Created: 12/7/1967

OCR scan of the original document, errors are possible

IIm following intelligence organizations participated in the preparation of this estimates ;

Tha Coittrol Irmjlliganeo Agoncy and thu lntalliganc* organization* of ihaof Slatend Iha NSA.

Coneurr/ngj -

Dr. R. J. Smith, tor tho Deputy enactor, CantruJ IntelHgehos

Mr.ha Director ofand Research, Deportment


Vice Adm.owranc. for tha Director, Defont*Agency li. Gan. Moohoil S.ho Or actor, Notoool Security Agency


Dr. Chori* H, Relcha.di, for tha Aiahtont Gtmaral Manager, Atomic foeegy Com-r'.von and Mr. William O. Cregor. for tha Assistant Director. Fodarol Bureau of Invention, the wbf.ct being outiide of jurisdiction.

Thb material contomaNotonal Dafarrto of tho Unltad Stolat within tha meaning of th. iia-^PU TttU IB., th. bona-mkaion or relation of whiafJTan.o onroh.Wted.









President and His

and the





Shorter Term




To consider the nature of Argentina's basic problems, the character and actions of the Ongania adniinistration, and the prospects foreconomic and political progress over the next four or five years.


Ongania is bent on retaining power as long asto revive the country's economy and, when that istackle its political maladies. The government has givena sustained attack on the most serious economic aberratiorjs; itsuspended politics as usual, ordered all the politicaland put off indefinitely any attempt to come to gripscountry's most divisive political

admiriistration has, for the most pari, avoidedactions, and, in the conduct of its business, it appearsthan military. Most Argentines, though not enthusiasticseem quite willing to wait and see how his governmentbelieve that Ongania will continue to hold power over theor so.

adinniistrarion hasomplex economicto achieve both financial stabilization and economicIt has sharply reduced the power of organized labortaken positive action to reduce budget deficits, increasecontrol inflation. These measures have attractedand private financial and technical support from year or two we look for additional progress in budgetaryin stabilization measures, and in some aspects of development.

the longernext four or fivethe regime can continue to keep Argentine political problems on

the shelf. We think Ongania will have great difficulty In holdingcivilian support behind his program, and as time passes hisbacking is likely to become less solid. These factors willany attempts by Ongania. to come to grips with, the Peronist problem. Further, we do not believe that even over this longer period of time Argentina willepresentative system of government capable ofonsensus on policies and tactics for dealing with its social and economic problems.

E. We believe, nonetheless, that the government will makeprogress in reducing the impact of fluctuating harvests and commodity prices on annual growth rates. Broader economic success, however, will depend on the governments ability to maintainin its policies and to retain public confidence in their durabilityumber of years. We believe that the government's chances of remaining in power over this longer run are considerably better than even, but we are less confident that it will be able to adhere firmlyuccessful economic policy.

F. Onganfa's anti-Communist leanings will continue toorce for close cooperation with the US. Among the issues which could adversely affect US-Argentine relations wouldefusal by the US to carry out what the Argentine military establishment regardsommitment to assist in the modernization of Its armed forces.


L For decades Argentina has failed to achieve the great potential of its human and materialountries whichrears ago were Argentina'sand Australia, formoved far ahead both in economic growth and lo advancement of political institutions. The Argentines, arrogant in their conviction that they ought to be the leading power among Latin American nations, have increasingly resented their country's failure to progress rapidly and to modernize. They have been better at expressing these aims, however, than in doing something to fulfill them. Argentines have seldom been willing to make personal sacrifices for the collective good, and, in recent years, have found it extraordinarily difficult to reach any political consensus. From the overthrow of Peron,ntil tbe assumption of power by the present government, there were five regimes in Argentina, and none of them was long capable of decisive, consistent action.

The declared purpose of the present government is to provide strong rule for as long as required to correct the country's most serious economic aberrations and to establish new foundations for orderly political and sociallearly thisask of great magnitude and not one where results can readily be achieved; thus, the most important tests of the government's performance may come onlyeriod of four or five years.

Argentina has basic economic problems that defy quick, easy solutions. The population is more thanercent urban, and industry and services account for more thanercent of gross national product (GNP) and total employment. (SeeEconomic Sectorsercent ofet the economy has continued to depend on agriculture to earn the foreign exchange needed for its maintenance and development. The conflict between the interests of thebulk of the population and those of the rural minority producing for export hasajor dilemma in national policy for decades. For many years Argentina has sufferedtop-go pattern of economic growth, and from budgetigh rate of inflation, balance of payments difficulties, and widespread inefficiency in production. Since the removal of Peron, tbe Argentine economy has been unable to sustain growth for more than two successive years.

'Thoseopulationhich provides one of the largest and best educated labor forces in Latin America, aa eateosive and very ferale agriculturaleveloped industrial base, and adequate petroleum reserves and hydroelectric power potential.

takeovers In Argentina are by noew phenomenon;0 coups have removed Eve civilian and two military governments. Each time the military have taken power, there have been some among IU leaders who wanted to retain it long enough to impose basic political and economic changes. Until the coupowever, these views did not prevail, and the forms of ccaatLtutioiiaJ government were restored fairly quickly.

Year-lo-year performance has fluctuated widely, with CNP rising as much as nine percent or declining as much as six peroent in one year. The rate of growth for the periodhole has been slow and,he annual rate of growth in CNP has averagedsame as the rate ofgrowth. Demand for goods and services, however, has continuedesult of politically motivated wage increases snd increasing budgetthe cost of living has risen an average of aboutear.ndices of Economicrovides these and other economic data for the period}

Figunt 1


Economic Sectorsercent of Gross National Product Selected

The national budget has been strainedombination of falling revenues and increasing expenditures to cover the operating losses of the public enterprises (mainly tbehich are overstaffed andong tradition of inefficiency has also been evident in the industrial sector, where, supported by subsidies in various forms and protected by the highest tariffs in Latin America, producers have had little incentive to reduce labor and other costs, increase productivity, and expand markets. Although the industrial complex absorbs more thanercent of imports, its products generally have not beenin foreign markets, and agriculture remains thexport earnings. Over the last two decades, however, thesector has tended to stagnate because of insufficient Investment: Profits have been limited and investment incentives dampenedombination of increased operating costs and export taxes, which have run as high asercent on wheat, meat, and other commodities. Thus, in failing to adopt modemtechniques, Argentina has lagged steadily further behind its mainAustralia, Canada, and the US, and has failed to expand sufficienUy its traditional exports.

The resulting trade deficits, together with periodic Sights of capital, have in turn, led to the accumulation of an extraordinarily large foreignhe tendeocy toward periodic crises in the balance of payments is now intensified by the heavy lien placed on export earnings in order to service and repay the foreign debt. Swinging between conditions of economic boom and bust, the country has not been able to pursue consistent development policies and public confidence in the future has been gravely eroded.

Among the country's political problems the most divisive, in recent years, has been the persistence of Peronism. Peron's creation of this political move-meat hadeglected sector of the Argentineunskilled as well as its better trained laborshare in the exercise of political power. By the end of his decade in power Peron had alienated many of the other groups that had supported him atwide variety of nationalists, elements of the military, the Church, industrial and commercial interests.and despite having been in exileerontilltrong influence over the rank and file of organized labor In Argentina. Tbe Argentine military leaden were clearly disappointed with the slow-paced approach of President Arturooward modernization of the nation, but It was his failure to develop an acceptable strategy to meet the threateronist victory, in key national and provincial elections to be held Inhat provided the occasion far the military seizure of power in

Upon seizing power the military leaders prorogued the national andlegislatures, dissolved the political parties, dismissed tbe governors of the

'Total foreign debteakillioninoe then imports have been held down and exports have been eapaoded, thus permitting foreign indebtedness to be reduced.

provinces, and purged the Supreme Court. The military junta, whose members were the commanders in chief of the Army, the Navy, and the Air Force, also concentrated all executive and legislative power in the hands of Juan Carlosetired lieutenant general and former commander in chief of the, whom they Installed as President. In sum, the military leadership decreed an end to political processes until some unspecified time in the future when the renovation of the nation has been substantially achieved and Argentina restored to its "rightful rank amongn the following paragraphs we propose to examine the character of the military regime, its program, and its prospects over the next four or five years.


A. Tho President ond His Advisers

he Ongania governmentresidential dictatorship dependent upon military support The way in which it intervened in the national universities and the overrcaction of its police forces to student resistance and provocation led observers to suppose that it would be as repressive as other Latin American dictatorships have been. But since the summer6 Ongania has notto repressive action on any major scale. He has issued an anti-Communist law underide range of activities could be interpreted as Communist and punished by severe penalties. This action was motivated by deep-seated aoti-Communist convictions which are shared by the military and othergroups in society. The admuustrationtrong bent to prudishness and has banned, forumber of plays and films that were accepted elsewhere. Ongania Is also intolerant of either political satire or criticism of the armed forces. The press remains relatively free, although the recent banning of two small periodicals bos revived fears regarding the government's intentions. Nevertheless, the press has con tinned to criticize official policies andalbeitegree of self-imposed censorship. This situation contrasts with the repressive and coercive measures employed to control the press during the Peron dictatorship.

n the conduct of its business the Ongania administration appears more civilian than military. While retired military men have been placed in charge of most of the provincial governments, of the Federal Capital and of the National Development Council, the day-to-day business of running the nationalhas remained in civilian hands. Within the government itself, the Cabinet Ministers and their principal subordinates ore civilians, and economic policies are now largely formulated and carried outeam of civilian experts. The Supreme Court was purged shortly after the military takeover, but the lower Argentine courts have ruled against the administration on several occasions.

Ongania hitoselfaciturn professional soldier, widely respected for bis cole in restoring constitutional government during the turbulence. He does not protect great appeal for the general public and, in his reluctance to court public opinion, he more nearly resembles the late President Castelio Branco of Brazil than the flamboyant Juan Peron. Ongania isan of broad fatellectual background,rusader in tbe usually accepted sense of the word; indeed, he tends to be pragmatic and even cautious. He has shown an ability to choose well among various options presented by subordinates,nack foreasonable balance among the views of competing groups. One factor which proved detrimental in his first few months in power, and which may still cause difficulties, is his long, close association with rightwiogevout Roman Catholic. Ongania had previously participated in religiousa number of these individuals.

As President, Ongania spends considerable time listening to and weighing the suggestions of bis advisers. There are within his administration varying viewpoints, but most of the officials adhere to one or the other of two basic lines of approach. Argentines refer to these two groupings as nacionalistas and liberates. Both are nationalistic, but tbe nacionalistas tend toward xenophobia, and arc opposed to foreign investment, particularly in the petroleum industry. They are better described as statists, because they strongly support state control of large sectors of the economy, many of them have previously belonged to rightist organizations, and many have no faith that the traditional forms ofdemocracy can work in Argentina. In recent months Ongania has shifted away from his early dependence on the statists, although their views are still represented in his adrrnnistration by such individuals as Maj. Gen. Osiris Villegas, the Secretary of the National Security Council, Guiherrno Borda,of the Interior, and Mario Diaz Colodrcro, tbe Secretary of Government

Tbe liberalea stress the importance of free enterprise lo the economy; they are liberals inh century sense of the term, holdingonservative,outlook. They believe in constitutional democracy but are reluctant to accept the lower economic classes and are willing to limit tbe suffrage. Sincen spite of his continuing close personal relationship with various of tbe statists, Ongania has clearly followed the advice of Ihe liberals inArgentine economic policies. He has appointed the respected economist Dr. Krieger Vasena to lead his economic team and other liberals to serve onmen who are reasonably interna tional in outlook, are proponents of private enterprise, and welcome foreign capital investment in all fields. The liberal grouping also includes individuals wlio hold other key jobs, among them LL Cen. Julio Alsogaray, the commander in chief of the Army, and his brother Alvaro, the Ambassador to the US. Ongania has not, however, committed himselfto the liberals and thereby keeps the statists hopeful that they may

have their turn.

B. Ongania and the Military*

The armed forces, and particularly the Army, are firmly committed to the revolution ordained by the military seizure oi power innd support Ongania. Initially, the military leaders had limited access to th* President but over tbe last year Ongania hasuch closer liaison with them to facilitate exchange of opinions. In the case of military criticism of tbeoriginal economic team, for example, the military leaders were able to bringhange in the Cabinet. On some occasions the President acts to keep situations from developing which would arouse military discontent, especially in tbe Army.

Hum for, Onganfa has been able to keep military leaders with widely disparate views, such as Aisogaray and Villegas, among his principal advisers. He has carefully balanced one with the other, to prevent either fromerious threat to his position. At the same time, through his control over military promotions, retirements, and assignments, Ongania has been able to remove or neutralize potential rivals and to move supporters of the revolution into key positions- In this manner, and while acknowledging that the armed forces are the backbone of the revolution he is carrying out in their dudc, he has been able to keep tbe direction of the government in his own hands.

in the Army there are Individuals and groups who are opposedor his present policies, or both,ariety of reasons includingambition and political differences. The impact of these Individualshowever, is limited by their inability to unite and by their lack ofor program able to draw support away from Ongania. The presentIs agreed on the necessity of maintaining its unity and givingchance to get oo with the modonixatJon of the nation. Thus,ossibilitylash over who ultimately controls the government,in chief of the Army (Aisogaray) and Ongania have aln defending the present economic program against itsin the eyes of most miliUry leaders, Ongania has made few

' Ton Argentine security farcesersonnel strength offoDowii


National Gendarmerie

Naefaoal Maritaae

The Gendarmerie and Maritime Prefecture an largely border and coastal patrol (intra, ir-speitrvrly. but both are well trained paramilitary forcea under sautary leadership andThar* Ifederal Police Fore* of abouten.0 uf this force are Involved In public safety activities In ihe area of the national capital; they Include two units totalingen who havo been trained ia paramilitary tactics with US assistance.


A. The New Program

The promt government took office with ao awareness of the nature o. the couotry's economic problemsetermination to deal resolutely with them. At the outset, however. Pagania's eceoomic advisers had little or no government experience and no clear idea bow to begin. They made some successful moves against such obvious targets as the inefficient and costly port system and tbe work rules for the laatjnnaj railroads. These moves fell far short of the expectations of those groups who had placed Onganfa in power. Before the end6 it was clear that inflationary pressures were growing, the economy was not moving ahead, and the ad mm tot ration's economic efforts were floundering. It was (henhat Ongania responded by shaking up his Cabinet and turning to the new team of economic experts.

Goals and Tactics. The major goals of the broad uttd complex program luillated by the new economic group in7 are financial stabilization and economic development. The kind of program Kricger Vasena has undertaken requires careful tuning and coordination to prevent the aggravation of problems in one area by the measures taken to correct conditions in another. Tothe inflationary' impact0 percent devaluation of the Argentinewhich was designed mainly to effect an improvement In the balance ofincomes policy has been initiated to freeze wages and to hold down prices. The simultaneous lowering of tariffs also was meant to reduce tbe costs of imparts as well as to force an increase in investment and production efficiency by lessening protection from foreign competition. Another countcrmrktionary objective of prime importance is the reduction in the government fiscal deficit. In the short term, this Is being accomplished mainly by an lo crease tn tax- revenues. Any sizable reduction fn the numbers of government employees is beinguntil they can be absorbed into productive jobs elsewhere. To facilitate their transfer and to counteract the recessionary effects of thehole, the government hasariety of Incentives to private investment, both foreign and domestic.

Tlie administration lius repeatedly stressed lis intention to reduce, and where possible, to eliminate government involvement in those sectors of thewhere private capital can be induced to take over. Generous tax and credit privileges liave been provided for investments in agriculture, industry, mining and construction, and private capital has been invited Into basicand services previously owned or dominated by the government.

At the tame time, the artnimstjafcen intends to expand public investment, primarily tn tbe ecooooiy's lnfrastnxrtu.-e. Its plan, whichariety of power, transportation, irrigation and Ipft'itg projects as well as basicand agricultural programs, is to be financed through domestic savings and foreign borrowing. These are designed to spur current economic activity as well as long-term economic growth. The largest of these projects is tbe

El Chocon-Coros Colorados hydroelectric development project which might costillion dollars over several years. Its purpose is to promoteas well as industrial development in the Ncurrucn-Rio Negro area, and to help check the migration from the interior to the heavily populatedarea (see map showing populationhe Onganiahas announced that this project will be initiated soon even if the World Bank does not provide0 million loan requested to finance part of the costs of the imports the project will require. The administration has indicated that it might call for European and Soviet assistance.

ho Record

No economic miracle has been achieved, but major problems have been identified, and action has been begun on many of them. Krieger Vascna has sought the counsel of international agencies, has incorporated tbefr suggestions in his program, and has thereby enlisted considerable official and privateand technical support from abroad. Thus far, the Argentine Government has obtained0 million in the form of standby funds from theMonetary Fund, the US Treasury,onsortium of European and US banks as well as important development loans from international financial organizations. Moreover, for the first time since World War II, arrangements are being worked out to float Argentine bond issues in the European market. The marked improvement In tbe financial position of the country is reflected in the substantial increase in the Central Bank's holdings of gold and convertible foreign exchange (from less0 million in early7 to0 million by the end of July).

Ihe effort to control rises in the cost-of-living Index has not been soPrices rose by nearlyercent during tbe firstonthshis rise was due in large part to theercent devaluation of the peso and to food shortages caused by bad weather and speculative hoarding of wheat The administration, however, moved quickly to relieve winter shortages bywheat from Spain andis doing so again to lessen tbe impact of the October floods. The largest portion of the price increases resulting from the devaluation has been absorbed, and current progress in stabilizing wages and utility rates holds promise of limiting further mflabonary pressure. In addition, there is some indication that businessare beginning to accept tbeiew that future profitswill be determined by efficiency rather than inflationary price hikes and protection from external competition.

The administration has, moreover, exerted an important stabUizingby Its reduction of the budget deficit. For die first eight months7 thatillion pesos) was in real terms less than one-half the deficit for theriod 7 expenditures are aboutercent

er, in real terms, than for the corresponding eight monthsevenues have risenercent. Most of this increased revenue comes from the export

tax and aa emergency property tax, but improvements in administration arc also partly responsible.

measures to encourage private enterprise have produced somea renewal of domestic business confidence. This is reflected inresponse to the voluntary price-restraint program and in theof tbe Treasury Bill marketapse ofrivateare still very cautious and some pockets of depression stillis now at about six percent. But the fact is that, despitestabilization measures the government has taken, it has averted anGNP per capita will probably rise7 by about onethe confidence of the long neglected agricultural sector will befor the government, though reductions in taxes on varioushaveseful first step.


The country's basic political problem continues to be the inability of its leaders toepresentative system that allows all political groups to participate and is acceptable to tbe military. This problem predates theof Peronism but has been complicated by it Peron, by giving material gains, social benefits, status,olitical role to Argentine labor, won its support as the popular base for bis regime. Under Peron laborrivileged, rather than an exploited, sector of the society,st-Perdnwere not able loew uibor-managcment-govcrnmcntwhich either labor, management, or the military would accept Although Peron's control over the leaders of the trades unions has declined, he still has considerable influence over the rank and file of labor and other elements of the Peronist movement Thatajor reason why the movement Is anathema to the military. Many of the senior officers realize that Peron's return fs not in thewould not permitthey are equally unwilling to allow Peronism toosition of dominant influence.

The Ongania administration has postponed any serious attack on the problemsack of political consensus and the persistence of Peronism. It has ruled by decree aad concentrated its energies on the economic front Onganfa has refused either to work with traditional political parties or toate for holding elections and relinquishing power.esult virtually all the country's political factions are in opposition to him. So are the bulk of the country's intellectuals, including teachers and university students. The political opposition has remained largely passive, however, and, in the main, the general public has seemed quite willing to wait and see bow the government performs.

A major point of strength for Ongania continues to be the dMsfveness of the opposition. Formidable obstacles stand in the way of any effectivebetween the two principal political groups, the Peronists and former

dent Una'shere are deep-seated personal animosities between some of tbe Radical leaders and ihe Peronists; there are wide differences among the various Radical factions; and there is little real unity among tbe Peronists. Nevertheless, some exploratory conversations aimed atorking arrangement have been held between Peronist and Radical leaders, and the members of the two groupings share many common views about what needs to be done in Argentina.

Peron's issuance of conflicting mitructioni, to various Peronists Harming to be his spokesmen, has undercut attempts at Perecist unity and has enabled bim to prevent anyone else from assuming his mantle. Furtherraore, as long as Peron is the dominant figure in Peronism, the Radicals and other opposition political leaders must consider the likely results of elections in which Peron would probablyecisive InflutinoR on the outcome of the voting. During the last decade virtually all Argentine political parties, including the Communists, have sought to win over the Peronist maun but none has succeeded.

The government's success in handling labor resistance has demonstrated tbe present political weakness nf the unionsembership ofillion. Labor leadership has been divided and few of the unions have gone far in backing up those unions which have challenged the militaryThis lack of labor solidarity reflects the Iieterogeneous membership of the individual unions (some representing highly trained workers while others are made up of unskilled laborers) and the divisions within the leadership of the General Confederation of Labort also reflects the basic dichotomy in the Argentine labor movement. Initially made up of unions with socialist. Communist, and even anarchist traditions (derived from the massiveof Italians and Spaniard!0. the CCT was inundated under Peron's leadership by tbe rapid organization of new unions. Many of the members of these unions were native Argentines, who had migrated from the provinces to tbe metropolis* These migrants from the more conservative societies of the Interior carried over into their unionraditional attachmentatron. Peron filled this role for them then aodonsiderable extent still docs.

The present government hat revened Its predecessor's largely laissez-faire labor policies by decreeing obligatory arbitration In labor disputesthe national interest While other factors undoubtedly were involved, the

'In the IflOS coDgnwilonal eUcttocu Illia'I party polled aboutermit of the total vole and tbe Perooiet-celented parties acmeercent. Nona ol the otaW partJa* aBHlMcl more than seven percent of tha total vote.

ad tb* nJd-lSOO. nafajratfea from tbo provtnra to th* greater Bocaoa Aires ara averaged0 panons each year. Daring th* rapid trrfnimalinikn oft tha number of mlgncci tnemaed to an earaantaal mvmgmnnoaDy. Ia the yeans7l the bright af Pafa'i program af hanWrialrration. thatii aathaataad to hav* mil ailear. It has oonanued to oaase the pope-la tion of ihe grater Jlix-nm AUra ara to growlit) partem70 (the data of tha latestompared to rae national average, oferoent.

government's firmness in dialing with labor is reflected in the loss of feweran-days, caused by labor disputes during tbe first halfs compared with morea the last six months of the lllia ad-iruriistratioii. Over the last few years price rises generally have been matched by wage increases, 'litis probably hasole in the refusal of tlie rank and file of labor, despite its grumbling oyer rising prices, toonfrontationtrong grrvernment.


A. Tha Shorter Term Prospects

Ongania has made appreciable headwayelatively short time. Over tbe next year or two he probably wfll press on with the general program his administration has developed, cootmuing to give priority to economic ma It en. and hoping to leave the major pnlHwl and social problems until later. We think that over this shorter term, he wfll retain the military support needed to give continuity to his economic program and that he will continue to make progress on Argentina's economic proUems.

Over the shorter run, the amount of growth and the degree of prosperity In Argentina will continue to be affected by the size of the wheat and corn crops, and on world prices for these and other exports such as beef and wool Hither poor harvests or lower market prices would decrease the administration's revenuesombination of both would force it either to curtail sharply its program of public works or to secure additional outside financing. Similarly, should the manufacturing sector fail to pick up substantially, the administration will be seriously hampered In carrying out the dismissals of governmentparticularly from the railroads, needed to effect further reductions in tbe deikab of government enterprises- Under such conditions there would be military and civilian pressure on Ongania to put the statists ln charge of economic policy We think that iaitiaUy, at least, be would resist such pressure. If ooodrtioTU did not bxrprove, however, be probably would give the statists their chance.hift would be politically popular. It would mean, however, that Argentina would be reverting to an urban-oriented ecrsrtoraic nationalism which would tend to renew the country's foreign exchange problems, discourage foreign capital investment and pose obstacles to long run economic progress.

We believe, however, that Onganfa will continue to hold power over the next year or two. No great enthusiasm for him or his government Is likely to develop among the general public, but there will probably be much more apathy than outright opposition. The traditional political parties will undoubtedly seek to exploit such discontent as exists, but we think that they will havo only limited success. Many among the Intellectuals wiU continue to be antagomstlc toward Ongania, and tlie administration will almost certainly encounter addition"!in its dealing with labor.

tbe very elements in tbe political sphere which are most likely toactive in their opposition tosome groups among theamong the Radicals, and perhaps among thetheto find support or sympathy for their views among the military.therehort-run threat to Ongania. almost certainly it be* in theitself. Here Ongania must proceed with considerable captiontoalance among the senior officers and among tbe viewsHe has, however, several things in bis favor: (a) He is clearly awareneed to retain tbe backing of key officers, and, as former commander inthe Army, be has close knowledge of the individuals he is dealing with;can control retirements and transfers so as to keep officers loyal to him inimportant ootmnan&'i; and (c) no one In the officer corps at presentprestige or support that Ongania possesses. Andngania can showtoward securing the return of the Falkland Islands (Islasthe UK, his prestige will be enhanced.

B. The Longer Run

We think that the government's economic program has the elementsfor sustained, long-tram economic growth. While that program is taking effect, the Ongania administration does have the advantageavorable credit position abroad and sizable monetary reserves to help it riderop failure without sharply disrupting longer range development. Continuity ineconomic policies for fiveperhapsprobably be necessary to alter the inflationary psychology and skepticism that have developed during years of "stop-go" approaches to the solution of deep-seated economic problems. All participants in thr. mmonii life ofountry must bethat theexist today will continue into the future before they will change their patterns of uiveatment, production, and to: is> imption.

Over this longer period, however, Argentina'i economic and politicalwill become increasingly intertwined, no matter bow much the government tries to keep them separate. Either economic successes or failures are likely to have heightened impact on political development: failures will producefor changes in personnel and policies, and successes will heightenfor electionseturn to representative government Finally, as tunc passes, Ongania is likely to have increasing difficulty in maintaining military unity and support.

Far these reasons, and because of the instability inherent in Argentine politics, we believe that Ongania't bold on power will eventually begin to slip, and, at the least, he will come under increasing civilian and military pressure to return to civilian rule. At this stage, there would be some increase in the danger that be might resort to more repressive methods of rule, and that this in turn, could produce further demandhange of government

Assuming he continues, in the Presidency, it is not clear what kind ofgovernment Ongania may eventually favor. He has not finallyhimself to the political solutions advocated either by the "liberals" or thet is clear, however, that he does not Intend to return to the multiparty system which the military overthrew innd he may lean toward indirect rather than direct ejections for President Furthermore, Ongania apparently expects the traditional party leaders somehow to "fade away- and be replaced by new and more capable leaderswo-party system Into which the Peronist can be absorbed.

Whatever else may occur, the gut issue for Argentine poUtical progress wiU be when and how the Peronists can be restored as acceptable members of the body politic. Political consensus will be difficult enough when and if this takes place; without its achievement, consensus will be impossible. Onganfa has mentioned his hopes on this score, but clearly more time must pass before practical steps can be taken. If Peron were to die soon the chances for fairly rapid progress on the Peronist issue in Argentina would go up significantly. By and large, those among the Peronists who preach "Peronism without Peron" are tbe more flexible leaders in the movement and more acceptable to other Argentines. An arrangement oould probably be managed with other political parties and with military leaders to permit groups which these men headed to come back in out of the political cold. Yet only part of the problem will be solved when the forms and organizations of Peronism are no more; there will remain the matter of somehow accommodating the attitudes and asrnratioosroad sector of the population which had it unusually good before and wants to have it unusually good again.

We do not believe, however, that even over this longer period of time Argentina willepresentative system of grrvernment capable cfonsensus on policies and tactics for dealing with its social and economicSome of those problems, of course, cannot bo solved in four or fiveeasonable degree of economic success for the Ongania government wiU depend upon its ability to maintain continuity in its policies and to retain publicin their durability. We believe that the government's chances ofin power over this longer period are considerably better than even, but we are less confident that it will be able to adhere firmlyuccessful economic fjohcy.

Wc do not expect much change in tbe traditional Argentine foreign policies of noninvolvement in great power struggles and resistance to any encroachment on Argentine sovereignty. The strongly anti-Communist views of the Ongania administration have caused some shift from the strong stand Argentina hastaken on nonintervention. Thus the Ongania adrnmistration will be much more sensitive than Its predecessors to situations In Uruguay, Bolivia, and other neighboring countries where forces it identifies as extreme leftist might pose some threat It would, for example, not long hesitate over intervening inshould Castro-Coelements appear to be on tbe verge of taking over there. It would, however, probably seek to act jointly with Brazil.

The present adminisb-ations strongly anti-Communist leanings willtoorce for Argentine cooperation with the US. One issue which could affect relations wouldefusal by the US to carry out what the Argentine military establishment considers toommitment to assist in the modernization of their armed fences. Thus far, Ongania has been able to persuade the military leaders that they should set an example in sacrificing for the national program; in particular he has dissuaded them from arranging the purchase of some itcms of equipment from Europe. He Is committed, however, to providing other items such as medium tanks and naval equipment, for which negotiations are being conducted with France and other European suppliers. Moreover, militaryfor more modem weapons will continue and could become entirelyshould the US not be willing to supply what the Argentine military regards as its minimal requirements. In the event that an Argentine President has to choose between antagonizing bis nulitary support or the US, US-Argentine relations will almost certainly be tbe loser,

Another issue which might cool US-Argentine relations would be athe World Bank to provide assistance for the El Chocon project. Many Argentines would believe that the US was responsible.




hli document was ditumlnated fay tbo^ Cent)ol rrrellfganoa Agency. Thli copy Ii for the Information and um of the recipient "arid ofunder hit jurltdictioneod-to know bailt AdcGtiona! MierrHa) diuemlnoHbn may be authorized by lb* following official) wWun their retpecrive depart meotii

of Intelligence and Ibtseareh. for the Departiriaot of Stcte

Do fame IntaHlganee Agency, for the Office of tha Secretory of

Defonia and theJotni,Chiert of Staff

f Staff for iMel'igence. Department of the Army, for tho

Deportment of tbo Army *

Chief ofor th* Department of -

o. Attlitant Chief of Staff, Intelligence'; USAF, for the Deportment of the Air

ofK, for lba Atomic Energy Comrr.inJon

Director, FBI, for th* Federal Bureau of IrreMlganon

of NSA, for the National. Security Agency ;

I. Directortral Reference, OA, for" anyT'othor Daportmont or Aganey

hit document may be retained, ory bur.Jng In acxordano* with applicable security ragulcrSom, or returned TN) tha Central Inteftgenes Aganey by arrongament with th* Office of Central Reference, OA. '

thb documant It dlitamlnatad overtaat, tha overeciplantiHeriod not In axoaii ofyear. At tha and of thli period,thould anSer ba destroyed, returned to me tonerardlng ogency, orthould be requested of the forwore-ng agency lo retain It In

line of thli documenl when utod teporataly from the text thould be datilfied:


White Home National Saeurity Council Daportmont of State Department of Defenio Atomic Energy Commiwlon Federal Buroau of Inrtitlgatlcn

Original document.

Comment about this article, ask questions, or add new information about this topic: