K-PROGRAM - POLITICAL-ECONOMIC VIEWS (W/ATTACHMENT)

Created: 4/21/1954

OCR scan of the original document, errors are possible

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Chlaf of Station, Guateoala LIBCQLfl

t-Prograa

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Attachedraft of iKOlUcal-eeoooadc rlava to ba expressed during aV-Prograai. Please not* that theae views are meraJj tentative and are intended aa guidance forage.

JEROME C. DUSBAP

CIA HISTORICAL REVIEW PROGRAM

SANITIZED

uatanala

- Washington

- LUCOLv

ESS

nt&FT

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HEMDRA3DDM KORl Polltleal-EcortOnlnto be Expressedrogrsa

I. PflUUBflj

The prlnary interest of tbe Doited States in Guateoala. Specifically, the Daitod States cannot end will not tolerate either the neornloElMtion or domination of Guateoala by an inrtlgwaaia Coma mist Party subservient to International Conrainlaa. Nor does the united Statoa aocept any olaima that there ia now or oan be Inrand ofCoaeninlsa. The united States will not aooeptitolet aolutloo in Guatemala. Aa far as AjBerioan interests are oonaerood, Titcdsa in Europe la one thing and Titcdeni on its front doorstep ia quite another. Furthermore, there is no avidaaoo nor is there likely to be anyuatemalan politioal leader of euffiolent stature ia the Martlet orbit could be found who could effectively awater the independents required for TitolBa. ord, Coaaaunleni and TitcdBM for Guateoala are out.

It is desired that the Coxaaunlat Party in Guateoala be outlaved. ediate eacaoutive decree, to be followed by oxtUnary legislation end thanonstitutional eoandnont are desired. The poaaible objection that outlawing too Connunist Party will only serve to drive it underground and thus aake it more difficult to detect can be easily disnlssed. Any objection to the effect that the united States does not outlaw the CaanimiBt Party should be quickly countered with the observation that in tbe united Statea tho Coanunlat Party has not secured control of the aauhinery Of tha government. In amplification of tbe request that ths Cnmanmtst Party be outlaved, it nay usefully be argued that Ceng mi aa haa no genuine Indigenous bass in Guateoala, such as it does have

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la acre highly Indus trlaliaed countries,a ovary irm of th* word

a foreign isportation, aolaed upon bpgfjtJWpt Oitieen* of ftartawall.

CoaaunlBa aad Coanunlsta la Ouatar* frankhich oaa b* reduced by legal intordioLloa, backed by tba authority of to* atato.

It ladaoirsd to aroldatUegrouad

waol^-bseded

anuniat aad onti^oaauniiit foroea. Prolonged political aad oivil conflict, polar lied around the fxtreuee of CcnaaiiBa endnaMPl anj can only hurt nnstantila and knapocstaji threat to the Fnen^apbar*. Tlauefaio, lt will ba eoeentlal to take atom andp* to end tba danger of Coatamlaa In Guateaala. To thU end, it la desired to provide for th* physical disposition of tba loading- aeacare Of tbaat Party, both la it* central haadqu*?tor* and in all ita pro-inoial cffganlaaUonel breach**. It ia believed that abort, draaatlo surgery will be tba aoat effective long-run our*. In addition, thian exaepla to Ccaeaaiiata in rwlgbborlnghat will keep than fron baking future attempt* agalnataod as/reduoo their effectiveoeea in their own eountrleo. It io tine totop to th* notion that only "social ref orae" can eradicate Coanoslani tha Coaaualst nor meat, ao largely founded on force aod subversion, oan also be affectively ooabattod by th* application of force.

Tba foregoing la not to be interpreted to aaao that oooporalo and polltloal and cultural progrees are horeby to be abandooed as weapons against Conounlsai. On tbe contrary, aa will ba aaeo later on, tbaae anti^oaauoiat weapons ore to be vigorously and effectively aaplayed inttM consolidation period of th* new Guatemala. The point to ba aade here is, hawever,ombination of force and reason affords bettor security thanbod alone, ia regard* tho pro-gvrerDBaat "revolutionary" portion, actualinfiltrator* of than anat be diapeaed of in tba aaaw aawaaar aa tba topf tbaat Pert^ itoalf. The Merely pro-Canauaiot loader* of thoa* partiaa ahould be punisbed

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tay oxlle or lnprlocoaoat, but ehouU receive noticeably leao atom retribution thannltIwinital lea, ao that there Bay ba no confusion aa to tha aatl-Comaunlst obaraotar of tba now reglm*.

On tba other band, tola aavaritar auat bo counter^aoalamoed by goaorool ty to tba looser bread of jiiriiojiiiilsl 3tdft retribution should bo noted outnall, compact band of tha guilty and equally awlft pardon and rehabilitation auat be granted to the great majority of political and aasd-polltloal flguroo, aa well aa to the population at large, to thing can con tendow reglne moreong, drawn-out proaeaa of Investigation of guilt. Surgury, not coaplex awllratilwi^la th* best aaaaaow start.

A period of oantrallsed emergency rule, not exoeedlng sixla foreseen. Tbe stability that depends on aaopular base and on aa Bottled conditions as pnarthlw should ba attained at tha earliest pcnalble aoaent.

Tba progress thus far aede toward enllataont of popular partioipatioa in tba governmental proceaa should ba expended. However, it would be unrealistic to atteopt to apply completely doaocratio aetbods and polltloal ataodardaountry that has neither the literacy rate nor the social structure aoaantial far olasslcal democracy. Premature extension of democratic privilegee and responsibilitieseople still accustomed to patriarchal methode can only be harmful. udicious combination of authority and liberty will bave to govern the political ay stem.

The keynote of the new regime auat be stability'combined with progress, and lt la axiomatic that stability can only be attained by progress because human desires urc constantly expanding. It lo baliovod that tho beet oofeguarda of polltloal atabllity are greater education, expended prosperity and all the rewards aod a* tl of actions for tha people that eliminate diaoontent with the political

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leadership. Special attention Bust be given to tbe nost talented individuals in every walk of life so that they nay realise their intellectual potential, their materiel desires and other aspirationsi if this is ppT done, the gifted people will naturally seek an avenue of satisfaction In political upheaval.

until such tinenified and literate electorate can itself eccerclea restraints on thexljaua effort most be made to build jjjL safeguardu of stability into ths structure of tba nau regiiao itself. That is, ths executive power, without being paraliBed, must be sufficiently divided in order to provide inner balance. While this at first sight may aeea toactor making for Instability, lt actuallyrotective aspect, because it prevents the capture of the canter of poweringle hostile blow. Plurallaed power, if the elements of tbe ooalition can cooperate, is tbe most stable and secure because it creates nustaroua groups dedicated not only to their own defense but also to ths defense of the (Xtmoa interest.

Thus, the independent judiciary oust be re-oetabliahad end made inviolate. Provisions against the summary diao&ssal of Judges, such ss occurred irrtbe recent conflict over the agrarian low, suet be mado. If political parties caunot solicit sufficient funds from the electcrate, thoy should at least be made free of the benevolence of the executive; it may be advisable tound, to be apportioned among the politioal parties, by congressional action. Likewise, tbe unions must be made financially Independent of executive whim. Tbe oaoe thing holds true for the press. As previously stated, were subsidies are needed for politicaleans should be found for supplying them from an impartial account, rather than through tho executive.

The army will obviously be an ioportant factor in politioal stability. The inner stability of the army oan probably best be assured by fair and adequate treatment of its officer and nau-caamirjuloaBd officer paraoanel, plus the supply

cut good ana* sasanMI oquipoent. Tho oj^udloatioa ofroportlflfwd to too length aod quality of solitary *ervio* abould ba eccooraged. cre highly darelopad syotaa of amy aohoollng, particularly la tho aarrioa oorpe, abould permit offlcara aad noo-cfTaalaalonad officers to aake tho transition froa military to drill an life when they ao desire.

^qyoud the oafoguarda built into the any, it will probably prove adliooblo to divide control of the any between tba executive and tba ccogreee. without visaing to copy any foreign models, lt does eeea desirable to repose tbe conoond aaaea function over th* amy in th* oxBcutlva, but to leave to th*he authority for financial allocationa for nllitary purpoaas.

These suggested *teps servo to divide acoewfaat th* central authority and to prepare for the furtheration of power in accordance with Increasing deoocratlaatlon of the country.

It will be useful, also, to altar the ay3 tec of appointing departmental govoraore by the central authority. Local obolce of governors, at first subject to conflraation by tbe central goveraaont, aad aoon tbareafter baaed only en local elections would seem toesirable devalopneat. Ia this way, there would be created regional oouoterbelnuclng forcoo against the excessive centraliza-Una in toe capital. These regional associations ofould sales for progrosaivo stamlllty.

The ccnatituUoa, in Its main aspects. Is an adequate and useful one.

Ceaaralij epeokiag, wo are interestedread and swift upward development of tha economy. It is vail known that tha raising of tba laral

of nontrisaan- cceurjeptioa, tba aTcpaaalon of productive facilities and tha general

au^aentation of prosperity is notood do torrent toward Cconmaato, but also an af fee tire method of produclne general polAtlaaul stability. It goes without saying that the pre lartnent reason for our desire for proopurl ty ia the protection and Turr'ton ofocial values.

Tbaasjaamnsa; developmentHtd by tha International

Bank for Reconstruction end Development is sound and is known by competent Qua tens Jans to be sound. It outlines tbe efficient and awthodioal approach to natiooal development and prosperity. Particulariid be attaohed to the rscoonasnda Lions of theon taocatico.

It ia realised, however, that these recozewnda Lions of the Bank have not been followed ia the past and are not likely to be followed ia to to by any future region. Tbe difficulty, we know, ia that the Bank's plan presupposes certain politioal conditions which do not actually exist; if theae political conditions code tod, the Bank's plan would probably not bo nacoasary. enae, the plan of the Bank attempts to square the circle.

A new departure lo the field of development might be tried. There is Increasing recognition in American and other bonking circles that ths economic development of countries such as Guateoala cannot bo undertaken and flnanoed under Btrictly economic criteria. Uo roallzo that there must necessarilyertain wastage, of funds because of local political conditions. Uo are prepared to underwrite this wastage. What we propose is, however,mnanni effort be made to separate and keep clearly distinct politioal and economio expenditures.

That la, for aranple, if tea aaw governnant foals it naoeeamry, foraii'iin. toeriaa of aaaaaaaaaau^ajT paJwMftfMe Jobe or to tnassa en Industrial plant that cannot, possibly ba cceanrclally prcfi table, tha auaa advanced against those mm onono/aic expendituresbe separately budgeted

ccount. On tho other hand, tho funds that are used for such occcoolcally sound and profitable enterprises aa tho so recommended by. should be kept strictly in their own account. What ao often happens la countries like Guatemala lo that the political aad eoooomio expenditures,avolopnaat plan, beooas hopelosaly intermingled, so that tho polltloal ends are not clearly served aad tba economic aads are dissipated. But if we switchyotea of honest bookkeeping, where wo plainly designate that soma funds are for political alow and others are for genuinely economic activities, we can servo both endsaffectively. It would then be desirable to apply genuinely political criteria to economicallyfforts sod to keep tbe truly economic efforts strictly in the hands of technical specialists, undisturbed by politicians.

Tho question ariooa as to the relative alee of the political and economice would think that the political account should not be higherhird of tho economic, aad preferably lower. Ue would be prepared to revise our estimates of what Guatemala could legitimately barrow abroad, or receive ia tho form of aid, upward to tho extent of the political account.

As far as direct assistance from the United State* la oencemed, seme will undoubtedly be forth^cocdng. It abould be remoabered that shortly after tho Communists were defeated In Iran, the Iranian Government received generous assistance, undoubtedly, the ttaappearance of tho Coaaunlst regime from Guatoaals will leaveertain economic aad finanolal chaos which oust bo rectified by American aid.

taxation, bya easing property valueey or iopoalng on Inoose tax or raiaing the coffee tax, then the united States would probably be prepared to extend an

equivalent amount in the form of direct aid or loans. In the cose of tho temporary

relief that the united States would probably grant shortly after tbe installation of the new regime, the united States might properly expect that ite oosietanee would be matchedater date by auch increases In the Guatemalan internal revenue.

In tbe implementation of agricultural and industrial development of Guatemala, technicians, either American or drawn from other South American countries, can certainly bo made available ond can be financed by the united States. We believe that extreme euro should be devoted to the selection of these individuals, so that they ore not only technically competent but ore personally acceptable to thewith whom they max must deal. It will cortalnly be the proroeative of the competent Guatemalan authorities to reject technicians whose personal attitudes and mannerisms aro such as to preclude their being able to put their technical knowledge into effective practice. In the selection of such technical assistance teams, maximum consideration should be given to those areas of development which the Guatemalans particularly favor; there is no intention of imposing on Guatemala what other countries think would be tood for Guatemala.

A particular form of development to be vigorously pursued ia the creation of light industries in the rural areas, not only in order to provide ijiyi^ added purchasing power to the residents of rural areas, but also to make goods available to them at more reasonable prices. For tbe foreseeable future, the combination of

acric-oiutral development and light industry oeeos to ba the sensible pattern oa whioh to baee Guatemalan national doveOopnont end prosperity.

tJ'Io diocusoion must bo kept free of propaganda oa both eideaasnd ouat derote Itself to the sober er*noerlfl realities.

Uo are not hero to prmsldo over the Uquidatlca of American business interesta abroad. The Obi ted Fruit Company, ths IRCA, and the ternTa ffieotrlca,ert of the Aamricaa national intereit and will ba protected by the Dai tad

States as such. On tba other hand, the united States does not expect American

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ooBponlee to enjoy iifcaaai ii isnunlties and prtvilagee that would aake for poll ileal instability or social injustice in other ocuntrles, becauseondition of course would be harmful to the over-riding iaerlcan political interest, which in weary oaaa ip_ auparios to tbeeooooaic interest represented by this or that

Tbe fact of tbe matter la that, aa auch aa tha united States needs, for

both political and oconoaic reasons, tha continuance of its investments abroad, so does Guateoala need tho influx of forcing'capital. For Guatemala to attoapt to revert to an autarchic eeonoay would not only result in econoedo damage to tbe country, but lt would materially assist political radiosationoma ml at or other variety. There la no real reasonegitimate accord, satisfying the interests of both, cannot be found between American companies in Guatemala and tht Guatemalan Government.

The Government of the Dai ted States would like as much asto keep out of any negotiations between American enterprises and the Guatemalan Government, This can be facilitated if the Guatemalan Government will take pains to separate its accnoado demands on foreleg companies from the politioal assaults on tha united States that have usually accompanied tbe economic demands. The more quiet and busdneaolika the negotiations between tho Guatemalan Oovernment and American ooapanlocy

the leas th* American Goveroaant win here to fool or exhibit concern. Itrealised that the new reglne cannot burden itselfnrrenderforeign ooapanles of tba "vlotorioo" union tba Conravrl sta hare allegedlytba other hand, certain arrangenenta can surely ba awda to alleviateperpetrated by expropriation end deliberately lowthe lands expropriated. The Aaarlosa enterpriees hare repeatedlythey a* more sereraly taxed and thia reoomsnodatlon should be acceptedadjustments in tbe initax Imposed might Ooapaoaata for tbe lossesthe ooapenlen due to the' lev indemnity paid for the land. In addition,be made to lease to th* united Fruit Company oertaln lands which ltfor the efficient prosecution of baoanata production. However, these areof detail whloh abould be ironed outonference between thethe American ooapanles and representatives of tbe Guatemalan Oovernaentearliest possible opportunity'. The results of the oooforence abould bethe new government can actually present to the people two new"victories"victory In the form of ensuranoe that foreign ocmpanles can continuein Guatemala end thus benefit the national economy and anotherthe form of new taxes,n the

Another point! The United States, whloh has eet up many bMIB corporations In ocmpetitlon with private latere ate, has no objection to the creation by Guatemala of rival companies snd enterprises to tbe American companion pre-neatly operating la Guatemala. Nor is there any reason why American grant aid cannot be used for the formation of such competitive enterprises. What the united Statos will not do, of course, lo to furnish funda that can be used for the expulsion and destruction of tbe American companies operating ia Guatemala.

The regulation of relation* beta/eon the Guatemalan Gcrarnaent and the private compenlea actually oen tareory eimpla prlncdplei neither party ahould exploit tho other, but their relations should bo established

under duly acoepted legal principles. v.

RUFUS is the man and there will ba no deflation froa that. Any crltlciemn or doubts of hla pal* before tba faot that he new baa both tba manpower and to*toto* job. Bo also baa tba reputation of tygtng too lsedor of the popular opposition to an extant that do on* els* baa. For tha sakeeal change In the country, tbe type of transformation Lhat RUFU3 represents is essential. * palaoe ooup will not do.

unPTIS mU3 conductnanner aa to preclude any charges that b* has been an Invader or an interventionist. Furthernora, the Banner In which RUFUS la operating leave* hla oontplateuy free of any ocandtaante except onai that Ccoaunlst strength in Ouataaala ba llquldatod.

In accordance with tha fcrogcdng, it Is obvioualy up to RUFUS to chooseasooiatea in hla effort*. Dowarar, lt ia perfectly olear aad haa been bo stated by RDFB5 that ba will justly and properly rewardho xx help hla and those who are loyal to bin/ in tha effort. It la aleo known that ruftj3 la sufficiently aware of the aagnltude of hla teak, both before and after victory, that he will not reject the counsel and preatlge of onyona whose integrity is beyond dispute. The precise allocation of honors and functiona belongs to RUFUS, but it can be stated, even at tola juncture, that be plana to be generous.

In addition, it should be observed that RUFUS will be operating with considerable teohnloal assistance. He haa the humility and the deceony to rely on advico, aod his present advisors have hie respect end ocnfldenceufficient degree that he would no doubt rely on tham for counsel when It comas to the anastlon of whoa he shall aoaociate himeelf with both before and after victory.

It should bo nmphaalgad that tha victory of ROFUS la Inevitable and that pralladnaiy dl soused ana with other man of rank aod stature ar* simply caalgnmd to establish aa bread an Initial baas as possible for tha RUFUS aovaaant/ and to Bdninlse the upheaval in Anyone who la given an opportunity

Baa Tatrtwa

te work with KOTOS, at this late da to, ahould seise upon it aa the only poaaible guarantee for bis personal future and as the bast poaeihla service he can render in win! aiming internal strife in Guatemala. VI. The, Army

It la clear that, after victory, the Guatemalan army must be aedaxnlsed and re-equlppod.

As far as the supply of American eras after victory is oonaarned, it may have ocas to Guatemalan attention that negotialions are presently in progaess with El Salvador, Buadurea, and fiioeragua for bilaterial military aid agreements. It mayuatemalan lasaaesslon that acme of thase three oountries are delaying completion of these agreements. Tans Impression should be immediately corrected. In fact, although appearances are otherwise, the united States has dslayed the implementation of thesa agreements in order to be able toree Guatemala with them. Raving baccate- evare of the ao&atonoo andolnoeaityarge eati-Caatsuniet clique wbltbln the Guatemalan army, the United States has decided that it does not wish to prejudice tbe present or future position of this aoti-CcraaunlBt group bymilitary old agreements with other countries that could conaelvable oompel these antiMkaaauniat Army officers toationalistic position that would throw them into the arms of Ahbanz and the CooDuniQts. however, If the American estimates of anti-Cogimnl nm In tbe Guatemalan Armed Forces ore proven wrong, then these aid agreements will be completed to the detriment of Guatemala, whereas, as matters aland now, they con await the emergenceree Guatemala to join in them.

As far as the supply of arms to antt-Communiet elements of tho Guatemalan Amy before tha Insurrection io concerned, it stay be possible to arrangeupply if trusted Army officers canlan for their reception that will stand expert scrutiny. Thia dell very must, of ooursa, ba unofficial and cannot be accompanied by any relaxation of the official American position against ths supply of arms to Guatemala. etailed plan for the reception of such anas, Including the names

of too officers who would receive then, the ultimate reclpisnta aad the security yrocsduroe envisaged for tha reception and dletrlbutlou of tba srne, would be valooaad at tba aarlieat pnaalBU opportunity.

aa for aa tha supply of arae to tba Army during tbe insurrection la concerned, this will definitely be possible wa once tbe loyalty to the antt-Ccnmunist cause of given units and given gmrriscoa la firmly established. RUFU3 will presumably have tha ax aoaoa at hand to aake such supply poaatbla. It ia reoonoooded that laqulrlas on both this and on the supply of arms before the insurrection be directed to RGFir. through aaour* ohaonala. VII. Labor.

This dlBcuanlca, Ilka the discussion of tha future position of foreign coapeniee in Guatemala, auat be kept free of propaganda.

Basic to any rational discussion Is the fact that organised labor in the Ini tod Statesowerful Instrumentality and that ltoice In tba United 5iatea easily ccewrnisiirnte with ahat of aanagemsnt. With thia premise, tharals no reasou even to enter tain any suspicions from Guatemalans to the effect that tbe United States io against Guatemalan labor. If Guatemalan labor leaders wish to rood sinisternto the letter sent iny Proeident Moaay of the AFofL to irbenx, they are at liberty to do ao, but they thereby only show either ignorance or hopeless partisan ship.

As far aa Lb basic struoture of the Guatenalan labor aovoment is concerned. Its devision into aa industiral foderatioo, the CGTC, aad an agricultural fedoratia-i, the CBX,oose serlea of oraft unions of tha SAhT variety appears hwninally sound. It ia obviously desired, beaver, that Commuaist influence be removed froa all thaee unions wnareeor it exists. Thia ia ths only condition that is to ba iapeesdon Guatemalan labor.

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If lt wourfj make amy ronnrnmnndatlnnn oa union matters In Guatemala, Ddted States labor officials would probably raocaaaaod that ^gi^fi firgant rati on ba aero completely freed of Gcvarnaant reuuictlocj. than lt now la. That lav unions ahould ba fraa to organiBe oron thougharrings are in oonfliot with those of tba glim limit Furthermore, aa long aa* <Mere needed for the unions, they ahould be aade available to the unions from afuod voted by the legislature, and not by exeuoltlve flat.

as far as tha relations of Guatemalan labor with forelng ooaasrical enterprises are oonoerned, it must be reaambered that foreign enterprises pay wages as least as satisfactory aa those of tba domes tin aatarprises. Ho objection is Interposed toward workar-cau-galning for area higher wages. It is, however, most forcefully to be pointed out that labor agitation agalnet the ajmssj sj on of forelng capital from Guatemala merely deprives Guatemalan workers af earning opportunities and Gmtemmla la generaligher level of prosperity.

Ths American aid that will be given to Guatemala should be locally allocated with aatrlaio participation of Guatemalan labor and labor laadare. As far as the labor coda

As far aa the labor code goes, it might usefully be modifiediew to removing government restraints from the Guatemalan unions.

Any asaistaace do aired ia union organisation and in tha practice of union nensgement would presumably be cheerfully granted by American labor.

It will be expected that the labor movement break off its ties with the CTAL and the wTTD. Maaberahip in the ICFTO, will while not mandatory, would be desired. Meotershlp in tne OUT is expected.

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