THE SITUATION IN URUGUAY 13 OCTOBER 1965

Created: 10/13/1965

OCR scan of the original document, errors are possible

INTELLIGENCE MEMORANDUM

THE SITUATION IN URUGUAY *

INTELLIGENCE irrent Intelligence '

OCI

CENTRAL INTELLIGENCE AGENCY Office of Current Intelligence5

INTELLIGENCE MEMORANDUM

The Situation in Uruguay

Uruguay's political and economic problems today derive in large partradition ofand corrupt government. Politicians for years have preferred to concentrate on lntraparty politics and patronage privileges rather than the national interest. Unless the government can stand firm and display fiscal and political responsibility in the face of strident labor demands, an unconstitutional change of government is likely. oup In Uruguay is much more likely to come from the right than from the left, and could bring toationalistic political faction Inimical to US Interests.

Two major political parties have dominated the Uruguayan scene forears. TheParty (Blancos) has governed8 and

is basically moderate and pro-Western in its policies. There is little difference of policy between the Blancos and the opposition Colorado Party. The lack of order in Uruguayan politics stems from the fact that complex national electoral laws havepolitical fragmentation and permittedrepresenting tbe entire range of thespectrum to run under either party banner.

government is conducted by aCouncil of Government (NCG) which annually rotating presidency. Tbe Councilhas six Blancos and three Colorados. the six Blancos represent two factions: the present president, Washingtonfrom the moderate Blanco Democratic Uniontwo are from the authoritarian, highlyand frequently anti-US Herreristathree Colorado Party councilors alsodistinct factions of their party. Thissystem and the plurality of views whichhave often combined to paralyze executive

skgiujt-

decision-making and to frustrate responsibleofficials.

current economic crisis Iseries of difficulties basicallya grossly over-extended public welfare system,

a number of Inefficient autonomous government enterprises, fluctuating prices and tbe loss of world markets for meat and wool (Uruguay's two mainnd the Inability of the country toits productivity in line with its spending. The country suffersontinuing industrial recession, rising unemployment (nowndrowing budget deficits,pirallng cost of living which is expected to rise more thanercent this year. Per capita gross domestic product has declined nearly oneannually7 and real wages havefor the last two years.

addition, the government hashronic balance of payments problem. two peso devaluations in the last year,market rate (approximatelyer dollar)to exceed the official rate bypercent. igh-level Uruguayanisit to the US and Curope tothe foreign debt; foreign lendersfurther unsecured loans and lines of credit

to government Implementation of vitally neededausterity measures. Aside from current efforts to reduce the inflationary spiral by holding down wage demands, no effective measures have been In the absence of credit and exchange foreign assistance has been withheld.

Uruguayan Communist Party (PCU) legal, and vociferous. It has someand draws its main support fromparticularly In Montevideo. The PCUor influences most labor unions, asstudent groups and many Intellectuals andmost levels of government. For thethe party has vacillated between fear ofgovernment reprisals or provoking aon the one handesire to exploitgrievances of the Uruguayan workerother. Within the last month, PCU policyto have veered toward the latter course, as

secret

the party apparently now fears that failure toconcrete benefits for the workers will cost it support within the labor unions.

7. The crux of the current crisis is theworkers' demandpercent wagehave refused to accept aincluding wagos and side benefits, percent. The PCU is supporting the workers'

aands and Communist union leaders havehour general strike to coincidehouremployees strike scheduled to begin 13 Rank and file pressure on the Communists and union leaders to produce isear-long pre-election wage freeze for government employees goes into effect in Pressure on the government to hold the wage line and maintain security is equally Intensethe government must demonstrate some political and fiscal responsibility if it is to receive vitally needed foreign loans, credit, and aid. In addition, any sign of government weakness would not onlyfurther Communimt-backed economic demands, but would be interpretedommunist victory. The party would gain respectability and probably increase its electoral strength inoreover, should the government bow to labor'sit would greatly Increase the riskightist coup.

There is little reason to think that the Communist Party is either capable or desirous of overthrowing the government. Montevideo, In fact, has served Communism wellropagandacenter and staging point for travelers to and from the bloc, and isrime site for bloc third-country operations. The PCU does not wish to Jeopardize its considerable freedom ofbyight-wing coup, and untilthe party has sought to appeal to workers and othersespectable political party, especially through its electoral front, FIDEL.

Right-wing groups, on the other hand, have shown an Increasing reluctance to support the present

form of government, and some responsibleand governmenttheUruguay's cherished democraticthat they would no longer oppose athough it might be unconstitutional. in both parties agree ain the form of government is needed, butbeen unable to agree on timing or theshould take. As chancesegal

In the system of government have receded, prospectsoup have increased.

The Uruguayan military has traditionally been aloof from politics and reluctant to interfere in the government. Government security forces numberman armyman police force. There is probably no significant Communist penetration of either the police or army. Although theseare adequate for maintaining order and controlling routinewhich there have beenn the last eightare hampered by poor training, obsolete equipment, and woefully inadequate communications facilities.

The silitary would probably notoup but is fully capable of putting down any coup attempt in which lt does not decide to uccessful coup would therefore have to have at'least tacit army and police support. For this reason, the most likely backersoup attempt have reportedly remained in close contact with like-minded military officers. Coup rumors have often centered around General Mario Aguerrondo, who reportedly has ties to National Councilman Albertoember of the Herrerista faction of the ruling Blanco Party. Heber is scheduled to become president of the Council innd he might move to take power and overthrow theif the opportunity presents itself. Alternatively, other Blancos, also thought to have significant military support, mightoup is required to maintain order and preserve their position. There is as yet no dynamic leader of either the right or left who appears able toarge personal following.

MO FOREIGN DIGOEM

The average Uruguayan Is tired of the endlessand economic chaos, however, and would probably support at least passively anyone whoay out.

positionuffer stateits two large neighbors, Argentina andtraditionally made it subject to theirand has fostered an almost neuroticto the principle of non-intervention.

It is extremely unlikely that either the Brazilians or Argentines wouldommunist government in Uruguay. They have, moreover, more leverage in the Uruguayan political scene than does the US, if only because of proximity.

US has always had reasonablywith Uruguay, which long has beenas one of the model democracies of the Our aid programstimated for fiscal yearconcentrated mainly on improvingforces and on some small agricultural

and administrative development programs. Out MAP program isillion estimated for fiscal yearit isto Uruguayan military officers. Recent Uruguayan foreignand directed by nationalist elements in the Nationalhas seemed calculated to frustrate and embarrass the US. as in the Dominican Republic debates in the UN Security Council. We have not been able to exert sufficient pressure on the government tomajor changes. Our assets are relatively small and will have to be carefully used if the US is to Influence Uruguay to put Its house in order.

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