FIRST MEETING OF THE
NATIONAL BIPARTISAN COMMISSION ON CENTRAL AMERICA

Schedule for Commissioners and Senior Counsellors

WEDNESDAY, AUGUST 10

<table><tr><td>2:00</td><td>Met at C Street entrance to the Department of State, escorted to 8th Floor, Monroe Room.</td></tr><tr><td>2:15</td><td>Members of the Commission are sworn in by the Chief of Protocol in the presence of the Secretary of State.</td></tr><tr><td>2:40</td><td>Administrative details.</td></tr><tr><td>3:00</td><td>Chairman's opening remarks and briefing by the Department of State.</td></tr><tr><td>6:00</td><td>Adjourn.</td></tr></table>

THURSDAY, AUGUST 11

<table><tr><td>10:00</td><td>Briefing by the Department of Defense (State Department, Room 1105).</td></tr><tr><td>11:15</td><td>Depart for White House.</td></tr><tr><td>11:30</td><td>Briefing by the National Security Council, accompanied by lunch.</td></tr><tr><td>1:00</td><td>The President meets with the Commission.</td></tr><tr><td>1:30</td><td>Return to the State Department.</td></tr><tr><td>2:00-3:00</td><td>Briefing by Department of Defense (continued).</td></tr><tr><td>3:00</td><td>Presentation of proposed work plan; schedule of meetings and other organizational matters.</td></tr><tr><td>5:30</td><td>Adjourn.</td></tr><tr><td>6:00-8:00</td><td>Reception hosted by the Commission - Jefferson Room, 8th Floor, State Department.</td></tr></table>

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FRIDAY, AUGUST 12

<table><tr><td>10:00</td><td>Briefing by the Agency for International Development (State Department, Room 1105).</td></tr><tr><td>11:00</td><td>Remaining Committee business.</td></tr><tr><td>12:00</td><td>Adjourn.</td></tr><tr><td>12:15-1:30</td><td>Luncheon with the Secretary of State.</td></tr></table>

The offices of the Commission staff are located in Room 1004, Department of State, which is adjacent to the Commission's meeting room, Room 1105. Messages for Commissioners and Senior Counsellors may be left at the staff offices, (202) 632-7804.

8/11/83 p.m.

#0008B

MINUTES OF DEPARTMENT OF STATE BRIEFING FOR THE
NATIONAL BIPARTISAN COMMISSION ON CENTRAL AMERICA

August 10, 1983

4:45 - 6:15 p.m.

Participants: Langhorne A. Motley, Assistant Secretary for Inter-American Affairs; L. Craig Johnstone, Director of Central American Affairs; Mike Skol, Deputy Director, Office of Policy Planning; members of the Commission, Senior Counsellors, and Commission staff.

Place: Room 1105, Department of State.

Summary: The Bureau of Inter-American Affairs provided the Commission a briefing on the situation in Central America, focusing on the historical and cultural roots of instability there, and on the Central American countries' relations with each other and the United States.

Amb. Motley Began with a brief introduction of the briefers and the scope of the briefing.

Mr. Johnstone We were asked to discuss the situation in Central America, avoiding policy per se at this point. Will provide a brief historical overview. Except for British Honduras, Central America was a Spanish colony, which did not gain its independence until 1821.

Guatemala: Its society has evolved essentially along racial lines; approximately 60% consider themselves Indian, approximately 40% Latino. Generally more a question of cultural identity than racial mix, this racial issue should be borne in mind in discussing insurgency and other issues affecting Guatemala.

El Salvador: Has no racial divisions of similar magnitude. Described development of a strong oligarchic, essentially feudal system. This produced a society of massive decentralization.

Honduras: Also an oligarchic structure, but not of the same magnitude as El Salvador. A more heterogeneous population than either Guatemala or El Salvador, but ex tremely poor, the poorest of the Central American nations.

Nicaragua: A land of chronic political instability. Also, a legacy of direct US military intervention in defense of what we perceived to be our interests. In response to question, identified those interests as of two types: political stability (e.g., defense of the Panama Canal) and economic (including private commercial) interests.

Costa Rica: Its population has the highest percentage of Spanish blood; it is the Central American country most influenced by European migrations and culture. Costa Rica is Central America's most successful democracy, but its democratic process only began in 1899. Still, it is unique in the region, since it has had, except for one or two lapses, a stable democracy since then.

Dr. Diaz
Requests explanation of the differences in land tenure between Guatemala and Costa Rica.

Mr. Johnstone
With regard to land tenure, Costa Rica is indeed different from the rest. The land tenure problem has been most acute in El Salvador. Guatemala has also had a serious problem, but there is more land there than in tiny El Salvador, and there have over the years been more effort at land reform.

Mr. Skol
Costa Rican land tenure reflects the way the country was founded. Those who settled there were going to the backwater of Central America. There was no organized Indian population to exploit, so they settled as an agrarian democracy.

Mr. Johnstone
Costa Rica was the most independent of the Central American countries. It was far from the centers of power, the furthest from Mexico and distant as well from Colombia.

Mr. Skol
This also helps explain the lack of a military in Costa Rica. Costa Rica is an armed country in the sense that many have weapons, but it does not have an army, which is representative of the "king" of colonial days. The idea of a private militia is strong.

Mr. Johnstone Panama: By and large was born of US economic imperatives, and only became independent when it was actively participating with the US in the Panama Canal in 1903. Actually, they had always wanted to be independent, and seized the Canal opportunity to become so.

Dr. Silber What is the stability situation in Panama?

Mr. Johnstone A history of chronic instability, of competition between the military and civilian hierarchies.

Revolution, violence, and forceful governments have been known throughout the region, but the 1960s were a period of economic growth and relative political stability. This economic growth created a middle class which could not get a level of political power commensurate with its economic status. Political aspirations could be contained while economic improvements continued; but in the 1970s, particularly as a result of the economic downturns caused by the oil crisis, these groups became dissatisfied with a political system that was no longer producing sufficient economic benefits. The situation was ripe for revolution in Nicaragua in 1979.

Dr. Kissinger But there was no law of nature that the situation in Nicaragua had to take that one particular revolutionary form.

Mr. Johnstone No, but other events caused the rising discontent to coalesce. The earthquake, for example, caused major social disruptions and there was great dissatisfaction with the government's response to the crisis.

Dr. Kissinger But the rise of the Sandinistas to head the revolution was not inevitable.

Mr. Johnstone Since they were the only organized opposition, it was logical that they would have taken over from Somoza. However, the Marxist-Leninist turn the revolution has since taken was clearly not inevitable.

El Salvador had its own revolution in 1979. They are in a continuing revolutionary or post-revolutionary stage, with substantial changes taking place and a breakdown of the previous system of law and order, which was largely feudal.

El Salvador has a history of leaders working by consensus, which is why it is so difficult to impose discipline today. A military commander traditionally does not just give an order, he calls a military conference to reach consensus on the order.

Dr. Diaz
Please discuss the change in character of the Salvadoran junta after 1979

Mr. Johnstone
There were changes in the makeup of the junta for several reasons. Some, like the Christian Democrats, had never been in a leadership role before and were frustrated by how difficult it was to accomplish and change things. Also, the increased support for the insurgency about this time made it uncertain how long the new government would last. Some, like the MNR (Ungo's party), calculated that the geurillas had a better chance of victory than the government and so dropped out. This was a major miscalculation.

Mr. Cisneros
It is important to the Commission to understand how the US is viewed in Central America. What impact have incidents like the William Walker episode had on Central American opinion of the US?

Mr. Johnstone
Incidents like those hav left a mark for both good and bad. All know the story of Walker who invaded Nicaragua with his personal army and became President for a year. It was a unifying episode, as all the Central American groups united against him.

Dr. Diaz
How would you evaluate the Arbenz coup and the fact that 30 years later, Guatemala is still unstable?

Mr. Johnstone
Things would not necessarily be better today if the coup had not occurred. There is a history of US involvement. There is a view that we therefore have a relationship to, and indeed, may be responsible for what happens in the region. There are those who attack us as interventionist and those who say we have a responsibility to involve ourselves in the region. The major fault in our policy has been the fluctuations, not the intervention nor the disregard, but the instability in our policy.

Amb.
Kirkpatrick
I would put a different emphasis on it. There is miserable poverty in the region. Even in Costa Rica, substantial rural poverty remains. In Honduras, it is estimated that over 50% of the rural population suffers from malnutrition so severe it can be called hunger. There are tremendous differences in the socio-economic conditions of the urban and rural populations. One consistent part of US policy has been indifference to this; a bipartisan disregard for the people of the region. An important situation for the Commission to consider; the poverty's short-term effects are both human suffering and political strain.

Dr. Kissinger
This is the opposite argument from those who say we are interventionists.

Mr. Scammon
When a country is on top, it naturally takes the rap from both sides, like the British navy.

Amb. Strauss
We need a breakdown of what these countries think of us.

Mr. Johnstone
Difficult to do, because ambivalence is the overriding emotion toward US. In some cases, the US is a counter to Central America's own colossus to the north: Mexico. El Salvador had petitioned for statehood not so much out of love for the US, but because they feared Mexico. US is much loved but also much resented.

Amb. Strauss
Can you tell us about the attitudes of the elite, the leadership?

Mr. Johnstone
In Guatemala, there is a feeling of betrayal. They believe they have been carrying out a campaign for values we share, but we have given them no resources and no appreciation, although they have made some changes, such as improvement in the human rights situation.

Mr. Cisneros
The question of what the leadership group thinks may not be the right one. They are small and unrepresentative. It is important what other groups think of us.

Mr. Kirkland
Yes, the leadership group in Guatemala is a conservative elite.

Dr. Kissinger There are three parts to the question: What does the leadership think (because these are the people with whom we must work and whose attitudes we may want most to change)? What does the general public think (this will be hard to get at)? And what are the origins of revolution?

Dr. Diaz Suggests defining "leadership" differently, to encompass the attitudes of the democratic center.

Mr. Skol In opinion polls, Costa Ricans self-identify as pro-American, anti-communist, and progressive liberals at the same time.

Dr. Kissinger We need to know the attitudes of the non-government leadership groups.

Mr. Skol Will do a brief history of current negotiations, of how the Central American countries deal with each other and with the US. There are now dozens of peace plans, but certain themes reappear.

Communicating among the Central American countries is significant. There is much contact among the educated (not necessarily the elite) and among those who are in business. Although there are differences among the countries, they understand what is going on in the others. This communication is in part a product of the small area, making travelling distances short and also requiring cooperation among the countries in order to achieve international stature.

The idea of neutrality in Central America is somewhat of a posture. They have historically been involved in each other's affairs. But there has historically been an odd man out. Until recently, that was democratic Costa Rica. Now, Nicaragua is the odd one.

Dr. Kissinger Did the other four feel about Costa Rica as they do about Nicaragua now? Did they see Costa Rica as a threat?

Mr. Skol Costa Rica is more fearful now of the Nicaraguans than it ever was of Somoza. Costa Rica has to a certain extent enjoyed being the odd one.

Amb. Strauss If Costa Rica is afraid of the Nicaraguans, they must support US military exercises in the region.

Mr. Skol It is correct that they support US policy, but they feel free to criticize aspects of it. Costa Rica is anti-military and therefore does not praise the exercises, although they are happy with the policy as a whole.

Amb. Motley In Central America, governments often say different things publicly and privately. While there was criticism of the exercises, two heads of state and three ministers of defense visited the Ranger.

Amb. Strauss Why can't they change their public position, when it is so important here?

Amb. Motley Their presence on the Ranger is a matter of public record.

Mr. Skol There are political needs in these very politicized countries, and one is a certain distance from the US. If there were no military display, other elements of US policy would be criticized.

Amb. Motley It is a matter of showing independence, not of being anti-US.

Mr. Skol The Costa Ricans and others are grateful now that the US is paying attention to the area.

Dr. Walsh Carazo told him that Costa Rica would call on the US if invaded.

Amb. Kirkpatrick One Cost-Rican type high-level leader told her he did not understand how the US could let large and growing military installations exist in Nicaragua.

Mr. Skol Democracy has been a theme in all the peace declarations--in San Jose, in Cancun, and so on. This key concept emphasizes Nicaragua as the odd man. Costa Rica in particular is bitter toward Nicaragua because it considers democracy to have been betrayed.

Dr. Kissinger Requests a listing of the different peace plans.

Mr. Skol The best source is to look at the San Jose principles, which are largely reflected in the Cancun Declaration. Also reflected in the President's letter to the Contadora presidents.

Dr. Kissinger Requests that the Commission get copies of these documents.

Dr. Walsh Requests also discussion of land reform efforts and why they have failed.

Mr. Johnstone AID will discuss in their Friday briefing.

Mr. Kirkland A comment on attitudes toward the US: Guatemalan efforts to improve the human rights situation have been modest. People with whom we work there want US support against their own government.

Dr. Kissinger Laid out the next day's program and what the staff will do. Press statement to be prepared on the purposes of the Commission, what it will and won't do. All will have a chance to review. Commissioners/Counsellors also requested to review the proposed schedule for unchangeable dates and to review the list of experts to suggest additions and to recommend who in particular should be asked to provide testimony.

8/13/83

W0065A

MINUTES OF DEPARTMENT OF DEFENSE BRIEFING FOR THE
NATIONAL BIPARTISAN COMMISSION ON CENTRAL AMERICA

August 11, 1983

1000 - 1100 A.M.

PARTICIPANTS: Dr. Fred Ikle, Under Secretary of Defense
General Gorman, Commander US Forces,
Southern Command, Panama

PLACE: Room 1105, Department of State

**Summary:** Dr. Ikle provided the Commission with a brief review of DOD security concerns and prognosis for Latin America. Recommendations were also given by Dr. Ikle regarding areas where the Commission may want to investigate further.

Dr. Ikle: I appreciate the opportunity to speak to the Commission and have asked General Gorman, Commander of our forces in Latin America, to assist me with my presentation today. I realize you're commissioned to look at the longer-term issues regarding the region, however, I would like to address our security concerns in Central America. First of all we, DOD, see a growing Soviet presence in the Caribbean and from that a possible future threat to Mexico.

Regarding the increased Soviet presence, Cuban and Nicaraguan military capabilities have increased as a result of Soviet assistance and the USSR continues to strengthen Cuba. This move by the Soviet Union in the region directly impacts not only on US contingency plans but the ability of CINCCANT to provide logistical support to US troops during the time of war in Europe. Additionally, as the threat grows in the area more and more funds and resources are being diverted from other areas to ensure a protected Southern flank. This causes trade-offs.

In Mexico, there is the possibility of violence spreading to that country. Should there be an increase of violence or instability in Mexico which would change the present relationship with that country, the US military posture along our now friendly border would have to be greatly changed.

The Soviet Union continues to deliver large quantities of arms to the region. Some 97 percent of them go to Cuba. Last year an estimated 68,000 MT of Soviet military equipment were delivered to Cuba. Equipment now being delivered to Nicaragua roughly equates to what Cuba was receiving before 1980 which was about 15,000 MT. Most of the arms going to Nicaragua go direct from the Soviet Union.

-2-

Foreign presence in Nicaragua also continues to grow. In July/August of 1979 some 100 Cubans were reported to be in Nicaragua. Within three months there were some 200. Presently there are 7,000 to 8,000 Cubans in Nicaragua. About 1,500 - 2,000 of that number are military advisors.

As an example of why such a Cuban presence and the building of of the Nicaraguan military: In 1979 a training camp was opened in Nicaragua to take the war to El Salvador.

Additional foreign presence in Nicaragua now includes 100 Soviets; 50 PLO (20 of which are pilots)); as well as East Germans and others. The Cuban Commander in Nicaragua, General Ochoa, was the former Cuban Commander in Ethiopia and Angola. A well respected and competent ground commander.

In an effort to conceal its military buildup, Nicaragua has begun to place UN initials on jeeps, trucks, etc. They are also placing USAID markings to these vehicles. However, the US is not providing any such aid.

At the present time the Nicaraguan military has about 75,000 members; it is projected to climb to 250,000. In comparison, Honduras has only 20,000 soldiers.

**Question:** What do the Soviet Advisors do in Nicaragua?

**General Gorman:** They provide such assistance as communications and security. They also virtually run the Nicaraguan Air Force. It should be noted that the Soviets are mostly in the cities while the Cubans are out in the field with the troops.

**Question:** Is there a transfer of Soviet military equipment from Cuba to Nicaragua?

**General Gorman:** While there is some equipment coming from Cuba the majority of the heavy equipment (tanks, armored personnel carriers, etc.) come from the Soviet Union. There is also a lot of air traffic into Nicaragua which is believed to be transhipping small arms to Nicaragua. An example would be the Lybian planes detained in Brazil. Recently a Soviet Cargo ship went through the Canal in Panama and its manifest declared 2/MI-8T helicopters for Nicaragua. These can be easily configured for military use.

-3-

**Dr. Ikle:** I would like to give the Commission our projection forward for the next two years. In El Salvador we will be monitoring the performance of the Salvadoran Army. Also we need to watch the level of US assistance to El Salvador and insure that our assistance is reliable. Also we would want more cooperation between El Salvador and Honduras. And lastly we will need to watch carefully the outside assistance provided to the insurgents.

Regarding Nicaragua we will watch the insurgency there and how that relates to Sandinista control. We need to be carefully aware of trends in outside assistance to Nicaragua also.

**Question:** Is the success and recent gains by the Salvadoran military a result of military improvements or guerrilla standdowns?

**General Gorman:** The Salvadoran army can fight. It is a better fighting force than the Vietnamese army and given the equipment, training and reliable assistance they will fight. For the first time the guerrillas are on the move as a result of the government's military pressure.

**Question:** What's the trend -- will the government win the war?

**General Gorman:** This war is winnable. Given the aid and assistance they can win possibly in two years.

**Question:** Secretary Haig briefed once that the guerrillas communications were effective. Is that still the case?

**General Gorman:** Yes. They have very good communications training and cryptological equipment. For example, on a raid of a safehouse in El Salvador there was found a computer; and at another safehouse an antenna system, only seen before in East Germany, was found.

**Dr. Ikle:** Going back to the government's ability to win the war, there has been an increase in the Salvadoran guerrilla casualty figures. For example, since the beginning of the year the figures have been: January 88; February 28; March 1; April 6; May 0; June 116. Additionally, the amnesty program has been successful.

Turning again to the outlook for the region, in Nicaragua we see a gradual increase in the Sandinista control; increased, but gradual, Cuban assistance, and increased military strength making Nicaragua the strongest military in Central America.

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In Guatemala, our ability to forecast guerrilla activity is difficult. Presently the government suffers from a lack of resources, the insurgents can be expected to receive increased assistance from the outside, and there remains the unsettled territorial question with Belize.

**Question:** Will the recent change in the Guatemalan government change any Congressional attitudes regarding aid to the country?

(General discussion here, but the consensus was No.)

**Question:** Has the Administration asked Congress to lift the Congressional restrictions on Guatemala?

**General Gorman:** I have my people up in Guatemala and they tell me that it is a "time-bomb." The insurgents are working to restore their nets and abilities. Meanwhile, the government forces have rested on their past victories. We could see a surge of insurgent activity there by this fall.

**Dr. Ikle:** In Honduras we see a need to watch the training and military infrastructure. Also, to carefully watch terrorism and Human Rights violations and a need to monitor the country's economic needs.

**Question:** If the insurgents prevail in El Salvador will it impact on Guatemala?

**General Gorman:** A loss in El Salvador will have impact on the whole region because of not only the loss of another country but also the psychological impact of such an occurrence.

**Mr. Cisneros:** What do we know about human rights violations in Guatemala and El Salvador?

(General discussion here about the mail received by various Commissioners detailing violations in these countries. Some Commissioners indicated that if the mail was to be balanced it should cover all violations and not just one side, normally the government.)

**Dr. Kissinger:** At a future meeting I think we should be briefed on the Human Rights violations committed by all sides. A profile of the victims should be given and some indication of the validity of the sources used.

-5-

Dr. Ikle: In conclusion, during the 1985-86 time frame we see
these future possibilities:

- Nicaragua becomes stronger, both politically and militarily.

- We lose El Salvador.

Insurgency in the region increases threatening Mexico and
Honduras.

These possibilities will divert limited US resources.
Additionally, it will require a major effort by the US to halt
the military threat and psychological threats to the region.

Question: Is it conceivable that Nicaragua will invade
Honduras?

Dr. Ikle: Before 1986, No. However, after 1986 it is conceivable.

Maj.EWRodarge
8/22/83
0153B

Cover Sheet for:

MINUTES OF MEETINGS OF THE
NATIONAL BIPARTISAN COMMISSION ON CENTRAL AMERICA

Date: 8/16/83
Time start: 2:00
finish: 3:00
Place: Rio, 11:05

Topic: Further DOD Briefing

Briefing/presentation/testimony by:

Present:

Kissinger
Brady
Cisneros
Clements
Diaz
Johnson
Kirkland
Scammon
Silber
Stewart
Strauss
Walsh

Kirkpatrick
Barnes
Bentsen
Broomfield
Domenici
Jackson
Kemp
Mathias
Wright
Lord
Rogers

Shlaudeman
Sutton
Korologos
Cullen
Hetu
Kozak
Olson
Bolten
Mussomeli
Robarge
Walser

Others present:

Primary
notetaker: Zabarge

Staff
notetaker:

8/16/83

W0068A

Minutes of Department of Defense Briefing for the
National Bipartisan Commission on
Central America

August 11, 1983

2:00 - 3:00 PM

**Briefer:** General Gorman, Commander US Southern Command, Panama

**Place:** Department of State - Room 1105

**Summary:** General Gorman provided the Commission a briefing on the issues he perceived the Commission should address. Additionally, a brief overview of security related matters was provided on each Central American country.

**General Gorman:** The General began his briefing by indicating that the Commission should look at three security areas regarding Central America. These were: The Arms Export Act, the NATO Support Act, and the Foreign Assistance Act. Regarding the NATO Support Act, General Gorman stated that as the Soviet Union increases its presence in the region NATO must increase its attention to the area and insure that its contingency plans are not disrupted.

Since 1973 the United States has sent signals to Latin America which signaled our diminished interest there. Such actions as reducing advisor presence, lowering rank structure for SOUTHCOM, dismantling intelligence assets, and losing contact with a generation of Latin American officers have all added to reduced influence in the region.

**Dr. Kissinger:** I don't remember that being our policy in 1973.

**Statement:** Yes, that was occuring and you were busy elsewhere on more important issues. Furthermore, this was not on the front burners at that time. DOD, however, was aware of this and did approve the actions being taken.

**General Gorman:** Over the past few years Brazil and Mexico have become important industrialized Nations. They both are sources of cheap (less expensive) military equipment. In order for these nations to continue to be good sources of such equipment, technology

(L.C)

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transfer issues should be addressed. I recently visited Costa Rica and while speaking to the Costa Rican Vice President he told me that Costa Rica is facing its most serious threat along the northern border with Nicaragua. At present there are some 100,000 refugees there and the Costa Rican guard is hard pressed to patrol the border where known subversion is occurring. According to the Vice President there is a threat to Costa Rica from a 5th column and the country needs help to prepare for this threat.

**Dr. Kissinger:** Would the Vice President say this publicly?

**General Gorman:** I don't know.

**Statement:** General Gorman was asked to address the Naval Base being constructed in Nicaragua.

**General Gorman:** The base is at San Juan del Sur. At present there are some 60 Soviets assigned there. Two cement barracks have been newly constructed at the base as well as a shallow pool. A Soviet dry dock is scheduled to be located there in the near future. The facility appears to be for a large fishing operation. Nevertheless, the installation could also facilitate Soviet war ships.

**Question:** Referring back to Costa Rica, to what extent is Costa Rica endangering its democracy by increasing its detenses?

**General Gorman:** That is a real possibility. However, it is because of this possibility that I recommended to the Vice President that Costa Rica improve its militia (National Guard) so as not to exacerbate such problems.

**Question:** Is there a threat even if there were no military increase?

**General Gorman:** Costa Rica perceives a threat.

**Mr. Cisneros:** It appears to me that Cuba is able to use its advisors not only for their assigned tasks, but also doubling in such areas as propaganda, etc. The US, on-the-other-hand, does not appear to have any such system to counter that. In effect we are fighting as system without a system. Is there any need for the US, as a nation, to send such representatives?

-3-

General Gorman: That is difficult to do.

Mr. Silber: Why do we send 50 advisors to a country to train when we could bring 250 to the US?

General Gorman: Because of legislative restrictions.

Dr. Kissinger: General Gorman was asked if he would provide the Commission with a list of the most irksome restrictions and give some idea of how much of his budget is spent as a result of these restrictions.

Question: Is the kill ratio for the guerrillas more effective than the government?

General Gorman: This depends upon the guerrilla group and which government force is in contact. For example, the US trained battalions are much better than those units which have not been trained. Also some guerrilla units are better than others.

Dr. Kissinger: Dr. Kissinger expressed that in the future briefings on the guerrillas he would like, for the Commission, information on the guerrillas Order of Battle, supply routes--generally an overview of the war.

Question: What is the most effective method of training? In the US, in the host country or in Honduras?

General Gorman: Honduras appears to be the best approach.

Senator Barnes: What will happen to US security concerns if we spent 1% of the Defense Budget on economic development programs for Latin America? I posed this same question to your predecessor, General Nutting, and he indicated that 1% of the Budget could probably be used and our security concerns would diminish.

General Gorman: I would like to see such a move.

Dr. Kissinger: General Gorman are you indicating that with enough economic aid into El Salvador we would not need military assistance?

General Gorman: No, I'm not stating that. We need some 2.3 million to keep growth there. We need both economic and military aid.

-4-

I would like to speak for a few moments regarding the US/Honduran exercise named AHUAS TARA II (Big Pine II). The exercise will have a perponderance of US at the start, however, as the Hondurans become trained they will be committed to the point where more Hondurans will be involved than US at the ending of the exercise.

In conclusion, some of the issues which I believe the Commission should look at include: legislation that bears on military and other aid in general to the region, US permanent presence in the region, and the level of resources being devoted to the region. Such things as money, equipment, human resources all should be addressed to insure there is a proper mix.

Dr. Kissinger: What do you mean by a proper mix?

General Gorman: That there is a proper balance between the military and civilian aid provided to the countries. Additionally, insuring that our programs are in sync with each other, and have longevity.

Dr. Kissinger: Will you please provide the Commission with a brief summary of the major topics (issues) which you feel the Commission should address. Also, please address the problems as you see them and your recommendations for solution.

General Gorman: Yes.

Comment: A comment was made that some consideration should also be given as to when does it become feasible to increase US aid to a specific country behind a security shield? When should it be considered, a time frame, for each country and where should the stress be made.

NBCCA:ERobarge

8/18/83 W0106B

Minutes of the Meeting of the National
Bipartisan Commission on Central America
with the National Security Council

Participants: Commission Members and Staff, Judge Clark, National Security Adviser, Donal Fortier, Roger Fontaine, Olivor North, and Al Sapia-Bosch.

Date & Place: August 11, 1983, 11:45 AM, National Security Briefing Room, Old Executive Office Building.

Summary: Judge Clark provided a brief welcome to the members of the Commission and outlined basic U.S. policy concerns in Central America. He reviewed the actions that led to the formation of the Commission, including Ambassador Kirkpatrick's advocacy of a regional Marshall Plan. Members of the NSC staff then provided summary briefings of current developments in Central America, both in a global and regional perspective.

Record of Discussion:

Judge Clark Thank you for setting aside your regular duties in order to participate in the work of the Commission. I would like to begin with an informal review of the development of the Administration's policy in Central America. In the first days of the Administration, we discovered that there was no plan or policy for Central America. President Reagan recognized that we had to place Central America high on our list of priorities for study and action. Since then there have been variations in our approach. We have devoted more attention to the area, as demonstrated by the President's trip in December and that of Ambassador Kirkpatrick.

Also in Cabinet sessions, Ambassador Kirkpatrick strongly argued for a Marshall type plan for the region. This in part prompted us to go before a joint session of Congress on April 27 with an appeal for bipartisan support in the region. Consistently, the President has attempted to avoid a confrontation with the Hill and has engaged in direct consultations with Congressional leaders. These consultations coupled with the resolution calling for the formation of a bipartisan commission led to the creation of this Commission. Selections for

-2-

membership on the Commission were made by the
President, in consultation with the Hill and Dr.
Kissinger.

You are in essence a jury, with a great diversity
in composition. All I ask is that you have open
minds and limit dissent before you issue your
report. This Commission forms a separate track
of what is a multi-track approach to the region.
We need you to look ahead for the next five to
ten years.

The prime object of your study is Central
America. No doubt, however, you will touch on
both Panama and Mexico, if not directly, at least
indirectly in your deliberations.

Judge Clark then withdraws.

Olivor North Provided a policy overview, noting four major
Dep Dir U.S. objectives for the region: encouraging
Pol/Mil political development and regional harmony;
Affairs assuring the continuation of formal and friendly
relations with Latin American countries; working
with regional governments to improve living
conditions; and preventing Soviet Bloc and Cuban
expansion.

He reviewed Soviet expansionism, citing the
substantial increase in arms provided by the
Soviet Bloc/Cuba to Central America. In
Nicaragua, arms deliveries for 1983 are estimated
to run at about $112 million. The triumph of the
extreme left in Nicaragua provided momentum to
other extremist groups in the region. A
continuation of this trend would further threaten
vital Caribbean sea and air lines of
communication. He also raised the concern that
the Soviets might elect to place strategic
weapons in the area.

The Soviets Bloc and Cuba, North continued, seek
to promote unity within the extreme left and
increase coordination among diverse groups that
range from the guerillas in Guatemala to the M-19
of Colombia. The targets of terrorism continue
to expand and could, in the future, include
Mexico, a country with significant political
strengths and vulnerabilities.

North cited the high costs generated by the
floods of refugees who in the past have fled
after Marxist-Leninist takeovers. Historically,

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8-10% of a population will flee such a takeover. If this occurred in the U.S., it could create staggering costs for the U.S. As many as 8 million refugees could seek entry into the U.S. The estimated cost for such an influx would be $115.2 billion at today's costs and such an influx could wreck the present economic recovery.

Finally, the crisis in Central America represents a serious test of U.S. credibility. Our failure to defeat aggression will send a telling signal to friends and adversaries alike.

Don Fortier
Sen Dir
Pol/Mil
Affairs

Outlined the increasing linkages between diverse extremist groups, ranging from the Soviets and Cubans to the Libyans and PLO. Recent evidence indicates that the Nicaraguans are, for example, training Basque separatists. In all this the Soviet's have maintained a certain distance and have also shown a willingness to play both sides in a number of conflicts.

Soviet objectives, while not entirely clear, probably include a desire to foment division in the West and to demonstrate U.S. impotence; show that the USSR is a co-equal to the U.S.; rebutt those who argue that the Soviet Union is weak; tie down U.S. assets; and attack U.S. credibility.

Fortier argued that reversals in Soviet forge alliances are rare. Some may cite the case of Egypt as evidence of the reversability of Soviet alliances, but this was an exception which owed much to Egyptian independence. Today the Soviets are more brutal and effective in consolidating their influence.

Fortier stated that U.S. Central American policy is an easy target for critics in Europe. Yet, a major but unarticulated fear of the Europeans is that major U.S. resources will be directed away from Europe. Also as the stakes increase, it will become more important for the U.S. to succeed in Central America. In Europe, there is also a certain amount of fallout from the Peace Movement.

Fortier concluded that the U.S. cannot ignore the use of force in the modern world. A consistent strategy requires the integration of force with diplomatic and economic incentives.

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Roger Provided a country by country review in Central America. Guatemala was described as a traditional leader in Central America that had lost its effectiveness in recent years. He noted that its major foreign policy concerns were Mexico and Belize. Today, Guatemala is more actively involved in the core four of the Central American states and has publicly denounced Nicaraguan aggression in the region.

Fontaine
Dep Dir
Latin Am
Affairs

Fontained then reviewed developments in El Salvador, outlining events both before and after the 1979 coup. He stated that prior to 1982, El Salvador had been diplomatically inept and isolated, but that the 1982 elections and a more aggressive foreign policy had improved El Salvador's standing. He predicted that a significant breakthrough would soon occur in resolving the outstanding border dispute with Honduras.

Fontaine saw concerns about Nicaragua as a driving force behind the foreign and dmoestic policy of Honduras. Fears over the intentions of Nicaragua had been expressed by President Suazo Cordoba and had led the national Congress to approve the establishment of a regional training center by 76 to 3.

Costa Rica, according to Fontaine, had also begun to play a more important role in Central America affairs, thus reversing its traditional non-involvement in Central America. He cited Costa Rica's active participation in the Core Four, the dispute with Nicaragua over the San Juan River, and the increasing anti-Sandinista attitudes of Costa Rican public opinion.

In Nicaragua, Fontaine pointed out, that a central problem was its increasing isolation from the other Central American states and former friends such as Panama and the Dominican Republic.

Fontaine then briefly mentioned the various peace initiatives that had been put forward for Central America. He summarized the positions as extremely diverse. He noted that there were signs of progress and that the members of the Contadora Group had begun to discuss levels of foreign advisers, the importation of heavy arms,

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the need for verification of accords, and the
issue of democratization. Fontaine stated that
the U.S. has always supported the Contadora
process.

Al Sapia-Bosch
Dir
Latin Am
Affairs

Provided a review of positive indicators in the
region. He argued that progress had been made in
raising issues of importance to the U.S., such as
the Stone talks with the Salvadoran left, the
recent proposals by Daniel Ortega for regional
peace, and the modest offer of Fidel Castro to
limit Cuban involvement in the region. In El
Salvador, he cited the elections of 1982, the
formation of a Peace Commission, and a Human
Rights Commission as signs of progress. He felt
that El Salvador had left the Middle Ages and had
begun to enter the 20th Century.

Professor Diaz-Alejandro

Asked if the pursuit of democracy in Latin America, also included such countries as Chile and Paraguay.

Sapia-Bosch

Responded that we are consistently pursuing the
support of democracy throughout Latin America.

Mr. Kirkland

Asked if one could point to significant
improvements in the judicial system in El Salvador

Sapia-Bosch

acknowledged that there was little real
improvement, yet reassured the Commission that
the U.S. was pressing for judicial reform at the
highest levels. He then responded to a question
as to how the Cubans could show their serious
about negotiations. He stated that a withdrawal
of certain heavy weapons, such as rocket
launchers and heavy artillery, would be a first
show of willingness to discuss seriously
disarmament in Central America.

Gov. Clements

Asked if the isolation of Nicaragua was a U.S.
objective. He recalled that the U.S. had
isolated Cuba for twenty years with little effect
on Cuban policy.

Sapia-Bosch

Responded that the U.S. did not want to isolate
Nicaragua, rather that it sought to bring it into
negotiations and bring them back into line with
other Central America states.

The Briefing ended at 12:55.

Minutes of the Meeting of the National
Bipartisan Commission on Central America
with President Reagan

**Participants:** President Reagan, William P. Clark, National Security Adviser, Ambassador Langhorne Moteley, and other members of the Administration, members of the Commission and staff.

**Date & Place:** August 11, 1983, 1 PM; The Cabinet Room, the White House

**Summary:** The President expressed his appreciation for the undertakings of the Commission. He then reviewed U.S. policy toward Central America. He stated that it was not the intention of the U.S. to seek military intervention in Central America. On the other hand, the U.S. had a responsibility for fostering reforms and providing a security shiled against outside aggression. The members of the Commission exchanged views with the President on the bipartisan nature of the Commission, the need for solutions that could be sustained by the American people, and the importance of crafting a program with adequate Congressional support.

Record of Discussion

The President: Let me express my appreciation for the willingness of the Commission members to serve on such a difficult undertaking. I want to thank Senators Jackson and Mathias and Representatives Barnes and Kemp for their work leading to the formation of the Commission. If the public opinion polls are to be believed, most Americans do not know which side the U.S. supports in Central America. Despite the public furor, the Administration has no intention to employ U.S. forces in Central America. Furthermore, the Administration seeks to forge greater unity among the nations of the hemisphere. Insufficient attention had been given to the means for bringing about unity in the Americas. I have discussed this with Presidents Lopez Portillo and de la Madrid and will do so again on my trip to Mexico. The borders in the hemisphere should be meeting places, not lines of separation.

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I remember that on my trip to South and Central America in December, I spoke with the various leaders in a spirit of partnership and urged that the problems of their countries be seriously examined with a view to ending the causes of revolution. Many revolutions in the area simply exchange one set of leaders for another. What is needed is not revolution, but evolution.

I believe that there are common bonds between all citizens of North and South America, including a common history, religion, and mutual aspirations for democracy.

In El Salvador a revolution had taken place. Despite its awful history, the people of El Salvador had an election and expect democracy to grow. The guerillas, obviously backed by the USSR, Cuba, and Nicaragua, are intent on establishing a totalitarian form of government in El Salvador. In Nicaragua, the revolution began with a pledge to establish a democracy. Nicaragua, however, has not kept this written pledge and have driven out those who want to implement a democracy. Today, most of those labeled as contras previously fought with the revolution. They want the Sandinistas to keep their promises. Because of this we are on their side.

The U.S. provided more aid to Nicaragua in one year after the revolution than it did in 20 years to Somoza. Aid to Nicaragua, however, was shut off in 1981 when we saw that they were aiding the guerillas in El Salvador. We also know that the command and control center for the Salvadoran guerillas is in Nicaragua.

In our aid programs for Central America, three dollars of economic aid are given for every dollar in military assistance. Yet, economic aid cannot be effective when a nation is torn by political instability. The people of El Salvador yearn for democracy. On such example was reported by observers at the 1982 elections. A Salvadoran woman, although

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wounded, refused to give up her place in the voting line so as not to lose her chance to vote. The slogan of the guerillas had been "Vote today; die tonight," yet it did not stop the vast majority in El Salvador from turning out to vote.

We are calling for active programs of reform, including land reform. I believe that opportunities for private investment and development exist and that if given the chance private investment could be the secret to success in Central America, as it has been in the U.S. Yet, a basic political need is for the development of democracy. For this, the support of Congress in appropriating the necessary assistance funds is required and the U.S. must help to provide a shield for the security of the region.

**Dr. Kissinger** Thank you Mr. President for the opportunity to serve and for the freedom given to the Commission. In no other country, even in other democracies, would it be possible to assemble such a diverse group and yet be confident that they are united in their goals. The Commission is united in its desire for democratic solutions to the complex problems which it will examine.

**Senator Mathias** I will give counsel when asked and will work to provide the continuing support of the Congress to the Commission. The Commission should work for recommendations that are both useful and acceptable to the countries under consideration and sustainable by the American people. For this reason a broad, bipartisan approach is necessary.

**The President** It was bipartisan support that had led to the enactment of the Caribbean Basin Initiative. The CBI had been formulated to deal with the 'brain and back' drain which drew people from the Caribbean countries to the U.S. The CBI will help to resolve this problem by making life in these countries more attractive. It will also benefit the U.S. because the countries in the CBI program are both good exporters and good customers. U.S. assistance programs and involvement in the region do not contain a "hidden hand grenade" of U.S. military action. The countries of the region do not want U.S. manpower and have not asked for it.

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Dr. Walsh
The President's April 27 speech contained an important message for Central America. Everyone in Central America has read it. The problem is in getting the American people to acknowledge the importance of what the President said.

The President
Most people remember what was said after I spoke, not what I said.

Dr. Silber
In matters relating to foreign policy all too often the U.S. speaks with two voices. It lacks basic continuity in its policies. There is little disagreement among the Commission concerning the need to address the President's objectives for the area. These include economic development, political democracy, and enhanced the security. The Commission can establish unity and deal with the situation on a commonsense basis.

The President
Recently a group of Democrats and Republicans traveled to the USSR to meet with their Soviet counterparts. Face to face with the Soviets, the Americans, both Democrats and Republicans, spoke with a united voice. Many of our political differences end at water's edge, where party labels can be left behind.

Mr. Barnes
The formation of the Commission offers a chance for important accomplishments. One should build on the CBI. In the past the President has not been an advocate of large scale economic assistance plans, such as the Marshall Plan. Yet, this could lead to an interesting paradox, if the Commission recommends such a program and the President supports it. There would be a good chance for passage of such a program in the Congress.

The President
I am not opposed to foreign aid, only to its misuse; if it is spent on a yatch for Halaie Selassie or for sawmills in countries where there are no trees.

Mayor
Cisneros
The President visited San Antonio on May 5 (Cinco de Mayo), a very important date in the history of Mexico. On this day the Mexicans celebrate their triumph over the French occupation forces. The trip was important because it showed the President's interest in

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the area. The formation of the Commission serves
as a means of addressing the crucial problem of
poverty in the region. The Commission should
also look at the reality of poverty as well as
the problems of class and race. We should
ensure that U.S. policy is not overly identified
with governing elites or with special economic
interests.

The President There are great possibilities for improvement in our relations with Latin America. The 600 million people on the two continents as essentially one, with a history of peace unparalleled on other continents. To establish a genuine harmony of nations in this hemisphere would set a tremendous example for the world.

Mayor
Cisneros I fear that the Commission might serve as a
cover for important tactical maneuvers on the
part of the Administration as it implements its
policy toward Central American. Please consider
delaying any major decisions that might affect
developments in Central America in order that
the Commission might have time to formulate its
recommendations and for them to be implemented.

The President Current U.S. policy aims at providing a shield in order to protect the processes of reform already begun. What is the value of a land reform process, if the land cannot be used because of terrorism and violence?

Mr. Kirkland The Commission will speak with an independent voice and must take a fresh look at old problems. The AFL-CIO has long been active in forging ties throughout Latin America. Samuel Gompers in fact died on a return trip from Mexico. Yet, often all our work for freedom and progress has resulted in frustration and disappointment. I continue to believe, however, that there are better ways and I have a hope for the future.

I have no personal objection to rebellion by
itself, as long as such a rebellion does not
become anti-democratic. In many cases
government structures become so rigid that
rebellion offers the only solution. I believe
that people should be given a better choice than
between the evils of the left and the right.

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One must fight for the vital center. Our
capacity to contribute to this struggle is the
measure of our success. You will recall Mr.
Barnes earlier remarks on economic assistance, I
think that we need a new and serious look at
economic assistance. There are things that can
be done that do not involve the waste of
precious resources on futile projects.

The President

I remember hearing about an individual who went
to Guatemala and developed a program for
acquiring used farm implements for the U.S.
This man established a lending service which
loaned the implements out to farmers who had
never had anything more sophisticated than a
pointed stick. Those who were most productive
were then granted ownership of these
implements. In a very brief time, the standard
of living among poor villagers rose
dramatically, some four or five times what it
was before. I feel that new ways can be found
in the present to assist in Central America.
There exist the opportunity to bring about bold
changes and improvements for the future.

I see that they are calling me to another
meeting. Thank you all.

The Meeting adjourned at 1:40 PM

MINUTES OF AID BRIEFING FOR THE
NATIONAL BIPARTISAN COMMISSION ON CENTRAL AMERICA

August 12, 1983

10:00 A.M. - 11:30 P.M.

The briefing began with an oral presentation by the AID Administrator, Mr. M. Peter McPherson, describing the major social and economic trends in Central America and the key problem areas. (Separately, AID distributed written briefing materials, in two volumes, which include an overview of economic and social trends in Central America, the status of key socio-economic sectors in the region, and a summary of the AID program in these countries.)

Mr. McPherson first discussed aggregate economic trends. Substantial economic progress was made in the 1960s and early 1970s; economic growth in the region began to decline after the 1973 oil price increases, but this deterioration was masked by high prices for coffee and other primary export commodities and by substantial borrowing. Economic deterioration became severe about three years ago because of the high debt burden, low primary commodity prices, and the world-wide recession. Mr. McPherson outlined the present debt and balance of payments situation and trends in Central America.

Mr. McPherson identified three problem areas: agriculture, commerce and industry, and quality of life. He focused his remarks on these three areas. In agriculture, Mr. McPherson stressed the low productivity in Central American agriculture and the need to increase it if overall development of the region was to be achieved. He also pointed out the need for improved agricultural research, more effective ways to communicate existing technology to farmers in the region, and land reform programs, which he regarded as an important part of efforts to improve both equity and productivity.

With respect to commerce and industry, Mr. McPherson noted that the Central American Common Market and the import substitution program undertaken by the countries of the region during the past twenty years substantially augmented industrial production. However, these policies led to stagnation because industries which were protected within the regional market could not compete beyond Central America. Mr. McPherson concluded that the Central American nations must create an export orientation in their economies and seek to integrate into the world economy. Adjustments to bring about this reorientation will be difficult, however.

Mr. McPherson stated that the last twenty years have seen substantial improvements in the quality of life in Central America, especially in Costa Rica and Panama. He noted several indicators of this improvement, including decline in child mortality, significantly better health status, and expanded education and literacy. Problems remain, however, and they are

2

serious. Health indicators are still poor for the region, and the quality of education is bad. The trend is toward greater urbanization -- by the year 2000, the majority of Central Americans will live in urban areas -- and the quality of life in urban centers is extremely important. In some countries as much as seventy percent of the urban population is without basic services such as water and sewage. These difficulties will be compounded by population growth, which will increase the population of the region from 23 million at present to 38 million in the year 2000 if current trends continue. Mr. McPherson stated that democracy was also a very important factor in the quality of life and an important input into economic development.

Mr. McPherson concluded his presentation with a brief summary of the AID program in Central America.

Following Mr. McPherson's presentation he entertained questions from a number of Commission members. Dr. Diaz-Alejandro asked how to reconcile the need for export orientation in the region's economies with further economic integration efforts. He also asked Mr. McPherson's views on the role of private and public investment in the region, from both domestic and external sources. Mr. McPherson replied that there is a role for an augmented Central American Common Market, but that several problems need to be solved, including the political problem of Nicaragua and settlement issues resulting from imbalances of trade between various Common Market member countries. With respect to investment, Mr. McPherson stated that one must look substantially to the private sector, both domestic and external, for the investment required to adjust to an export orientation. While public sector investment in some areas (e.g. roads) will be needed, in general governments will not have funds available for major investments in the near future.

Dr. Silber asked whether AID had information on average per capita income, median per capita income, and on income distribution in the region, and how serious the problem of income maldistribution was in Central America compared, for example, to the United States. Mr. McPherson replied that AID has this information and would provide it to the Commission.

The topic of land reform was discussed in some length. Dr. Silber asked whether the basic research on amount of land titled, amount cultivated, land distribution and other factors necessary to support land reform programs had been conducted. Mr. McPherson replied that AID has information on these subjects that would be provided, but that the issue of land titles was a difficult one in Central America. Mr. Johnson asked whether farmers who have benefited from land reform in El Salvador are free to work their land to their own advantage.

3

Mr. McPherson stated that Phase III of the agrarian reform, in which farmers are receiving ownership of lands they previously rented, is working well in El Salvador, especially in the Western areas of the country. Dr. Walsh inquired how land reform in Central America was affecting productivity, and whether land reforms there are resulting in government ownership of lands rather than land being owned by the farmers benefiting from the reforms. Mr. Kirkland replied that the purpose of the land reform in El Salvador (Phase III) is to give land to private individuals. Mr. McPherson concurred that AID was pushing to put land in private hands. Rep. Kemp suggested that the Commission hold an entire session on land reform.

The education system in the region was also discussed by a number of the Commission members and Mr. McPherson. Dr. Silber commented that increase in the number of people with a college education creates a market force for the expansion of government, and adds to dissatisfaction. He added that education systems should educate workers to the extent they need education to perform their jobs. Dr. Kissinger asked Mr. McPherson if AID could define a desirable program of educational reform in Central America that the Commission could support in its recommendations. Mr. Kirkland asked that AID provide the Commission information on vocational education in the region, including programs being financed by AID and other donors. Rep. Barnes asked that this information include programs funded by the Soviets and Cubans. Dr. Kissinger asked AID to provide -- in education and every major field in which AID is working -- a description of what is going on and what AID believes should be done in each sector (even if one could not get these ideas through the bureaucracy at this point), so that the Commission could consider these ideas for its recommendations.

Rep. Kemp commented that development in Central America has mirrored economic events in the United States. He inquired, however, why a program of recovery and growth should be associated with a loss of standards of living as in, for example, IMF austerity programs. Dr. Kissinger agreed that this was a very important problem, all the more so when austerity conditions are placed on countries by commercial banks seeking to collect loan payments. Dr. Kissinger commented that austerity programs undertaken by governments in the name of growth were one situation; but when these conditions are set every six months in order to meet payments on bank loans it can be very destabilizing.

Dr. Kissinger asked Mr. McPherson what his and AID's concept of democratization was. Dr. Kissinger stated that many of the conditions described by Mr. McPherson in his briefing have

4

existed over centuries, and asked whether anyone has analyzed
what happens when, through the process of democratization,
structures are dissolved, what takes their place, and at what
rate this can be done. He asked whether the process of
achieving democratization does not create its own issues. He
asked AID to provide the Commission its views on what
constitutes a democratic society and what it takes to create
one. Mr. Kirkland agreed, stating that the issue of democracy
is more complicated than just having parliamentary elections.
There are many paradoxes. For example, he stated that the
military is often an institution for social mobility in Central
America that could sometimes be more progressive, more
supportive of social change, than the oligarchy.

Rep. Kemp inquired further into Mr. McPherson's views on the
need to promote exports from Central America. He commented
that economic development is based on stable money, and that
governments should not take measures which artificially boost
exports or imports. What is needed, he said, is a healthy
balance of payments program that does not promote either
exports or imports to the detriment of the other. Mr.
McPherson responded by saying that AID, in its policy
discussions and balance of payments programs in Central
America, is not encouraging the establishment of systems to
favor exports as much as to correct for current biases against
exports

Dr. Kissinger inquired whether AID could make recommendations
on how to solve the problems of unemployment in Central
America. Mr. McPherson replied that, with respect to urban
unemployment, it was necessary to move away from stagnant,
internally-oriented economies to ones oriented toward exports.
Regarding rural unemployment, Mr. McPherson stated that ways
must be found to make agriculture more productive, to make
farming a more economically viable enterprise.

Mr. Cisneros asked what are perceived to be the most severe
implications of U.S. economic policy in Central America, and
what are the key aspects of U.S. policy that cause rancor and
that can be changed. Mr. McPherson said that the enactment of
the Caribbean Basin Initiative and the signature of the Panama
Canal treaties have helped improve relations between the U.S.
and Central America. However, issues still remain in the areas
of bank interest rates, tariffs, and prices for key
commodities. Mr. Cisneros inquired whether the Central
American countries perceive that they have to be totally
submissive to variables outside their control, and asked how
development efforts are affected by these constraints. Mr.
McPherson responded that while some in Central America feel
that the major forces affecting them are beyond their control,
many feel they can affect their economies and their
development. Mr. McPherson cautioned, however, that we should

5

not think that we can solve the Central Americans' problems for
them, but that they must make their own efforts and solve their
own problems. Rep. Kemp commented that the United States has
caused serious dislocations in Central America, and that the
economic advice we are giving is mixed, at best. Mr. Clements
agreed. Dr. Kissinger concluded the discussion of these topics
by stating that the Commission would need to move from
generalities toward analysis of problems in terms of the
concrete circumstances in Central America.

Mr. McPherson concluded the briefing by saying that AID would
look forward to setting forth for the Commission its ideas on
what can be done to increase agricultural productivity, to
increase productivity in industry and commerce, and to improve
the quality of life in Central America. Dr. Kissinger stated
that the Commission will have follow-up sessions on each major
problem area and that AID will be invited back then for that
purpose.

CHAIRMAN
DR HENRY A. KISSINGER

COMMISSION MEMBERS
MR NICHOLAS F. BRADY
MAYOR HENRY G. CISNEROS
GOV WILLIAM P. CLEMENTS, JR.
CARLOS F. DIAZ-ALEJANDRO
VILSON S. JOHNSON
LANE KIRKLAND
MR RICHARD M. SCAMMON
DR JOHN SILBER
JUSTICE POTTER STEWART
AMB ROBERT S. STRAUSS
DR WILLIAM B. WALSH

EXECUTIVE DIRECTOR
AMB HARRY W. SHLAUDEMAN

SENIOR COUNSELLORS:
REP MICHAEL D. BARNES
SEN LLOYD BENTSEN
REP WILLIAM S. BROOMFIELD
SEN PETE V. DOMENICI
SEN HENRY M. JACKSON
REP JACK F. KEMP
AMB JEANE KIRKPATRICK
MR WINSTON LORD
SEN CHARLES MCC. MATHIAS
MR WILLIAM D. ROGERS
REP JAMES C. WRIGHT

PLANNED AGENDA FOR SECOND SESSION

August 31 - September 1

WEDNESDAY, AUGUST 31

<table><tr><td>10:00</td><td>- Cyrus Vance</td></tr><tr><td>12:00 - 1:00</td><td>- Administrative and organizational matters</td></tr><tr><td>1:00 - 2:30</td><td>- Alexander Haig (light lunch will be served during this segment)</td></tr><tr><td>3:00</td><td>- President Ford</td></tr><tr><td>4:30</td><td>- Ambassador Thomas Mann</td></tr><tr><td>6:00</td><td>- Adjournment</td></tr></table>

THURSDAY, SEPTEMBER 1

<table><tr><td>9:30</td><td>- Sol Linowitz</td></tr><tr><td>11:00</td><td>- William P. Rogers</td></tr><tr><td>12:30 - 2:00</td><td>- Dean Rusk (light lunch will be served during this segment)</td></tr><tr><td>2:30</td><td>- President Carter</td></tr><tr><td>4:00</td><td>- General discussion</td></tr><tr><td>5:00</td><td>- Adjournment</td></tr></table>

W0111B

3/29/83 1230

2201 C STREET NW. ROOM 1004. WASHINGTON, D.C. 20520 TEL: (202) 632-7804

Notes on the Meeting of the
National Bipartisan Commission on Central America

Subject: Meeting with former government officials

Briefer/Witness: Secretary of State Cyrus Vance

Date: August 31, 1983
Time: 10:00-12:00
Place: Room 1105

Summary: Secretary Vance stated that the problems in the region are primarily local in origin, and should not be looked at through an East-West prism. He defined the vital interests of the U.S. as access to the Panama Canal and to sea lanes in the Caribbean, keeping the region free of nuclear weapons, and maintaining strong and friendly relations with Mexico. He said that a military solution in El Salvador is not realistic; a political settlement is required. He added that a political solution should be arrived at in cooperation with regional groups, such as the Contadora Group.

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Kissinger: Warm greetings. Thanks for taking your valuable time to be here.

Vance: Glad to have the opportunity. The Central American issue is important not only with our neighbors but within the Atlantic Alliance. I'd like to discuss this morning the nature of our interests in Central America, the threats posed to these interests, and the responses I believe make sense.

The primary issue to be addressed is the source of the problems. Is it local or Soviet inspired. The answer seems clear: the problem is essentially local in nature. In El Salvador, the problems are economic, social and political with roots in local history, and exacerbated by years of authoritarian rule. The Soviet Union and Cuba have and will continue to fish in these waters, but the problem must not be looked at exclusively through an East-West prism. A political solution is needed. The problem will not be resolved in Moscow or in Havana, nor dictated by the United States. We must work with other nations in the region; for example, the Contadora group.

The second issue is to define our vital interests in the region. Nicaragua, El Salvador and Guatemala are not vital to our safety and well being. However friendly relations and strong and active trade relations should be maintained. The increase in economic support proposed by the Reagan administration is long overdue. We must strengthen regional political and economic institutions, and we must remember that each nation is unique and not part of a homogenous whole.

Our vital interests are:

1. Free and open access to the Panama Canal

2. Free and open access to the sea lanes in the Carribean

3. Insuring that nuclear weapons are not introduced into any nation in the region.

4. Maintaining strong and friendly relations with Mexico.

How to attack a realistic solution:

In El Salvador, there is a choice between a military and a political solution. There can be no durable military solution. There is no reason to believe that a military victory by either side would result in respect for democratic

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pluralism and institutions. Therefore there must be a negotiated settlement. The Shaba conflict of '77 and Zimbabwe are good examples of regional cooperation for political settlements. Central America already has the Contadora group. We should support them. We should take them seriously, and we should let them take the lead. We have not so far taken them seriously. It may eventually be necessary to expand the Contadora group to include Costa Rica and Brazil, as the leader of the Andean pact.

Question and answer period:

Kissinger: How would you distinguish and separate East-West issues from local problems?

Vance: You must first assess the root of the problems, to determine that they are local. The Soviets will fish in these waters and continue to fish there, but the underlying root causes must be attacked and that takes time.

Kissinger: It takes many years to attack root problems.

Vance: It requires:

1. economic assistance to attack developmental problems

2. limited military assistance. We must be prepared to condition it on the behaviour of the countries involved.

3. work with other nations of the region

Kissinger: El Salvador is not vital but Mexico is?

Vance: Mexico is vital because of the long border with the United States, the large number of hispanics and Americans of Mexican origin, and its size. El Salvador is important, but not vital. The protection of vital interests may require the use of military force. The protection of important interests does not require the use of military force.

Kissinger: Suppose they became Cuban satellites?

Vance: No military force would necessarily be required, except if sea lanes were threatened or nuclear weapons introduced.

-4-

Kissinger: You said that a military solution is not a solution, but that democracy would not be viable if either side won.

Vance: A military solution is not a solution, but would lead to continuing conflict that could spread throughout the region.

Kissinger: Does that mean that we have an interest in promoting a military stalemate in El Salvador?

Vance: I think we have a stalemate now.

Scammon: I don't agree with the "inherent promise of goodness" in a political solution. There are merits in the Dominican Republic solution which involved limited amounts of violence. One third of the U.S. public is prepared to send combat troops to El Salvador, as compared to only 20 % who were ready to send troops to Europe the week before Pearl Harbor. How do we then maintain a posture of credibility with the American people? If these areas are not vital, could a line-drawing somewhere in the South be made tenable to the U.S. public?

Vance: There is no assumption of basic goodness. It is self interest, not goodness, that will bring about a political solution. We can't at this point conclude that there is no possibility of a political settlement. You tell the American people that it is in the national interest to pursue a political solution, not troop involvement. You can't count on much help from the army of El Salvador. You tell them it is in the U.S. self interest to do it.

Silber: Was there a coherent policy under any administration? What makes the development of a coherent policy difficult?

Vance: Carter administration policy was not totally coherent, but it was different:

1. We decided to use U.S. leverage to force the government to move away from excesses.

2. Rhetoric which has been used by the U.S. Government in this administration has:
   -promised more than we're prepared to deliver
   -made it look as if we're not willing to look at the alternative solution, i.e. the political solution

-5-

**Silber:** Did the USG aid Pastora when Venezuela cut off aid? Did it see him as a democratic alternative?

**Vance:** In Nicaragua, we saw that something had to be done right away, or there was a risk of civil war and polarization. We asked our regional neighbors if they could help us to move Nicaragua to the center. Lopez-Portillo said he would not help. He said Nicaragua was a problem of our making and we would have to solve it. Only two countries, the Dominican Republic and Guatemala, agreed to help. When trying to negotiate a centrist solution with Somoza, Guatemala dropped out, leaving only the Dominican Republic. With Mexican help, perhaps the outcome would've been different.

The final story on Nicaragua has not been written. There is no question that they are Marxist. But there is a distinction between a Marxist and someone who will be doing Soviet interests against our national interest.

**Silber:** How do we decide there is a risk prior to a crisis? For example, astute people could see a threat in Hitler as early as '35, but some could not see it up to the outbreak of the war. How is risk determined in advance of the interdiction of sea lanes or the discovery of stockpiles of nuclear weapons?

**Vance:** It is a question of practical self interest. The Cubans have adhered to agreements since the missile crisis. The Soviets have been cautious and complied with agreements. Even the Cubans have been cautious. Therefore the risk is minimal.

**Silber:** Some thought the risk was minimal when Hitler was allowed to rearm and retake the Rhineland. If the Cubans are able to arm and provide manpower in Nicaragua, and to some extent in El Salvador, won't they continue to make "cautious moves"...You say there is no worry about domino effect on Mexico. But if El Salvador led to Guatemala and Honduras, would you say then that there is a risk to Mexico?

**Vance:** I have not yet seen or heard of solid information that a substantial amount of equipment has come in. There are advisers for the guerillas. That is a minimal risk. Increasing polarization will make it more difficult to resolve the problem. Military victory for either side in El Salvador is a recipe for failure. How much risk is there? The President and his advisers must decide. But even by 1990 I don't see a substantial risk to the U.S.

-6-

Strauss: If you, having said that the final story has not been written in Nicaragua and a military solution is not best in El Salvador, were Secretary of State and didn't have to worry about the President, the NSC, or Congressional support, in this ideal world, what would you say would be your program?

Vance: I would:

1. Continue economic assistance as currently programmed. I would go along with increases.

2. Continue military assistance to El Salvador, making it clear there's no blank check. Problems to be addressed are human rights violations and land reform.

3. Seriously work with the Contadora group, and if necessary, expand it to get the required support for political solutions.

Doing this, there is some chance of success. We haven't taken the Contadora group seriously, and we've given mixed signals on whether we think it's worth listening to.

Strauss: What would you do, specifically, for land reform?

Vance: The program that was instituted was making progress, but was allowed to lapse. Specifically, oversight by the U.S. is required. They should not have a blank check.

Walsh: Everyone, including the President, agrees that the origin of the problem is local. There is no question. But you raised a question in my mind. You said you would eliminate the East-West dimension.

Vance: No, I said you're prone to profound error if you see the problem through an East-West prism.

Walsh: How do you do this? How does the U.S. solve local problems without at the same time being aware of the security problem? How does one, for example, monitor land reform, without interfering with sovereignty, and resulting in criticism from the local people based on the unfortunate history of U.S. interference?

Vance: You do this by improving economic and social conditions, but without a blank check. You can't have an open purse and pour money into their hand.

Walsh: I don't accept that El Salvador or anyone else thinks they have a blank check. But I still want to ask how do we reduce influence in Central American countries of by powers outside of this hemisphere, not only the

-7-

USSR, but, for example, your friend Willy Brandt. We don't want to have a vacuum to allow dictators of the right or left to take over.

**Vance:** It's an evolutionary process that has to take place over a period of time. We have to make slow progress through incremental steps, and use the leverage that you get in associating ourselves with other Latin American democracies. It's not easy and I'm not pretending it is.

**Brady:** Please review our vital interests.

**Vance:** Mexico and Panama, because of the canal, sea lanes, and nuclear weapons.

**Brady:** Would you see a threat if Nicaragua were followed by El Salvador and Guatemala as leftist governments?

**Vance:** That depends. If they are hostile to the U.S., the U.S. must act accordingly. If they are like Zimbabwe, which is Marxist but won't allow the USSR to establish an embassy, no. A lot of these groups call themselves Marxist, but are not necessarily hostile to the U.S.

**Brady:** Would exploitation worry you?

**Vance:** That depends. If they become a base for nuclear weapons, or interfere with the sea lanes, yes. But if they govern themselves in a way we don't like, that is not a threat to our vital interests.

**Cisneros:** You opened your speech with a discussion of the effect of Central American problems on our Atlantic alliance. I would like to caution you, if I may be so presumptuous, that Central America is important of itself, not just in terms of its effect on Latin American neighbors and the Atlantic alliance. They should see that we are motivated by genuine respect for them as people, not just by our stake in it. What do you see as a view of the Atlantic alliance? What are the sources of friction?

**Vance:** The sources of friction are:

1. They do not understand what our policy is. It seems that first we're concentrating on East-West conflict, then withdrawing from that, then going back, and the rhetoric has continued to escalate.

2. This has made it unclear to them where we are headed. They see in that a lack of stability. We are seen as ricocheting and unable to pursue a steady, stable course.

-8-

Cisneros: Is it the point you're making that Central America is being used to show that our commitments to our allies are real?

Vance: No.

Cisneros: Mr. Chairman, if I may say so, I think one of the jobs of this Commission is to define a policy for a region that has never had a policy before.

Diaz-Alejandro: How would you see the U.S. interest in the rest of Latin America affected by what's going on in Central America?

Vance: I think we have to demonstrate firmness without unnecessary bellicosity. If you're bellicose, you have to be prepared to carry it out. I don't believe in bluffing. It's very important what other Latin American countries think of us. That's why I insisted on resolving the Panama Canal problem right away. It had an effect in Latin America and third world countries in general of showing fair and equitable settlement between the U.S. monolith and a small country.

Diaz-Alejandro: What about Costa Rica?

Vance: Costa Ricans have to tell us what they want to help defend themselves against threats as they perceive them. They should not be issued a blank check, but they've had a good record over the years and it's important that we stand with them.

Johnson: Would you amplify on a way to make economic assistance actually touch individuals' lives?

Vance: You must work out the mix between bilateral and multilateral donations. There is more control over bilateral aid, but at least 1/3 should be multilateral. We can monitor bilateral aid satisfactorily. We haven't done such a good job in the past, but that doesn't mean we can't.

Johnson: If the USSR and Cuba make further headway in Central American countries, won't this affect our access to the canal?

Vance: This depends on how much and what kind of influence the Soviets have been quite cautious. It has not reached a critical point; I just don't see a threat to our security. I don't see the hard facts to illustrate this.

-11-

financing. You cannot get the U.S. or the
multinational institutions to do social
development work because it does not affect
productivity. How do we make meaningful
recommendations.

Mr. Marisciulo There are a variety of ways. There is the <u>servicio</u> concept. This should allow freedom of movement once there is agreement between the receiving government and the donor. There is also the IADB, with its small social projects fund. Since 1976, it has lent out $30 million in loans of up to $500,000. One third of this has gone to Central America. The Banks current input is small, but it could be increased. One should also look at private groups as AID has begun to do.

Dr. Walsh My second question concerns the sensitivity of AID to the political purposes of AID. We have seen how the extensive use of Cubans to promote health care in Nicaragua. They serve the health needs of the population, but they also have a political purpose. Can AID increase its work in health care.

Mr. Marisciulo My recommendation is that you not go to AID. Got to the Peace Corps. You can recruit Hispanic volunteers and train them as paramedics. This is important culturally because it shows ties. We could easily muster a larger corps for rural areas.

Dr. Silber It seems to me that it would also be feasible to bring people to the U.S. for training as paramedics.

Mr. Marisciulo Let me call your attention to the section in my paper on Father Tooney as an example of picking leaders and agents of change in a society. There is a danger factor. You can do it in some countries. You cannot do it in Guatemala or El Salvador.

-12-

Dr. Silber
There seems to be a peculiar phenomenon in Nicaragua and that is the presence of many children of socially prominent and wealthy families in the revolution. These appear to be the alienated children of the well-to-do. There seems to be a process of generational turnover in the leading and historically families.

Mr. Marisciulo
I do not know the answer or explanation for this. There are parallels, however, there is the examples of the Melvilles in Guatemala who attempted to make a revolution with the children of the 50 best families. There is also a generation gap. Seeing the model of democracy, they used it against their parents. Many have also experiences with the ley de fuga (the shooting of escapees)- they have seen their friends picked up and never returned. The Nicaraguan revolution is an exception because it succeeded. The young people are in revolt because they are trying to emulate democracy in the U.S.

Mr. Scammon
Shouldn't we take a closer look at the use of the manpower in Puerto Rico? Wouldn't some form of draft for social service be useful?

Mr. Marisciulo
I do not think that a draft is necessary. Also in Puerto Rico, my opinion is that the Puerto Rican is not as well accepted as someone from the mainland U.S. They are not as comfortable in most of the Central American environments.

00238S

Loy Bilderback, Population, 9/6/83

Bilderback: Introductory remarks, including a recommendation that the Commission members read Dr. Ed Fox's book on Central American Demography. Dr. Fox is the foremost expert in this area. I also commend the work of the Center for Latin American Demography.

Although we have had twenty years of declining birth rates in LA, the population continues to go up. In 1960 there were 200 million people in Latin America; today there are 410 million and by 2000 there will be 900 million. Even if we continue to have a decline in birth rates, the population will continue to grow. The only change will occur if mortality rates catch up with birth rates.

I believe American developmental efforts in Latin America, including family planning programs, have been a failure because there are today in Latin America more hungry, unhealthy, unclothed, and unhoused people than there were in 1950. AID has done its best, but best has not been good enough.

One of the problems with family planning is that institutions are reluctant to discuss matters relating to human sexual behavior. Issues of population control are two politically sensitive.

At any rate, family planning is not the issue now, because the problem already exists. This is true of all LA and of CA in particular. While birth rates in CA have declined at a somewhat lesser rate than the overall rate for LA, the general trend is the same. Still, in 1960 there were 11-12 million people in CA and by 2000 there will be 37 million.

The most disturbing aspect of the population growth problem is the growth in the work force, which has occurred across the board in all CA countries regardless of the relative effectiveness of family planning programs. And the growth in the CA workforce has been primarily urban.

Many of our development tactics ignore the fact that 60% of the growth in the work force is

occurring in urban areas. We emphasize rural and land reform programs, but there is no 20th century example of enticing people to leave the cities to return to rural areas. So rural development programs will address only a small part of the problem.

This urban growth also has political implications. Revolutions are fought in the countryside, but they are born in the cities.

By the end of 1983, there will be 250,000 more people in the CA work force than there are today. The work force is growing by 600 people each day, and the rate of growth of the work force is increasing every year.

To put this in a clarifying context, in 1977, when the US economy was strongest, 300,000 jobs were created in this country. If we compare economic growth in CA and do our calculations on a pro rata basis, the most we can then expect of the CA economies is that they will create at best 75,000 jobs a year -- only one fourth of the jobs they need.

Growth in population -- particularly in the work force -- is the basic problem of CA because unless you solve this problem, the other problems cannot be solved.

We are not talking about the need to create jobs for unskilled, rural laborers. We need 150,000 urban, industrial jobs each year. The new urban dwellers are not looking for a piece of land to farm. Their expectations for their lives are shaped by media perceptions of life in the US, combined with 20 years of development propaganda that has told them they will someday share the blessings of development. Now they are beginning to doubt that promise because their lives are actually getting tougher.

Some of these people do find work, but most live on the margins of society, living always in a state of expectation. But an increasing number choose migration. There are half a million Salvadorans living in the US and another one-quarter million living outside Salvador in other countries. This is not a result only of events that have occurred since

1979. In 1969 10% of the Salvadoran population was living as squatters in Honduras.

These people have proved to be extraordinarily patient. Few have chosen violence. In El Salvador, there are about 5,000 guerrillas. This is less than 10% of the work force growth in that country for a single year.

In Nicaragua we can ask why, after Somoza had endured for so long, he was finally ousted in 1979. Although it is not the sole cause, one thing that made a difference was the growth in the urban work force. In 1970, Nicaragua had 290,000 workers in the country and 260,000 in the towns. By 1980, there were 350,000 on the land and 420,000 in town.

El Salvador has the fastest growing urban work force in CA. In 1978 El Salvador was touted as a model of CA economic development. But what developmentalists ignored was the creation in El Salvador of a two-tiered economy, of growing disequilibria between the rich and the poor as a small group got an increasingly large share of the wealth. And at the same time, 10% of the population was living as squatters in Honduras.

**Brady:** You talk about the burgeoning population, but say family planning is not the issue. Can you explain that?

**Bilderback:** Family planning is not the issue because 95% of the people who will join the work force between now and 2000 are already born. Family planning programs have long fuses and won't make a difference for the problems we face now.

**Lord:** Still, family planning is important when you consider the problems CA will face in the next century.

**Bilderback:** But our immediate problem is whether CA can survive into the next century. Clearly, however, family planning problems must be strengthened, but this is a touchy subject politically and this Commission should not get hung up in the politics of population control. I do think though that AID's family planning programs need to be strengthened.

**Kirkland:** The charts you have displayed showing population growth up to the year 2000 are based on birth rates that were higher than those we presently have in CA, correct?

**Bilderback:** Yes, but the really important element is not the birth rate, but the gap between the birth and the death rate. The death rate has dropped markedly, that's why the population continues to grow.

**Kirkland:** You talked about the economic disequilibria in El Salvador. Yet, this administration calls for a development strategy that would make the wage base commensurate with the size of the work force, which, in El Salvador, can only mean reductions in wages.

**Bilderback:** That type of recommendation does not recognize the realities of CA. No development program for CA can succeed unless it involves the creation of more jobs at a higher wage. Historically, US development programs have been based on the trickle down effect. Well, we don't have the time to wait for trickle down in CA.

**Johnson:** Then how do we solve the problems you have raised?

**Bilderback:** First of all, by recognizing that the fundamental problems are not caused by the Cubans and the Soviets, but are economic. Once we accept this, we can stop this ineffective war. Everyone cites Costa Rica as being different from the rest of CA. Well, the most significant difference is that CR in 1948 abolished its army. It's not a matter of all the military being bad and all civilians being good. Rather it's a plain fact that military machines are parasitic tape worms eating up a country's best resources and providing little in return.

The Somoza National Guard was one of the most effective small fighting units in the world, but it lost in the field, not to the Sandinistas, as many now say, but to the broad-based Front, which included the Sandinistas. If the National Guard could be defeated, the much less effective Salvadoran army doesn't have a chance. A military force can't stop

change, but it can keep it bottled up until the
change must be violent and radical.

Johnson: But again, how can we solve the problems of
growth in the work force?

Bilderback: I think there are two things we can do now.
The first is to open US markets to CA goods,
despite the objections of US labor
organizations. The second is to support CA
economic integration. I have seen it in the
Eastern Caribbean and believe it is generally
true, that the bigger the economic system, the
better it can deal with economic shocks.
Unfortunately, not all the CA's support the
idea of economic integration.

Kirkland: To your point about labor opposition to opening
US markets, AFL-CIO opposition to the CBI had
two objectives. We wanted to increase the
required percentage of domestic content so
these countries would be more than export
platforms. And we wanted to impose stricter
human rights criteria on qualifying countries.

Diaz-Alejandro: What do we know about the migrants. Who are
they? Some have said that there can be no
centerist solution in El Salvador because all
the centerists are outside of the country. Is
that true? And can migration be part of the
solution? Should we, perhaps, recommend
increased migration to the US?

Bilderback: Should we open our doors to all?--No.
Including Mexico 1 million are added to the
labor force each year between the Rio Grande
and the Panama Canal, and we can't absorb
enough to make a difference. We can't use this
labor any better in the US than we can in their
home countries where they can produce the
products we use in the US. Also, a growth in
the US population has long-term implications
for the state of our environment.

You ask who are the migrants, in the case of CA
they are anyone who can get out. From CR the
numbers are small and they tend to work in the
US in upper-blue and some white collar jobs.
They work for a short time and then return to
CR. From Salvador, most work in agribusiness
in the Southwest, like the Mexicans.

Diaz Alejandro: Do they come from the bottom 50% of the economic classes?

Bilderback: No, it costs at least a couple hundred dollars to come to the US, so these are the people who have been able to afford to get out. They are also relatively skilled people, even those who work in agriculture are specialized, and their skills are often wanted in the US.

Walsh: You have laid out the problem very graphically. But what are the solutions?

Bilderback: I see three possibilities, all of which I have mentioned: to open US markets; to support economic integration in CA; and to stop strengthening the military to the detriment of development in other areas.

Walsh: Is the idea of opening US markets realistic given the state of our own economy? And can there be any development at all without some security? We withdrew support from the National Guard in Nicaragua and look what we have now.

Bilderback: I don't believe the situation in Nicaragua right now is entirely incompatible with our national interests. I think it can be saved, but I don't believe it will be because of our inclination toward military solutions and our actions strengthen our adversaries in Nicaragua. We support the Contras who already lost the war once.

Silber: The only conclusion one can draw from your comments on the demographics of the situation is that the best way to solve the problem is by hoping for an increase in the mortality rate and to achieve this, I wouldn't stop the shipment of arms, but rather shipments of food and health care which have helped to decrease the mortality rate. I also wonder, if armies are, indeed, the tape worms you describe, how Nicaragua is able to support the largest army in CA. To do so, Nicaragua must have major financial support from Cuba and the Soviet Union. I think one sign of the tie between Nicaragua and the Soviet Union is that the GRN does not recognize the PRC.

To continue this train of thought, I wonder why

the US can't sustain the economies of our allies in the region if the Soviet Union is able to support the Cuban economy and Cuba, in turn, supports Nicaragua. Why not large economic aid programs for a few years while we find labor intensive ways to do the work that needs to be done in these countries. I find it hard to accept the idea that the work force is too large when there is so much basic work to be done.

I also believe that if the US pulls out its security support, the Soviet Union will fill the gap.

Marasciulo:

There is no doubt that there is indeed basic developmental type work to be done in these countries. This has been the focus of AID's programs for many years. But these programs have not worked as we would have liked and the question now is not whether we should build roads and dams and housing and schools, but how these projects should be undertaken.

W 4952N

drafted by DHrinak

The National Bipartisan Commission on Central America

Subject: Economic Development: Role of Private Sector in Social Development Policy

Witness: Ronald Scheman, OAS
Date: September 7, 1983
Time: 2 p.m.
Place: Room 1105

## Summary

- Mr. Scheman stated that a major problem facing Central America today is that the private sector (i.e. big businessmen and bankers) has not seriously acted upon the social and unemployment problems of the poor in their respective countries. Unlike the U.S. private sector, which is actively engaged in community and civic affairs, the Central American private sector has avoided such involvement. In sum, the private sector is not involved with the issues which concern large numbers of poor people.

- In part as a result of this lack of involvement, the intellectual community as well as the poor, often view the private sector as part of the problem, rather than a force which could be involved in solutions. Thus, the private sector is not respected.

- Mr. Scheman noted three specific areas in which the private sector needed to focus its attention:

1. Productivity - That is, to help create jobs in the small enterprise, informal sector.

2. Motivation - That is, to take a stand and to get involved in the needs and welfare of the poorer segment of the society.

3. Communication - That is, to demonstrate by action and personal involvement that it can help solve problems facing poor people.

- Mr. Scheman summarized by stating that there is no substitute for this involvement, that the local business community must change its mentality.

- Mr. Scheman's suggested actions concentrated on the need and role of local, national development foundations, such as those started by PADF in the mid-1960s. He noted that these foundations provide a framework (i.e. an institution) through which the private sector can work and at the same time provide a vehicle for delivering assistance to the poor. The main focus of these foundations has been to provide credit and technical advice to small enterprises.

Questions and Answers:

1. Mr. Silber: What effects will programs such as the ones you suggest have on the employment problem, given the great increases in population pressures?

Answer: There will be no substantial affect in the near term, generations will be required for major changes. The main purpose in programs such as the ones I discussed is to involve the private sector in problems of the poor. There will be some impact, however, in the skills training area.

2. Mr. Walsh: Regarding the large dollars required to solve the unemployment problems, can the U.S. expect to get Congressional action?

Answer: Investment capital is needed from public and private sources, but involvement from both the U.S. and local private sectors is also needed. Government dollars are not the key element.

Mr. Walsh: Will the U.S. private sector invest without government guarantees?

Answer: No, not unless the local private sector is involved and puts its funds into sound projects as well. I agree, however, that insurance or guaranty programs would be extremely helpful.

Mr. Walsh: What is your concept of how the commission should approach the length of time needed for involvement in C.A.?

Answer: The Alliance for Progress was very large, but in looking at the results, the impact in terms of narrowing the gap between the rich and the poor has been slight. I believe quite a long period of time is needed.

Mr. Walsh: From your own experience in Latin America, what do you think will be the reaction to a special program for Central America from the other Latin countries?

Answer: The Latin countries understand the special relationship with Central America, so the reaction will be positive. You should know, however, that all of these countries have problems sustaining democracies, and when the economic conditions are bad, these problems are made more difficult.

3. Mr. Diaz Alejandro: How would you characterize the relations between the private sector and the security forces, especially in Guatemala and El Salvador?

Answer: The private sector is terrified of the security forces, and they try to stay away from them.

Mr. Diaz Alejandro: Who would help, what kind of businessmen?

Answer: All types of businessmen have been involved and could play an important role - bankers, lawyers, doctors, commercial enterprises, etc, the full range of the private sector.

4. Mr. Johnson: Why isn't the private sector respected? Are they not concerned with their community image? Don't they know what to do? Is there an undue outside influence?

Answer: The conditions are very different in Central America. Businessmen view their role in society very different from that of the U.S. businessmen. Their cultural framework is different, the big firms are not involved in civic actions.

5. Mr. Kirkland: What interest rates do your foundations charge?

Answer: They charge a market rate, with no real subsidies. We have found that interest rates are not a constraint to borrowing, that businessmen are used to paying very high rates from money lenders and they are most in need of access to credit.

Mr. Kirkland: Why haven't capital controls been imposed?

Answer: In some cases they have. One problem is that the people in power are often the ones who don't want capital flows restricted.

Mr. Kirkland: Who buys the products and services sold by the beneficiaries of your foundations?

Answer: Small businessmen generally sell to other small businessmen and the poorer members of the society.

Notes on Meeting of the
National Bipartisan Commission on Central America

SUBJECT: Aspects of U.S. Social Development Policy
toward Central America

PRESENTATION BY: Mr. Leveo Sanchez,
Development Associates, Inc.

DATE: September 8, 1983
TIME: 3:00 - 4:00 p.m.
PLACE: Room 1105, Department of State

SUMMARY: Mr. Sanchez expressed that over the years, there have been effective and non-effective social development programs in Central America. New approaches, possibly based on success of the past, need to be developed. Efforts have to be made to involve the private sector, church, and even the military. Those policies which add to the problems in the area need to be identified and corrected.

-2-

NOTES:

Mr. Sanchez: Commitment to social development policies cannot go up and down. Commitment must be long term, ten years, and concerted.

Many US policies and procedures exacerbate the problem in the region. These need to be identified and corrected.

US posture in the region has been that of low visability. Change cannot be made with such a presence. This has to be changed. This is a losing policy.

Even those long-range commitments the US has for the region are linked to one year funding cycles. Fiscal years of the US and Central American nations are different and further add to the problems.

One of the programs which has been effective is the SERVICIO. This system was flexible and dynamic, offering a cooperative approach to development programs. The donor and receiver countries were able to structure programs and organizations not tied to the past and the bureaucracy. The SERVICIO involved the participating nations in a partnership, jointly funded programs and they moved forward jointly on plans for development. The SERVICIO was helpful in creating the OAS, American Bank, and even the Peace Corps is a spin-off of this system.

Future programs may take a different approach and may even involve more than two parties; include the OAS, private sector or even the Minister of Agriculture. The Commission may even wish to look at the ROCAP as a possible regional approach. One successful ROCAP program was the five-nation textbook program set up in 1962.

Areas where the Commission may wish to focus are institutions which cover the countries as a whole. Some of them include the church, private groups, university students and the military.

Mr. Kirkland: Are steps being taken in the area of judicial reform?

Mr. Sanchez: Yes. Some being done through the OAS and the International American Judiciary. The Judiciary is, however, not that effective or powerful.

Mr. Johnson: You mentioned that thousands of individuals have been trained in population control; how do you grade them?

Mr. Sanchez: We think they are very effective.

Dr. Diaz-Alejandro: In what role do you see the church in support programs?

Mr. Sanchez: Literacy, health, day care, credit unions, vocational schools, family planning.

Dr. Diaz-Alejandro: How are such programs coordinated with the State?

Mr. Sanchez: Done through a third party like the SERVICIO program.

Dr. Diaz-Alejandro: Are Protestant groups doing similar programs you mention?

Mr. Sanchez: Yes.

Mayor Cisneros: What strikes me is the fall-off of government outside of the city and its ability to conduct civic action programs. There appears to be a need to shore up the municipalities.

Mr. Sanchez: That is true. More emphasis has to be placed on rural participation.

Dr. Walsh: How could the Commission suggest supporting the use of the Catholic Church as a means for social development given the anti-US position of the Church? How could such a program be sold to the US population?