal 
by the US; and (c) the activities of French interests seeking to assure construction of 
the canal in Panama. 
2. 
PRESENT GOVERNMENTAL STRUCTURE. 
The traditions of Colombian Roman law were incorporated into the civil code . 
adopted by the nascent Panamanian Government, which also used the US-inspired 
Colombian constitution as a model for its own. 
Indirectly, the Constitution of the 
US thus influenced the governmental forms adopted: the latter were, for example, 
based on the concept of separation of powers among the executive, legislative, and 
judicial branches, though with a greater concentration of power than the US had, 
at that time, ever known. 
Because its framers feared retaliation by Colombia and 
recognized the paramount interests of the US, they included in the original 1904 Con- 
stitution the provision that the “US may intervene in any part of the Republic of 
Panama to re-establish peace and constitutional order in the event of their being 
disturbed.” 
Panama’s present constitution, although based on that of 1904, was adopted in 
March 1946. 
Many Panamanians had, by the early forties, become convinced that 
some of its provisions, especially those pertaining to citizenship, fundamental guaran- 
tees, labor, and the right of the US Government to intervene were no longer satisfactory. 
A National Constitutional Assembly (the predecessor of the present Jiménez Adminis- 
tration as the Government of Panama) was accordingly convened to draft the con- 
stitution now in effect. 
The Panamanian Government consists of a legislative branch (the National As- 
sembly), an executive branch, and a judicial branch. 
a. 
The Legislative Branch. 
The unicameral National Assembly convenes annually and is composed of 
deputies popularly elected for a period of four years. 
There is one deputy for each 
15,000 people, a guarantee of one deputy each to provinces with less than 15,000 in- 
habitants. 
The National Assembly has legislative powers analogous to those of the 
US Congress, including the judicial function of trying the President, judges of the 
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Supreme Court, members of the Tribunal of Administrative Controversy, and its own 
members in any case involving violation of the constitution. 
It also performs such 
nonlegislative functions as that of passing on certain executive appointments, appoint- 
ing investigative commissions, and “censuring” Ministers of State. 
As in some European countries, there is a Permanent Legislative Commission, made 
up of five Assembly members, that sits during Assembly recesses, prepares projects for 
consideration by the Assembly in its next session, and acts as a “watchdog”’ vis-a-vis 
the President with respect to the prerogatives of the legislative branch. 
b. The Executive Branch. 
The constitution provides for a President and two Vice Presidents, elected by 
direct suffrage for a period of four years, for an appointive Secretary General of the 
presidency, and for Ministers of State appointed by the President (collectively they 
constitute a Council of Cabinet). 
In general, the executive powers are analagous to 
those of the US Constitution, except that the Panamanian Executive has wider appoint- 
ive powers. 
The Panamanian system is not federal in character: the governors of the 
provinces and the heads of some of the municipalities are appointed by the President. 
There are no provincial legislative bodies. 
c. 
The Judicial Branch. 
The constitution provides for a Supreme Court of Justice of five “magistrates” 
(named by the President with the unanimous approval of the Council of Cabinet and 
subject to approval by the National Assembly), and there are subordinate courts 
and tribunals established, as in the US, by law rather than by constitutional provision. 
“The guardianship of the integrity of the Constitution,” according to the language of 
that document itself, “‘is confided to the Supreme Court.” 
The so-called Public Minis- 
try, headed by an Attorney General elected for a 10-year term by the National As- 
sembly, is, under the Panamanian Constitution, regarded as part of the Judicial Branch: 
its duties include the prosecution of crimes, the promotion of the execution of the laws, 
- “defense” of the interests of the nation “and its provincial and district subdivisions,” 
and the supervision of the “official conduct of public functions.” 
The privilege of municipal self-government is vouchsafed by the constitution, which 
expressly provides that the “State rests on a community of autonomous municipalities.” 
However, the mayors of some municipalities are appointed by the President, while others, 
notably those of Panama City and Colon, are elected for a four-year term. 
Some of 
the municipalities have elected municipal councils. 
Although the theory of the constitution is, in general, respected in actual practice, 
this does not mean that constitutional democracy is on as firm a footing in Panama as 
in the US or Great Britain. 
Political bickering and intrigue are “in the blood” of the 
country’s influential leaders, and the Panamanians do not place so high a value on 
observance of the supreme law as do the Anglo-Saxon countries. 
Furthermore, a 
large portion of the electorate — despite its several decades of experience with demo- 
cratic government — remains venal, and the extensive patronage powers of the Execu- 
tive and the emoluments to be gained from public office give the “ins” great oppor- 
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tunitics to influence the outcome of elections. 
Since this means, in effect, that the 
party or group in power can hardly be ousted by electoral methods, the golpe de fuerza 
is a familiar Panamanian political technique. 
It is, indeed, hardly too much to say 
that.a President who has gained power through a cleverly managed coup is likely to 
be respected and followed. 
Freedom of assembly, of speech, of religion, and of the press are guaranteed 
by the constitution, as is private property; and these guarantees are for the most 
part observed by the Panamanian Government. The constitution expressly rejects the 
principles of economic laissez faire, recognizing that “relations between capital and 
labor are an affair of ordinary law”, guarantees the “conditions necessary for a normal 
life” to the worker, and “compensation proportionate to investment” to capital. 
Labor’s 
rights to strike and to a minimum wage are also guaranteed. 
A unique feature of the Panamanian Constitution is the provision that vir- 
tually excludes all foreigners save US citizens from retail trade and authorizes a 
similar exclusion from wholesale trade. 
This provision reflects the power of the shop- 
keeper and the trader in Panamanian political life. 
3. PoLrricaL PARTIES. 
Both the composition and the alignment of Panamanian political parties undergo 
constant change. 
At the present time it is possible to identify seven political parties 
which are important enough to have, in one way or another, an impact upon events, 
e 
and can, therefore, be expected to influence the 1948 Presidential elections. 
a. 
The United Liberal Party (Partido Liberal Unido 
— PLU). 
As the major political support of the Jiménez Administration, the United 
Liberal Party regards the 1946 Constitution as the embodiment of its guiding prin- 
ciples. 
Despite the party’s broad official pronouncements concerning the benefits to 
‘ 
be gained from state control and planning, its actual practice indicates a strong prefer- 
ence for laissez faire in economic matters. 
It opposes the “infiltration” of Panama by 
foreigners (an emphasis from which, however, it excepts US citizens), pleads for popular 
acceptance of the idea of government-sponsored public works (its reasoning on this 
point is along pump-priming and developmental lines rather than socialist lines), 
and favors certain specific measures (completion of the Pan American Highway, in- 
tensified inter-American cooperation, lower taxes, a balanced budget, etc.). 
There is 
reason to believe that it is decidedly more sympathetic to the US point of view on the 
defense-sites problem than day-to-day Panamanian policy (which it controls) would 
suggest, apparently because it fears that it will alienate its political following if it 
accepts US proposals without prolonged negotiation. 
The party’s leader is President 
Enrique Jiménez, and its 1948 Presidential candidate is Domingo Diaz Arosemena. 
b. The Authentic National Revolutionary Party (Partido Nacional Revolucion- 
ario Autentico — Autenticos 
— Arnulfistas). 
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This is the personal party of Arnulfo Arias, who, when ousted from the 
Presidency in 1941, carried with him into this new organizaton the allegedly “authen 
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members of the Partido Nacional Revolucionario. 
Since Arias enjoys great personal 
popularity, the party is the chief opposition group in present-day Panamanian politics. 
It has, however, few commitments, either on economic policy or on political organiza- 
tion, and is apparently ready to follow Arias’ mood of the moment, which seems to vary 
: 
with his own conception of what is likely to restore him to the Presidency. 
The major 
constant in Arias’ political faith is his ardent patriotism, which frequently takes the 
form of noisy insistence upon the danger that Panama, as a “quasi protectorate” of the 
US, will fail to safeguard its independence. 
He has, therefore, been an indefatigable 
critic of the Panamanian Government’s course of action in the defense-sites negotia- 
tions, has made a number of pro-Argentine pronouncements, and has not hesitated to 
identify himself as a “nationalist.” 
A further manifestation of his patrioteering 
tendency is his open hostility to Panama’s British population. 
There are 100,000 to 
125,000 persons in Panama who are either British subjects or descendants of British 
subjects and Arnulfo Arias has publicly advocated discriminatory legislation against 
them. He constantly attacks the Jiménez Administration for its alleged weakness, 
corruption, and “subservience” to the US. 
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There is evidence that Arias is himself venal, and that a portion of his energy 
has been channeled into the accumulation of a private fortune. 
He is unlikely to be- 
come pro-USSR on ideological-grounds, although a widening rift between the USSR 
and the US might tempt him, for reasons of expediency, to favor a foreign policy that 
would embarrass US efforts on behalf of hemisphere defense. 
He would not, there- 
fore, from the US point of view, be a desirable successor for Jiménez. 
It should be 
noted that he has not yet made formal announcement of his candidacy, but is ex- 
€ 
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pected to do so about 1 December 1947. 
c. 
The National Democratic Front. 
This party, recently formed by a group of prominent politicians, can be ex- 
pected to emerge as one of Panama’s leading political parties. 
It includes among its 
directorship Ernesto de la Guardia (who has brought to the Front the support of the 
Liberal Reform faction of President Jiménez’ original coalition government) and Har- 
modio Arias, Panama’s most influential behind-the-scenes politician. 
Although the Front has not yet officially announced its candidate or platform, 
it is expected to nominate J. J. Vallarino, Panama’s Ambassador to the United States, 
as its candidate for President in the 1948 elections. 
The Front, because of the leaders who comprise its governing council, can be ex- 
pected, during the forthcoming campaign, to attack both Arnulfo Arias and Domingo 
Diaz vigorously. 
Its views on issues, rather than personalities, do not yet appear to 
have been formulated. 
d. The National Revolutionary Party (Partido Nacional Revolucionario — PNR). 
The National Revolutionary Party differs little, as regards platform, from 
Diaz’ party, although there is some reason to expect it to be the more successful of 
é 
the two in appealing for the support of the shopkeeping and trading middle classes 
of Panama City and Colén — if for no other reason than because of its more critical 
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HARRY S, TRUMAN LIBRARY 
attitude toward government éxpenditures on public works. 
Unlike some of Panama’s 
other parties, it is a genuine opposition party in the sense that it regards itself as a 
i 
genuine competitor of the PLU for power in the state. 
Once in power it would probably 
continue the public works program, the manifestations of hostility to foreigners, and 
the dickering on the defense-sites problem, along with many other characteristic 
policies of the Jiménez Administration. 
It might even launch a broader program of 
social reform than that now under way. 
The nied has nominated José Fabrega as 
its candidate for 1948. 
e. 
The Popular Union Party (Partido Union Popular). 
This is smaller than Panama’s other parties although it claims the 7,500 ad- 
herents the law requires for participation in Presidential elections. 
It addresses itself 
to simple folk in the provinces by denouncing the “evil plutocracy” in the capital where 
“Arnulfo Arias, the Nazi, public enemy No. 1 of the Government,” affirms PUP’s leader, 
Dr. Sergio Gonzalez Ruiz, “walks arm in arm with Don Enrique Jiménez, the Liberal 
President, while they defend the interests of democracy.” 
Since, however, the grip 
of Panama City and Colén upon the country’s politics seems secure, these appeals are 
not likely to be heeded within the predictable future. 
f. The Socialist Party (Partido Socialista). 
Led by a political adventurer named Demetrio Porras, the Socialist Party makes 
its influence felt through the so-called “League of Tenants and Wage Earners.” 
Most 
middle and lower-class Panamanians are tenants, and the rents they pay for the 
miserable dwellings they occupy are, by any standard, high. 
Porras has recognized 
and exploited the resultant widespread popular resentment by inciting the tenants to 
civil disobedience. 
In this way he has won a popularity that makes him a factor to 
be reckoned with in Panamanian politics. 
At the same time, as a pleader for tenants 
in rent cases, he has won a considerable reputation as alawyer. 
There is some evidence 
_ that he has, on occasion, accepted financial support from Moscow, but there is reason 
to believe that he is swayed primarily by considerations of local political advantage. 
As Panamanian Ambassador to London he has been to all intents and purposes a 
political exile, and has therefore been unable to continue his campaign against the 
landlords. 
His party has consequently lost strength, so that it now holds only two 
seats in the National Assembly. 
However, with Porras now back in Panama and a 
prohable candidate for President on the Socialist Party ticket, the movement he leads 
can fairly be expected to begin to attract sizable numbers of new followers. 
g. The People’s Party (Partido del Pueblo). 
With only 375 to 400 active members, the People’s Party is technically not a 
party atall. 
As the successor to the Panamanian Communist Party, which went out of 
existence in 1943, it maintains close relations with Lombardo Toledano’s CTAL in 
Mexico, with Vanguardia Popular in Costa Rica, with the Democratic Socialist Party 
in Colombia, and with other Communist and Communist-front organizations in Latin 
America. 
The leadership of Local 713 of UPWA-CIO in the Canal Zone is known to 
look upon the party with, to say the least, a friendly attitude. 
Celso Solano and 
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_ HARRY S, TRUMAN 
| PRESIDENT'S SECRETARY FILE 
‘ 
Crist6bal L. Segundo, as the party’s spokesmen, have endeavored to win support 
for Panamanian recognition of the USSR and to rally opinion against the US with 
regard to the defense-sites problem. 
For instance, they have organized a so-called 
Provisional Committee for the Return of the Bases which, like front organizations 
elsewhere, seeks wide non-Communist support for a purpose which, while clearly 
Communist, is not put forward as such.. On domestic questions the party’s present 
practice is to give what it calls “conditional support” to all “progressive” groups and 
measures, and it has thrown its weight vigorously behind President Jiménez’ public 
works program. 
At the same time, however, it makes propaganda —in the language 
of economic determinism and the class struggle — for whatever themes happen to be 
fashionable in Moscow, and, in its present phase this of course commits it to working- 
class “unity” against racial discrimination in the Canal Zone, against Wall Street, and 
against the Panamanian “traitors” who allegedly serve the interests of the US and the 
United Fruit Company. 
The party is at present engaged in a struggle for control of 
the Federation of Students and the Popular Youth Front. 
4. 
CuRRENT ISSUES. 
Because of Panama’s relatively high level of post-war prosperity, the issues that 
divide its political parties are rarely of an economic character. 
There is some current 
discussion of high prices and thus of inflation, but no particular party has taken a 
definite stand for or against any specific policy in this area, although the “outs”, 
hoping to improve their prospects at the polls, blame the government and at least imply 
that if they were in power, prices would come down. 
They also point to the venality 
and corruption of the government as a “cause” of the general economic imbalance. 
However, in the absence of a definite scandal, this is not likely to become a vital issue 
in the next campaign. 
The existence of Communists both in Panama and in the Canal Zone is well known, 
but the Panamanians have shown little concern about their activities and do not regard 
the USSR itself as a threat to their security. 
Communism, in short, remains a minor 
political issue. 
Most current political debate turns, in point of fact, upon purely local issues and, 
even more than in most other Latin American countries, is characterized by the person- 
alism that pervades all Panamanian politics. 
The defense-sites problem, because it 
concerns foreign relations and does not lend itself to statement in terms of personali- 
ties, isan exception. 
The other two big issues of the moment, however, are the person- 
ality of Arnulfo Arias and the alleged excess of the country’s alien residents, mostly 
negroes of British West Indian origin. 
a. 
The Defense-Sites Issue.* 
In 1942 the US and Panamanian Governments entered into an executive agree- 
ment under which the US leased certain sites in Panama for use as bases in the 
defense of the Canal and the Republic itself. 
The agreement gave the US jurisdiction 
* Subsequent to the writing of this report Panama’s National Assembly rejected the proposed 
US-Panama defense-sites agreement, and the US has begun to withdraw from the bases. 
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over the sites, and no major issues appear to have arisen concerning the exercise of 
that jurisdiction. 
The debate over the defense-sites concerns, rather, the stipulation 
in the agreement that the US would evacuate the sites “one year after the date on which 
the definitive treaty of peace which a: about the end of the present war shall have 
entered into effect.” 
The Panamanian Government holds that the instruments signed at the end of 
hostilities by the German and Allied military commanders in Europe, together with 
the instrument of unconditional surrender signed aboard the USS Missouri in Tokyo 
Bay on 1 September 1945, should be regarded as a “definitive covenant of peace” ending 
the armed conflict. 
The US view is that the definitive covenant of peace is still in 
process of negotiation. 
Many Panamanians support the Panamanian Government’s 
view; but others either support the US view or insist that, since continued US juris- 
diction over the bases is in the interest of both countries, what the treaty says is a 
matter of small importance as compared to the need for prompt negotiation of a 
new agreement authorizing the US to use the bases. 
Every phase of the negotiations 
concerning the terms of the proposed agreement has been followed in great detail by 
the Panamanian press and radio and has given rise to a spate of rumors, charges, 
and counter-charges regarding the motives, competence, and good faith of the Pana- 
manian negotiations. 
b. Arnulfo Arias. 
| 
Arnulfo Arias is both the most popular and the most hated and feared of 
‘Panama’s political leaders. 
Because he is known to be a tireless plotter who is deter- 
mined to be President again, and because he frequently espouses extreme nationalist 
measures:which, if adopted, would involve open discrimination against large elements 
of Panama’s population, his every public move precipitates vitriolic political debate. 
Even the details of his personal life are grist for Panama’s political mill, and rank 
equally with the Government’s public works program as a topic for discussion. 
¢. Racial Tension. 
Sincé work was first begun on the Panama Canal, large numbers of British 
West Indian negroes have taken up residence in the Republic. 
They and their descend- 
ants today account for approximately 20 percent of the population (some estimates 
place the total number at 125,000). 
Although many of them are full participants in 
the social and cultural life of the country, the extreme nationalists among. the rest 
of. the population have taken as one of their major propaganda themes the negroes’ 
alleged threat to the “purity of the race.” 
Since most Panamanians are themselves 
of: mixed white and Indian origin, “racial purity” is not, in Panamanian conditions, 
easy to define; and the line the nationalists propose to draw by means of discriminatory 
legislation would be linguistic rather than racial. 
It would not, that is to say, exclude 
non-whites as such, but only non-whites of non-Spanish-speaking origin. 
Although no Panamanian politician ever states this objective baldly (so that 
discussion of the issue proceeds largely by indirection), the race question is a continu- 
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ous and weighty factor in Panamanian politics. 
The nationalists have, moreover, al- 
ready achieved a limited measure of success in their campaign for discrimination. 
The country’s present citizenship laws, for instance, are worded in such fashion as to 
place disabilities upon the English-speaking negroes, and many informed observers 
believe that the negroes’ demonstrated susceptibility to the activities of both West 
Indian agitators (many of whom are Communists) and of US labor organizers reflects 
their dissatisfaction with the increasingly disadvantageous position they occupy in 
Panamanian society and economy. 
The vast majority of the 7,000 members of the 
widely discussed CIO Public Workers local union are not Panamanians but persons of 
British West Indian origin. 
Thus, insofar.as the British West Indian negroes come to 
be regarded as adherents of foreign ideologies, racial tension is likely to increase, 
the more since many Panamanian mestizos in the interior believe the negroes threaten 
their own position in the labor market. 
Even today few Panamanians would admit 
openly and publicly that they exercise and approve of discrimination against any racial 
or linguistic group. 
Most Panamanians, that is, think of themselves as champions of 
nondiscrimination, and this ideological factor may operate to prevent further deterio- 
ration of the negroes’ economic and social status; so also may the fact that the political 
parties have lately begun to use the negroes as weapons in the struggle for power. 
In the months since May, for instance, numerous negroes have received political party 
assistance with their applications for citizenship papers, presumably in return for 
their promise to vote in a certain manner in the 1948 elections. 
If this development 
leads to the enfranchisement of a considerable percentage of the British West Indian 
negroes, their vote will become an important factor in Panama’s political equilibrium, 
and they would probably be able, as time passed, to reverse the present trend toward 
discrimination, and demand the equal opportunity to which, under the prevailing 
political ideology in Panama, they are theoretically entitled. 
5. OTHER INFLUENTIAL GROUPS. 
The following four ostensibly nonpolitical groups are so influential as to demand 
attention in any survey of Panamanian political life. 
a. 
The Federacién Sindical de Trabajadores de Panamd (FSTP). 
This is the dominant labor organization of the Republic. 
It includes eighteen 
independent unions which claim a total of 20,000 members. 
The majority of the im- 
portant executives of the Syndicate are Communist Party members and maintain 
intimate ties with labor leaders in Mexico, Cuba, and Colombia. 
The Syndicate’s plat- 
form is also avowedly Communist in orientation: it stresses the class struggle, capital- 
izes politically on the race problem and on the tenant dissatisfaction with the housing 
situation. 
It has been openly and aggressively hostile to the US position on the defense- 
sites problem, and has consistently exploited nationalist and patriotic sentiment for 
the purpose of rallying opposition to US leadership in the hemisphere. 
The Syndicate 
has not, however, yet become an effective political force on issues that do not bear 
directly on labor problems as such. 
Nor is there any reason to expect its influence to 
increase noticeably in the foreseeable future. 
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b. CIO Local 713 of the United Public Workers of America. 
Now a year old, CIO-UPWA 713 has approximately 7,000 regular dues-paying 
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members, most of them unskilled negro laborers employed in the Canal Zone. 
The 
union, which claims about 17,000 members, demands for them a minimum hourly 
wage of forty cents, a generous retirement program, and, most insistently, discon- 
tinuance of alleged discrimination as regards job rights and opportunities. 
Avail- 
able evidence suggests that most of the union’s members are not themselves Com- 
munists; but the three organizers sent by UPWA from the US are known to be persons 
closely linked with the Communist movement, and data point definitely to Communist 
influence in the management of the union’s affairs. 
The union has sought to dis- 
associate itself from labor organizations and labor problems within the Republic of 
Panama, but because so large a percentage of its members live there, it is drawn 
willy-nilly, into Panamanian domestic politics — the more unavoidably since working 
conditions and job regulations in the Zone are frequently the subject of negotiations 
between the Panamanian Government and the Canal Zone authorities. 
Since a high percentage of the union’s total membership is drawn from West 
Indian negroes rather than typical Panamanian mestizos or whites, it is not surpris- 
ing —its Communist connections entirely to one side—that it is alert and active 
_ with respect to problems involving alleged racial discrimination; and since it is alert 
and active on this point, it is not surprising either that it continues to attract negro 
members. 
The union’s political importance, both present and future, lies precisely 
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in the fact that, prior to its appearance, the negroes had no effective representation 
in their dealings with the Zone authorities (neither the Panamanian Government 
nor the British Legation had at any time interested itself in their welfare). 
c. 
Frente Patriotico de la Juventud (Patriotic Youth Front). 
One of the country’s two influential youth organizations, the Front has some 
1,500 members. 
It was founded by Arnulfo Arias who, during his time in Germany and 
Italy, had observed the youth movements in those countries, and had concluded that 
a similar movement could play an important role in his own long-term plans for 
Panama. 
Arias has, moreover, succeeded in keeping control of the movement, so that 
he is in a position to exploit its considerable nuisance value for political purposes. 
Some 
recent reports state, however, that the Communists have now penetrated the organiza- 
tion, and are bent upon capturing it. 
The young men who have been attracted to 
its membership (Arias’ flamboyant personality appears to be the major attraction) 
live mainly in Panama City and Colén and seem to have no common tie save their 
dislike of the US and of the present Panamanian Government. 
The movement’s 
public behavior suggests that its members are characterized by a high degree of 
irresponsibility. 
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d. 
Federacion de Estudiantes de Panama. 
This influential youth organization dates from 1942, and now has a member- 
ship of approximately 2,000. 
Along with other Latin American student organizations, 
it is totally unlike the student organizations in the English-speaking world. 
Its leaders 
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are full-time professional agitators, not students but men from 25 to 35 years of age; 
and the members,who are in their teens, correspond, from the standpoint of training 
and maturity, to US high school rather than US university students. 
Their major 
characteristic is their excitability, which can on brief notice be translated into demon- 
strations and riots in the streets; and it is this characteristic that makes them valuable 
to their founders. 
Within the Federacién, as within the Frente, a struggle for control 
is now in progress between Arnulfo Arias and the Communists, both of whom it serves 
by its anti-US activity on such issues as the defense-sites problem. 
6. 
STABILITY OF THE PRESENT ADMINISTRATION. 
In June 1940, following a turbulent campaign, Arnulfo Arias was elected Presi- 
dent. 
His pro-Fascist orientation became evident soon after his inauguration, and 
he was speedily ousted —in part because of a growing conviction that he was taking 
steps that might, in view of the difficult international situation, oblige the US, for 
reasons of self-defense, to adopt measures against his Government. 
After his departure 
for Cuba on 7 October 1941, Adolfo de la Guardia, his own Minister of the Interior, was 
named as his successor. 
In the ensuing months th® new government rescinded the decrees by which Arias 
had attempted to frustrate the US program of aid to the democracies, and put in their 
place decrees predicated upon the idea of cooperation with US policy. 
On 4 January 
1943, the Panama National Assembly extended De la Guardia’s term of office by two 
years. 
By December 1944, however, the National Assembly was showing signs of inde- 
pendence vis-a-vis the Executive. 
De la Guardia suspended the Constitution, dis- 
solved the Assembly, and called for a 6 May 1945 election for members of a new consti- 
tutional convention. 
This election was held as scheduled; and the present administra- 
tion, under Enrique Jiménez as provisional President, owes its mandate (15 June 1945) 
to the resultant Constituent Assembly rather than to normal electoral processes. 
The 
first Presidential elections under the constitution drawn up in the early months of 
the provisional administration are scheduled for May 1948. 
Arnulfo Arias returned to Panama in 1945, and quickly succeeded in resuscitating 
his Authentic National Revolutionary Party. 
Meanwhile a shift occurred in the United 
Liberal coalition that placed President Jiménez in office. 
In this sense the present 
administration is not stable. 
Jiménez, not himself a candidate for re-election, has pledged that the 1948 elections 
will be impartial. 
His party has nominated an aged, political wheel horse named 
Domingo Diaz Arosemena, but the “democratic” elements Jiménez included in his 
original coalition have already broken away in anticipation of the 1948 elections, and 
are about to nominate a candidate of their own. 
This suggests that many persons 
connected with the Jiménez administration will appear as active participants in, per- 
haps even as candidates of, new splinter parties. 
Diaz is, in this background, unlikely 
to. poll a majority vote. 
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Arnulfo Arias’ recent line is that he is opposed to political intrigue and fully 
subscribes to the electoral process, 
There is, however, no reason to believe that such 
statements reflect his real views; and his mere presence in Panama keeps alive the possi- 
bility, however remote at the moment, of a sudden coup that would, by giving him con- 
trol of external policy, revive many of the vexed problems he posed for the US through 
the months preceding his ouster. 
There are two principal obstacles in the path 
of such a coup: (1) Chief of Police José A. Rem6én, whose position in the Panamanian 
political framework will be discussed below (in the chapter on the Police Force); and 
(2) the not inconsiderable personal influence of Arnulfo’s elder brother, Harmodio Arias. 
Reports now current in Panama state that Harmodio Arias, before throwing his 
support to the National Democratic Front in the coming elections, promised his support 
to Arnulfo in the 1952 elections. 
Harmodio is reported to have urged his brother to 
run for President 
in 1948 so as to keep his name before the public, preparing himself to 
accept defeat with good grace. 
Harmodio has also reportedly urged his brother to 
assume certain pro-US attitudes in the hope that by 1952 the US will forget his one-time 
Nazi leanings and not oppose his re-election. 
Arias’ popularity would probably assure him a majority in the 1948 elections if he 
were to have the support of his brother Harmodio. 
Without his brother’s support, he is 
unlikely to win.~ Diaz, however, has the handicap of age and the further handicap of 
colorlessness, and as spokesman for the party that must explain the recent defense-sites 
negotiations to a suspicious, increasingly nationalistic electorate, his campaign must 
proceed uphill. 
Fabrega, the candidate of the Revolutionary Party, will appeal for votes 
in terms indistinguishable from Diaz’, save that he will be free to criticize (and will not 
be called upon to justify) the involutions of Panamanian policy on the defense-sites 
issue. The candidate of the National Democratic Front will probably have the support 
of Panama’s leading newspapers and radio stations. 
He will also have the added advan- 
tage of being free to attack the defense-sites negotiations of Jiménez and, at the same 
time, claim credit for the popular domestic policies of the Administration. 
Insofar as the choice is narrowed to Diaz, Fabrega, and Vallarino (the probable 
candidate of the National Democratic Front), the US will have no paramount interest 
at stake in the election. 
If, on the other hand, Arias, as is expected, offers himself as a 
candidate, the elections would assume great importance from the US point of view. 
As 
a democratically elected President, able to claim the support of the majority of 
Panamanians, Arias would be even more dangerous than as a self-appointed dictator. 
Regardless of any protestations he might make in the course of the campaign, he could, 
on assuming office, be expected to oppose various US policies and to miss no opportunity 
to forward (along with his own interests) the interests of groups or individuals opposed 
to the position of the US’ dominant position in the Caribbean. 
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RY FILE 
SECTION Il 
ECONOMIC SITUATION 
1. 
GENESIS OF THE PRESENT ECONOMIC SYSTEM. 
The Panamanian economy is based in large part upon the transit of goods and pas- 
sengers across the Isthmus. 
This has been true ever since colonial times, when the 
Isthmus was already being used as a point of transshipment for goods originating on 
the west coast of South America and destined for Spain. 
Second in importance to the 
economic activities associated, directly or indirectly, with the construction, administra- 
tion, and defense of the Panama Canal and with the transportation of goods and pas- 
sengers through the Isthmus, are agricultural pursuits. 
Fifty-two percent of the 
population is engaged in agriculture. 
No other activity or complex of activities employs 
nearly so many people as these two, or makes nearly so large a contribution 
to the 
national income. 
Although the Constitution of the Republic authorizes detailed regulation of indus- 
try, agriculture, and labor, in actual practice there is a minimum of government control. 
Moreover, the Panamanian Government will probably maintain its policy of minimum 
interference in private enterprise (although it will continue to encourage nationaliza- 
tion of domestic trade). 
The present laissez faire policy enjoys the active support of 
the middle classes in the terminal cities of Col6n and Panama, and these are undoubt- 
edly the most powerful and vocal element in the Republic’s life. 
2. 
DESCRIPTION OF THE PRESENT ECONOMIC SITUATION. 
If strict government controls were imposed upon its economy, as well as broad 
agricultural reforms, Panama could feed itself without outside help. 
In the absence of 
such controls it will continue to import those foods that cannot be produced domesti- 
cally without adverse effects upon the Republic’s standard of living. 
Rice is Panama’s basic food, 
Domestic production, which is encouraged by the 
government, totaled 1,147,094 quintals in 1945, a quantity insufficient to meet the 
domestic demand (49,024 quintals were imported from neighboring countries). 
In 
1945 the country imported 4.3 million dollars worth of foodstuffs (principally processed 
foods and cattle from the US). 
This accounted for 18.4 percent of the country’s total 
imports. 
The inadequacy of the country’s agricultural labor supply and the retarded devel- 
opment of its transportation facilities are the main deterrents to agricultural expansion 
in Panama. 
Panama’s principal exports are bananas, cacao, abaca, rubber, and coconuts. 
Most of these exports go tothe US. 
In 1945 there were 116 million commercial banana 
plants in the Republic. 
These were controlled chiefly by two US companies, the one 
with large plantations of its own in Chiriqui and Bocas del Toro, the other the principal 
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purchaser of bananas from private growers in the Provinces of Col6n, Panama, and the 
Canal Zone. 
Cacao is produced primarily for export although a small percentage is processed 
locally. 
For the period 1942-45, exports totaled 6.8 thousand metric tons. 
Panama’s natural resources are virtually undeveloped and to a large extent 
unknown. 
The Province of Darién is reputedly rich in gold, silver, and copper deposits, 
and from time to time private companies have been organized to explore and develop 
them. 
Limited capitalization, inadequate transportation facilities, disease, and inabil- 
ity to find profitable ore deposits caused all these companies to fail. 
In 1939 gold was 
mined in the amount of $105,000, along with well-nigh negligible quantities of silver, 
copper, 
and manganese. 
Panama has extensive forest resources, which, if developed, would enable the 
country to market more than fifty species of commercially valuable cabinet, building, 
and dye woods. 
Transport difficulties have been a determining factor to date in pre- 
venting their successful exploitation. 
The waters adjacent to the Republic abound in edible fish, but here also develop- 
ment up to the present time has been on a small scale. 
The country’s pearl-fishing 
industry and its mother-of-pearl industry both make a small contribution to the 
national income. 
Neither crude oil nor asphalt is produced in Panama. 
The Sinclair Oil Company 
is, however, now engaged (under a government concession) in exploring for possible 
oil resources. 
The country has no petroleum refineries and chooses rather to depend 
on the Canal Zone distribution facilities for its supplies of petroleum products. 
Panama’s industrial potential is limited by its small population, its scant purchas- 
ing power, its limited natural resources, its continuing capital famine, and its inade- 
quate and relatively expensive transportation facilities. 
In 1943 less than 2 percent of 
the population was engaged in industry, and no significant new industrial development 
took place during the war. 
Industrial development has proceeded slowly in Panama, and up to the present has 
been largely confined to the production of light consumers’ goods in small factories or 
shops. 
Thus manufacturing industries play a minor role in the national economy. 
The largest of the enterprises are those that produce electric power, alcoholic beverages, 
soft drinks, foodstuffs, and, recently, soap. 
Other significant manufactures are cloth- 
ing, ceramic products, wood products, leather and leather products, chemicals, and 
cement. 
Practically all manufacturing takes place in Panama City, Colén, and David, 
with the greatest concentration in Panama City. 
With the exception of electric power, alcoholic beverages, sugar, and possibly soap, 
Panama is unable to satisfy its domestic industrial needs. 
It has no significant indus- 
tries that could be converted to important wartime uses. 
Because of its limited indus- 
trial productivity, it is not an important market for foreign raw materials. 
It will 
remain for some time at least an important source of bananas, and also, to a limited 
extent, coconuts and abaca fiber. 
The per capita national income for Panama was estimated in 1945 at $190.00. 
This compares favorably with that of Panama’s neighbors, but it should be noticed that 
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37 percent of the income on which this figure is based apparently originated in the 
Canal Zone. In 1944 the corresponding figures were $202.00 and 40 percent, respec- 
tively. 
The national budget over the years shows no significant imbalance. 
In 1944, 
receipts totaled $27,198,000 and expenditures $26,300,000, 
In 1945 there was a deficit 
of $4,631,000. 
The three main sources of government revenue are import taxes, inter- 
nal revenue, and the lottery. 
In 1944 the latter accounted for approximately 25 per- 
cent of the totalrevenue. 
The main item of expenditure is public works. 
The total public debt of Panama as of 31 December 1946 was $19,869,468.78, of 
which $15,826,005.10 is external debt held mostly in the US. 
Interest rates on the for- 
eign debt have been considerably reduced in recent years. 
The value of the balboa, Panama’s currency unit, is pegged to the dollar 
at the 
rate of one balboa to one dollar. 
Panama’s imports and exports for the years 1940-1946 are as follows: 
YEAR 
IMPORTS 
EXPORTS 
1940 
$23,936,657 
$4,054,866 
1941 
32,917,392 
4,283,145 
~ 
37,928,071 
2,229,028 
1943 
40,267,592 
1,965,995 
1944? 
38,100,000 
2,927,229 
1945" 
45,648,100 
4,507,842 
1946 
57,057,498 
1,792,177 
1947 * 
17,581,342 
2,290,814 
*Bananas accounted for $922,099—31%—of total. 
* Bananas accounted for $2,047,759—45%—of total. 
* Bananas accounted for $4,154,432—61%—of 
total. 
‘First quarter approximate. 
In 1942 the US supplied Panama with 75.7 percent of her total imports and took 90 
percent of her exports; and these percentages have remained fairly constant through 
subsequent years. 
These international trade figures do not, however, represent the true picture of 
Panama’s international balance of payments since exports are only a minor source 
of dollars. 
Dollars are derived chiefly from the operation of the US Government in the 
Canal Zone. 
Total Panamanian receipts from the Canal Zone during the fiscal year 
1945 amounted to $69,266,000, as compared to out-payments of only $17,383,000. 
The 
largest single receipt item is the wages paid by the US Government to Panama residents 
(during the US Government’s fiscal year ended 30 June 1946 there were 35,000 Panama 
residents on the US Government pay roll who received $31,970,000 in wages). 
Addi- 
tional sources of dollars are sales of goods and services to the US Government and to US 
citizens (residents and transients) in the Canal Zone. 
Thus, despite the strikingly 
unfavorable merchandise trade balance, Panama does not suffer a dollar shortage. 
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That Panama’s ability to satisfy its heavy import requirements and, consequently, its 
prosperity, is mainly dependent on factors beyond its control is, however, apparent. 
3. 
Economic STABILITY. 
At the present time the Panamanian economy is relatively stable. 
Although US 
expenditures in both the Zone and the Republic have declined appreciably since the 
cessation of hostilities, the resultant slack has to some extent been absorbed by the 
Panamanian Government’s own public works program, much of which had been 
adjourned for the duration of the war. 
Furthermore, the present administration has 
made an attack upon the nation’s continuing economic problems in a promising man- 
ner, that is, by planning projects for Panama’s economic and agricultural development. 
There is reason to believe, too, that the policies embodied in the 1946 Constitution have 
tended to encourage both US and Panamanian businessmen to expand their commer- 
cial and industrial commitments. 
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SECTION Ill 
FOREIGN AFFAIRS 
Panama’s foreign policy is based on a compromise between its wish to retain its 
position as a quasi protectorate of the US and its desire to assert for itself unlimited 
national sovereignty. 
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Under the Treaty of 1903, the US guaranteed Panama’s independence: Article 136 
of the original Panama Constitution conceded to the US a legal right to “intervene 
in any part of the Republic of Panama to re-establish peace and constitute order in the 
event of there being a disturbance.” 
Inasmuch as none of the other American Repub- 
lics has granted any such right to the US, this clause in Panama’s Constitution clearly 
created a special situation, which has lent itself to description by anti-US elements in 
terms of tutelage and about which even pro-US Panamanians have—without for a 
moment denying the urgency of the US interest on the Isthmus—shown increasing 
sensitiveness in recent years. 
This contrasts sharply (the constitutional provision 
entirely apart) with Panamanian attitudes through the earlier years of the Republic, 
when the special position of the US tended to be taken for granted. Thus when, in 
1909, the US asserted that it was entitled to prevent Panama from getting into a contro- 
versy with another government that might render imperative US intervention on 
Panama’s behalf, Panama offered no objection; and on occasion the Panamanian Gov- 
ernment has itself invoked the constitutional provision cited in order to permit US 
intervention in its domestic affairs (on one such occasion the President of Panama 
orally requested intervention). 
Moreover, US intervention, in the absence of such 
authorizations or requests, has been accepted without any question of, for example, an 
appeal to other powers. 
A shift in attitude became perceptible around 1933; and, increasingly through sub- 
Sequent years, Panama has taken steps that appear to have been motivated in large 
part by a desire to draw attention—inside Panama, in the US, and over Latin America 
as a whole—to its equality of status with the US. 
As an active member of the Pan 
American Union and the United Nations, as a power represented by diplomatic and 
consular establishments throughout the world, and as an ardent partner in the Good 
Neighbor Policy and hemisphere cooperation, it today, at first glance, appears to possess 
all the external paraphernalia of full sovereignty, and might on this showing fairly be 
expected to adjourn its fears concerning the possibility that it will be considered a US 
protectorate. 
For the Panamanians, however, the nub of the question is, on the one 
hand, the US’ supposed right of intervention and, on the other hand, their own complete 
unwillingness (US attitude entirely to one side) to sever the bonds of interest which 
(as they themselves know) make it impossible for the US to remain indifferent to events 
within Panama. 
The major objective of Panamanian foreign policy is, in this back- 
ground, that of retaining the political and economic benefits that accrue from the fact 
of US reliance upon the Panama Canal for its defense and its commerce, while weaken- 
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ing and wearing down the “rights” which the US has traditionally regarded as ee 
concomitants of that reliance. 
To some extent the Panamanians have made progress toward the achievement of 
this objective, as may be seen from the following facts: (1) the US has intervened in 
neither of Panama’s two most recent revolutions; (2) no Panamanian President would 
today venture to call upon the US to intervene in any internal Panamanian crisis; (3) 
the 1936 US-Panamanian Treaty withheld intervenient rights from the US that it had 
enjoyed under the original 1903 Treaty, although it established the principle that all 
problems affecting the security of the Republic and the Canal in case of aggression and 
international conflagration would be handled on a consultative basis; and (4) the most 
recent Constitution (1946) omits the article under which the US had enjoyed special 
intervenient prerogatives. 
None of these facts should, however, be taken as implying 
that Panama is likely to press forward with this line of policy beyond the point at 
which the US might begin to withdraw its economic support and its military protection 
from the Canal, or that these superficial developments have substantially modified the 
realities of US-Panamanian relations. 
So long as nearly half of Panama’s national 
income is derived from the sale of goods and services (domestically and via export 
channels) to Americans, Panama can be counted upon to stop short of alienating 
either public or official opinion i in the US. 
The Panamanians are well aware that, for instance, a fortnight’s embargo on com- 
mercial relations between the Zone and the Republic would plunge them into an eco- 
nomic crisis which would speedily bring down upon the existing Government’s head the 
vengeance of its own people. 
All the major considerations affecting Panamanian foreign policy today arise out 
of the conflict set forth above. 
The Panamanian Government concedes—though with 
increasing reluctance—that the presence of the Panama Canal within its territory gives 
the US a paramount interest there; and at the margin it never actually denies that, 
corollary to that interest, the US has a continuing need for sites in Panamanian terri- 
tory on terms roughly parallel to those of the 1942 defense-sites agreement. 
By the 
1942 agreement, the US gained “complete use of such areas and exclusive jurisdiction 
in all respects over the civil and military personnel of the US situated therein, and their 
families,” and was, moreover, “empowered to exclude such persons as it sees fit without 
regard to nationality.” 
But, for reasons of domestic politics, the signing of a new 
agreement in which such terms will be set down in black and white is a step which 
neither the present Government ( faced as it is with an election in 1948) nor any alterna- 
tive Government can be eager to take. 
Too many influential Panamanians not only 
see in it a reaffirmation of the Republic’s subservient position vis-a-vis the US, but also 
feel that it goes further than the original Hay-Bunau Varilla Treaty of 1903 on the 
point of extraterritorial privileges. 
Only the fact that the 1942 agreement was negotiated in time of war prevented a 
sharp issue from arising at that time; and the eagerness of the Panamanians, on pat- 
ently faulty textual grounds, to terminate the agreement as soon as hostilities ceased 
was a sure indication that pressure was strong inside Panama against any and all 
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avowals of the US special position. That the pressure has not diminished 
since is indicated by (1) the fact that President Jiménez, when the current defense-sites 
negotiations began, tried to associate both Arnulfo Arias (as leader of the Authentic 
National Revolutionary Party) and Harmodio Arias with him in recognizing the neces- 
sity of a new agreement along roughly the lines desired by the US, and (2) the fact that 
the Arias brothers refused the gambit. 
(Had they agreed Jiménez could probably have 
proceeded with the agreement, without regard to its domestic political effects.) 
The 
results of the conference 
were never announced, but Harmodio 
Arias believes that peace- 
time jurisdiction over the defense sites should vest exclusively in Panama, and Arnulfo 
Arias is personally hostile to any sort of US control over the defense sites—although for 
domestic political reasons or for motives of personal ambition he may temporarily adopt 
pro-US attitudes. 
The original 1903 Treaty between the US and Panama and the 1936 Treaty be- 
tween the two countries are the only special political treaties which Panama has at 
the present time. 
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The Panamanian Government, pointing to US-USSR economic and political rivalry, 
has adopted a hostile attitude toward the Soviet Union. 
It does not maintain diplo- 
matic relations with the Soviet Union; it can be counted on to favor the US against the 
Soviet Union not only in any future war situation but also, and even more certainly, in 
any short-of-war clash or conflict of interest; and there is no likelihood that the Pana- 
manian Communist Party and its several “front” organizations will be sufficiently 
strong within the foreseeable future to modify the Government’s attitude on these 
points, even though the present ability of the Communists to exploit Panama’s feeling 
of nationalism affords it an influence beyond that which its numbers deserve. 
There 
are, moreover, reasons for believing that the pro-US, anti-USSR orientation of Pana- 
manian foreign policy has deep roots in the minds and hearts of the Panamanian people, 
quite apart from the motives of real-politik. 
The Panamanians have prospered under 
their system of free enterprise; they are deeply committed to its Spanish, thus 
Christian, cultural traditions; and their demonstrated allegiance is to hemisphere 
solidarity and inter-American unity rather than to a fanciful world-wide union of the 
working classes. 
The dominant political group in the country, moreover, the middle 
class, has proved highly resistant to the appeal of Communist propaganda and Commu- 
nist theory. 
Panama’s present foreign policy appears to involve four themes: 
(a) Denial—at least upon the verbal or formal level—of any inference that 
Panama is a quasi protectorate of the US, with, however, no evident intention 
of modifying the realities of its special position. 
(b) Friendship and cooperation with the US. 
(c) Promotion of the concept of hemisphere solidarity. 
(d) Adherence to the United Nations. 
While it is conceivable that at one time or another an ill-advised demagog might 
seek to modify what has been termed above the realities of US-Panamanian relations, 
it remains true that (a) no leader known to be committed to such a course is likely to 
STIMAN 
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be elevated to the Presidency in Panama, and (b) any leader who suddenly adopted 
such a policy after becoming President would promptly be forced out of office. 
In 
short, Panama’s fate is inextricably linked to that of the US, and in such fashion that 
Panama’s nationalist aspirations must, now and in the future, be subordinated to its 
role as the host of the Panama Canal. 
On the other hand, the Panamanians 
are keenly aware that the US, committed as 
it is to hemisphere solidarity on the basis of consultation among twenty-one equal and 
sovereign republics, will never press its special interests in Panama to the point of 
impairing Panama’s status as one of those republics. 
Believing this, the Panamanians 
see the strength of their position as lying in the fact that, while enjoying the economic 
and political benefits of a quasi protectorate, they can demand the rights and privileges 
of an equal sister nation. 
This belief now pervades all US-Panamanian negotiations 
on Panama Canal defense, and accounts in large part for the Panamanians’ conviction 
that they can drive a hard bargain in such negotiaticns. 
The United Nations has little practical meaning for Panama other than as a forum 
before which to ventilate Panamanian protestations of equality and independence. 
Panama is certain to remain an active participant in the UN; but it will continue 
to 
rely for its security upon the armed forces of the US. 
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SECTION IV 
MILITARY SITUATION 
1. 
GENESIS OF PRESENT MILITARY POLICIES. 
Panama has neither an army, a navy, nor an air force. The US maintains exten- 
sive military, naval, and air establishments not only in the Canal Zone but in the Repub- 
lic itself, and has a treaty obligation to defend Panama. 
The Panamanians, well aware 
of the Canal’s strategic importance for the US, know that even in the absence of such 
treaty obligations, the US would move rapidly to defend them should their security be 
endangered. 
They have, therefore, always felt that armed forces for the defense of 
their national patrimony would be an unnecessary expense, and for this reason they 
have not, since the country’s establishment, provided for a national defense force. 
Since the outbreak of World War II, however, there has been a growing body of 
opinion (particularly among officers in the National Police who have had military 
training in various Latin American military academies or in the US) in favor of revers- 
ing the no-armed-forces policy. 
Plans in this sense now reportedly exist on paper, and 
provision has actually been made for the conversion of the Panama National Police into 
a Panama Army during any national emergency. 
No such plans are likely to be 
adopted in the foreseeable future. 
Influential Panamanian politicians will be reluctant 
to recommend expenditures for an integrated military establishment, and will, as 
civilians, probably continue to think of the military as a potential threat to their careers. 
The fact that the present Panamanian Government has taken no steps toward reor- 
ganizing and improving the Panama National Police in its present form suggests a 
wish to keep it weak. 
During the bilateral staff conversations with the US in 1945, the 
Panamanians showed considerable interest in acquiring a US military mission, but no 
formal request has been made. 
The commander of the Panama National Police Force, provided he has the support 
and loyalty of his men, is in a position to wink at, provoke, or even initiate political 
disturbances, and could probably overthrow any Panamanian Government. 
The mis- 
sion of the Police Force, according to Panamanian law, is dual. 
It is charged with (1) 
the protection of the State and the maintenance of internal order, and (2) the functions 
usually assigned to police forces in democratic countries: namely, protection of persons 
and property; prevention of crime and infractions of the law; and the capture and 
prosecution of criminals. 
The present active strength of the Police Force is approxi- 
mately 2,246 (159 officers, 2,051 enlisted men, and 36 employees who do not wear the 
uniform). 
The President of the Republic is the Commander in Chief, and exercises his powers 
through the Ministry of Interior and Justice. General headquarters is in Panama City. 
The force is divided into a headquarters section, a central section consisting primarily 
of a mounted or cavalry squadron designed to be used in connection with crowd disper- 
sions, parades, riot duty, etc.; special detachments for five geographical zones; an 
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immigration section; a paymaster section; a prison section; a traffic section; a Presi- 
dential guard whose loyalty is crucially important during times of political-unrest and 
possible revolutionary activities because it polices the Presidential palace; and a record 
section. 
The National Police is fairly well equipped with small arms, and the Central 
Police Station in Panama City is a modern functional building. 
Since the cavalry and 
traffic units of the police occupy adjoining annexes, the nerve center of the National 
Police in the event of revolutionary activity would be this one building. Any revolu- 
tionary group unsupported by the Police Force would attempt as a matter of course to 
stop movement in and out of this building as a first step toward overthrow of the 
established government. 
As an armed force, the value of the Panama National Police is practically nil: it is 
inadequately trained, badly organized, and poorly equipped. 
As a police force, it is, 
when judged by US standards, mediocre. 
The appropriate standards are, however, 
Latin American, and from that point of view the nub of the matter is that because of 
the control it exercises over all arms and weapons, it is able to maintain law and order in 
normal conditions. 
Its resources for handling crowds and mob violence are, however, 
extremely limited. 
Although the commissioned officers of the National Police appear 
to be fairly able men, dishonest, practices are traditional in the organization. 
Many of 
them, moreover, have outside business interests, not infrequently in prostitution and 
gambling. 
There is no evidence of Communist infiltration in the Panama National Police. 
Colonel José A. Rem6én, who is regarded as pro-American, is the Commandant and 
Director of all Panama National Police activities. 
His loyalty to the present Jiménez 
Administration is unquestioned, the more since he is a bitter personal enemy of Arnulfo 
Arias, whose revolutionary activities he has dealt with officially on many occasions in 
the past. 
He may be counted upon to suppress any future revolutionary activities, 
whether by Arias or by subversive leftist forces. 
Any future constitutional President 
of Panama except Arnulfo Arias (who would probably remove him from office) could 
count upon his loyalty. 
The Deputy Commandant of the National Police is Lt. Col. 
Francisco Aued Hurane. Aued’s father was a Syrian and his mother of German extrac- 
tion. 
His private commercial connections are notorious. 
He is disliked by President 
Jiménez and distrusted by Colonel Remoén. 
In case of large-scale political disturbances 
Aued’s sympathies would probably not coincide with those of his chief, and, in the im- 
probable event of Remén’s absenting himself from the Republic of Panama, Aued, in 
active charge of the Police, would bear watching by the Government. 
The Military 
Aide to the President of Panama is Lt. Col. Manuel de J. Quijano, Jr. 
He owes his 
position to the fact that he is the President’s son-in-law, and will probably not be con- 
tinued in office by the next President. 
Panama also has a Secret Police, which, like the National Police, has a dual function. 
Its mission is (1) the prosecution and investigation of violations of law (apprehending 
felons and their accomplices, turning them over to the appropriate authorities, and 
producing the necessary evidence to prove their guilt), and (2) prevention of activities 
directed against national security and the State. 
The Secret Police is autonomous 
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vis-a-vis the National Police. 
The President of Panama is its Supreme Chief, but it is 
directly responsible to the Ministry of Interior and Justice. 
It has a total strength of 
approximately 81 persons, and maintains offices in Panama City, Colén, and David. 
Since its physical equipment consists of approximately 100 revolvers and 6 automobiles, 
it cannot be regarded as a potential rival to the National Police (in the event of revolu- 
tionary disturbances, that is to say, it could not notably affect the outcome by taking 
sides against the National Police). 
The relation between the two organizations is not, 
however, cordial. 
Some members of the Secret Police have received training from US 
criminologists, and the organization’s recruitment standards, especially with regard to 
education, are more rigorous than those of the National Police Force. 
On the other 
hand, there is considerable evidence of sharp practices on the part of its officers, and of 
political chicanery in connection with promotions. 
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One of the tasks of the Secret Police is that of following the activities of possible 
subversive organizations on the Left, for which purpose it uses part-time paid agents 
and informers, many of whom are recent graduates of the National Institute and the 
Inter-American University in Panama City, and some, at least, former members of the 
Federation of Students of Panama, which is one of the radical groups that local Commu- 
nists have sought to dominate. 
The Secret Police has, however, cooperated with G-2 of 
the US Army with regard to subversive activities. 
The present chief of Secret Police, 
Raoul Ramon Acevedo Ramirez, is considered loyal to President Jiménez, and would 
probably transfer his loyalty to any constitutional successor. 
At one time he was an 
employee of Harmodio Arias’ newspaper, the Panama American, and there is reason to 
believe (1) that he would be unavailable for any major political purpose unacceptable 
to his former employer, and (2) that much of the information known to the Secret 
Police is available to Arias. 
In the 1943 and 1944 biennial budget for the Republic of Panama the equivalent 
of $4,046,520 was appropriated for the police forces. 
This represents 11 percent of the 
total expenditures of the Republic during the same period, and can be regarded as the 
national defense budget of the Republic. 
2. 
War POTENTIAL. 
Panama has no organized military reserve. 
There are approximately 5,000 
ex-members of the Police Force who for some purposes can be regarded as trained 
reserves. 
These men could presumably be called up by the Republic in case of a war 
or an emergency, but it is improbable that many of them would be useful from a military 
point of view. 
During the last few years there have been three attempts to set up infor- 
mal para-military organizations which would offer training in the handling of weapons, 
but none of them was large enough in scope, or lasted long enough to merit attention as 
relevant to Panama’s war potential. 
It is estimated that approximately 70,000 Pana- 
manians, exclusive of tribal Indians, are physically capable of bearing arms and thus 
available as untrained reserve. 
From the standpoint of natural resources, it is improbable that Panama could 
maintain its own defense forces even if it decided to make the attempt. 
Its industries 
could not, within the foreseeable future, supply the necessary weapons and equip- 
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ment; and its budgetary position precludes large-scale acquisitions elsewhere. 
Nor, 
given present conditions as regards health and education, are the militarily acceptable 
conscripts sufficiently numerous to form a strong military establishment comparable to 
that of other countries Panama’s size. 
Panama has few competent scientists, and commands neither funds nor facilities 
for advanced research. 
Panama is incapable of producing rockets or atomic, electronic, 
and bacteriological weapons; and its capabilities in this regard are not likely to increase 
in the predictable future. 
The only kind of war which Panama could support financially would be a small- 
scale struggle with one or another of her weaker neighbors. 
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Be 
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SECTION V 
STRATEGIC CONSIDERATIONS AFFECTING US SECURITY 
Because of the Panama Canal’s immense strategic value, Panama and Panamanian 
foreign policy are of paramount importance to the US. 
Concretely, US strategic neces- 
sities would be endangered by any situation in which (a) Panama might ally itself with 
a potential enemy of the US, (b) any part of Panama might be occupied by a potential 
enemy of the US, or (c) Panama might become a base of operations for persons sympa- 
thetic to the policies of a potential enemy of the US and/or inimical to the US. 
Be- 
cause an unfriendly Panamanian Government might permit such a situation to occur, 
the foreign policy of the Panamanian Government of the day, and the probable policy 
of any administration that might replace it, are matters of continuing interest to the 
US. 
The crucial problems in this connection are: (a) the (present or prospective) 
Panamanian Government’s attitude toward Panama’s special position vis-a-vis the US; 
(b) its ability to maintain public order; (c) its attitude toward US policies and proposals 
at international conferences; and (d) its capacity to associate with it, in its support for 
US leadership in the Caribbean and in Latin America as a whole, a substantial 
majority of the Panamanian people. 
In general, Panama’s constitutional democratic system of government and its well 
defined political and economic ties to the US render improbable any Panamanian politi- 
cal developments unfavorable to US security. 
There are, however, three factors at work in the political life of Panama that might 
conceivably lead to situations sufficiently embarrassing to US interests in Panama to 
require either close observation by the US or positive US action, or both. 
Were Arnulfo Arias again to become President, which although unlikely (in view of 
the recent decision of his brother to support Ambassador to the US Vallarino), is never- 
theless conceivable, many of the vexed problems he posed for the US through the months 
preceding his 1941 ouster would probably recur. 
Nothing in his past record suggests 
that Arias would, as President, sincerely and honestly accept the realities of US strategic 
necessities in Panama. 
At the same time, however, it is unlikely that Arias, should he 
again become President, could continue indefinitely an unrealistic policy toward the US. 
Opposition forces within the Republic could in this event be counted on, as in 1941, to 
remove him from office. 
The People’s Party and the Socialist Party in Panama are either Communist or 
Communist inspired, and are thus inimical to the strategic interests of the US in the 
area. 
At present they do not have sufficient strength at the polls to constitute a real 
menace to the US position in the Republic. 
Since, however, it is of continuing interest 
to the US that Panama exclude from its territory persons sympathetic to a potential 
enemy of the US and hostile to the international attitudes and policies of the US, a sub- 
stantial increase in the number of adherents of either the Socialist Party or the People’s 
Party would jeopardize US interests. 
The presence of sabotage elements within the 
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radical groups of the Panamanian political scene is discussed in Section _ of this 
study. 
Although the large number of West Indian negroes and negroes of West Indian 
origin (about 20 percent of the total Panamanian population) does not at present con- 
stitute a threat to US strategic interests, the trends as regards the political orientation 
of this minority group are also of continuing interest to the US. 
The group includes 
the majority of Panamanians employed by the US to assist it in the operation of the 
Canal. 
Many of them, because they are English speaking, are denied citizenship in 
Panama; and, as a group, they make no secret of their conviction that they are dis- 
criminated against both by the Canal Zone and by the British Crown, which is theoreti- 
cally responsible for their protection. 
They contend, in short, that neither the Pana- 
manian Government nor the British Government safeguards their interests, and that 
this is because they are not Caucasians. 
Consequently, they are susceptible to the 
propaganda of any group that appeals to them in terms of racial discrimination. 
The success of the Communist-dominated CIO-UPWA local union in recruiting members 
among them might easily stimulate groups openly hostile to US interests in Panama to 
try to mobilize them for political purposes. 
The Panamanian economy 
is capable neither of contributing to nor of jeopardizing 
US security. 
At the present time, Panama’s economic system is based on free enter- 
prise, despite the fact that the Constitution expressly rejects the principles of laissez 
faire; and it is unlikely that Panama will, in the foreseeable future, initiate any pro- 
gram of state control over economic activities. 
There is, in any case, no reason to sup- 
pose that such a program would jeopardize US interests. 
Since Panama does not pro- 
duce important quantities of any strategic materials required by the US or other 
nations, its economic position is irrelevant from that standpoint. 
The economy of 
Panama is, moreover, so closely linked to that of the US, and its prosperity so dependent 
upon US activity in the Canal Zone, as to guarantee that Panama will, in the future as 
in the past, formulate its economic policy with an eye to US reactions. 
In a word, 
the dependence of the Panamanian economy on the US is advantageous to US interests 
since it affords the US a considerable measure of indirect control over economic and 
Panamanian political trends within the Republic. 
The only military aspect of the Republic’s life that could in any way contribute to 
or jeopardize US security is the police force. 
It is the task of the police force to protect 
the State, to maintain internal order, and to insure domestic tranquillity. 
A strong, 
well disciplined, and completely nonpolitical police force designed to perform these 
functions in Panama, especially in the areas adjacent to the Canal Zone, would be a 
useful adjunct to US security to the extent that it was able to keep under observation 
and contain any elements within the Panamanian population regarded as hostile to 
US interests. 
Since, however, a completely nonpolitical and efficient police force is an 
unlikely achievement within the predictable future, no genuine contribution to US 
security should be counted upon from this quarter. 
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TRUMAN 
SECTION VI 
PRESENCE OF SABOTAGE ELEMENTS IN PANAMA 
At the present time, the existence of considerable Sabotage elements within the 
Republic of Panama constitutes the most important factor tending to jeopardize the 
security of the Panama Canal, and through it, that of the US. The USSR, whether alone 
or assisted by satellite or conquered nations, is the only present potential threat to the 
US. 
It is also the only potential threat to Panama, since, in view of the strategic 
necessities arising out of the presence of the Canal in its territory 
and of existing treaty 
obligations, a threat to the US is also a threat to Panama. 
In the event of a decision 
by the USSR to begin hostile operations against the US, concurrent hostile operations 
can be expected both against the Canal and against the Republic of Panama. In the 
event of such hostilities, USSR activities in Panama will, it is expected, take the form of 
an extensive sabotage and subversive campaign. 
This action might possibly be coupled 
with a limited submarine campaign, and hit-and-run attacks by air forces operating 
from either ocean. 
Within the confines of the Republic of Panama, it is estimated that the USSR’s 
sabotage operations will be divided into two distinct fields: (1) sabotage activities aris- 
ing out of control of organized labor, which will, by promoting strikes, slow-downs, and 
sit-downs, seek to impair directly transportation, political stability, and public utilities; 
and, only by indirection, the operation of the Canal; and (2) sabotage activities against 
US naval, military, and air establishments within the Republic and against certain 
facilities related to the operation of the Canal (examples are the Gatun Spillway and 
the Madden Dam) designed to disrupt directly the functioning of the Canal as an 
artery of transportation. 
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It cannot be doubted that Soviet agents can filter into the Republic of Panama 
for the purpose of promoting both types of sabotage. 
Furthermore, the Soviets can 
count, for local aid, on the well organized and disciplined management of the People’s 
Party, which is the Communist Party of Panama. 
This group, not large numerically, 
owes its power to the fact that it is the directing force behind the Syndical Federation 
of Workers of Panama, an organization representing some eighteen unions in the 
Republic (it claims some 20,000 members, but 10,000 is believed to be a more accurate 
figure). 
Celso Solano, the Secretary General of the People’s Party, is the Number 
One Communist of the Republic. 
At present he is known to take orders from Vicente 
Lombardo Toledano, the founder and president of the Confederation of Latin American 
Workers (CTAL). 
It is estimated, however, that were Lombardo Toledano, in the event 
of developments within Mexico, compelled to adhere to a national line as distinct from 
directives from Moscow, Solano would remain loyal to Moscow, and would do everything 
in his power to promote whatever objectives Moscow might dictate. 
Local 713 of the United Public Workers of America, CIO, which has about 7,000 
dues-paying members.among the 32,000 government employees in the Canal Zone, is an 
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organization of proved Communist direction. 
Although by far the great majority of its 
members are not Communists, it is to be expected that in the event of hostilities between 
the US and Panama on the one hand, and the USSR on the other, such Communist lead- 
ership as this union possesses will do everything in its power to promote the interests 
of the USSR by fomenting labor disturbances with a view to impairing the operation of 
the Panama Canal 
In contrast with saboteurs identified with labor and political organizations in 
Panama, it is estimated that those saboteurs who will seek to impair the utility of the 
Canal by means of activities directed against its various installations and those of 
adjacent US army, navy, and air establishments, will not be persons now identified by 
US intelligence authorities with existing Communist Party or labor organizations in 
Panama or the Caribbean area. 
It is further estimated that such instructions as these 
saboteurs may receive will not be transmitted to them by any Communists now known 
to US intelligence authorities. 
These saboteurs will, on the contrary, receive their 
instructions from abroad by radio, mail, or other established means of communication, 
or from Soviet or satellite couriers or seamen who will have passed through the Republic 
of Panama immediately prior to 
the outbreak of hostilities. 
They will be agents who, in 
the past, have in no way compromised their usefulness as saboteurs by identifying 
themselves with recognized Communist activities or Party members. 
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SECTION VII 
PROBABLE FUTURE DEVELOPMENTS 
The Government of Panama (whether in the hands of the present administration 
or in those of its probable successor) will continue to base its policies upon a tacit 
recognition of the Republic’s position as a quasi protectorate of the US. 
It will, how- 
ever, continue to promote Panama’s claims as a sovereign nation enjoying full equality 
under international law. 
As a consequence, Panama may be expected to reject the 
most recent US proposals on the defense-sites agreement as incompatible with its posi- 
tion as a sovereign nation. 
Should the US, however, elect, without a formal agreement 
_ between the two countries, to occupy its present bases, Panama will probably acquiesce 
in such occupation until domestic political conditions within the Republic are appro- 
priate for the negotiation and ratification of an agreement acceptable to both countries. 
If the US were to become involved in a war with an extracontinental power, Panama 
could be expected to support the US and to permit the use of its territory 
as a base for 
operations for US troops. 
It is expected that the present Jiménez Administration will be able to maintain 
public order and that the election scheduled for May 1948 will, by Panamanian stand- 
ards, be peaceful and orderly. 
Present indications are that Arnulfo Arias will lose the 
election and that Vallarino or Fabrega may win. 
Despite Harmodio Arias’ reported 
promise to support Arnulfo’s candidacy in the election in 1952, there is a possibility, in 
the event of his death in 1948, that he may be unwilling to accept the popular verdict. 
Panama can be expected to support most of the major US proposals in international 
conferences. 
At the same time it can be expected, both at the United Nations and in 
inter-American conferences, to put itself forward as the exponent of the doctrine of 
equality under law for all nations, regardless of size or resources. 
_ 
The Panamanian Government can be expected to be able to associate with it the 
majority of its electorate in its recognition of the US as the dominant country in the 
Caribbean, particularly in those situations in which no commitment to any verbal 
statement of the position is involved. 
It is not expected that the Communist People’s Party of Panama will, within the 
foreseeable future, substantially increase the number of its adherents or the influence 
it exercises upon the domestic affairs of the Republic. 
The Socialist Party, on the 
other hand, with its leader, Demetrio Porras, back in Panama, may increase its strength 
somewhat in the forthcoming elections, but not on a scale that will enable it, as a 
party, to influence any future Panamanian Government. 
Communist Party members 
will continue their subversive activities in the Republic and will make every effort to 
maintain their control over organized labor unless and until they are instructed other- 
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‘PRESIDENT'S SECRETARY FILE 
The large number of West Indian negroes and negroes of West Indian origin in Pan- 
ama will remain one of the basic political and social problems of the Republic. 
Unless 
and until a particular government—whether the US, which employs many of them, or 
Panama, in which they live, or Britain, which claims many of them as subjects—is able 
to convince them that they are being treated on a basis of equality with other nationals, 
they will remain highly sensitive to any leadership that promises to take an interest in 
their problems. 
Consequently, it is estimated that the present CIO-UPWA Communist- 
dominated union, to which a substantial number of them now belong and to which 
many feel a personal attachment, will continue, so long as it makes an issue of the 
alleged racial discrimination in the Zone and in the Republic to command their support. 
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APPENDIX B 
POPULATION CHARACTERISTICS AND STATISTICS 
~ Economically Active Population, 10 Years of Age 
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_ and Over by Provinces and Race 
Census of 1940. 
‘Panami 
12,198 
18,518 
35,562 
2,256 
68,934 
Chiriqui 
4561 
23,963 
791 
30,617 
Veraguas 
_ 
2,198 
339 
24.761 
276 
27,574 
Colén 
4.399 
13,853 
6,593 
1357 
26,202 
Coclé 
826 
699 
15,972 
182 
17,690 
Los Santos 
3,357 
105 
13,272 
16,758 
1,306 
227 
11,487 
13,082 
Bocas del Toro 
220. 
2,650 
1,083 
209 
4,162 
Z 
1,410 
1,151 
2,699 
29,162 
39,103 
134,255 
5,198 
207,718 
2.5 
Percent of Total 
14.1 
18.8 
64.6 
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APPENDIX C 
Receipts of the Republic of Panama from the Canal Zone Classified as to Recipients 
and Purposes for the Fiscal Years 1939-1945 
(In thousands of dollars) 
RECIPIENTS AND PURPOSES 
1939 
1940 
1941 
1942 
1943 
1944 
1945 
Received by Individual Residents of 
Panama for Wages and Salaries 
US Gov’t Agencies (excluding contract 
work for Army and Navy) 
9,188 
13,475 
26,491 
37,530 
36,474 
30,541 
28,499 
Army and Navy contract pay rolls 
668 
9,561 
14,961 
18,721 
20,102 
6,943 
3,862 
TOTAL US Gov't Agencies 
9,786 
23,036 
41,452 
56251 
56576 
37,484 
32,361 
Business concerns in Canal Zone 
831 
865 
968 
1,353 
1,762 
1,603 
1,617 
Domestic servants 
1,034 
1,034 
1,034 
1,851 
2,083 
1,851 
1,658 
TOTAL Wages and Salaries 
11,651 
24,935 
43,454 
59455 
60,421 
40,938 
35,636 
For pension and disability relief 
100 
129 
151 
165 
176 
195 
176 
For rentals 
TOTAL 
11,751 
25,066 
43,608 
59,635 
60,636 
41,166 
35,815 
Received by Business Enterprises in 
Panama 
Wholesale trade 
2,551 
2,890 
3,095 
4,875 
7,393 
7,447 
8,100 
Retail trade and services 
8,960 
11,953 
15,532 
26202 
26938 
23,597 
21,596 
Unclassified amounts to business enter- 
prises including contractors’ profits 
and capital payments 
671 
1,216 
1827 
4454 
2171 
1,729 
£2,366 
TOTAL 
12,182 
16,059 
20454 
35,531 
36,502 
32,773 + 32,062 
Received by Government of Panama 
(direct receipts only) 
Rentals 
430 
430 
437 
573 
700 
755 
667 
Lottery 
105 
273 
601 
711 
726 
720 
TOTAL 
518 
535 
710 
1,174 
1,411 
1,481 
1,387 
Total Receipts 
24,451 
41,660 
64,772 
96,340 
98,549 
75,420 
69,266 
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nye: 
, Papers of 
| HARRY S, TRUMAN 
| PRESIDENT'S SECRETARY FILE 
APPENDIX D 
BIOGRAPHICAL DATA 
HARMODIO ARIAS, born 3 July 1886 in Penonomé, Panama, 
is a graduate of Cam- 
bridge University, England. 
A lawyer by profession, he has for many years combined 
a successful and lucrative law practice with politics. 
: 
During his term as President of Panama, 1932-1936, 
he was personally active in 
the negotiation of a new treaty with the US which today forms the basis of Panama- 
US relations. 
Subsequent to his retiring from the presidency, he has been active in 
the management 
of his newspaper, the influential 
Panama American, as well 
as 
many of his business ventures. 
intelligent, astute, extremely nationalistic and an anglophile.” 
"Whatever the truth 
of these statements may be, there can be no doubt that he is a singularly able lawyer, a 
man of considerable prestige among Panamanians and one who possesses extraordinary 
ability in foreseeing political trends within his own country. 
Although there are those 
who claim he again aspires to the presidency, he probably prefers to be “the power 
behind 
the throne”, a role for which his intelligence, his law practice, 
his commercial 
interests, and his many personal connections throughout the world admirably fit him. 
ARNULFO ARIAS, younger brother of Harmodio Arias,.was born on 15 August 1901 
at Penonomé, Panama. 
He was educated in the US and was a practicing physician 
and surgeon in Panama from 1925 to 1930. In 1931 he was a leader of the revolution 
which resulted in the election of his brother, Harmodio, as President. 
Since that 
time, Arnulfo has been active in politics. 
In 1937 he left Panama and held various 
diplomatic posts in Europe where he became a friend of Mussolini and many prominent 
Nazis while waiting for his turn as President, which had been promised him by the 
governing clique in return for his efforts in bringing about the election of Harmodio in 
1932 and Arosemena in 1936. 
In 1941, after he had returned to Panama and had been President for 
a year, 
public opinion turned against him because of his extreme nationalism, his dictatorial 
methods which showed a resemblance to Nazi practices, and his pro-Axis and anti-US 
attitudes. 
As a consequence, he was overthrown and exiled. 
Since his return from exile in October 1945, Arnulfo has been tireless in his efforts 
to rebuild his political following and, feeling as he does that three years of his Presi- 
dential term were illegally denied him, he is determined again to become President. 
Capable of inspiring blind confidence among his friends and intense hatred among 
his enemies, he is extremely popular among a substantial number of Panamanians 
who admire his personal courage and daring and find a vicarious pleasure in his 
personal irregularities. 
Basically Arias’ political tenets, other than his ardent and 
extreme nationalism, appear to be amorphous and, as a result, he is particularly sus- 
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ceptible to friendships of the moment. 
Meanwhile, his elder brother Harmodio’s in- 
fluence is not without significance, although Arnulfo has at times been known to oppose 
his elder brother on basic issues. 
JOAQUIN JOSE VALLARINO was born in Panama on 24 October 1889. 
He was educated 
in the US, receiving an MD degree from the University of Pennsylvania. 
He has practiced medicine in Panama since 1913 and is considered one of the 
country’s outstanding roentgenologists. He was Minister of Foreign Affairs from 
1931 to 1932 and in 1945 was named Ambassador to the US. 
Personable, well liked by 
both Panamanians and US citizens, among the latter of whom he has many friends, 
Vallarino is considered to be very pro-US. He is not a politician in the usual sense of 
the word, and his selection as the Presidential candidate of the National Democratic 
Front and the support which Harmodio Arias has promised him in the forthcoming 
political campaign were possibly motivated by the feeling that his political inexperience 
would make him susceptible to control by the governing clique. 
Francisco Auvep, Second Commandant of the National Police, was born on 14 
November 1910 in Los Santos Province, Panama. 
He received his early education in 
Panama, and later attended Mexico’s Escuela Militar, 
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Aued entered the National Police as a captain in 1940, and in 1941 was promoted 
to major largely as a reward for his services during the overthrow of former President 
Arnulfo Arias. 
Major Aued is personable and intelligent, but considered basically unfriendly to 
the US. 
He is a heavy gambler and has a bad reputation among many Panamanians. 
He unquestionably exercises the power of his office as Chief of Police in Colén to further 
his own interests. 
One of Aued’s activities is the “regulation” of prostitution. 
In view of his unsavory reputation and the unlikelihood of his continuing in office 
should Vallarino become President, Aued can be expected to place his influence behind 
whoever seeks the presidency by a coup so that he can perpetuate himself in office 
on the basis of services rendered. 
For this reason Aued could be expected to align 
himself, and that portion of the police force he controls, with Arnulfo 
Arias should 
the latter seek to foment a coup in order to gain office. 
Jose ANTONIO Remon is in command of the Panama National Police. He was 
born in Panama City in 1909 and received his early education there. 
Subsequently he 
attended Mexico’s Escuela Militar. 
Shortly after Remén’s return to Panama he was made a Captain in the National 
Police and later became Chief of the First Section, which covers Panama City and 
its immediate environs. 
In 1933, rather than accept an assignment to Bocas del 
Toro, he went into private business operating a garage. 
In 1939 he re-entered 
the National Police and was named Commandant in February 1947. 
Remon is considered to be pro-US and attempts to administer the police force with 
. honesty and impartiality. 
He is loyal to the present administration and would prob- 
ably be loyal to Vallarino were he elected. 
However, he is a personal enemy of Arnulfo 
D-2 
papers 
aRY FILE 
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S. TRUMAN ETARY FILE 
pRESIDENT!S 
Arias and can be expected to do everything in his power to prevent Arnulfo from be- 
coming President by illegal means. 
In view of Aued’s reported pro-Arnulfo leanings, 
{ 
a widening rift can be expected to develop between these two officials of the National 
Police which may translate itself into the factionalizing of the police force itself. 
D-3 
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INFO, 
23-30 MARCH 196) 
Intelligence Information Cable. 
DATEOF 
1 APRIL 196}. 
. 
SUBJECT 
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PLANNING FOR REVOLUTIONARY ACTION IN PANAMA 
PLACE&® 
DATE ACQ. 
MARCH 196);) 
IN 
AND 
APPRAISA 
af 
1S CERTAIN JORGE AND DAVID TURNER, LEADERS: OF THE 
VAN, ARE PLANNING AN ARMED UPRISING IN THE NEAR FUTURE, 
THE ORGANIZA~ 
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TIONAL PLAN OF THE UPRISING HAS BEEN MADE AND THE MILITARY RANKS HAVE. 
BEEN ASSIGNED, 
GILBERTO VELASQUEZ, VAN MILITARY LEADER TRAINED IN CUBA, 
IS INVOLVED IN THE PLAN AND VISITS JORGE TURNERS HOME EVERY -DAY 
VELASQUEZ 1S WORKING DILIGENTLY, BUT MAKES THE MISTAKE OF WALICING 
AROUND TOWN IN OLIVE GREEN TROUSERS AND COMBAT ROOTS, THUS CALLING 
ATTENTION TO HIS APPEARANCE AND 
AROUSING THE SUSPICIONS OF THE 
materia contatns information 
tin the Nations) Dol 
of tae United Stetes within the meaning of the 
plunags Laws, Ville 
8, U.S.C. Secs. (53 
794, thy 
or revelation 
which 
in 
monney to 
person 
ts 
by Jaw. 
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STAVE/INA: 
DIA 
AWAY/ACS) 
NAVY 
AIR 
SCS 
SECOZF 
NSA 
NIC 
AID 
USIA 
OCk 
ORR 
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TDCS 
3/577533 
AUTHORITIES, 
2." | 
SAID THAT THE POSSIBLE PARTICIPANTS IN THE UPRISING 
"ARE. UNDERGO! 
NG O°NTAL TREATMENT, SINCE THIS ASPECT OF PHYSICAL FITNESS 
IS VITAL FOR PERSONS SERVING AS GUERRILLAS IN THE MOUNTAINS, 
THE FACT .. 
THAT THEY ARE AT THIS POINT OF PREPARATION INDICATES THAT THE UPRISING 
WILL OCCUR IN THE NEAR FUTURE, AT THE TIME OF THE UPRISING AND BECAUSE 
HE 1S NOT QUALIFIED 
FOR, GUERRILLA.ACTIVITY, DAVID TURNER WILL BE SENT 
TO ANOTHER COUNTRY WHERE HE WILL SERVE AS. THE FOREIGN INTELLECTUAL, 
LEADER 
OF THE MOVEMENT. (FIELD COMMENT: - 
DAVID TURNER RECENTLY MOVED 
HIS FAMILY TO MEXICO AND PLANS TO MAKE 
HIS OWN HOM THERE.) 
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JORGE CHANDECK, CARLOS GARCIA, AND LUIS 
HAT 
Gu 
RETURNED TO PANAMA FROM CUBA AHEAD OF SCHEDULE. 
SAID THAT TH: 
INDICATES | 
THAT SOME SERIOUS ACTION MAY BE IMMINENT IN PAWAM 
THOUGH SHE HAS NOT BEEN incor 
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CLASSIFICATION 
DISSEMINATION CONTROLS 
IN 
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3/577,33) 
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5. FIELD DISSEM: 
STATE, ARMY, NAVY, ATR, CINCLANT, CINCSO, CINCMEAFSA, 
END OF MESBACE 
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x4 
CLASS!) ICATIO! 
0355) 
ATION CONTROLS 
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Declassified by 
164 
No. 0640/62 
CENTRAL INTELLIGENCE AGENCY 
Directorate of Intelligence 
S March 1568 
INTELLIGENCE MEMORANDUM 
DANAMA 
(Situation Report $3 = As of 0001 EST) 
1, 
The National Assembly, which convened with 
out serious incident at 5:00 PM EST, has recessed--0S= 
tensibly while the legislators await a leadership” 
cecisyion on the make-uo of a comuission which is to 
“study” impeachment charces levied against President 
Ro»mles. 
In fact, both sides are waiting for evidcence 
the other is complying with the terms of the compro- 
mise reached last nicht. 
2. 
crowd estimated by the embassy to nuzoer 
7,090 at its peak gathexed in the vicinity of the Ase- 
Ssmoly before the session got under way but dwindcled 
to half that number by 7:00 PM. 
opposition Na~- 
tional Union adherents were said to outnumber govern~ 
ment supporters 3 to 2 in the noisy crowd. 
Both sides 
were relatively orderl:,. 
The National Guerd renained 
in control of the situation. 
3. 
The Assanmbly may postpone further action 
until Robles follows through on his part of the come- 
promise by appointing a “nonpar’isan” cabinet. 
Robles 
&i50 promised today to amend tho electoral code, 
A spokesman for Arnulfo Arias’ National 
Union has said that Robles is demancing that the impoach- 
nent charges 
dropped altogether before announcing 2 
new cabinet. 
Arias has threatened to press for a nearing 
on the charees if Robles fails to come across. 
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5. 
Rodies was last reported to be at the Guard 
heacquarters, along with resresentatives of both face 
tions. 
His moves over the next few hours will determine 
action the Assembly takes when it roconvenss<- 
probebly tomorrow. 
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aie
CENTRAL INTELLIGENCE AGENCY 
POUT 
Intelli 
ntelligence Information Cable 
vj 
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reorvary 1964 
pistR, 
11 Feekuany 1964 
| INFO. 
SUBJECT 
DECISION CY THE “MOVIMIENTO DE 
REVOLUCIONARIO 
TO BEGIN PREPARATIONS FOR REVOLUTION 
PLACES 
eV 
: 
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Ann 
i= 
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1, 
‘HERE WAS A CONFERENCE OF NATIONAL LEADERS OF THE MOVIMIENTO 
DE! QUITRDA REVOLUCIONARIO (MIR) AT A SECRET MEETING PLACE IN THE 
RIM’. DISTRICT OF LIMA ON 8 FEBRUARY 1964, 
THE CONFERENCE WAS LED BY 
LUIS CL LA PUENTE UCEDA, AND THE FOLLOWING DECISIONS WERE TAKENs 
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h, 
THC MIR WILL NOT HOLD A NATIONAL CONGRESS, 
THE MIR MEMBERSHIP WILL BE INSTRUCTED SY THE THREE REGIONAL 
CHICTS TO PREPARE, FOR ARMED REVOLUTION IMMEDIATELY, 
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C. THE MIR HAS ARMS 
IN COLOMBIA, BRAZIL, ARGENTINA, CHILE, 
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AND THESE ARMS WILL” NOW BE BROUGHT 
INTO PERU, 
THERE ARE 
OOLLARS WORTH OF ARMS IN CHILE, 
DOLLARS WORTH! IN 
‘ 
‘ 
‘ 
eet 
aterial contains information atercting the National Defense of the United States within the meaning of the Espionage Lawa, Title 
. 
‘ 
‘ 
or revelation of which in any manner 
to an vneuthorized perso ts_probibited by few. 
Lyndon 
Johnson Library 
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CLASSIFICATION DISSEMINATION CONTROLS 
» AND 7,989 DOLLARS WORTH IN ARGENTINA, 
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DC LA PUENTE SAID THAT THE MIR HAS THE EQUIVALENT OF 89 
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SOLES (3 MILLION 
DOLLARS) IN SWiSS ZANKS, 
THIS MONEY WAS 
GC." 
UTED BY CHINA, 
THE MIR MAINTAINS CONTACT VW TH CHINA THROUGH 
Chiil. EMBASSIES AND REPRESENTATIVES 
IN LONDON, BERN, STOCKHOLM, ANO 
THERE ARE 606,00 DOLLARS AT IR CISPOSAL IN PARIS. CHINA 
“OMISED TO CONTRIBUTE 5¢ MILLION DOLLARS FOR THE REVOLUTION, 
tt 
CESSARY, 
+, 
A MIR MEMBER NAMED CANDELARIO MEJIA LAREDO, ALSO KNOWN AS 
 GCi is, WHO LIVES AT CALLE LA MERCED 2¢3, THICLAYO, HAS 2,59% STICKS 
OF "iA ITE HIDDEN AT A CAMP NEAR CHICLAYC, 
ALSO HIDDEN THERE ARE 
ANDO, IN THE CENTRAL 
Wk, FIVE REVOLVERS, CALIBRE 
“ARBINES AND FOUR REVOLVERS, 
MAXIiC VEL 
PE oto! HAS THREE CARBINES, 
CALIGRE 
| TWO PISTOLS, AND ONE MACHINE GUN, 
1}. MERCEDES 
MORALES, WHO WAS ONE OF THE MIR MEMBERS ARRESTED IN 
JAN 
HAS LEFT FOR'PARIS AND WILL. TRAVEL TO CHINA, 
A FIERY SPEECH AT A 
IM THE PLAZA SAN MARTIN THE CVCNINS OF 7 FEBRUARY, 
HE CXHORTEO 
WHICH WAS ENTHUSIAST IC, TO TAY! UP ARMS AND REVOLT. 
THE 
RAL * WAS SPONSORED BY THE MIR, 
THE FRENTE DE IZQUIERDA REVOLUCIONARIO, 
| 
| [PH CHINA FACTION OF THE PARTIDO 
PERUANO, THE FRENTE 
ZION NACIONAL, AND SAN MARCOS UNI'YEPSITY STUDENTS.) 
J 
CLASSIFICATION — DISSEMINATION. CONTROLS 
\, 
Conny ATION OF, TDCS INFORMATION REPORT ! 
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CLASSIFICATION — - DISSEMINATION CONTROLS 
[ND OF MCSSAGE 
9996 
MFO. 
(15-20-44-47) 
hates Johnsen Library 
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, TDOCS-3/572,629 
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[race 
STATE ARMY NAVY AIR CINCSO CINCLANT, cincerac, 
PRON, ARPAC, 
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SUBJECT 
PLANS OF THE MIR FOR REVOLUTIONARY ACTION 
| sy 
CENTRAL INTELLIGENCE AGENCY 
ine 
Intelligence Information Cable 
, 
; 
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COUNT2Y 
PERU 
TOCS- 3/572 4658 
410 reeruary 
DISTR. 
12 reenuary 1954 | | 
: 
‘THERE WAS A MEETING. OF LEADERS OF THE MOVIMIENTO DE IZQUIERDA 
| REVOLUCIONARIO (MIR) ON.1@ FEBRUARY 1964. 
IT WAS LED BY LUIS DE LA 
‘PUENTE UCEDA, THE MIR CHIEF, 
IT WAS 
DECIDED THAT THE MIR WILL BEGIN 
ies REVOLUTIONARY ACTION.WITHIN THE NEXT TWO OR THREE MONTHS, 
DE LA PUEKTE 
BELIEVES THAT CONDITIONS FOR REVOLUTION ARE NOW EXCELLENT BOTH 
POLITICALLY AND OPERATIONALLY, BUT DOES NOT FEEL THE MIR HAS REACHED 
| 
TOP CONDITION , HE WISHES, HOWEVER, 
‘TO TAKE ADVANTAGE OF THE RAINY 
_, SEASON IN THE SIERRA AND TRY TO INITIATE REVOLUTIONARY ACTION BEFORE 
2. 
DE LA PUENTE SAID HE HAD RECEIVED A LETTER FROM MAO TSE-TUNS 
= 
1; 
Thte raatertal contains informatinn agecting the Nations! Defense of the United States within the meaning of the Eaplonage Laws, Title 
STATE/INR 
«AIR 
JCS) 
SECDEF 
«NSA 
NIC 
AID vasa ( 
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cory 
PLACE & 
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SOURCE
CLASSIFICATION — 
DISSEMINATION CONTROLS 
FECOMMENDING THAT THE REVOLUTIONARY PARTIES CF THE LEFT UNITE, THE 
MIR 1S ALREADY CO-OPERATING CLOSELY WITH THE FRENTE DE LIBERACION 
NACIONAL, THE PRO~CHINA FACTION OF THE PARTIDO COMUNISTA PERUANO, 
AND THE JUVENTUD COMUNISTA PERUANO IN RALLIES AND DEMONSTRATIONS, 
DE 
LA PUENTE 
SAID THAT HE WOULD CONT INUE SUCH CO-OPERATION BUT THAT HE’ !S 
AGAINST WORKING WITH THEM IN REVOLUTIONARY UNDERTAKINGS, 
3, DE LA PUENTE SAID THAT ARMS COM/NG FROM BRAZIL WOULD BE 
USED IN SUPPORT OF THE NORTHERN AND CENTRAL DEPARTMENTS, SUCH AS 
JUNIN, 
THESE ARMS WILL BE BROUGHT THROUGH MANAUS, BRAZIL, ON THE 
| AMAZON, 
HE SAID THAT IN CACH INSTANCE WHERE ARMS ARE BROUGHT INTO 
FERU FROM A NEIGHBORING COUNTRY, THEY WOULD SERVE THE NEEDS OF THE 
MIR 
IN DEPARTMENTS BORDERING ON THAT COUNTRY, 
4. DE LA PUENTE DIRECTED EDMUNDO CUZQUEN TO LEAVE FOR TACNA ON 
11 FEBRUARY AND TO RENT A HOUSE THERE WITH A GARAGE OR PATIO LARGE 
ENOUGH FOR STORING ARMS, 
ARMS ARE NOW IN ARICA, CHILE, 
HE GAVE 
TWICE = WILL BE SENT ON TO ANOTHER PART OF THE COUNTRY, 
AT THE END 
CUZQUEN 15,999 SOLES (US$6¢%) TO PAY THE RENT, 
THE ARMS WILL BE 
BROUGHT OVER TO TACNA FROM ARICA DURING FEBRUARY IN A STATION WAGON 
OR PANEL TRUCK, 
THEY WILL BE CONCEALED IN THE SEATS AND SPARE TIRES, 
A STATION WAGON HAS. ALREADY BEEN PURCHASED IN AREQUIPA FOR TRANSPORT IN3 
THE ARMS FROM CHILE, «IT 1S IN THE POSSESSION OF MAXIMO VELEZMORO, 
AN ENGINEER, 
1T WAS AGREED THAT EVERY CAR THE MIR BUYS WILL BE ALTERED 
IN APPEARANCE FOLLOWING CACH TRIP, 
NO CAR WILL MAKE THE SAME TRIP 
CLASSIFICATION — DISSEMINATION 
2096 
MFO. 6-63 
(15-30-44-47) 
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“cond VATION. OF 
Tocs INFORMATION REPORT 
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CLASSIFICATION --- DISSEMINATION CONTROLS 
| OF TWO MONTHS EACH VEHICLE WILL BE REPLACED, 
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5. 
THE TRAVEL ROUTES FOR MIRISTAS GOING A5R0AD TO GUCRRILLA 
| 
TRAINING CAMPS ARE AS FOLLOWS; 
FOR THOSE GOING TQ NORTH KOREA, THE 
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ROUTE WILL BE BY WAY OF CHILE, ARGENT:NA, PARIS, ALGERIA, AND NORTH 
| 
KOREA, 
FOR THOSE GOING TO CHINA THE ROUTE WILL BE PARIS, MARSEILLES, 
AND CHINA, 
DE LA PUENTE SAID THERE ARE NOW EIGHT STUDENTS !N CHILE 
| 
PREPARING TO GO TO NORTH KOREA, 
HE ADDED THAT 29 MIRISTAS WILL GO 
TO CHINA ON 2 OR 3 MARCH, 
, 
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6 DE LA PUENTE HAD CARLIER COMMENTED THAT MIR TRAINEES SOUND 
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FOR CHINA AND NORTH KOREA WOULD NO LONGER GO 3Y WAY OF MOSCOW, 
HE 
SAID HE BELIEVES THAT THE SOVIET UNIO! 1S CO-OPERATING WITH THE 
US, IN IDENTIFYING MIRISTA TRAVELERS, 
FIELD DISSEM; STATE’ ARMY NAVY AIR CINCSO CINCLANT, | 
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CLASSIFICATION — DISSEM!NATION CONIZOLS__.. 
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CONTINUATION OF TDCS INFORMATION «SPORT | 
po 
Deities Johnson Library 
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Intellig 
BENCE 
Cable 
IN 
895625 
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(DIA) 
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PAGES 
DIQECTORATE OF 
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THIS IS AN INFORMATION REPORT, KOT FINALLY EVALUATED INTELLIGENCE 
suavectt PLANS, OF PERUVIAN GOVERNNGNT To 
PRESSURE ON 
re 
CERRO DE “PASEO MENING COKPANY 
A VIEW TO 
-* 
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fie 
t 
SUMMARY! 
THE PERUVIAN Govenn ENT PLANS To IMPOSE 
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SAEURES ON MINING INDUSTRIES 
Den 
WILL ENABLE THE 
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NGOVERNNENYT Th BRING PRESSURE ON THE CERRO PS PASCO MINING 
QMPANY HITH 
PO NATJONALSZING IT, 
TNE MEASURES HAVE 
PROPOSED BY GENERAL JONGE 
ERA AND E F HALDONADO, 
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MINESTER OF SNERGY AND KING 
RHOSE AOTIVES. FOR 
THE MEASURES 1§ TO SEIZE ON AN ISSUE OF SUFFICIENT DRAMA 
TQ 
MAKE 
THE. FRONY-RUNNER 
SUCEEED PRESIONST JUAN. 
‘ 
» 
THE PERUVIAN. GOVERNMENT WILL 
& APPROVE HOTLONS MACE BY 
MINESTER OF HINES-AND ENERGY GENERAL JORGE 
FERNANDER 
MALDONADO TO LMPOSE STANDARDS FOR WORKERS! HOUSING, POLLUTION 
CONTROL» AND SIMILAR HEASUASS ON MINING INDUSTRIES IN. PERU, 
THE ADMSTTED PURPOSE-OF THESE KEASURES HITHIN TNE PERUVIAN 
GOVERNMENT 1S TO ENABLE THE GOVERNMENY TO SRING PRESSURE ON 
THE CERRO DE PASCO MINING COMPANY WITH 
TO NATIONALIZING 
. 
REPORTED IN EARLY APRIL THAT PEANANDED HALDONADO 
HAD BEEN: cAEAT ING DIFFICULTIES FOR CERRO DE PASCO,’ 
HE Also. 
SAID THAT FERNANDEZ MALDONADO. IS PREPARING 
TO STRIKE AGAINST 
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PAGE SOF 
pages. 
ME HARCONA MINING CONPARY AND THAT 
“OULD HOST LIKELY 
THROUGH 
ACCUSATION THAT UAHCONA NAS: 
[LLEGALLY 
IN PERY 
3s. 
A DISCUSSION GF CERRO DE PASCO Nas 
OF FERNSNDEZ MALDONADO, 
WAS DECIDED To pLace BFORE THE 
CABJNE 
_jspectete VECREES FOR PASSAGE HHIGH 
| 
(‘IMPOSE HIGH STANDARDS FOR WORKERS! HOUSING, FOR CONTROL OF 
| 
CONTAMINATION OF RIVERS AND THE ATMOSHER, 
AND OTHER 
| 
“EASURES, 
FERNANGEZ HALDONADOIS 
| 
PECTFIC.PURPOSE IS 70 GIVE THE GUVERNMNT TOOLS TO 
TAKE -OVER THE UsSe- OWNED CERRQ DE PASCOs | 
COMMENTI 
| 
| 
ERRO DE PASCO AND THE PERUVIAN GOVERNMENT, OF COURSE, HAVE 
| “Eh NEGOTIATING FOR SOME TIME THE TAKEOVER BY THE PERUVIAN 
VEANHENT OF THE COMPANY!S HOLDINGS IN PERU. WHICH IS ‘TRE 
| 
VPANY!S ULTIHATE AIM, 
HOWVER: THE THO SIDES ARE FAR APARTE 
|. 
DE PASCO VALUES ITS HOLDING IN PERU AT 
$1700488 
| 
(TON, 
TRE MINISTER OF HINES ESTIMATES THAT THE 
J 
| 
WILL FINALLY GEY THE COMPANY FoR ADOUT 
-| 
| 
42 MILLIONG) 
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4, -THE VEHICLE FOR 
CERAQ DE 
WILL BE FINES-LEVIEQ AGAINST. 
THE COMPANY BY THE 
GOVERNMENT FOR FAILURE TO 
RESULATIONS 
ON 
HOUSING AND POLLUTION: EG) AY THS MEETING IT WAS ASTINATED . 
THAT UNDER THE 
DE 
COULD BE 
ORDERED GY THE-GOVERNNGNT FO INVCST. IMMDEATELY.SCHE 
HILLLON SOLES 
iN HOUSING ALONE,” THE 
MORE RADICAL ADVISORG'IN THE NINISTAY AESONMEN ED THAT) 
«IF 
THE COMPANY OALKS-AT 
THe New DEGASSS-OR DOES. NOT REACT. PROMPTLY 
TO. THE LEVEL-OF EXPEND {TURES .RGGUINGDo THE GOVERNMENT COULD 
COMPLETELY INTERVENE. THE CONPANY.. NORE. MODERATE 
ADVISE NAS 
SIMPLY TO.INTERVENS 
COMPANY TO 
exTeNT NEEDED TO COMPLY 
WITH New Decrses, JN ANY GASSe 27 WAS AGRESD THAT THESE 
DEVICE « BURPOSELY NADE APPLICADLE TO ALL-NENING, ENTERPRISES 
iN PERU IN QRDER FO 
TRE GOHPANY CLASMING $T WAS BEING — 
SINGLEO OUT FOR PUNITIVE TREATMENT, WERE DESIGNED To PROVOKE THE 
COMPANY TO CHALLENGE THE GOVERNNENT OR TOCAUZE BT TO LOSE 
INTEREST 
JN 17S HOLDINGS IN PERY BY THREATENING 70 2MPOSE 
EVER HORE CONF ISCATARY FINES, AND 
JN THE LATTER CASE’ 
COMPANY'S WILL Ta GARGAIN STISELY 
THE GOVERNMENT 
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IN 
PAGE 5 OF 8 PAGES 
felerstticetion) 
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FOR REASONABI, 
FON WELL 
D TMINIGHED, 
THE 
70 THESE MOVES 26 CURRENT NEGOTLATIONS FOR 
FOREIGN INVESTHE NT IN NUMEROUS 
ENTERPRISES IN PERU. 
| 
THIS CHIEFLY CONCERNS THE GEFORTS 
DOWN THE FINANCING 
FoR THE SOUTHERN PERU 
CONRAN 
1S REQUIRED BY 
 Conrracr BEFORE 39 JUNE 1973. 
JONMENTI THE CHASE 
MANHATTAN BANK OF NEW. HORK 
4a 
PRINGTPAL INSTITUTION 
ATTEMPTING TO ARRANGE THE SOME 350 MILLION DOLLAR INVESTMENT 
REQUIRED 
PERNANDE2 NALDONADG. iS EXCEEDINGLY NERVOUS ABOUT 
GRASPING THE NETTLE THAT THE MOYES: ON CERRO D PASCO ENTAILS AND DOES 
| 
NOT INTEND TO 09 SO UNTIL THE POREION FENANGING OF OTHER 
| 
YVENTURS 
INPperu HAS GEEN SUSCESSFULLY ARRANGE 
OUT 
FEAR THAT THE IMPACT OF FORCLOSING ON CERRO DE PASCO WOULD 
louse | 
OTHER INVESTORS TOLOSE 
CONT IDENCE IN 
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PAGES 
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"OF THE PERUVIAN GOVERNMENT. 
6, 
HIGHe LeveL OFFICIALS OF THe MINISTRY OF MINES 
EXPLAIN FERNANDES 
MALDGNADGIS TACTICS ViSeAeVIS. CERRO DE 
PA GO AS PART OF THS-SUCCESSfCN STRUGGLE NOW GOING ON 
BEXIND THE scene 
IN PERU, 
FERNANDEZ MALDONADO BELIEVES 
HIMSELF TO GE CF presroenTiAt. 
CALLGER AND YET FEELS HE REOQUSRES 
SOME DRAMATIC GESTURE 
HIS Noe GVYEN 
BEFORE THE 
PUSLIC AND THE ARMED FORCES THAN TT 1S TODar. 
THE ONLY 
VEHICLE READILY ACCESSLOLG iN- MSS CAPACITY ad 
OF 
| 
ENERGY AND MINGS 28 TH LONGeSTANDING PROBLEM OF CERRO 
PASCO, 
«THES WILL PERMIT ANT{©YANKE AGITATION AND CAN 
PRESENTD AS A NATIONAL TALUNPM, 
RENONSTRANG BY 
Of THE MINISTRY 
THAT JHE GOVERNMENT CANNOT IN FAGT RUN SUCH 
COMPLEX MINING GPRATION as CERRO DE PASCO WITHOUT FOREIGN 
| 
UsSs) TECHNICAL HELP ARE BEING ORUSHED ASIOG BY 
FERNANDEZ MALDONADO POA THEGE POLSTIGAL 
. FRNANDG# MALDONADO AND GENERAL LEQNIDAS 
RO DRS GUE 
FIGUEROA, HEAD 
OF THE NATIONAL 
SYSTEM OF SUPPORT FOR SOCIAL MOBILIZATION tSINANOS)2 
“WE MAINTAINS CLOSE CONTACT 
CUBAN EMBASSY OFFICSALS 
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IN PERU YO CONSERY 
TACTICS 
GN THE PART 
OF FHE RADICAL 
IN 
THE GOVERNMENT 
IN THE PRSENT EVE-QF eSUCCESSICN SITUATION, 
HIS PURPOSE, 
AND THAT OF THE CUGAN 
» 3S THAT. EVEN. 
SF RE 
(FRNANDEZ MALDGNADO) 
DOS NOY MAKE 
GY TO THE PRESIDENCY BY 
THIS tactic AND ALLJED MEASURES, 
IF WILL GE A FAIT 
ACCOMPLI 
FOR THE NEW ‘PRESIDENTONE HE WILL OY 
AGLE TO REVERSE 
| 
AND ONE WHICH WILL HAY TRE GENERAL EF 
OF ORJVING-A 
BETWEEN THE PERUVIAN GOVERNKNT AND RESTERN LENDING 
AND INVESTMENT- INSTITUTIONS, 
TT HELL GAUSE PERU IN THE 
| 
FUTURE TO RELY NFORCE MAJEURE” KORE AND MORE ON THE SOCIALIST 
COUNTRIES FOR SUPPORT AND TECHNICAL ADVICES) 
| 
THe NATPONALTZATION OF CERRO MUST GE COMPLETED 
34 DECEMBER. 
GUT ALSO MUST 
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PAGE 1 OF 3 PAGES 
DIRECTORATE OF 
BIC 
CIEP 
EXO. 
EPORT, “NOT FINALLY EVACUATED” INTELUGENCE 
CITE AAGKTDF IRDB-315/05873-73 
DIST 20 JUNE 1973 
COUNTRY PERU 
DO} 
18 JUNE 1973 
| 
| 
‘SUBJECT 
PERUVIAN COVERNMFNT CAMPAIGN AGAINST 
THE CERRO DE PASCO CORPORATION 
1, 
ON 18 sone 
| 
— 
"9 SAID THAT HE HAD LEARNED 
. FROM GENERAL JOSE 
G.R AH AM 
HURTADO, CHIEF OF THE ADVISORY 
COMMITTEE TO THE PRESIDENCY (COAP), THAT THE PERUVIAN COVERNNENT 
a 
WOULD BEGIN ON 19 JUNE A CAMPAIGN AGAINST THE AMERICAN-OWNED 
CERRO DE PASCO CCRPORATION, WHOSE PERUVIAN HOLDINGS THE GOVERN- 
MENT HAS DECIDED TO EXPROPRIATE, 
GRAHAM SAID THAT THE CANPAIGN 
. 
WOULD BEGIN WITH THE PUBLICATION OF INFORMATION FROM THE 
- 
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THIS 
AN INFORMATION R 
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SOURCE™ 
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IN 
952455 
IRDB-315/05873-73 
PAGE 2 OF3 
PAGES 
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MINISTRY OF ENERGY AND MINES REGARDING THE FAILURE OF CERRO DE 
PASCO TO PROVIDE HOUSING FOR ITS WORKERS AS REQUIRED BY LAW. 
—— 
2, 
ACCORDING TOG), GRAHAM SAID THAT THE CAMPAIGN WILL 
SHOW THAT CERRO DE PASCO HAS NOT CONPLIED WITH LAWS REGARDING THE 
WELFARE OF ITS WORKERS AND, FURTHER, THAT THE COMPANY'S FINANCIAL 
SITUATION IS NOT AS SOLID AS IT RECENTLY SAID IT WAS, 
j 
3, | 
COMMENT: 
ON 19 JUNE LIMA NEWSPAPERS REPORTED THE 
‘| 
ISSUANCE OF A.COMPLEMENTARY DECREE TO THE 8 MAY DECREE LAW 20007 
REQUIRING THAT ALL MINING COMPANIES PROVIDE WORKERS WITH ADEQUATE 
HOUSING, SCHOOLS, RECREATION CENTERS, AND SOCIAL AND MEDICAL 
ASSISTANCE, CERRO DE PASCO WAS CITED AS ONE OF THE MOST NOTORIOUS 
. VIOLATORS OF THE LAW, AND IT WAS ESTIMATED THAT TO COMPLY WITH THE 
|] 
LAW, THE COMPANY WOULD HAVE TO INVEST ABOUT TWO AND ONE-HABF 
‘BILLION SOLES (ABOUT US$57,630,242) WITHIN A FIVE-YEAR PERIOD, 
GOVERNMENT'S DENUNCIATION OF CERRO DE PASCO FOR NON-COMPLIANCE 
“EXPRESO, 
THE LEFTIST PRO-GOVERNMENT DAILY, CARRIED THE 
ON ITS FRONT PAGE.) 
COMMENT: 
IT WAS REPORTEDS 
- 
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PAGE 
320F3 
PAGES 
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SOLARI, MINISTER OF ENERGY ANU MINES, HAD TOLD OFFICIALS OF HIS 
MINISTRY THAT PRESIDENT JUAN VELASCO 
ALVARADO HAD arepevee 
THE NATIONALIZATION OF CERRO DE 
NID-SEPTENBER, 
AN 
EARLIER REPORT 
bo 
SAID THAT FERNANDEZ MALDONADO HAD PROPOSED IMPOSITION 
OF MEASURES SUCH AS POLLUTION CONTROL AND HOUSING REQUIREMENTS ON 
THE MINING INDUSTRY, THE ADMITTED PURPOSE OF WHICH WOULD BE TO 
; 
| ENABLE: THE GOVERNMENT TO BRING PRESSURE ON CERRO DE PASCO WITH A 
VIEW TO NATIONALIZING IT, 
THAT REPORT RELATED FERNANDEZ 
MALDONADO'S ACTION REGARDING CERRO DE PASCO TO HIS AMBITION TO 
SUCCEED PRESIDENT VELASCO, ) 
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PAGE 1 OF 7 PAGES 
EXO 
CIEP 
DDI 
_THIS 1S AN INFORMATION ‘REPORT, NOT “FINALLY EVALUATED INTELLIGENCE 
CHE TNFIRDB-315/06953-73 
DIST 23 JULY 1975 
COUNTRY 
PERU 
MID-JULY 1973 
| 
|. SUBJECT 
DEVELOPMENTS IN THE PLANS OF THE MINISTER OF MINES TO 
TAKE OVER THE PERUVIAN HOLDINGS OF THE CERRO DE PASCO 
CORPORATION 
SUMMARY: THE MINISTER OF ENERGY AND MINES IS PERSISTING IN 
HIS PLANS TO TAKE OVER THE PERUVIAN HOLDINGS OF THE CERRO DE PASCO 
CORPORATION AT AN IMPOSED MINIMUM PRICE. 
PRESIDENT VELASCO AND 
‘THE CABINET ARE NOT AWARE OF THE TACTICS BEING PURSUED BY THE 
"MINISTER 
TO REDUCE COMPENSATION FOR THE COMPANY OR TO LESSEN ITS 
RESOLVE TO GET-A FAIR PRICE FOR ITS HOLDINGS. 
THE LATEST ACTIONS 
TAKEN AGAINST CERRO 
BY THE M‘“ISTRY OF MINES INCLUDE REGULATIONS 
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THE GOVERNMENT TQ BRING PRESSURE ON 7 
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PAGE 
OF 7 PAGES 
| 
068 
~_ 
- 
- 
| SETTING EVALUATION PROCEDURES FOR NINING PROPERTIESs THE CUTTING 
7 OFF OF RELATIONS BETWEEN MINEROPERY AND CERRD SALES» AND PROVOKING 
LABOR TROUBLES. IN ADDITION, THE GoVERNMGNT NAY NOT RELEASE MONTES 
ARE 
IN ARREARS, 
ONED TO CERRO FOR PROFIT WHICH THE COMPANY 
SUMMARY, 
| 
COMMENTS IT WAS REPORTED. 
ERGY AND MINES, WAS 
JUDG 
MALDONA DO SOLARI, MINISTER OF EN! 
POSING THAT THE PERUVIAN GOVERNMENT IMPOSE MEASURES ON THE MINING 
| 
INDUSTRY OF PERU, THE ADMITTED puRPOSS OF WHICH WOULD BE To ENABLE 
THE 
CERRO DE 
PASCO MINING CORPORATION WITH A VIEW OF NATION) \LEZING ITS PERUVIAN 
HOLDINGS. THE EMBASSY IN.LIMA IS [1 FORMED PAT CERRO DE PASCO 1S ‘ 
DUE TO BEGIN NEGOTIATING WITH THE PERUVIAN GOVERNMENT REGARDING THE 
SALE OF ITS HOLDINGS ON 
AUGUST 19736) 
| 
2. FERNANDEZ MALDONADO IS PERSISTING tN HIS PLANS TO TAKE) 
- OVER THE HOLDINGS , IN PERV. 
OF THE CERRO DE PASCO CORPORATION AT AN 
[MPOSED MINIMUM PRICE, FERNANDEZ MALDONADO HAS THE APPROVAL OF THE 
COUNCIL. OF MINISTERS TO BRING THIS {SSUE TO A HEAD BETWEEN 34 - 
AUGUST AND 36 SEPTEMBER 1973.1 
COMMENT? FERNANDES 
“ff 
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PAGE, 3 OF PAGES 
MALDONADO PLANS To ATTEND THE “BIANNUAL HEE TING OF THE MINISTERS 
OF THE INTERGOVERNMENTAL COMMITTEE OF COPPER PRODUCING COUNTRIES 
(CIPEC), TO BE HELD IN LUSAKA, ZAMBIA, FROM 6 TO 42 SEPTEMBER. se. 
IS LIKELY THAT HE WILL PoSTPONE THE SHOWDOWN WITH CERRO DE PASCO. 
a 
om 
UNTIL HIS RETURN.) 
3, THE COUNCIL OF HINISTERS AND PRESIDENT JUANVELASCO.” 
ALVARADO, HOWEVER, ARE NOT AWARE OF, NOR HAVE THEY.APPROVED, THE 
! 
f 
| 
TACTICS CURRENTLY BEING 
BY FERNANDEZ MALDONADO TO REDUCE 
COMPENSATION FOR THE COtPawy OR TO LESSEN ITS RESOLVE fo GET A FAIR 
PRICE FOR ITS HOLDINGS. 
COMMENT: THE REQUIREMENTS FOR 
; 
-WORKERS' HOUSING WERE DRAFTED GY THE MINISTRY WITH CERRO 
, 
| 
|. SPECIFICALLY IN HIND, THE COMPANY HAS NOW EILED ITS PLAN FOR THE 
EXPENDITURE OF 65 MILLION PILLARS OVER FIVE YEARS TO COMPLY 
WITH 
| 
‘THIS REQUIREMENT. LIKEWISE, EARLIER REGULATIONS REGARDING POL= 
3 “LUTION CONTROL WERE ALSO DRAFTED WITH CERRO. DE PASCO IN 
| 
TO BLEED THE COMPANY-oR TO FIND. 
in. VIOLATION OF, THE. 
LAW.) THE LATEST REGULATION. DEVISED -IN THE. 
DE PASCO, IN MIND IS THE DECREE LAM SETTING EVALUATION | 
PROCEDURES. FOR MINING PROPERTIES WHICH PROVIDES FOR THREE SEPARATE. 
MEANS oF ARRIVING AT VALUE "FOR A GIVEN PROPERTY, WENTSFRY 
¢ 
. 
a 
| 
| 
~~
atom 
=~ 
. 
OFFICIALS ARE AWARE THAT FE OF CERRO DE 
PASCO'S HOLDINGS WOULD, 
UNDER THESE RULES, BE EVALUATED AT ANYRHERE NEAR THEIR VALUE AS A 
GGING BUSINESS OR FOR POTENTIAL RETURN, TRE NEXT MOVE “AGAINST | 
CERRO DE PASCO IS LIKELY TO BE GOVERNMENT PROVOCATION OF LABOR 
DEMANDS AGAINST THE COMPANY. ONE REASON FOR THIS TACTIC IS THAT 
CERRO DE PASCO'S WORKERS ARE KNOKN BY THE MINISTRY TO BE CONFUSED 
AS TO THE BEST SOLUTION FOR THE COMPANY AS REGARDS THEIR OWN 
INTERESTS) THE MINISTRY JUDGES THAT THE SEst WAY. TO APPROACH THIS 
PROBLEM IS TO STIR UP THE WORKERS! FEELING AGAINST THE COMPANY 
AND IN THIS WAY INCLINE LASOR TOWARDS THE TAKEOVER OF THE COMPANY 
BY THe GOVERNMENT, 
DESCRIBES FERNANDEZ MALDONADO'S PLANS AS CONFISCATION," HOWEVER, 
HE 1S TOO LOYAL! 
“j]70 G0 OUTSIDE THE CHAIN OF COMMAND Ta 
WARN THE COUNCIL OF MINISTERS OF THE LIKELY RESULT, WHICH [S 
PARALYSIS OF THE MINE IF CERRO DE PASCO SHOULD PULL OUTY. 
IS CONVINCED THAT FERNANDEZ MALDONADO 1S HOODWINKING THE COUNCIL 
OF MINISTERS, EGGED ON BY HIS THO KEY COMMUNIST ADVISORS» CESAR © 
DEL GAD 
BARRETO AND CARLGS V A S Q@ U 
@ VELARDE, WHO ARE 
ALSO HIS SPEECH WAITERS AND MENTORS. 
| 
THE PRESS 
‘ 
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: 
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{ 
| 
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% 
| 
4 { 
. 
“ge 
. 
E
| 
HONORABLE BASIS AS A WELL©INTENTIONGD COMPANY Goop FOR its. 
| 
OPERATIVE ASSUMPTION 1S THAT THE COMPANY 1s A CLASSIC EXPLOTTING. 
é 
HAS REPORTED THAT VASQUEZ WILL REPRESENT THE MINISTRY AT THE 26TH 
OF JULY CELEBRATIONS IN HAVANA.) THE ATMOSPHERE IN THE MINISTRY IS 
| 
HEAVY WITH POLITICS AND_ANTI“CAPITALIST, ESPECIALLY ANTE -AMERICAN 
| 
CAPITALIST.» FEELING 
COMMENTS 
KEY PERSONS INVOLVED 
| 
ARE INTELLIGENT ENOUGH To KNUir THAT THEY ARE ADVOCATING A COURSE = 
WHICH HILL SERIOUSLY DISRUPT THE COMPANY'S OPERATIONS IN PERU BUT. 
{ 
ARE MORE TAKEN UP’WITH THE POWER STRUGGLE IN PERU AND THEIR OWN | 
: 
PROSPECTS THAN THEY ARE WITH SOUND ECONOMIC DECISIONS. een 
5, TO HARASS THE COMPANY FERNANDEZ MALDONADO HAS NOW DIRECTED” 
MINERGPERU TO CUT OFF ALL RELATIONS WITH CERRO SALES» WHICH HAS 
BEEN SERVING AS MINEROPERU'S AGENT IN SELLING CERRO'S PRODUCTION 
OVERSEAS. THE EXCUSE USED 15 THAT CERRO Is SOME 6 MILLION DOLLARS 
— 
BEHIND IN REMITTANCES TO MINEROPERU FOR PRODUCTION SOLD, ‘BUT THE ae a 
ACTUAL PURPOSE IS TO BRING PRESSURE ON CERRO, (SOURCE COMMENTS rere 
THE CHANGE IN THE MINISTRY'S ATTITUDE TOWARD CERRO. HAS BEE 
DRAMATIC; WHEREAS PREVIOUSLY THE COMPANY WAS DEALT 
TAK 
NOW» UNDER ‘FERNANDEZ 
THE 
FIRM, DETERMINED TO 
pERUIS RICHES FROM ITS OWNERS. AND 
| 
| 
‘ 
| 
‘} 
| 
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| 
}
THEM ON THE PRICE. GOVERNMENT=“0RGANIZED PROPAGANDA 
IS NOW 
! 
DEPICTING CERRO AS A HOSTILE, GRASPING AND SELF-CENTERED COMPANY 
CONTEMPTUOUS OF PERUVIAN 
LAW AND CUSTOM. THIS 3S ALSO DESIGNED 
be 
TO WEAR DOWN THE COMPANY'S WILL TO CONTEST ITS FATE. FERNANDES 
MALDONADO'S TACTICS PROVIDE FOR A FAIT ACCOMPLI PRESENTED 
fo 
BUT TO CONFIRM,?) 
6, VICTORMIRO- 
QUESA 
A URETA, HEAD OF 
THE SPECIAL GOVERNMENT COMMISSION To STUDY THE POSSIBILITY OF 
. 
NOT RELEASE MONIES T 
NED TO-CERRG FOR PROFIT WHICH THE COMPANY 
COUNCIL OF MINISTERS WHICH PRESIDENT VELASCO WILL HAVE NO CHOICE - 
‘ 
PURCHASING CERRO DE PASCO HOLDINGS» SAID THAT THE GOVERNMENT WOULD as 
JUDGES ARE IN ARREARS AND THEY WILL HAVE TO BSE SHOWN AS BLOCKED InN- 
CERRO'S SEMI-ANNUAL 
STATEMENT TO BE ISSUED IN NEW YORK 
City IN LATE JULY. 
SONMENTS THIS ALSO i's "HARASSMENT AND 
| 
UNDERSCORES THE 
DETERMINATION NOT. To PERMIT CERRO To 
% 4 
EXTRACT ANY FUNDS PENDING THE ENFORCED SETTLEMENT. MJRG QUESADA 
ALSO DOWNPLAYING THE POSSIGILITY 
THAT CERRO'S MANAGERIAL AND 
Booed 
ENGINEERING STAFF WILL NOT STAY WITH THE COMPANY If IT 18 TAKEN 
[0] 
OVER, IN FACT, NANY PLAN TO DEPART FORTHWITHs LEAVING THE 
GOVERNMENT WITH A VIRTUALLY INOPERABLE MINING» TRANSPORT AND SALES 
| 
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AN INTORMATION REPORT, MOT FINALLY EVALUATED INIEIUGENCE 
CITE 
COUNTRY 
$ 
PERY 
DO! 
SUBJECT 
EARLY AUGUST 1973 
SCHEDULED TAKE-OVER OF CERO DE PASCO HOLDINGS IN PERU 
é 
‘ 
" 
. 
* 
SUMMARY? 
THE TAKE*OVER 
BY THE PERUVIAN GOVERNMENT 
OF THE. 
PERUVIAN MOLDINGS OF THE CERRO DE PASCO CORPORATION WILL PROSABLY 
THE 
TAKE PLACE BETWEEN 15 AND 32 SEPTEMBER 1973, 
MINISTRY OF ° 
INEGOTIATIONS 
ENERGY AND MINES 
!S NOW CARRYING ON 
WITH KEY 
- 
‘ 
PERSONNEL OF CERRO DE PASCO TO PERSUADE THEM TO CONTINUE 
IN THEIR 
POSTS AFTER THE TAKEOVER, THE GOVERNMENT INTENDS TO CONDUCT 
‘EGOTIATIONS WITH THE COMPANY BUTe IF IT WILL NOT GO ALONG WITH 
¢ 
THE GOVERNMENT'S 
OFFER 
OF Bo 12 TO 14 MILLION DOLLARS, 
THE 
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995699 
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PAGE 2 OF & PAGES 
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™ 
GOVERNMENT WILL CUT OFF. NEGOTIATIONS AND SEIZE THE COMPANY'S 
HOLDINGS. END OF SUMMARY, 
It WAS REPORTED) 
| 
GENERAL JORGE 
FERN AND 
M AL . ONADO 
SOLARI, MINISTER OF ENERGY 
44ND MINES, HAS THE 
APPROVAL OF THE COUNCIL oF MINISTERS TO BRING TO A HEAD THE ISSUE 
OF THE GOVERNMENT'S TAKING OVER THE PERUVIAN HOLDINGS OF THE | 
| 
CERRO DE PASCO CORPORATION PROSABLY EETWEEN 
of1 AUGUST AND 39 
| 
SEPTEMBER, 
SOURCE COMMENTED THAT, SINCE FERNANDEZ MALDONADO 
| 
PLANNED TO ATTEND THE MEETING OF MINISTERS OF THE INTERGOVERNMENTAL 
| 
COMMITTEE OF COPPER PRODUCING COUNTRIES ¢CIPEC) 
IN LUSAKE. 
2ZAMSIA, 
FROM 8 TO 12 SEPTEMBER, 
IT WAS LIKELY THAT HE WOULD POSTPONE THE 
WITH CERRO DE PASCO UNTIL HIS RETURN.) 
2. 
JN VIEW OF THE CANCELLATION SY ZAMBIA QF THE. CIPEC 
MEETING AND THE FACT THAT FERNANDEZ MALDONADO WILL NOT BE GOING 
TO LUSAKA IN EARLY SEPTEMBER, 
THE TAKE*OVER 
OF CERRO DE PASCO CAN. 
BE SPEEDED UP AND WILL PROGASLY BE COMPLETED HETWEEN 415 AND 30 
SEPTEMBER, 
THE MINISTRY OF ENERGY AND MINES HaS BEEN INSTRUCTED 
TO PREPARE FOR THE TAKEOVER OF CERRO DE PASCO BY THAT TIME, 
MINEROPERU IS NOW SETTING UPA COMPLETELY SEPSPATE MARKETING 
| 
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ORGANI ZATION, WHEREAS MARKETING OF PERU'S ORES WAS DONE BEFORE 
THROUGH CERRO SALES, 
3. 
FERNANDEZ MALDONADO CONT&NUES TO SET HIS OWN COURSE 
UNDETERRED BY ADVICE FROM THOSE IN THE MINISTRY WHO FEEL THE 
TAKE= OVER OF CERRO DE PASCO COULD SET THE COUNTRY BACK FOR OR 
FIVE YEARS IN ITS ECONOMIC DEVELOPMENT, 
FERNANDEZ MALDONADO IS. 
FOLLOWING THE ADVICE OF CESAR DELGADO 
BARRETO AND CARLOS 
VASQUEZ 
VELARDE, WHO ALSO ARE THE PRINCIPAL ADVISERS OF 
VICTOR 
MIRO 
QUES ADA 
URETA, HEAD OF THE SPECIAL 
GOVERNMENT COMMISSION STUDYING THE POSSIBLE PURCHASE OF CERRO DE 
PASCO HOLDINGS, 
}COMMENT! 
THE EVALUATION OF CERRO DE 
PASCO'S HOLDINGS BY A COMBINATION OF AUDITING FIRMS LAST YEAR 
ARRIVED AT A SUM OF 18 To i4 MILLION DOLLARS. 
BY CURRENT PRICES « 
JUDGED AS A GOING CONCERN, CERRO'S HOLDINGS ARE NOW WORTH AN 
> pees 
¢ 
ESTIMATED 5@ MILLION DOLLARS IN VIEW OF THE RISE IN WORLD PRICES.) 
- 
DELGADO, AND VASQUEZ ARE ARGUING TO MIRO QUESADA AND FERNANDEZ 
MALDONADO THAT THE PERUVIAN GOVERNMENT SHOULD PAY "VIRTUALLY 
NOTHING" FOR CERRO'S HOLDINGS BECAUSE» 
THEY ALLEGE:'. THE COMPANY 
HAS ALREADY "RAPED THE COUNTRY" FOR FAR IN EXCESS OF ITS NET 
KORTH TODAY. 
/COMMETN: 
17 WAS REPORTED, 
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HAT DELGADO SAID 
THAT ScME GOVERNMENT OFFICIALS ARE WILLING TO PAY 20 0R 3B MILLION 
DOLLARS MORE FOR THE COMPANY'S HOLDINGS To AVOID PROBLEMS eUT 
OTHERS DO NOT WANT TO-PAY NORE THAN THE MINIMUM.) 
THEY ARE GOTH 
IGNORANT 
OF, AND DOGMATICALLY UNINTERESTED 
IN, 
THE EFFECTS ASROAD 
oF SUCH AN ACT SY THE PERUVIAN GOVERNMENT AND THEY DISKISS POSSIBLE 
UeS» GOVERNMENT REACTION aS LIKELY TO BE WEAK ON THE GNE HAND AND 
USEFUL TO THE GOVERNMENT ON THE OTHER AS A NATIONALISTIC ISSUE 
| 
WITH WHICH TO BUILD SUPPORT FOR THE REVOLUTION. 
4, 
THE MINISTRY OF ENERGY AND MINES IS CURRENTLY 
PERUVIAN AND FOREIGN, TO PERSUADE THEM TO STAY AFTER THE TAKEOVER, 
WITH KEY PERSONNEL oF CERRO DE PASCO, BOTH 
GUARANTEEING THEM IN WRITING SALARY AND PERQUISITES FOR UP TO THO 
YEARS 
{COMMENT 
THESE EFFORTS REVEAL THE MINISTRY'S 
FEARS 
OF HOW PRACTICAL 
IT WILL GE FOR 
JT TO RUN THE CORPORATION'S 
COMPLICATED MINING OPERATION ONCE THE TAKS=OVER IS A FAIT 
ACCOMPLI, 
ACTUALLY, @ETWEEN 602 AND 760 SENIOR PERSONNEL are 
INVOLVED, THE MAJORITY OF WHOM WILL PROBABLY LEAVE THE COMPANY 
BECAUSE OF DISTRUST OF THE PERUVIAN GOVERNMENT AS AN EMPLOYER 
SND BECAUSE THEY HAVE HIGHLY MARKETASLE SKILLS ELSEWNERE IN THE 
{ 
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999699 
«PAGES «OF PAGES 
(dissem cocntrols) 
WORLD, ) 
THE GOVERNMENT INTENDS TO. CONDUCT NEGOTIATIONS WITH 
CFFICIALS OF CERRO DE PASCO SOON BUT. IF THE COMPANY PROVES 
DIFFICULT AND 
BECOMES CLEAR THAT IT WILE NOT Gd ALONG WITH 
| 
THE GOVERNMENT'S 12 10 14 MILLION BOLL AR ‘OFFER, THE G0 VERNME NT 
WILL ABRUPTLY CUT OFF NEGOTIATIONS AS FUTILE AND SETZE The 
COMPANY'S HOLDINGS. 
THIS WILL SE DONE BY THE PERUVIAN ARMYs 
PLANS TO NO SO ARE NOW BEING DRAWN UP BY THE MILITARY, 
6, 
THE ONLY CAUTION THAT FERNANDE? MALBONABO AWD His 
LEFTIST ADVISERS ACCEPT 
IS THE POSSIBILITY 
THAT CURRENT 
= 
NEGOTIATIONS FOR INVESTMENT FROM OVERSEAS MINING IN PERU 
WOULD BE AFFECTED FOR THE WORSE BY THIS STEP, 
THE Late 
SEPTEMBER DATE PROVIDES FOR MOST OF THE CURRENT NEGOTH AT {ONS fo 
_ HAVE BEEN CONCLUDED, 
ESPECIALLY THAT FOR THE SOUTHERN PERU 
| COPPER COMPANY, 
OTHERWISE, THERE ARE No RESTRALATS WHICH ARE 
ENTERING THEIR 
COUNCIL OF MINISTERS AND PRESIDENT JUAN 
A 
6 ALVARADO 
OMMENTS 
WHETHER THE: 
WILL 5 
MATTERS 
SAME WAY REMAINS TO BE SEEN, ESPECTALLY 
AFTER THE 12 AUSUST ANS OUNCEMENT OF “NEGOTTAT IONS BETWEEN THE 
PERUVIAN AND UiS, GOVERNMENTS ON A RANGE 0 OF INVE ST MENT PROBLEMS. 
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IN 999699 
TOFIR D3-315/07595-73 
PAGE 6 OF 6 PAGES 
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NONETHELESS, THE COUNCIL OF MINISTERS AS IN THE PAST 
[TS SUBJECT 
TO NATIONALISTIC EMOTIONS WHEN A FOREIGN COMPANY'S HOLDINGS ARE 
INVOLVED, OVERRIDING THE MORE CAUTIONS OF {TS MEMBERS AND 
SIMPLY 
FACING THE MORE-RESPONSIOLE OF THEM, SUCH AS GENERAL 
MORALES 
BE RM Up © 2, MINISTER OF ECONGMY AND FINANCED 
ORDERS TO CARRY 
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COUNTRY: 
PERU 
DOI: 
MID-AUGUST 1973 
SUBJECT: 
OPPOSITION OF THE MINISTER 
OF ECONOMY 
AND FINANCE TO PLANS 
CERRO DE PASCO CORPORATION 
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FOR THE NATIGNALIZATION OF THE PERUVIAN HOLDINGS OF THE 
| 
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2. 
GENERAL FRANCISCO MORALE 
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SAID 
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MINISTER 
OF ECONOMY AND FINACE, RECENTLY 
| 
THAT HE CONS IDERS 
THE PLANS FOR NATIONALIZING THE PERUVIAN HOLDINGS OF CERRO DE 
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HE SAID THAT THE PLANS ARE OUT OF TUNE WITH PERU'S PROGRAM FOR FOREIGN 
—— 
INVESTMENT AND TREATMENT 
9F FOREIGN INVESTORS 
IN PERUs FOR THAT REASON, 
IF THE NATIONALIZATION OF 
CERRG DE PASCO IS CARRIED 
OUT AS PROPOSED BY 
MINISTER OF ENERGY AND MINES GENERAL JORGE F_E 
AL 
MAL 
DONAN OO SOLARI: HE 
HE WILL RESIGN, MORALES BERMUDEZ 
CEIVED ASSURANCES OF SUPPORT FROM, | 
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NATIONALIZATION PLANS, , 
ICOMMENT?! 
IT 1S NOT KNOWN WHETHER OR NoT 
PIN HIS OPPOSITION TO“THE 
MORALES FERMUDEZ MADE THESE REMARKS GSEFORE OR AF.TER THE HIGH*LEVEL MEET= 
ING HELD AT THE MINISTRY 
OF ENERGY AND MINES ON 15 AUGUST 1 TO DISCUSS 
THE TAKE*OVER OF CERRO DE PASCO'S: HOLDINGS AS REPORTE 
REPORTEDLY TOOK PART) COULD HAVE BEEN A CONTENTIOUS ONE.) 
— 
ER NANDE2 
MAL 
DONADO 
IS SPEEDING 
PLANS FOR THE TAKE*OVER 
OF CERRO DE PASCO HOLDINGS SINCE HE NO LONGER 
WILL BE ABSENT FROM THE COUNTRY FOR THE MEETING OF MINISTERS OF THE 
INTERGOVERNMENTAL COMMITTEE 
OF COPPER PRODUCING COUNTRIES 
(CIPEC) 
FROM 8 TO 12 SEPTEMBER WHICH WAS CANCELLED. 
TIMING OF THE TAKE OVER 
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TOFIR DB-315/0741-73 
PAGE 3 OF 4Y PAGES 
‘COMMENTS 
{IT WAS 
— 
RNANDEZ MALDONADO 
HAD APPROVAL FROM THE COUNCIL OF MINISTERS TO BRING THIS ISSUE TO A 
WAS THEREFORE BEEN MOVED UP TO ABdNT_15_SFPT,! 
MEAD BETWEEN 31 AUGUST AND.39 SEPTEMBER BUT IT WAS LIKELY A SHOWDOWN 
WOULD BE DELAYED UNTIL AFTER HIS RETURN FROM THE CIPEC MEETING.) 
«ig, 
«THE MATTER OF THE FUTURE OF KEY FOREIGN TECHNICIANS AT CERRO 
DE PASCO. PREVIOUSLY DOWNPLAYED, 
IS ONE OF THE ISSUES FERNANDEZ 
MALDONADO HAS NOW FOCUSED ON. 
THESE TECHNICIANS ‘ARE MAINLY AMERICANS 
} 
AND CANADIANS, 
FERNANDEZ MALDONADO PLANS TO HOLD A DINNER ON 23.AUG, - 
FOR THE PRINCIPAL TECHNICIANS IN ORDER TO CAJOLE THEM INTO AGREEING 
TO REMAIN WITH CERRO DE PASCO ONCE !T IS TAKEN OVER BY THE GOVERNMENT, 
HE WILL OFFER THEM THE SAME COMPENSATION AND BENEF I YS 
ARE NO 
VICTOR HIRO QUESAD 
A URRETA, HEAD OF THE SPECIAL 
GOVERNMENT COMMISSION TO STUDY THE POSSIBILITY OF PURCHASING CERRO 
: 
! 
DE PASCO HOLDINGS, WAS DOWNPLAYING THE POSSIBILITY THAT CERRO == 
: 
MANAGERIAL AND ENGINEERING STAFF WOULD NOT STAY WITH .THE COMPANY IF° 
: 
IT WERE TAKEN OVER BY THE GOVERNMENT. “SOURCE REPORTED THAT 
a 
MANY OF THESE KEY PERSONNEL PLANNED TO DEPART IMMEDIATELY, LEAVING 
== | 
THe GOVERNMENT WITH A VIRTUALLY INNPERARLE MINING, TRANSPORT AND SALES 
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6. 
LD BE BORNE IN MIND twat THE INFORMATION IN: PARAGRAPH | 
_ @ REPRESENTS THE THINKING WITHIN THE NINSITRY OF ENERGY AND MINES, 
“ec WHERE IT IS BELIEVED THAT FERNANDEZ MALDONADO WILL OBTAIN APPROVAL 
a FROM THE COUNCIL OF MINISTER FOR HIS PLANS. 
FROM THE INFORMATION 
IN PARAGRAPH 2 IT IS APPARENT THAT THIS APPROVAL MAY NOT BE AS FORTHe 
COMING AS IS EXPECTED WITHIN THE MINISTRY, 
®ATHER THAN RISK THE 
RESIGNATION OF MORALES BERMUDEZ, THERE MAY SE A MODIFICATION OR 
"" A COMPROMISE WITH RESPECT TO THE MINISTRY OF ‘:NES' PLANS FOR THE 
NATIONALIEATION OF CERRO DE Av 
HOLDINGS.) 
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PORT, NOT FINALLY EVALDATED INTELLIGENCE 
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LATE AUGUST 1973. 
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SUBJECTS 
OPPOSITION WITHIN THE GOVERNMENT TO NATIONALIZA= 
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THON OF CERRO DE PASCO HOLDINGS WITKOUT ADEQUATE 
| 
acd: 
SOURCE! 
| 
MINISTER OF ENERGY AND MINES, COMMENTED ON 38 AUGUST THAT THE 
a 
| 
PERUVIAN GOVERNMENT WANTS TO TAKE OVER THE HOLDINGS OF THE CERRO 
: DE PASCO CORPORATION AT ALMOST ANY COST UST AS PRESIDENT WJUAN 
PAS C0 
ALVARADO SAID DURING HIS.29 AUGUST PRESS CONFERENCE, 
OPPOSTION TO THE NATIONALIZATION OF CERRO DE PASCO'S HOLDINGS 
WITHOUT JUST COMPENSATION, HOWEVER, IS STRONG AND UNITED, 
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( AND COMES FROM TECHNICAL ADVISORS OF THE 
ADVISORY COUNCIL TO THE PRESIDENT (COAP) AND THE NATIONAL 
INSTITUTE OF PLANNING, AND FROM THE JOINT COMMAND OF THE ARMED 
FORCES, AIR FORCE AND NAVY OFFICERS, 
2. THE OPPOSITION INCLUDES MANY CABINET MINISTERS 
EVEN PRESIDENT VELASCO FEELS THAT EVERY EFFORT 
BE MADE T0 AVOID A CONFRONTATION 
AND A REPETITION OF THE 
INTERNATIONAL PETROLEUM COMPANY (IPC) CASE, NOT BECAUSE HE 
BELIEVES THE REVOLUTION DOES NoT HAVE THE RIGHT TO USE FORCE 
— 
BUT BECAUSE SO MANY. QUALIFIED PERSONS SAY.CONFISCATION WITHOUT 
_ FOREIGN INVESTHENT 1s NOT LIMITED TO THAT OF THE UNITED STATES 
“BUT INCLUDES THAT OF EUROPE, JAPAN AND THE SOCIALIST BLoc 
COUNTRIES WHO, IT 1s FEARED, NIGHT WITHDRAW FROM IMPORTANT 
PROVECTS JUST WHEN PERU NEEDS THEM 
WAS REPORTED/ 
WOULD. BE MORE PRACTICAL FOR - 
a 
HE GOVERNMENT TO COMPENSATE CERRO DE PASCO UP TO 38 MILLION 
DOLLARS FOR {TS HOLDINGS THAN TO EXTEND A CONFRONTATION KHICH 
“WOULD” EVENTUALLY COST PER MORE FROM AN ECONOMIC POINT OF VIEX,) 
_ ADEQUATE PAYMENT WOULD roe THE INVESTMENT CLIMATE. 
THE CONCERN ABOUT 
| | 
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3, 
THATeTHE TAKE*OVER OF CERRO DE 
PASCO'S HOLDINGS 1S STILL UNDECIDED AND CAN GO EITHER HAY, 
HE HOPES THAT VELASCO WILL NOT GIVE IN TD THE OPPOSITION BUT IS SOME= 
WHAT PESSIMISTIC DECAUSE OF THE APPARENT STRENGTH OF THE NAVY AND AIR 
FORCE BLOC FORMED "TO STOP THE PROGRESS OF THE REVOLUTION," 
HE 
MENTIONED THE CASE OF "EL COMERCIO" AND SAID THAT, ALTHOUGH 
PRESIDENT VELASCO CALLED IT STRICTLY A "LABOR" MATTER, EVERY ONE 
KNOWS IT WAS MUCH MORE AND THAT TKE SAME PEDPLE WHO ARE FIGHTING 
THE EXPROPRIATION OF CERRO DE PASCO'S HOLDINGS HAD FOUGHT THE 
TAKE*OVER OF MEL COMERCIO" AND HAD WON, 
ere 
COMM EN Tr 
THAT PRIME MINISTER AND MINISTER OF WAR GENERAL EDGARDO 
MERCADO 
VJARRIN HAD RECENTLY TOLD AN ARMY OFFICER THAT 
PERU DOES NOT WANT TO PICK A NEW QUARREL WITH THE 
UNITED STATES AT THIS TIME. HE ALSO SAID THAT THE "= 
MISSION DF JAMES GREENE, U,S, PRESIDENTIAL EMISSARY 
WHO WAS 
IN PERU IN MID*AUGUST TO DISCUSS U.S, INVESTMENTS 
IN PERU, WAS BY NO MEANS A FAILURE AND THE TALKS WOULD 
CONTINUE, ? 
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IN 017728 
TORR DB 34S/05275-73 
PAGE 4 OF 4 PAGES 
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s, { 
__}SAID THAT THERE ALSO IS THE PROBLEM OF 
PERSONNEL REMAINING AT CERRO DE PASCO AND HOW TO MAKE se a de 
HIMSELF THINKS THEY 
CAN DO 17 BUT THE OPPOSITION DOES NOT, 
POLISH COMMERCIAL 
“ATTACHE IN PERU SAID THAT POLAND IS READY TO SEND i5¢ MINING 
EXPERTS TO PERU IN CASE CERRD DE PASCO 1S NATIONAL IZED AND 
PERUVIAN AND FOREIGN TECKNICIANS AND HANABENENT LEAVE AS {S$ 
{ 
THE GOVERNMENT FELT IT IMPERATIVE 
TAT FOREIGN TECHNICAL PERSONNEL REMAIN DURING THE FIRST MONTHS 
AFTER THE TAKE= OVER). 
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THIS 1S AN INFORMATION REPOR:, NOT FN ALLY EVALUATED 
AUGUST AND SEPTEMBER 1973 
DISCUSSION BY MINISTHY OF 
se 
GF POSSIBLE COURSES OF ACTION ki" 
CERRO DE PASCO CORPORATION 
ENEAGY AND MINES OFFICIALS 
h REGARDS TC THE 
SUMMARY, 
POSSIBLE COURSES OF aCTiCn 
NG 
uF 
GFFiC 
Td= CERRO DE PASCO 
were CONS 
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Cr TRE MiN.STRY 
OUTRIGHT CONFISCATION OF Cer 
SOME TOKEN CONPENSATION- 
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COMPANY WITH THE STATE HOLDING MAJORITY CONTROL. 
THE GROUP 
REJECTED THE IDEA OF CONFISCATION SND FOUND THE IDEA OF 
| 
EXPROPRIATION THE MOST ATTRACTIVE OF THE THREE 
PROPOSALS, 
| HOWEVER» MODERATES IN THE GROUP STILL PUSHED THE MIXED 
| COMPANY CONCEPT, 
END OF SUMMARY. 
is 
THE MANNER OF TAKING OVER 
PisdusseD 
THE CERRO DE PASCO CORPORATION'S HOLDINGS IN PERV 
OFFICIALS OF THE MINISTRY OF ENERGY AND MINES 
= 
SENERAL JORGEFERNANDE® 
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MALDONADO 
MINISTER OF 
wae MINES, ATTENDED 
DENLY CALLED BACK TO LIMA FOR TALKS WITH PRESIDENT JUAN 
fase 
- 
V EL A SC 0 ALVARADO REGARDING THE CERRO DE PASCO PROBLEM, 
| 
| 2. 
EE POSSIBLE COURSESOF ACTION WERE DIScUSSEIL J 
| 
CONFISCATION OF CERRO'S HOLDINGS, EXPRGPRIATION WITH 
j 
fOME TOKEN COMPENSATION BASED ON THE GOVERNMENT'S VALUATION 
F THE COMPANY'S HOLDINGS, OR FORMATION OF A MIXED COMPANY WIT 
E STATE HOLDING MAJORITY CONTROL AND FAIR COMPENSATION BEING 
VEN THE COMPANY FOR ANY HOLDINGS SEIZED OR "CONVERTED" BY 
STATE. 
THE GROUP REJECTED THE IDEA OF OUTRIGHT CONFISCATION 
- 
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BSCAUSEs 
THEY SAID» THE EXTREME RIGHT@KING ELEMENTS COULD USE 
THE REVOLUTIONARY GOVERNMENT. 
AT THE SAME TIME, CONFISCATION 
WOULD GIVE THE EXTREM LEFT THE OPENTNS IT 1S LOOKING FOR TO 
RADICALIZE THE REVOLUTIONARY PROCESS 
_N FURTHER AND PUSH THE 
GOVEANMENT FASTER 
TO THE LEFT THAN 
IT KANTS TO GO. 
3. THE MOST ATTRACTIVE OF THE THREE ALTERNATIVES TO THE 
GROUP WAS THAT OF EXPROPRIATION, THE GRoUP “ORDERED THE: COMPLE~ 
TION OF THE VALUATION OF CERRO'S HOLDINGS AS SOON AS POSSIBLE 
AND ASKED THAT IT BE DONE IN THE SAME WAY AND UNDER THE SAME — 
GUIDELINES AS WAS DONE FOR THE CASE OF THE INTERNATEVNA. 
PETROe 
LEUM COMPANY (IPC), 
4. 
SOME MODERATE MEMBERS OF THE GROUP CONTINUED TO PUSH 
FOR THE MIXED COMPANY CONCEPT AS THE BEST COURSE OF‘ ACTION 
PROVIDED THE COMPANY HOULD GO ALONG WITH IT, 
THIS SOLUTION: THEY 
ARGUED, 
WOULD GIVE THE STATE THE DESTRED CONTROL OF. 
THE MINING SECTOR BUT WITHOUT THROWING THE COMPLETE BURDEN oF 
ADMINISTERING CERRO ON THE STATE ALL AT‘ONE TIMEs IN ADDITION. 
GOVERNMENT COULD GRADUALLY PREPARE TO NATIONALIZE CERRO 
AND ALL MINING COMPANIES FULLY AFTER SEVERAL YEARS OF EXPERIENCE 
> 
_17 TO RUIN PERU'S IMAGE ABROAD AS WELL AS-aT HOME AND TO EMBARRASS. . 
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TDFIR -314/0?4?e- 73 
PAGE 4 OF 7? PAGES 
KTH THE MIXED COMPANY CONCEPT, 
IT KOULD ALSO GIVE THEM MORE 
TIME TO DEVELOP TRAINSD PERUVIAN MANAGERS AND TECHNICIANS 
FOR SUCK AN EVENTUAL TOTAL TAKEOVER. 
5. 
MINISTRY OF ENERGY AND. NINES ADVISORS AND TECHNICIANS 
ARE WORKING HURRIEDLY TO ACCOMPLISH THE GOALS SET BY "PLAN 
S1N0" (DESTINY), THE PROJECT TO TAKE OVER CERRO'S HOLDINGS BY 
EXPROPRIATION OR BY FORMATION OF A MIXED COMPANY. AND 9 OCTOBER 
1S BE{NG MENTIONED AS THE SUITABLE DATE FOR FINAL SETTLEMENT 
OF THE CERRO DE PASCO PROBLEM. 
THE GROUP WHICH HAD MET IN 
ANCON LEFT LIMA ON 14 SEPTEMBER FOR CERRO DE PASCO TO PREPARE 
THE WORKERS AND THE PEOPLE OF CERRO DE PASCO FOR TKE TRANSFER 
OF THE COMPANY'S HOLDINGS TO’ THE STATE. 
6. 
IN MID©AUGUST THERE HAD BEEN STRONG SUPPORT AMONG 
ADVISORS OF THE MINISTRY OF ENERGY AND MINES FOR THE ESTABLISH- 
MENT GF A MIXED COMPANY, 
IT WAS BASED ON TKO STRONG UNDER@ 
LYING FACTORS: 
| 
A. 
A SPECIAL ECONOMIC STUDY, 
CLEARLY SHOWED THAp THE GOVERNMENT JS NOT CAPABLE OF COMPLETELY 
ASSUMING ALL CERRO DE PASCO HOLDINGS, ADMINISTRATIVE, SALES 
LASOR PROBLEMS AT THE SAME TINE, SO MUCH MONEY, MANPOWER 
> 
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-. 
AND PLANNING WOULD HAVE TO GO INTO.A COMPLETE TAKEOVER THAT 
OTHER GOVERNMENT PROJECTS WOULD SUFFER, INCLUDING SOME WITHIN 
THE MINSTRY OF ENERGY AND MINES ITSELF. 
FOR THESE REASONS IT 
WAS FELT THAT OUTRIGHT NATIONALIZATION OF CERRO'S HOLDINGS WOULD 
PROVE TOO COSTLY, 
| 
Bs THE LABOR FACTOR WOULD BE A PROBLEM SINCE THE MINISTRY. 
HAS LITTLE EXPERIENCE IN THIS FIELD AND DOS NOT WANT TO GET 
INVOLVED IN BEING THE STATE ENTITY WHICH HAS TO CONFRONT ‘THE 
“ANGRY MINERS, 
THE MINISTRY HAS BEEN TRYING TO BALANCE THE ¥, 
COMMUNIST UNIONS AGAINST THE THO UNIONS CONTROLLED BY THE © 
AMERICAN POPULAR REVOLUTIONARY ALLIANCE | (APRA) AT. CERRO 
“DE PASCO BY CALLING THE UNION LEADERS TO LIMA AND BY-NOT DEALING 
AT THE LOWER LEVELS. 
HE GOVERNMENT HAS BEEN CLOSELY HONTTORING 
ACTIVITIES OF THE UNJONS AT CERRO DE PASCO.) - 
7, 
THE FEELING 18 THAT SOME KIND OF AGREEMENT OR. ACCOM” 
NODATION WILL BE REACHED WITM CERRO TO AVOID THE USE.OF TROOPS: 
| HOWEVER» THE LATTER EVENTUALITY IS NOT COMPLETELY DISCOUNTED 
"AND WILL BE APPLIED IF THE GOVERNMENT FINDS THERE 3S NO OTHER 
RECOURSE, 
| 
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JOMMENT 
“ON 
SE PTEMBER THAT 
GENERAL FRANCISCO” 
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2. CERRUTTI>» 
| 
MINISTER OF ECONOMY AND FINANCE, 
SAID THAT THE PROBLEM OF CERRO 
DE PASCO WOULD BE 
SETTLED IN SEPTEMBER 
OR OCTOBER. AT THE LATEST. 
| 
MORALES BERMUDEZ SAID THAT HIS MINISTRY HAD. RECOMMENDED THE 
PAYMENT OF 40 MILLION DOLLARS FOR CERRO'S HOLDINGS BUT THAT 
THE COUNCIL OF MINISTERS WAS DIVIDED BETWEEN THOSE WHO DID NOT 
“WANT TO PAY ANYTHING FOR CERRO?S HOLDINGS AND THOSE WHO BELJEVED 
THAT CERRO SHOULD BE PAID BUT NOT THE AMOUNT ASKED BY THE 
df 
COMPANY. 
IN THE NEANTIME, MORALES BERMUDEZ SAID» IN SPITE 
OF PRESSURE FROM CERRO DE PASCO, THE COMPANY WILL NOT RECEIVE 
| 
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PAGE 
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PAGES 
AUTHORIZATION 
TO CONVERT 
ITS PROFITS AND FEES WH.LCH 
HAS 
NOW IN SOLES INTO DOLLARS IN ORDER TO TAKE THEM OUT OF THE COUNTRY,3 
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INrORMATION REPORT, NOT FINALLY EVALUATED INJELUGENCE 
ABET 
CITE XNOMTDFI RDB-315/099 
23- 73 
nara 
| 
DIST 
17 OCTOBER 1973 
| 
DEVELOPMENTS IN THE BANCO DE CREDITO 
‘SUIT AGAINST CERRO DE PASCO CORPORATION 
r 
SCOMMENT: 
LIMA EMBASSY TELEGRAM 7353 OF 
‘4 OCTOBER OUTLINED THE PROBLEMS CAUSED THE PANCO DE CREDITO (BDC) 
[OF LIMA 
IN PARTICULAR AND PERUVIAN BANKING CIRCLES IN GENERAL 
BY THE ACTION TAKEN BY CERRO DE PASCO CORPORATION IN STOPPING 
PAYMENT ON A $3,5 MILLION REMITTANCE DUE TO THE PERUVIAN GOVERN- | 
‘ENT FOR ORE SALES AND GUARANTEED BY THE BODC,) 
. 
08) 36 
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PAGE2 OF 3 PAGES 
2.° LIZARDO A'LZAMORRA PORRAS AND PAOLO 
CUCURELL 1, PRESIDENT AND GENERAL MANAGER RESPECTIVELY 
OF THE BDC, RETURNED TO LIMA FROM NEW YORK CITY ON 5 OCTOBER, 
“GHEY SAID THAT DESPITE STRENUOUS EFFORTS ON THEIR PART TO GET A 
“HEARING ON THE EFFECTS IN LIMA OF CERRO DE PASCO: CORPORATION'S 
ACTION, THEY WERE TOLD FLATLY BY CERRO OFFICIALS THAT THERE WOULD 
BE NO MORE DOLLAR REMITTANCES AS ADDITIONAL AMOUNTS BECAME DUE, 
SINCE BDC IS THE GUARANTOR FOR A TOTAL OF $7 MILLION FOR ORE 
PAYMENTS TO THE PERUVIAN GOVERNMENT, AND PERUVIAN LAW PROVIDES 
FOR A 50-PERCENT PENALTY FOR CURRENCY EXCHANGE VIOLATIONS, BDC 
COULD BE LIABLE TO THE BANCO CENTRAL FOR A TOTAL OF $10.5 MILLION, 
WHICH IS ONE-THIRD OF BDC'S TOTAL RESERVES, CUCURELLI, WHO 18 
THE CHIEF OPERATING OFFICER OF BDC, IS ALSO LIABLE'TO A JAIL 
TERM OF QNE TO FIVE YEARS, AS IS YANUEL L LOB A, THE CERRO 
, 
‘MANAGER IN LIMA, 
THE PERUVIAN GOVERNVENT COULD PROBABLY MAKE 
A LEGAL CASE OF CURRENCY VIOLATION AS A PRETEXT \IF IT WISHED 
TO USE THIS AS A MEANS OF TAKING OVER THE BDC, 
IN ANY EVENT, 
PAYMENT OF THE $10,5 MILLIQGN WOULD ENDANGER THE ‘BANK'S 
POSITION, 
| 
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TDF IRDB-315/09923-73 
PAGE 3 OF 3 PAGES 
Pee eer 
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2, 
A ViCE PRESIDENT OF THE CHEMICAL CORN EXCHANGE BANK 
(CHEMICO) IS ARRIVING IN LIMA TO HEAD OFF BDC'S SUIT AGAINST 
CHEMICO FOR THAT INSTITUTION'S ROLE IN THE STOP PAYMENT ON THE 
$3.5 MILLION, 
CERRO HAS WRITTEN A LETTER TO BDC ACKNOWLEDGING 
THAT CERRO AND NOT BDC IS LIABLE TO THE PERUVIAN GOVERNMENT FOR 
$7 MILLION, BUT ADDING THAT PAYMENT IS TO BE DELAYED INDEFINITELY 
¢ 
OWING TO "FORCE MAJEURE, " 
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SANITIZED 
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INFO: DIR CIA HELMS 
CITE: CAP67169 
| 
SUBJECT: CIA DAILY REPORT ON SECURITY SITUATION 
IN URUGUAY 
20 MARCH 1967 
2- IN THE MEANTIME, THE COMMUNIST PARTY’ s PLAN FOR 
ACHIEVING EXTREMIST COORDINATION ON ANTI-SUMMIT ACTIVITIES 
IS SUCCEEDING AND THE PARTY HAS DECIDED TO INTENSIFY 
SIGNIFICANTLY ITS PROPAGANDA ACTIVITY AFTER EASTER WEEK. 
BEGINNING ON 27 MARCH, THIRTY*OR FORTY CARS, CAPABLE OF 
SUPPORTING THIRTY PROPAGANDISTS EACH, WILL TRY TO CANVAS © 
MONTEVIDEO NIGHTLY DISTRIBUTING PROPAGANDA. THE COMMUNIST 
LEADER OF THE TRANSPORT FEDERATION HAS STATED THAT HIS 
ORGANIZATION WILL JOIN THE LABOR MOVEMENT IN A‘24 HOUR GENERAL 
STRIKE 
(NO DATE GIVEN AS YET) AND THE COMMUNIST DOMINATED 
LABOR CONFEDERATION HAS PROMISED TO ORGANIZE STRIKES AND 
SLOWDOWN IN EVERY MONTEVIDEO FACTORY. ON 6 APRIL THE COM- 
MUNIST PARTY'S YOUTH ORGANIZATION WILL BEGIN A MARCH FROM THE 
UNIVERSITY TO PUNTA DEL ESTE AND THE STUDENTS AND THE 
LABOR CONFEDERATION WILL JOINTLY SPONSOR A “CONFERENCE OF 
SOLIDARITY WITH PEOPLES IN STRUGGLE” DURING 
WEEK 
‘10-16 APRIL. 
Se ALSO DURING STRUGGLE WEEK, THE PARTY HOPES TO ORGANIZE 
ANTI-SUMMIT DEMONSTRATIONS AND STUDENT STRIKES IN SECONDARY 
SCHOOLS. 
IN ADDITION IT HAS PLANS TO HALT ALL PERFORMANCES 
IN MONTEVIDEO’S 28 THEATERS FOR SEVERAL MINUTES DURING WHICH 
' ACTORS WILL READ PREPARED ANTI-SUMMIT STATEMENTS. THE PARTY 
GUIDES OR CONTROLS AN IMPORTANT SECONDARY TEACHERS*’S AND 
THEATRICAL UNION AND ITS PLANS STAND A GOOD-CHANCE_OF 
BEING AT LEAST PARTIALLY IMPLEMENTED. 
DTG: 1922512 MAR 67 
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GPS: 359 IMI 359 
SED 
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— 
THE GOVERNMENT ON "THE ADVISABILITY OF CALLING. IN TOP 
., COMMUNIST LEADERS AND WARNING THEN AGAINST DISRUPTIVE ACTIVITIES. .- 
-.- 
_ GROUPS: 240 
249 
‘SUBJECT cra DAILY REPORT oN. 
SITUATION IN 
THE 
EMBASSY 
MONTEVIDEO REPORTS THAT THERE IS 
an INCREASED AWARENESS AMONG URUGUAYANS OF TNE WEED TO 
COUNTERACT COMMUNIST AGITATION DIRECTED AGAINST THE SUMMIT 
MEETING. THERE IS, FOR EXAMPLE, SERIOUS DISCUSSION WITHIN 
- 
. 
THERE IS ALSO THOUGHT BEING GIVE! TO BRINGING TO TP 
et. SE 
‘ATTENTION OF SOVIET EMBASSY OFFICIALS THE HARMFUL EFFECT THAT 
COMMUNIST*INCITED DISTURBANCES MIGHT 
NAVE ON URUGUAYAN- 
USSR RELATIONS. THE GOVERNMENT PLAWS TO CLOSE OFF THE 
Me wee 
MONTEVIDEO AIRPORT DURING THE WRRIVAL OF CHIEFS OF STATE, 
. 
WITH THE CROWD AT THE AIRPORT TO BE “SELECTED.” 
URUGUAYAN PRESS COVERAGE OF THE SUNMIT MEETING IS 
. 
BECOMING INCREASINGLY FAVORABLE. THE RESPONSIBLE PRESS IS 
EXPANDING ITS COVERAGE OF ALL ASPECTS OF THE SUMMIT, INCLUD ING:. 
REPORTING ON THE ACTIONS BEING TAKEN To PREPARE FoR, 
3. FORMER BRAZILIAL PRESIDERT 
GOULART WAS CHANGED 
RESIDEMCE FROM PUNTA DEL ESTE TO HIS RANCH 38 
URUGUAY. THIS DECISION BY GOULART, WHO KAS 
EXILED 
URUGUAY SINCE HIS OUSTER BY THE ANT I-CONMURIST REVOLUTION, 
OF MARCH 1964, REMOVES A POTERTIAL SECURITY PROBLEM FROM 
THE 
"AREA OF THE SUMMIT MEET EUG SITE 
DIG: 2022222 MAR 1967 
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ORE 65 
a 
5 January 1948 
Copy No. 
THE VENEZUELAN ELECTIONS OF 14 DECEMBER 1947 
SUMMARY 
The economic and social reform program of the Accién Democratica, the imple- 
mentation of which was begun under the Betancourt provisional 
Junta, was approved 
by the Venezuelan electorate on 14 December 1947 in the first truly democratic na- 
tional election in the country’s history. 
The overwhelming victory of the Accién 
Democratica, which gave it the presidency and control of both houses of Congress, 
not only assures a progressive and pro-US government but continues in power an 
active non-Communist party which can be counted on to obstruct the development 
of a strong Communist movement. 
Note: This paper has the concurrence of the intelligence organizations of the Departments of 
State, the Air Force and the Navy. The dissent of the Department of the Army is set forth 
in Enclosure “A’”’. 
TRUMAN 
- 
's SECREDARY 
<PRESIDENT!S 
SE 
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F
THE VENEZUELAN ELECTIONS OF 14 DECEMBER 1947 
: 
The elections held in Venezuela on 14 December 1947 reflect the character of 
: 
ae: 
the revolution that occurred in that country in October 1945, and confirm the view 
that the Venezuelan Government is today, for the first time, democratic both in 
form and in operation. 
: 
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During the two-year interval since the revolution, Venezuela has been governed 
| 
by a Junta headed by a political reformer named Rémulo Betancourt. 
On coming 
to power, this 
Junta instituted a program of economic and social reform without 
precedent in Venezuela’s history. 
At the same time an intensified effort was made to 
win wider popular support (a) as a defense against counter-revolutionary movements 
through a period of “consolidation,” and (b) to prepare the way for democratic 
elections under a new liberal constitutional system. 
The 14 December elections place 
the stamp of unmistakable popular approval on the course the Junta has followed, 
and leave the Accién Democratica in complete mastery of the Venezuelan political 
scene. 
The democratic character of the present Venezuelan regime is indicated by (a) 
the decisive popular vote of confidence it received in the 14 December elections, (b) 
the social and economic policies to which the new Romulo Gallegos government stands 
commited as the successor of the Junta, (c) the character of the regime’s electoral 
system, as revealed both by the new suffrage legislation and the peaceful and fair 
manner in which the 14 December elections were conducted. 
‘Three of Venezuela’s four major parties ran presidential candidates in the recent 
election, and all four offered candidates for both houses of Congress. 
On the basis 
of approximately nine-tenths of the total vote (the other tenth is still to be counted), 
the electoral verdict stands as follows: 
| 
Presidential 
Congressional 
Accién Democratica 
831,087 
791,067 
COPEI 
261,753 
200,777 
Communist 
| 
35,716 
43,148 
1,128,556 
1,034,992 
Under the Venezuelan system of proportional representation it is expected that the 
composition of the houses of Congress will be: 
Senate 
House 
Accién Democratica 
COPEI 
Communists 
Unién Republicana Democratica 
*Completed count of votes cast for presidential candidates is: Gallegos (Accién Democratica) 
of 
SRESIDENT!® 
|
The new Accién Democratica president, R6mulo Gallegos, will accordingly be able 
to count on firm congressional support for his legislative program. 
The social and economic progressivism of the revolutionary Junta (to a con- 
tinuation of which the newly elected Government is firmly committed) has been 
clearly demonstrated. 
Accidn Democratica’s leaders, out of an avowed determination 
to make AD a “popular” party, have deliberately sought, and won, support from all 
segments of the population. 
AD is not, therefore, a strictly working-class party, but 
rather a coalition of those groups that are seeking to promote the industrialization 
of the country, extensive land reforms, better standards of living, health measures and 
cultural opportunities for the people; and the establishment of a tradition of demo- 
cratic processes. 
The Junta’s accomplishments in education, housing, in extension 
of the trade-union movement, in improving working conditions in the country’s in- 
dustrial concerns, in basing taxation on ability to pay, in agrarian reform, and in the 
promotion 
vf agricultural and pastoral production, attest to the progressive trend in 
Venezuelan, public policy. 
— 
Because of post-revolutionary changes in Venezuela’s electoral law and because 
of the impartial manner in which the Junta conducted the electoral campaign and the 
voting, the 14 December elections were Venezuela’s first truly democratic national 
elections. 
This is evidenced by (a) the unprecedently large number of persons who 
cast their votes (Venezuela now has, to all intents and purposes, universal adult 
suffrage, and the final official count will almost certainly show that between one 
million and one and a quarter million persons voted, out of a population officially 
estimated at approximately 4,200,000) and (b) the poll involved, for the first time, 
direct election of all important national officials. 
Before the revolution, the electoral 
process had consisted of a series of indirect elections under which the voters elected 
the city councils; the councils elected the state legislatures; the state legislatures elected 
the Congressmen, and Congress selected the President. 
The December elections were, 
moreover, held without violence and, according to foreign and domestic observers alike, 
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with exemplary honesty. 
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: 
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_ 
Accién Democratica’s policies, and its avowed political philosophy as well, look 
to a rapid advance in Venezuela toward political, economic, and social equality; 
| 
and its enemies, especialiy among the elements that governed the country in the past, 
miss no opportunity to identify it as a “radical” party and as a threat to the status 
quo. 
Some go still further, and describe it as a disguised Communist party; but all 
the evidence available points to the conclusion that (a) it is not only non-Communist 
but anti-Communist, (b) it is so regarded by the Communists themselves, and (c) it 
has gone out of its way to alienate any Communist support. 
Notwithstanding the 
Accién Democratica’s anti-Communist attitude, the Communists will in all proba- 
. 
bility refrain from excessive or militant opposition since they are in agreement with 
many of the AD policies and since they reason that any alternative to AD might 
well be more anti-Communist and might seek to suppress the Communist Party or at 
least to curtail its activities. 
| 
The Accion Democratica does not deserve the Communist label its enemies have 
sought to fix on it. In fact, the great popular support won by the party in the 
“~~ 
“SEOREDAS
December elections is another indication that, in the special conditions of Latin Ameri- 
can politics, an active non-Communist progressive party constitutes one of the best 
guarantees against a strong Communist movement. 
In foreign policy the AD is pro-US 
and anti-USSR. 
of 
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ENCLOSURE “A” 
DISSENT OF THE INTELLIGENCE DIVISION 
DEPARTMENT OF THE ARMY 
The Intelligence Division, Department of the Army, Hoes not believe that Accién 
Democratica is at present an active non-communist party “which can be counted on to 
obstruct the development of a strong Communist movement.” 
It is believed that 
Accién Democratica may cooperate with the Communists in the future if it seems 
expedient, as it has done in the pasi. 
It is not believed that the present Junta is 
democratic in operation nor that the 14 December elections place the stamp of “un- 
mistakable popular approval” on the actions of Junta. 
It is the opinion of the Intelli- 
gence Division that the Junta has done little actually in the way of social and economic 
reform except on paper. 
It appears to the Intelligence Division that the nationalism 
of Accién Democratica represents a potential danger to United States interests in Vene- 
zuelan oil and that their present temperate pro-United States policy represents ex- 
pediency. 
OS 
\ RESIDENT!
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ORE 31-48 
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VULNERABILITY TO SABOTAGE OF PETROLEUM INSTALLATIONS 
_ IN VENEZUELA, ARUBA, AND CURACAO 
SUMMARY 
Oil wells in Venezuela and refineries on the adjacent Netherlands West Indies 
islands of Aruba and Curacao offer one of the most remunerative targets for industrial 
sabotage of the Western Hemisphere. 
Venezuela in 1947 produced 80 percent of all 
Western Hemisphere oil excluding the US, and 60 percent of Venezuelan production 
was refined at Aruba and Curacao. 
Political conditions are generally favorable in 
both areas, but both areas have particular points of vulnerability to sabotage, especially 
by trained agents. 
By crippling either production or refining in these areas, or by im- 
pairing the utility of the specialized tanker fleet which transports the oil from the wells 
to the refineries, such agents could seriously affect US capacity either to prepare for 
or to wage war. 
Protection against such sabotage would require precautions (coop- 
eratively taken by the companies concerned, the local governments, and the US gov- 
ernment) at least as comprehensive as those taken under the emergency status of 
1941-1945. 
Note: The information in this report is as of 23 April 1948. 
~-"The intelligence organizations of the Departments of State, Army, Navy, 
and the Air 
Force have concurred in this report. 
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VULNERABILITY TO SABOTAGE OF PETROLEUM INSTALLATIONS 
IN VENEZUELA, ARUBA, AND CURACAO 
In 1947 Venezuelan crude oil production averaged 1,191,000 barrels per day. 
While this is equivalent to only slightly more than one-fifth of the US production, it 
is about 80 percent of all Western Hemisphere production outside of the US. Two- 
thirds of available Venezuelan exported crude oil is refined on the adjacent Netherlands 
West Indies islands of Aruba and Curacao. 
(Venezuelan refining capacity is only 
~ 116,000 barrels per day.) 
Local political situations both in Venezuela and the Dutch islands are, in general, 
favorable for the continuance of operations, but both production in Venezuela and re- 
fining on“the islands are vulnerable to sabotage by trained agents. 
Together or sep- 
arately these installations constitute one of the most remunerative targets in the 
Western Hemisphere. 
If the fields are shut down, the refineries are of little value, as 
there. is no alternative comparable source of crude. 
There is at present no additional 
refining capacity that could be used in place of the refineries on Aruba and Curagao. 
Furthermore, tankers now used to transport crude from Lake Maracaibo to the re- 
fineries cannot make ocean voyages, nor can ocean-going tankers cross the bar into 
Lake Maracaibo. 
Crippling of these wells or refineries would be a serious blow to US 
capacity either to prepare for or to wage war. 
, 
The USSR presumably has plans against this area, and it is eaiainhs that prelimi- 
nary steps have already been taken to put these plans into effect. 
VENEZUELA* 
Recent political developments in Venezuela are in general favorable to the US, 
and the denial to the US of petroleum is unlikely to become a government policy. 
Communist control of labor is decreasing rather than increasing. 
There are several 
points, however, in which the producing fields are peculiarly vulnerable to sabotage. 
There has been, furthermore, ample opportunity for trained saboteurs to enter the 
country, and they may be assumed to have done so. 
Both the Betancourt regime in its last months and the present Gallegos admin- 
istration have shown increasing concern over the potentialities of the Soviet threat, 
and, as a result, Venezuelan policy has moved more and more into the orbit of the US. 
The recent history of the government party, Accién Democratica, justifies the con- 
clusion that earlier acceptance of support of the Communists (at the time of the rev- 
olution in 1945) was a marriage of convenience only. 
It is expected that the Vene- 
zuelan government will continue to support US petroleum policy by employing all 
* The situations as to Venezuela and as to Aruba and Curacao are discussed separately in the 
following paragraphs. 
As other Western Hemisphere installations — Mexico, Colombia, Peru — 
are of minor present importance compared with Venezuela and Aruba and Curacao, they are 
not included. 
Dangers of enemy direct action — considerable particularly against Aruba and 
from submarines approaching close to bombard — are likewise beyond the scope of 
paper. 
; 
;
, 
the means at its disposal 
— however scant these may be— to protect installations 
and insure continued production. 
It is true also that petroleum is the source of one- 
third or more of the Venezuelan government’s revenue. 
How readily the Venezuelans 
would accept additional assistance from the US, such as receiving a special security 
| 
mission, would depend on (a) their estimate of the immediate danger, and (b) whether 
the project could be presented to them as a logical extension of Venezuelan policy in 
regard to the military and naval missions they have already received. 
There can be no doubt that Accién Democrdatica’s antipathy to Communists is 
increasing, and that the party appears determined to remove the Communists from the 
labor. field in general and from the petroleum industry in particular. 
Thoroughly 
reliable figures are unavailabie, but a report dated 18 February 1948 states that there 
are 35 to 45 thousand persons employed in the petroleum industry, of whom 5,000 are 
believed to be Communists. 
In December 1946 the corresponding number was esti- 
. 
mated to be 12,000. 
In 1947, when the national labor confederation (Confederacién de 
: 
Trabajadores Venezolanos) was formed, Actién Democratica prevented the election of 
any Communists to office. 
Early in 1948, the 15 Communist members of the board of 
directors of the national federation of petroleum workers (Fedepetrol), which is the most 
: 
important federation in the national confederation, were expelled. 
The fact that capa- 
| 
bilities of local Communists are limited, however, does not guarantee against any labor 
disturbances, since strikes for wages could get out of hand and result in considerable 
reduction of output, even if there were no deliberate intention to sabotage. 
Strikes of 
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other unions in allied industries furthermore (transportation for example) from which 
: 
Communist control may not yet have been eliminated could have similar adverse effects. 
It is estimated, however, that these possibilities are of minor importance compared with 
the danger of sabotage by expert agents already in Venezuela or later introduced from 
outside. 
Recent oil-company estimates as to likelihood of sabotage differ, but enemy cap- 
, 
abilities are at least as great as they were during World War II, when much more 
: 
than existing protection was considered necessary. 
Most vulnerable are the pumping 
Stations, each of which could be destroyed by a single explosive charge and would 
then require about 18 months for replacement; and the Los Maroches power station 
in the Lake Maracaibo district. 
In addition, the fields are peculiarly vulnerable in 
that two-thirds of Venezuelan production is from Lake Maracaibo, where the rupture 
and firing of a single well could produce a conflagration almost impossible to extinguish 
_ and destructive of the production of the entire area. 
At present, key installations can- 
not be considered adequately protected, even though plans for national guard or army 
. 
posts near danger spots are being considered, and studies made in 1942-43 are available 
| 
as a basis for additional precautions. 
The companies hope that the Venezuelan gov- 
ernment will take the initiative in requiring employee-identification badges, a step 
which the companies are reluctant to take for fear of stirring up labor difficulties. 
It is estimated that adequate and immediate protection in case of emergency does not, 
because of lack of proper training, lie within the capabilities of the Venezuelan police 
or armed forces. 
|
Several indications suggest that the USSR and the Soviet Embassy may be plan- 
ning for future sabotage operations. 
The Ambassador himself (accredited since late 
1946) is a petroleum geologist, and he has a staff sufficient to direct any agents that 
may have slipped in. 
As early as 1943, trained agents are reliably reported to have 
entered the country, and, though their primary purpose at that time was to stir local 
Communists to action, it is entirely possible that they could be used in sabotage oper- 
ations as well. 
Immigration from Russia and satellite countries has greatly increased; 
the records show no Slavic migrants prior to 1946, 109 in’ 1946, and 2,915 (including 
non-Slavs from satellite countries) in 1947. 
While every effort — with the Venezuelan 
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government cooperating in every respect — has been made to screen these people, it is 
quite possible that well trained agents may have been included among the almost 
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3,000 migrants. 
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In spite, therefore, of a generally favorable situation in governmental orientation 
| 
and in labor, it must be assumed that expert saboteurs are in Venezuela at present, and 
: 
that they have the capabilities, failing a much more comprehensive protective program 
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in which US assistance would almost certainly be necessary, of seriously reducing 
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Venezuelan oil production. 
It is probable that this group could also carry out, or at 
least assist with, similar activities in Aruba and Curacao. 
ARUBA AND CURACAO 
About 60 percent of the total Venezuelan production of crude oil is refined on 
Curacao and Aruba, where two of the largest oil refineries in the world are located.* 
The production of these refineries amounts to about eight percent of the world total 
or the approximate equivalent of the oil allotments to the Marshall-plan countries. 
: 
As a consequence these refineries are a primary enemy strategic Western Hemisphere 
target, especially since their destruction would not only create an immediate shortage 
of refined petroleum products but would also nullify the utility of a large percentage of 
Venezuelan crude, since neither the tankers nor refinery capacity would be available 
to transport and process this oil elsewhere. 
In the event of either (1) further deterioration in the relations between the US and 
the USSR, or (2) a decision by either the US or the USSR to begin hostile operations 
against one another or against powers allied to one another by ties of friendship or 
treaty, intensive efforts to sabotage these refineries by the USSR are to be expected. 
Because of highly favorable working conditions, the friendly attitude of the native 
population toward the US, and the absence of Communist-directed labor organizations, 
the possibility of subversive action arising from local Communist penetration of labor 
is unlikely. 
The Netherlands Colonial Government has cooperated with the oil com- 
panies in refusing admission to known Communists and labor agitators. 
On two 
recent occasions it has deported those who succeeded in gaining admittance. 
(Con- 
*In 1947 Venezuelan crude production was 434 million barrels; 36 million were refined in Venezuela, 
and 396 million were exported. 
Of the exported crude, 260 million went to Aruba and Curacao, 
93 million to the US, 11 million to France, and smaller quantities to various other countries. 
More than 95 percent of the crude received at Aruba and Curacao is from Venezuela; the balance 
‘ 
is from Colombia. 
} 
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templated changes in the political status of Curacao and Aruba might temporarily 
affect the ability of the US to safeguard the security of the refineries. 
However, prob- 
lems arising from such a change could rapidly be solved in a manner satisfactory to 
US strategic interests.) 
The oil companies themselves exert a firm control over labor 
and have encouraged the growth of employees’ advisory committees as a device to 
combat the rise of labor unions. On Curacao, such unions as exist are sponsored by 
the Roman Catholic Church and concern themselves primarily with welfare problems. 
On Aruba, the labor union is primarily the personal creation of a single individual, 
Henny Eman, and is designed to maintain his political power. There 
has been no 
notable labor unrest on either island since 1943. 
In the absence of Communist penetration of labor organizations, Soviet sabotage 
activities will therefore be confined to direct operations against the refinery instal- 
lations themselves by trained Soviet operatives. 
These agents will, it is estimated, 
enter the-colony in the guise of either migrant laborers or commercial travelers from 
Venezuela and/or other Caribbean areas (Soviet agents are reported to have been 
among recent DP arrivals in Venezuela), or directly from Soviet submersible craft 
ordered to the area for the purpose of transporting operatives to their targets. 
Present security measures for protecting the refineries from direct sabotage by 
Soviet agents are inadequate. 
Although employees wear number-picture badges, there 
is no patrol of property lines or fences. 
Intelligence coordination between the Colonial 
Government and company management on the one hand and Western-power intelli- 
gence services on the other are not adequate to prevent the inadvertent hiring of sabo- 
tage experts. 
The US does not maintain security personnel on the islands. 
The Colo- 
nial Government merely pursues a policy of denying entrance to Curacao and Aruba of 
all known Communist agitators as distinguished from specially trained saboteurs. 
In case of emergency, there are not sufficient Dutch troops on the islands to afford - 
adequate protection either to the refineries or to harbor installations, which are 
particularly sensitive to sabotage because of the geographic configuration and hydro- 
graphic condition. 
Favorable factors for the protection of the refineries from sabotage are the main- 
tenance of effective fire-fighting organizations and equipment, the presence of guards 
throughout the refineries and at plant entrances, plans for the establishment of ma- 
chine-gun posts at strategic points, antisabotage and defense experience gained during 
World War II, and the friendly disposition of the Netherlands Colonial authorities 
toward whatever security precautions the US may elect to take. 
| 
Despite these favorable factors, however, and in the absence of additional precau- 
tions on the part of (1) the Netherlands Colonial Government, 
(2) the refineries 
themselves, and (3) the US government, it is estimated that Soviet sabotage on Cura- 
¢ao and Aruba would succeed in material reduction of the productive capacities of 
the refineries. 
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BRICERO Linares, Anton‘to 
VENEZUELA 
(Pronounced: 
Droo-SAyn-Yo) 
Min’ ster of Natdonal Defense 
Appointed to the cabinet on February 22, 1961, Bricefio has 
publicly and strongly supported democratic, constitutional govern=- 
ment and has affirned that the role of the armed forces is not to 
become involved in politics but rather to defend the peop).e, 
Prom an upper middle-clcss family of old Spanish stock, 
Antonio Dricefio was born to Rufeel BricelNo Graterol and Emilia 
Rose Linares on July 3l, 1915, ot Carvajal, in the Stato of Trujillo. 
After completing military school and graduating from the Venezuelan 
Naval Acadeny, he chose avintion as a career in 1933 and entered 
the Venezuelan Mil4tarz Avintion School, 
During 1940 he took a 
nino-month course in navn) aviation and afr navigation at the U. S. 
Navel Air Station, at Pensacola, Florida, 
Most of Bricefio's sub= 
mequent training assignments havo aleo been in the United States, 
including tours at. tho Air Tactical. School, Tyndall Air Force Base, 
Florida (19/8) ari at the Air Command and Staff School, Maxell 
Air Force Baso, Alnboma (1951), 
According to reliable sources, 
4n September 2955 Drisefio was assoctated with a proup of officers 
who wero arreeted for complnining about the venality of top-ranking 
officials in the government of Presidont Karcos Péres Jiménez 
(1952-58). 
His subsequent assimment as Air Attaché at the 
Venezuelan Embassy in Washington may have been due to the desiro 
of the regime to keep him out of the country. 
Very pro-US in attitude, Ericefio admires this country's demo~ 
cratic institutions and sincerely cesires close ties of friendship 
between the United States anc Venezuela. 
He spoaks English fairly 
woll, has traveled widely and his military knowledze is considered 
supsrior to that of his contenporarles, 
Of a somewhat retiring nature, Bricefo never expresses himself 
forsefully, but rathor quistly and mildly. 
He is well-mannered, 
and his personal coniuct 45 above reproach, 
With regard to social 
activities, Briceio limits himself to properly fulfilling the 
responsibilities of his position, attending all necessary functions, 
A devoted family man, ho is married to the former Yolanda Colina 
Rodriismez. 
Tho couple have tio daughters, Maria Fedora (18) and 
Glenda Lucia (16). 
Bricefie’s religion is Roman Catholic. 
END, 
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Of the, best known of. the mintsters, having, :yir 
lopnent under the AD goverament of 1945-19480 
based 
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deal f 
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Eeppointment Mayobre™. 
As “Minister: of “Pinance ;‘ in, whi chs 
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Si splayed an “orthodax “approach to: gconamic 
end exerted? 
in the: formation “of fiscal’ programs,’ Be {8 th chief. 
of ticht credit and s talanced budget, Doth 
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Cumana 
inthe State’ of Sucre “on 
1913;" Jose Mayobre 
, Party. of. ‘Venerus! 
asa “teenage” student, and ‘spent = 
Ros 
@-1930's 
in hiding or in 
According to his own statement 
"Yew 
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CENTRAL INTELLIGENCE AGENCY 
OFFICE OF CENTRAL REFERENCE 
BIOGRAPHIC REGISTER 
LEONI, Raul 
VENEZUELA 
‘(Pronounced: 
Lay-OH-Nee) 
t 
President of the Democratic Action Party, Senator 
and President of the National Congress 
Elected president of the new Executive Board of the Democratic Action 
Party (Accion Democratioa - AD) in January 1961, Raul Leoni has been pre- 
sident of Venezuela's largest political party since 1959. 
A party founder and 
distinguished national leader, Leoni had been acting chief of the party 
since the inauguration of Romulo Betancourt as President of the Republic 
in February 1959. 
He is a staunch supporter of the coalition government 
and of Betancourt, whom he has known intimately for many years as a fel- 
Jow revolutionary, exile and national leader. 
Leoni is one of the "old 
guard” of the AD, the mature and long established party leaders who, 
although once revolutionaries, are now moderate leftists and practical 
politicians. 
Elected to the National Senate in December 1958, he has 
three times been chosen by that fody to be its presiding officer and the 
president of the National Congress as a whole. 
Raul Leoni was born in 1906 in Upata, State of Bolivar. 
As an ad- 
Olescent he was active in student groups against the dictatorship of Juan 
Vicente Gomez (1908-1935) and, in 1921, spent some time in one of the 
dictator's most notorious prisions, La Rotunda in Caracas. 
After com- 
pleting his secondary schooling in Ciudad “Bolivar, Leoni entered the Cen- 
tral University to study law. 
Displaying a marked aptitude for student 
politics, he became president of the Law Student's Association and later 
organized and was elected president (1927-1928) of the Federation of Vene- 
zuelan Students (Federacion de Estudiantes Venezolanos 
- FEV). 
Together 
with Betancourt, Jovito Villalba and others } Leoni played a prominent role 
in the celebrated "Students Revolt of 1928," and was one of the fortunate 
rebels who managed to escape from Venezuela after Gomez crushed the up- 
rising. 
Proceeding to Colombia, he lived with other young Venezuelan 
exiles, including Betancourt, in a communal state of poverty. 
After the death of Gom-z (December 1935), Teont returned to Vene- 
zuela and in 1936 was elected deputy to the National Congress from the 
State of Bolivar. 
His election was annulled by a federal court apparently 
because of his revolutionary background, but Leoni continued active in 
politics by aiding Betancourt to found Venezuela Organization (Organi- 
zacion Venezolana - CaVE) in 1936 and the National Democratic Party (Parti- 
do Democratico Nacional - PDN) in 1937, both of which werg leftist revolu- 
tionary ‘movements in opposition to the regime of President Eleazar Lopez 
Contreras (1935-1941). 
When all political parties were disbanded by order 
frprovel Lor 
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LEONI, Raul (Continued) 
VENEZUELA 
of the government in February 1937, he became clandestine director of the 
PDN. 
Expelled from Venezuela later the same year, he returned to Colombia 
and studied at the National University in Bogota, receiving a doctorate 
in law and political science in 1939. 
Repatriated shortly after gradua- 
tion, he accepted an appointment to a permanent commission which revised 
Caracas' municipal ordinances. 
In 1941 the 
AD was established and Leoni 
became active in the new party as a member of its National Directorate 
and editor of its weekly publication. 
In October 1945, discontented young military officers, in alliance 
with the AD, overthrew the government of Isaias Medina Angarita (1941- 
1945) and established the Revolutionary Junta of Government (1945-1948) 
headed by Betancourt. 
Leoni was a member of the Junta and also served as 
Minister of Labor during both the Junta government and its freely elected 
successor, the AD goveriument of President Romulo Gallegos. 
Gallegos was 
ousted by a militarv 
oup in November 1948. 
The sucer2ding Military 
Junta of Government (1948-1952) outlawed the AD and expelled most of the 
party's leaders. 
Leoni was imprisoned for eight months and then exiled. 
After a year's residence in the United States, he moved to Costa Rica 
where he remained until 1955. 
In Costa Rica he was very active as a 
leader and spokesman for AD exiles in that country. 
Having been unem- 
‘ 
ployed during this period and anxious to regain useful employment, Leoni 
solicited and received a job with the ILO as representative and adviser 
to the Bolivian Ministry of Labor in 1955. 
He worked in La Paz for two 
years, and then moved to Lima, Peru, in mid-1957, but was asked to leave 
the country as a result of pressure brought to bear on Peruvian officials 
by the Venezuelan Government of President Marcos Perez Jimenez (1952- 
1958). 
Leoni returned to Venezuela soon after the fall of the Perez 
Jimenez regime in January 1958. 
Elected 
AD first vice president the 
following August, he hélped to reorganize the party as Venezuela's 
strongest political force. 
| 
Of obvious intelligence, Leoni has demonstrated consideral'. abil- 
ity both as a politician and a lawyer. 
He is quiet, studious, ard self- 
disciplined in manner, and seems to prefer to work in the background 
rather than in the limelight of political activity. 
Within AD councils 
he reputedly relies on tactics of persuasion through free debate rather 
than strong political sanctions. 
Sincere, optimistic, reasonable and 
industrious, he commands the admiration and respect of his party and most 
of the members of the National Congress. 
Described as having regular features, Leoni is partially bald, anid grey 
ing at the temples. 
He wears horn-rimmed glasses which lend an academic 
eir to his serious, even stern, expression. 
He is married to a Costa 
Rican, the former Menca Fernandez. 
The couple has at least five children. 
December 1961 
Hod 
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; CENTRAL INTELLIGENCE 
AGENCY * 
.-* 
° 
SUBJECT. 
"ADDITIONAL INFORMATION. OW THE LEFTIST. 
DATE DISTR. 4 may 1962 
MiLITARY UPRISING IN EASTERN VENEZUELA 
j 
DATE ACQ. 
RAISAL 
TH US 1S UNEVALUATED 
SOURCE GRADINGS ARE DEFINITIVE. APPRAISAL OF CONTENT IS TENTATIVE. - 
SOURCE 
. 
1, AN AVENSA COMMERCIAL AIRCRAFT LEFT CARUPANO WITH A LOA"! 
OF MARINE OFFICERS THE MORNING OF 4 MAY Bs 
BUT RETURNED 
_ GILDNER eo 
KAYSEN 
| 
+ 
SHORTLY THEREAFTER. 
| 
RASKIN 
ALL ROADS. “HAVE, BEEN cLosto INTO CARUPANO | 
AND GOVERNMENT SAUNDERS 
TROOPS. ARE PLANNING TO MOVE. INTO THE AREA FROM, CIUDAD BOLIVAR, 
3. SECONDARY STUDENTS IN CARIPITO AND ONE ‘SECONDARY SCHOOL 
IN CARACAS. HAVE 
RIOTING, HANDBILLS ARE BEING DISTRIBUTED 
CLASSIFICATION 
— DISSEMINATION CONTROLS 
CENTRAL, UNIVERS 
[stats Army/acs! 
NAVY| AIR | JCS | 
NSA | NIC 
| “SA 
| OCI | ONE | OCR 
| 
| OO [DIA [Exo] 
REE CINCLANT 
INFORMATION REPORT 
OPERATIONAL 
IMMEDIATE TO: 
DIRNSA (PROD WO) 
AFSS— - 
CLASSIFIED BY _ 
EXCATT 
DECLASSIFICATION 
cro (or 922 
1) 
(selec 
vols, ine st dete or event) 
> 
¢ 
~ 
| 
| 
N_CARACAS CALLING FOR THF OVFRTHROW 
EFLEGRAM
| 
F IGHT ING HAS BROKEN OUT IN: CARUPANO BETWEEN, 
REBELS. 
_ AND. GROUPS OPPOSING, THE EXTREMISTS.. 
| 6. 
FIELD DISseM: STATE ARMY. 
AIR CINCARIS COUNT, 
| 
| 
> 
f 
| 
END OF MESSAGE 
CLASSIFICATION — DISSEMINATION CONTROLS 
; 
Pad 
. 
| 
| 
%. 
| 
ow 
{
. AND PEDESTRIANS», THE BURNING OF SEVERAL CARS,.AND OCCASIONAL 
aun 
| LUKMAISLON REP, RT 
CLASSINCANON — DESEMIN ATION CONTHAS 
@PPRAISAL 
-. 
UNEWALUATED maroamanon, SOURCE GRADINGS ARE DCFINITIVE. APPRAISAL OF CONTENT 1S TRNTATIVE. 
| 
. 
é 
AYSE 
ABOUT 200 
EQUIPPED PARAMILITARY TROOPS WERE F 
INTO CARACAS FROM MARACAY IN THE EARLY AF TERNCON OF 4 MAY 
— 
| 
| 
1962, 
SHORTLY BEFOREHAND A CONVOY OF 12, MILITARY VEHICLES 
— Fax 
| 
CARRYING GOVERNMENT TROOPS WENT TO THE DOWNTOWN AREA OF CARACK ORRESTAL 
WHERE SCATTERED: OUTBURSTS OF VIOLENCE HAD BEEN TAKING PLACE, — RASKIN 
yTHE, VIOLENCE: INCLUDED RANDOM SHOTS FIRED FROM CARS AT BUILDINGS 
CLASHES, BETWEEN THE. POLICE. AND-SMALE; GROUPS: OF: RIOTING -YOUTHS 
DURING THE. LATE. ‘MORNING HOURS OF*} MAY THE RADIO IN 
-CARUPANO ‘CONTROLLED BY. THE- MILITARY REBELS WAS -USED’TO ANNOUNCE 
THAT, A 
SENT.“OUT ON RECONNAISSANCE 
EGR 
RA 
-> 
CLASSIFIED EY 056375 
fer 922 
1) 
Acs! 
EXEMPT 
C&NERAL DECLASSIFICATION 
| 
(wale: 
‘ble, insert dete or 
vent) 
| 
WELECRAN 
| 
| 
| 
| 
| 
STATE 
=ARMY/ACSI” [NAVY | AiR] 
| 
| NSA | 
Nic | USA | 
| ONE | OG | | OO 
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2 THE RADIO BROADCAST Réquesr. 
. 
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| 
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Hap 
AT CARUPANO AND JOINED® THE REBELS, 
= 
TO ALL STUDENTS AND 
= 
RING THEIR ARMS AND SUPPORT THE. REBELS 
AND AN. 
TAL WAS ALSO MADE TO ALL CLANDESTINE’ ano COMMERCIAL RADIO.” 
STATIONS TO JOIN THE REBELS, 
THE REBEL RADIO IN CARUPANO ALSO ANNOUNCED THAT, THE 
| 
REBEL LEADERS HAD ‘DECIOED To ATTACK THE OIL COMPANY INSTALLATIONS
SOURCE 
| 
NUK = 77+ 
CENTRAL INTELLIGENCE AGENCY 
teria] 
lefermation effecting the Netlens! Defense of the United Stete: withia the mesalag 
of the 
the treseminion or revelstion of which In 
monner te on 
serosa ls prohibited by lew, 
hi, 
— DISSEMINATION CONTROLS 
SOUNTRY 
VENEZUELA 
REPORT NO, 
TOCS-3/512, 822 
, 822 
SUBJECT 
DISTURBANCES IN CARACAS) 
DATE DISTR. 5 yune 1962. 
APPRAISAL 
— RASKIN 
1s UNEVALUATED 
WERARE DEFINTTive. APPRAISAL OF 
1. 
OURING THE 
MID=MORNING OF 4 JUNE 1962 BUSES WERE BURNED IN 
THE VICTORIA AND CATIA SECTIONS OF CARACAS, 
(SOURCE CCGMENT: 
A MEMBER OF THE NATIONAL GUARD SAID THAT THE SITUATION 
IN THE 
STREETS 
COULD BECOME SERIOUS), 
/ 2. 
ON THE MORNING . OF 4% JUNE A BOMB EXPLODED AT THE GENERAL ELECTRIC 
COMPANY ON SABANA GRANDE, AND AN UNEXPLODED 
BOMB WAS FOUND IN THE PEPS I= 
COLA COMPANY OFFICES. 
DISTURBANCES 
IN CARACAS ON 3 JUNE INCLUDED A 
BOM3 
WHICH EXPLODED NEAR A LARGE APARTMENT BUILDING IN EASTERN 
: 
CARACAS AND SHORTLY THEREAFTER ANOTHER BOM3 WHICH EXPLODED FURTHER EAST 
OF THE BUILOING, 
SOME EXPLOSIONS ALSO OCCURED NEAR THE AVILA HOTEL, 
EARLIER THAT AFTERNOON THERE WAS GUN FIRE IN THE 23RO OF JANUARY HOUSING: — 
STATE 1 ARMY/ACSi 
| MAVY| AIR | JCS 
| SECOEF 
| NSA | 
NIC | USIA | Oct] ONE | OCR] ORR | oo fous 
xO 
; 
Me 
| 
REPORT
= 
CLASSIFICATION —DISSEMINATION CONTROS 
| 
* 
ANO SHOTS WE 
WERE 
RECEIVED URDANETA) BARRACKS AND LEFTIST SNIPERS IN THE AREA. 
"EXCHANGED BETWEEN SOLDIERS AT THE URDANETE - is 
' 
3. THE PARTIDO COMUNISTA DE VENEZUELA (PCV, COMMUNIST PARTY OF "| 
VENEZUELA) IN PUERTO LA CRUZ WAS ON AN ALERT STATUS. THE NIGHT. OF 
JUNE WITH ORDERS TO SUPPORT A MILITARY UPRISING WHEN AND IF THE MILITARY 
woven, 
| 
4, THE GOVERNMENT 1S TAKING AGGRESSIVE 
MEASURES AGAINST THE COMMU. 
© 
ISTS AND EXTREMISTS, 
GUSTAVO MACHADO MORALES, A MEMBER OF THE NATIONAL 
SECRETARIAT OF THE PCV WHO WAS RETURNING FROM AN EXTENDED VISIT 
TO MOSCOW, WAS ARRESTED UPON ARRIVING AT MAIQUITIA AIRPORT, (FIELD. 
_ COMMENT s IT WAS REPORTED IN THE, NEWSPAPERS THAT RAUL LUGO ROJAS, 
~ DEPUTY OF THE. MOVIMIENTO DE. AZQULERBS REVOLUCIONARIA (MIR, MOVEMENT OF-. 
THE REVOLUTIONARY LEFT), WAS: 
IN PUERTO CABELLO WHERE HE PARTICI~ 
PATED IN THE REBELLION). 
FIELD 
ARMY-NAVY..ALR CINCLANT CINCAR} 
— 
rey 
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CEMTRAL INTELLIGENCE 
wa SSIFICATION — DISSEMINATION CONTROLS | 
copy 
COUNTRY VENEZUCLA 
REPORTNO. 
TDCS$-3/522,'379 
SUBJECT 
PLANS OF VENEZUELAN MILITARY TO OVERTHROW 
DATE DISTR. 
1952 
THE GOVERNMENT OF PRESIDENT POMULO BETANCCURT 
PRECEDENCE ROUTINE Val 
} DATE OF 
1962 
INFO. 
3 BATE ACO, 
DUFF 
THIS ts UNEVALUATED InFormaTION, SCURCE GRADINGS ARE DEFINITIVE, APPRAISAL OF CON 
: 
1, A GROUP OF VENEZUELAN MILITARY PERSONNEL LED BY COLON 
fl 
ANGEL NIETO BASTOS, CHICF OF PERSONNEL(J=1) OF THE JOINT GENERAL STAFF 
OF THE MINISTRY OF DEFENSE, AND CONS!STING OF ALL THF IMPORTANT GROUPS 
IN THE ARMED FORCES, 1S PLANNING TO OVERTHROW THE GOVERNMENT OF PRESI- 
DENT ROMULO BETANCOURT IN THE IMMEDIATE FUTURE. 
2, THE GOVERNMENT 1S AWARE OF THE EXISTENCE OF THE PLOT AND THE 
FACT THAT NIETO 1S THE LEADER, 
THE PLOTTERS BELIEVE THEIR MOVEMENT 1S 
TOO LARGE AND WELL ORGANIZED FOR THE GOVERNMENT TO DO ANYTHING AT THIS 
- 
POINT 
LT IT, 
NIETO EXPECTS TO BE ARRESTED MOMENTARILY WHICH 
WOULD IN TURN TRIGGER THF. REVOLT. 
CLASSIFICATION — DISSEMINATION CONTROLS 
. 
— 
CRAM INFORMATION REPORT] 
| 
— 
| 
| 
AL 
| 
| 
J aim acs | 
wic aso [usta] ocr | one | 
| one oor | co | 
| 
~ 
Approved for 
|
CLASSIFICATION — DISSEMINATION CONTAOLS 
(Waen Filled In) 
|e 
-3/522,579 
24605 
3. FIELD DISSEM: STATE ARMY NAVY AIR CINCLANT CINCARIB - 
END OF MESSAGE 
CLASSIFICATION — DISSEMINATION CONTROLS 
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— 
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— 
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“GOGREF 
‘ 
TABLE OF CONTENTS 
Page 
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A. Leoni, His Coalition, and THis Opposition 
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VENEZUELA 
THE PROBLEM 
To estimate the situation in Venez rue la and the prospects under the 
Leoni administration (unti! genera! elections in 1963). 
CONCLUSIONS 
A. 
Venezuela will probably continue te experience nolitieal stability 
and a favorable rate of economic growth over the next few years. 
However, it will still face deep-seated. social problems. 
Most eco- 
nomic and social reform programs w wil 
il be pushed vigorously through 
1966, 
Thereafter budgetary restraints are deca to lead to some Joss 
of momentum. 
This’ slowdown will iImost 
certainly become a major’ 
issue in the December 1°68 elections. 
have cealt reasonably 
P. 
The government a and secu rity forces 
effectively with the leftist insurgency; the capabilities of the cuerrillas 
and terrorists will probably <lecline further. 
The insurgents are not 
likely to pose a major thre 
eat to the covernment during the period of 
this estimate. 
C. Some misgivings regarding the Leoni administration still persist 
among the military, but the military establishment js generally clisposed 
to support the constitutional government. 
We believe that there is 
little chance of a successful militery coup within the period of this 
estimate. 
D. 
Leont’s governing coalition will probably hold together at least 
until the near approach of the elections scheduled for December 1968. 
The contest is then likely to be between two center-left parties, AD 
and COPEI, each claiming to be the more effective means of achieving 
social reform. 
If, in anticipation of this contest, Leoni should initiate 
a more radical reform program, he might thereby antagonize the mili- 
tary and increase the chances of a military coup. 
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E. The administration will make some attempts to increase Vene- 
zuelan influence in Latin American affairs, while ao'ding to the Betan- 
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court Doctrine of denying recognition to governments which come 
to power by overthrowing constitutionally-clected ones. 
Manifesta- 
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tions of economic nationalism—and in particular resentment over US 
restrictions on the importation of Venezuelan of!-will probably pro- 
duce frictions in relations with the US. 
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