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RECORD AND COVER SHEET
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lOWTiOl Cia> TO
IAIMH FQIU Chief, W/0IP
The Coffeeinpecial Con-
siderations rteparrfin^ Possible Economic Sanctions.
In preparing the economic report on the Coffee Industry in Guatemala (ourertainerced which was outside the scope of that study end is outside the scope of this Division's functions. This evidence, nevertheless, is passed to you because it my be irnoortant to the successossible operational plan forconomic sanctions. Those considerations ntijrht be disregarded if Guatemala uero the only country concerned. Thirteen othor countries in Latin Africa, however, are coffeo nroducers. Their economies can be vitally affected by US policies or actions withto this coitncdity. Regardless ofentiment, theanij business interests of those countries would tend to judge this case, however it nlfht be presented to public knowledge, in the li^ht of its implications for their own future economic and political security.
Our evidence concerns: (a) special difficulties i'luerilino preservation of Secrecy before and after the event, (b) posoiblo public attribution of responsibility to CIA, fc) ability of Guntamola to'sell its eeffoo stocks to European buyers and thus evade (IS oressure,
probable adverse results of tine lag in impact of economic action,
lone-term versus short-tern advantages, and (f) nationalistic nndxploitation of reveolediscredit the IS in Guatemala and otherAmerican countries.
a. Preserving secrecy: The danger to maintaining secrecy comor, froii two directions which will bo extremely difficult te control: (l) the African ndvocatcc ofl tho American interests who fear business losses in case of US intervention,entral Americans who will notto rake their opinions Known publicly at home and to the Anerican press.
L-Li i
Apia
The Anmrican advocates of intervention will he just os dangerous after the event as before it, with regard to future interests of CIA and the US Government in Latin America. If the operation is successful, some of those who havesuch- action at any tine will be likely to brag about their own participation, whether they actually were involved or not. Such individuals will tend to be devoidense of personal responsibility as long as they see no direct danger to their own interests. Various other interested persons not susceptible to our control night be adversely affected and thereafter would be likely to throw out charges of US intervention to the press in this country and before anti-US interests ln Latin America.
Another danger to security lies in the fact that there is such f. Inrge number of diverse investrant interests, both in the IIS ant! in Control America, which are involved in the problem. This multiplies the risk since all concerned cannot bo expected to agree; the dissidents can hardly fail to ret some information about the proposed action ami nre likely to reveal it doliber-etely. The practice of US buyers extending short-term credits to Guatemalan coffee producersituation that is especially vulnerable in this regard. J. A. Folger, for example, last year loaned overillion dollars to several Guatemalan coffee producers. The parent firm in Sen Francisco and the Guatemalans involved, therefore, have large stako3 in tho coffee industry, and could not be expected to accept serious financial losses nuletly. Moreover, they comprise angroup wherein convincing explanations of any majorin credit policy would bo demanded, thus compounding the chances of unwitting or deliberate revelation. Experience inency shows that although thoroughly trained and indoo-trlnated, miry non-intelligence-trained people fail to maintain secrecy "forever" bo causeack of understanding of the effects ofinor breach of security. When dealing with independent businessmen accustomed to complete freedom of talk and liabitually inclined to apead hours daily in trade gossip, the prolw.bility of maintaining complete security, especially after the event, becomes very doubtful.
Intelligence reporting indicates the existence of aenount of loose talk already predicting that the US is planning to use economic sanctions against Ouateitola in an
Sccuaffy lnfornjation_
cnv. copies
Svcuriw Information
effort 'o curbthere. An.xample or this ty;wivident in ninterviewIA cn-nionnnt in Townd en Anorlcenhon rjuflteptalen coffee.
Int woe reported tlirtf^tlioepor-Vrr of I'-iutteKilanexpressedserious
concern Hint tlw> IB ws planningi.siwaft worried becnuRe he had purchr.oed Guatemalanextensively and had no escape clause in hiswould lose heavily in tJio event of any dislocation incoffee industry* (it is likely ttiat Medina didconfine expressions of his concern to
of the US rovornnent.;
row Central Anoricp. is tha report thatvictorious Cost* Ricnn presidential candidateof the largest coffeo growers in tho nrm,
to (iti'tei*nla arc proposed to Foreign Minister Osegueon wtub Gu^to-alr review its relations with thn US and. try to improvei"ce he had received thc distinct L'spreasion on hia trip to tha IS that the US war. probably goinr to apply econonie sanctions rrrinst Ountemla if totters get worse. Fipueres allngodly offered to help in settling tho differences botvecn the two countries and oxprossed the hope that Costa Rica andould be "inch closer once hp hocamo President*eportedly 'old the envoy that Guatemala was not worrier) in thc sli^htact about any economic action the US nde-ht tak* as Guntemle already had European wxrl ets all lined up to bsJta crre of their coffee and other produce.
In San Salvador shortlyrevealed
the contont of his conversation witheda end added that Figuerea "had been vory welln the US by officials of tho Dopirtrnont of State, by Mr. C. D. Jackson in the White House, are'r. Allen Dulles, and intimated he might bo able to assist the Guaterelen Oovernnentn^AtawlU. th* United Fruit Cofipeny." ZJ slaijwl he ban several meetingo with President Arbenz, Osegueda, and othor nuatei'olan officials, but he fount! themisinclined to occept Figuerea1 viev/ that sanctions woul" bo
CoFIES
Attribution of responsibijitv to. CIA: Theof Figuerns ineeting with the Director of CIA and tho nature of tho comments ho wide indicate that ho presumes that other interested people anticipate that CIA will be responsible for the opposition. This contact with CIA has been reported in Central America, where the Agency has already boon credited with instigating an abortive revolt in the interest of the I'nited Fruit Company. This charge also lias received wide publicity in the I'S press. onsequence, any dislocation in the coffee industry will also probably be attributed to CIA, whether the Agency is responsible or not.
diversionGuatemalan coffee to Oseguedn's comments, above quoted, as toto sell Its coffee to European buyers protebly isan empty boast. Reeont reporting indicatesand negotiations with Gernany,argoof Guatemalan stocks. Guotem?la this year openedin Kanburg.
adverse results of time la//i Theon oncmtion/il impact which would take Bffect fastn^rrlyzo tho ftuatennlan coffee industry seens rwete.
Coffee interests in tho ITS and in fluatenala are so woll integrated that any hints of approaching sanctions or boycott are likely to pass amongo quickly that elements in opposition to the plan could readily marshall their resources for resistance and evasion.
In tho event of advance security leaks, or if the action should take place in successive stages, the Arbonz Government might be able to increase its domestic support because of the nationalistic resentnont the government probably eouH arouse on the basis of suspicions of GS intervention. Arbenz also could stimulate alarm and adverse reactions in neighboring countries which, liko Guatemala, depend heavily on one or two export products. It is not beyond the realm of possibility that sorio of these countries might try to bring the case before OtVaCA (whose Secretary-General, Roberto Canossa, is ono of tho leading coffee growers of the area) or tho OAS, and thusthe IJS and damage inter-American relations. In any case, Giwtepiala and other Central American countries might mora aggressivelyursuant to recent overtures- Europeantep which would weaken one of tho bonds of tho inter-American system.
OPIES
information
versus shorts torn advantages: In casesecurityhe long-tern interests of tho AgencyGovernment in maintaining the willing economicLatin American countries would be jeopardised. US good will and intentions on the econonie front hasfor soma time throughout Latin America, andalready exists in the Latin American coffee countries regarding the power the IIS can wieldintorosts. f recent illustration,73 bulletin issued by the Boardof the Coffee Federation of Central America,the Caribbeanhich complained ofthe US seeking to "boycott" Latin American coffee.
and Communist exploitation: and. propagandists throughout Latin America, as wellagitators, can be expected to exploit andany hints of infonoation detrimental to the US,lines, for an extended period after the event.
Such interests in Argentina could be expected toon the anti-US oropa-nndp aspects ofinterference in GurtemnlA, regardless ofecent goodwill overtures. It certainly would be very difficult for the Argentines to resist an opportunity of exploiting in any derogatory way thefflct that their "favoritepruille Braden, is now cliipf of public relations of the United Fruit Company. *
Original document.
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