GENERAL - OPERATIONAL - SPECIFIC - EFFECTS ON THE ECONOMY OF GUATEMALA OF A CES

Created: 6/15/1954

OCR scan of the original document, errors are possible

CIA HISTORICAL REVIEW PROGRAM ' RELEASE AS SANITIZED

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GDJERAL Coerational specific Effects on the Economy of Guatemalaessation of Imports.

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Attached for your informationeport on above Subject. This report was prepared toasis on which to Judge statements and claims concerning results of possible economic sanctions against Guatemala.

This report indicates that the overall suspension of imports intowould have little effect on the Guatemalan economyhort-term basis. It does not, however, consider psychological reactions.

ong term basis, however, the suspension of petroleum imports, if undertaken so as to assure the exhaustion of diesel and crude stocks at the time the coffee crop begins to move in December, could seriously affect the economy; coffee is the primary export commodity, accounting for over

ercent of total exports and therefore of foreign exchange. Obversely

the shortage of petroleum products would also affect imports by interrupting the

internal distribution channels from the ports.

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yrtcTs ottconomt of

GUATEMALAessation OF IMPORTS

Tha Immediate economic effect upon Guatemalaassation of Import* kt tale time would be negligible. At the cod of two weeks, or even four weeks, there would ba hardly anyla tha economy. It would ba moat unlikely that tha buelneaa community would suffer sufficiently to cauaa any bualaaaa failures. At tha and of two montha, lomi ahortagea probably would appear, depending upon invcatorlea, but with tha exceptionessation of petroleum products these shortages probably would have no appreciable effect upon tha economy of Guatemala,

Tha only lmporta of major economic Importanca to Guatemala arc petroleum products aad machinery andufec. Tha to varum ant ba. takes palna apeclflcally to exclude these prodacta from various Increaseauty and trade rcatrictlona. Guatemala alao la entirely dependent on lmporta far newsprint.

Guatemala la totally dependent upon foreign sources for petroleum and petroleum prodacta, because bo petroleum la produced or refined in the country,essation of lmporta would have an Immediateonly If stocks wara abnormallytorage capacity within the country would provide, under normalp ply ai motorx-month supply of aviation gaa and uppply of dleacl fuel. Shipments are received, however, at comparativelyntervals,ew Urgeear rather than frequent smaller ones, and sxact flgnrea on current stocks are unavailable. Consequently, tha effectack of imports would be tn direct relation to the amount held ia storage at tha time an embargo was enforced.

Petroleum products account for more than SO per cent of the totalpply and are used primarily to power tha railroads, motor transport and for domestic lighting and cooking. Tha only part of tho transportation system which might feel any immediate effect of an end to Imports, however, would ba the motor transport. Taxis in Guatemala City, which ass most of the motor gas, would feel the

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shortage moat acutely. Current supplies are received from Arube, Curacao and the US* with minor amounts from Venesuela aad Mexico. The alternate sources of supply for petroleum products art:

Peru (International Petroleum Co.anadian-American Company In which Standard Oil of New Jenny owns an Interest)

Trinidad <Brltiah companies, probably aim La ted with the Anglo-Iranian group)

Xndoneala and Borneo (Royal-Dutch Shell and Standard Vacuumiddle East (American, British and Iranianoviet Bloc (USSR, Rumania)

The tanker market la currently depressed, so that Guatemala could charter the necessary tonnage, although transport costs from these areas would be very high.

The effectessation of manufactured Imports wouldhort-term outlook. Imports of machinery cons letof earth moving equipment and farm equipment, almost all of which come from the US. atter of months, without Imports, machinery aad metal products in use ln Guatemala would begin to need replacement and shortages would become apparent. Thahowever, has cut down oa appropriations for tha extensive public works program begun Thus the possibility of shortages being felt In that field to the government's disadvantage becomes even more remote. The alternate sourcss af supply aret

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United KingdomGermanyGermany

Guatemala Is entirely dependent on Imports for newsprint. Local production Is limited to paper suitablelat-bed press, and there is

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no newsprint produced in Guatemala suitable for roller preaeee. Theons required by Guatemala is euppllod almost exclusively by the US and Canada. Worldwide supply and demand ia approximately In balance, but there is In unused capacity, principally fau

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In additionons of estimated unused capacity exists in tha

US.

In the consumer goods Held, wheat flour and textilea/are among Guatemala's larger imports by value, but the government ta taking specific steps to curtail these imports. Tha technique usually is toequired ratio of domestic material in thell bread baked In Guatemala mustinimum ofer cent domestic flour. The US has complained officially to tha Guatemalan government that these actions contravene the provisions of6 Reciprocal Trade Treaty between the US and Guatemala.

Tha third quarter is notably tha slack period In Guatemalanwith Imports in August being usually aboutar cant below the January-March paaka. The cutting ofi of Imports would have, therefore, substantially lass effect upon the Guatemalan economy at that timeessation during the active months of the first quarter.

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