HW 355355 DoclId: 32401316 AREA NOTES The British Communist Party has expelled a sma pro-Chinese faction which issued a manifesto bitterly criticizing some of the party's top leaders for supporting Moscow in the Sino-Soviet ideolog- ical dispute. The specific charge is that these leaders have aban- doned Marxist-Leninist principles and are turning the party into nothing more than a radical ap- pendage of the British Labor Party. - The decision of the pro- Chinese to bring their dispute 7 Canada: The Pearson govern-_ tment Continues to stress its inten-. tion of lessening US "domination" of. Canadian industry and stemming ‘Canada's balance-of—payments ‘deficit with the US. . don of Ambassador Batterworth, In the opin- Ottawa's concern with the "domina- tion" question has reached the point of obsession, and only vig- orous countermeasures are likely to forestall increasing intervention in the operations of American- owned subsidiaries. Canadian officials believe that the country's basic economic problems of slow growth, idle capacity, and continuing trade deficits are attributable--directly or indirectly~-to the policies of ' absentee US owners who control the bulk of :Canada's secondary industry. The measures the government is searching for would encourage the expansion of such industry but as- sure at the same time that US- owned subsidiaries exported more while Canada as a whole imported Page 32 Europe with the hierarchy into the Open probably stems in part from growing frustration over the party's consistently poor Showing . at the polls--in the recent Luton © by~election, the Communist candi-~ date came in last with 490 votes | out of 44,000. Any widening of the cleavage among British Com- munists may force the party to recast its plans to put up 4 rec~ . ord number of candidates in . next year's general election. (CONFIDENTIAL NO FOREIGN DISSEM) 5 Western Hemisphere ' “Phe government on 1 November instituted a tariff rebate scheme designed to encourage some $200 million in sales abroad of auto- motive products manufactured in American-owned subsidiaries. This plan calls for Canada to remit import duties ow parts in- ported from the US if exports of the finished product exceed a cer- tain level, thus avoiding the need to raise tariffs and risk US retaliation. While the profits of such increased sales would ac- crue to the US parent companies the sales would at the same tine bring more US dollars into the Canadian treasury. The Department of Industry is reportedly being flooded with requests from other manufacturers to be included under this _ kind of ‘rebate scheme. Despite offi- cial assurances that this specific plan would not be extended to other products, the US Embassy is con~ vinced the government is attempting to devise other forms of inter- ' less. vention to produce similar effects on other industries. (CONFIDENTIAL | NO FOREIGN DISSEM) os a vee ene pte 22 Nov 63 CURRENT INTELLIGENCE WEEKLY REVIEW Page 21
Western Hemisphere ARGENTINA ANNULS OIL CONTRACTS President Illia's annul- yy “~The report is to include ment of Argentina's petroleum a rundown on such imprecise contracts with nine foreign matters as "economic damage" and two Argentine companies caused by "inefficient" manage- fulfilled one of his party's ment and the amount of taxes that chief electoral campaign commit- | had been excused by the Frondizi ments, and thus came as no sur- regime. In accordance with prise. Illia, however, acted Illia's decrees, the attorney in haste out of deference to general filed a petition in his more nationalistic advisers. | federal court on 18 November asking the court to determine The explanatory clauses the financial position of the of the annulment decrees under- companies vis-a-vis the govern- score the Illia administration's |ment. YPF President Suarez contention that the Frondizi | said that three drilling con- ~ government used. inappropriate tractors were excluded from this procedures in negotiating the petition, since their work was _ contracts and assert that. completed. Presumably these Frondizi had no legal right to would be the Italian state oil approve them by executive action. ; company and two US firms mentioned They also state that there is in the second decree. ample legal precedent for annul- ling an executive decree by While leftist groups have simply issuing another. hailed the annulment action, there has been strong criticism The State Oil Company (YPF) |from other elements over the ~._ is authorized to take any way Illia went about it, partic- measures necessary to maintain ularly his failure to seek a normal output of petroleum. prior court decision on the The foreign companies continue contracts' validity. The in- to operate, and some are reported fluential independent press to have worked out temporary points out that the action re- arrangements with the YPF. flects adversely on Argentina, and might result in a reduction One of the most trouble- of foreign investment and of some aspects of the annulment US aid, not only in Argentina, action is the call for a de- but in all of Latin America. _— tailed report by the Treasury's Army and air force officers attorney general on the companies’ |are worried about the disruptive operations and financial accounts, |jeffect the oil controversy . This report is to provide a may have on US-Argentine re- basis for determining compen- lations, but indicate an sation due the companies, but intention to try to stay out could also be used as a bargain- |of the matter. (CONFIDENTIAL) ing weapon in negotiations for oo, 4 new contracts. - Bs 22 Nov 63 CURRENT INTELLIGENCE WEEKLY REVIEW Page 22 TOP SECRET DINAR HW 55355 Docld:32401316 Page 33
VENEZUELAN ELECTION POSTERS , CODE WORD MATERIAL ON REVERSE OF PAGE HW 55355 Docld:32401316 Page 34
HW 355355 DoclId: 32401316 THE OIL CONTROVERSY IN PERU Peru's President Fernando Belaunde Terry appears to be adopting a more conciliatory position in his handling of the controversy which has arisen with the US-owned International Petro- leum Company (IPC). On 29 October, Belaunde sent a bill to congress calling for a new, much higher tax sched- ule for the company. IPC offi- cials claim that the proposed schedule would result in “eco- nomic confiscation" since the taxes would amount to more than 100 percent of the company's gross profits. Belaunde countered by threatening to turn over the company's entire $190 million worth of assets to the state pe-- troleum corporation should Con- gress pass the bill and the com- pany refuse to abide by its terms. Congress was quick to act on a part of the President's bill. It passed, almost immediately, that portion nullifying a 1922 internationally arbitrated deci- sion which has permitted the IPC to operate under relatively len- ient tax schedules. This fulfilled a Belaunde election pledge to "do something" about a matter which has been a Peruvian political is- sue for over 40 years. The IPC continues to operate under the 1922 tax schedules pending the establishment of new ones. Congress, however, has been much slower to act on the admin- istration's proposed tax schedules. This is because the APRA party-- which controls the largest bloc of congressional seats-~-opposes the measure, fearing the international repercussions which could result 22 Nov 63 CURRENT INTELLIGENCE WEEKLY REVIEW Western Hemisphere from the President's stringent tax revision program. Thus, the pros- pects are that the bill will lan- guish in various legislative com- mittees for weeks and perhaps months. APRA congressmen hope that in the interim the government and IPC will negotiate a compromise which will obviate the need for congressional action. Belaunde, in recent days, has indicated a tendency to back away from taking precipitous action against IPC, also largely because of the adverse international reac- tion it would provoke. He now seems to be acutely aware that such reac- tion might spoil Peru's prospects for new and badly needed foreign private investments. It might, for example. upset current negotiations with automobile firms for oo the establishment of assembly plants in Peru, or jeopardize talks with two other US oil companies which have expressed an interest in in- vesting in the country. Belaunde also may be concerned that a move against IPC could disrupt pro- posed US aid prograns. For the moment, the Presi- dent appears to be satisfied to allow his bill to be subjected to prolonged congressional re- view, and has said he expects no legislative action until after the municipal elections which are to be held in mid-December. Moreover, Belaunde's new-found caution is reflected in a report which quotes him as saying that if IPC could prove to Congress that the government's bill would force the company to operate at a loss, then adjustments "ob- viously" would have to be made. (SECRET) Page 23 ~FOP-SECREF-DENAR Page 35