ECONOMIC AND POLITICAL PRESSURES ON COLOMBIAN GOVERNMENT

Created: 5/14/1965

OCR scan of the original document, errors are possible

SECRET

5

SCopy No.. 3

SPECIAL REPORT

APPIOVEIfOI RELEASE DATE IUH7M1

economic and political pressures on colombian government

CENTRAL INTELLIGENCE AGENCY

OFFICE OF CURRENT INTELLIGENCE

secret

"Secret

M5

ECONOMIC AND POLITICAL PBESSUBES ON COLOMBIAN GOVERNMENT

A variety of economic and political pressures threaten tho survival of Colombia's National Front government under President Gulllermo Valencia, at best an uncertain leader. Tbe threat stems In part from power struggles within the coalition Itself sod from the increased strength of Its opposition in In addition, popular discontent is widespread, and business and labor leaders are dissatisfiedgovernment measures to combat inflation andore equitable tax system have been

Last January labor demands for tax and otherwere ao strong that the governmenthowdown only byommission to study the situation and agreeing topecial aession of Congress In late April to consider its It is In this special session that theand opposition power struggles now are taking place.

Military leaders are showing concern. Tbey recently pledged their aupport to Valencia but dropped a thinly veiled earning that they would not tolerate his failure to take some remedial action soon.

uation

The National Front in an artificial coalition of theand Conservative partiestwowas contrived8 to put an endecade of civil war Under tho terms of the coalition agreement the presidency is to alternate every four yearsa Liberal and aand all government whether elective orare to be divided evenly between the two parties.

The coalition's majorwas toechanlair which would force the warring Conservative* and Ll'>erals to cooperate in government untillater extendednd induce them to devise aof competing without violence thereafter, lor the most part, the scheme has succeeded thus far but may have outlived its usefulness.

The general public hasincreasinglyith the National Fcont

particularly in the past eight to twelve *onths. Shortages of basic goods--partlcularly neat anil milk, at present--and the usual pressures of Inflation have Induced widespread cynlclsv about the political system and Its Tbe public has come tothat nothing will change for the better no matter who wins the congress tonal elections next March, and the presidentialthe following May.

The pernicious apathy of the voters oub demonstrated during the congressionalinereercent of thecast ballots. As athe followers ofGustavo Rojag Pinllla, organised as the NationalAlliance (ANP) butnominally as Conservatives, snapped up most of theeats the National Front lost. The front, which mustwo-thirds majority to paas any meaningful legislation, now

can claim only two thirds plus two. Considering the almost total lack of discipline in the coalition parties, theis virtually

A large number of Colombians-possible adegreos of political sopbls-tlcstion, Including members of both major political parties as well as those on the more radical right and on tho left, would welcome anore conventional form of self-government as soon as possible. Some few care less for order than for speed, and their voclferousness and obstrep-erousness make their numbers seen greater than they really are. They are dangerous, however,they set the scene for dem-agoguery, political radicalism, and illegality.

chism ln the Conservative Farty has widened as Conservative congressmen

opposed to the presidential candidacy of Liberal Carlos Lleraspresumed National Front candldats lnwith congressmen of Rojas Pinilla'a ANP and of tho Liberal Revolutionary(URL) in an effort to elect the officers of the present special session. LoyalConservatives demanded that President Valencia consider the defectors outside thefold and thersforefor cabinet and other appointive positions. Thehue and cry threatened toerloua crisis, and started rumorsending state of siegeilitary coup. Lleras has resigned biscandidacy and thismay permit Congress to gst to work on the tax reform bills. President Valencia has survived two other majorcrises since September, but lost some of bis support each time. His losses this time, if any, cannot yet be estimated.

Economic Situation

Colombian economic ban been generally poor in the last few years; in real terms gross dosastic productercent3 andercent Investment activity has been sluggish after growing rapidly8he government failed toan ambitioua program ofsector investment and private investment declined, in real terms, . Incomplete data Indicateodestin investment

A major domestic issue presently facing the countrythe threat of Inflation. The combined effects of excess monetary liquidity, annualdeficits, and the Inability to Implement effective wage and price controls lederiod of severe Inflation lasting from2 through that period price levelsercent for most consumers. Although budgetary deficits34 were reducedolicy of monetary restraint softened Inflationary pressures in the economy, the threat Of another poriod of rapid priceis serious Specialmeasuresurcharge on income taxes) which enabled the government to narrow the budget gap34 are no longer ln effect and It seems unlikely that governmentwill be kept within thecolling. Theretrong possibility thereforeeficit ofillionthird of scheduledspending for the year-will be generated in

The threat of resurgentis also made serious by current pressures on the country's exchange rate system. Colombia maintains multiple exchange rates. Inun on the"pegged" free rate which forced the Dank of the Republic to cease supporting the currency at the rate often Colombian pesos to one US dollar. The present free rate of exchange Is about IS pesos per dollar. The official selling and coffee export rales

are still maintained atrates.

Although President Valencia has unequivocally committed his administrationolicy of no devaluation, tbe ability of the Bank of the Republic to maintain the present overvalued rates is doubtful. Speculation and political uncertainty are exerting continuous upwardon the rates while, at tho same time, the Bank of thehasillion dollars left with which tothem. Moreover, Colombia's International credit position has suffered considerably and the country may find itto acqulro even short-term commercial credit with which to buttress international reserves.

Violence and Insurgency

Colombiaong history of banditry, and the ethnic and topographical make-up of the country seems to make it fertile ground for such lawlessness. To this tradition ofew feature has now been added. national Liberation Army"stlmsted aten and women, including urban sympathizers, bas formedadre of at least twenty-two young Insurgents trained in Cuba. roup of fifty of these meo beganoperations in January, and since that time Colombian officials bava attributed to this "army" three armed asssults against Colombian towns.

Although tbs attacks may not have beenigh order of skill and effectiveness, ihey are significant in that they are political ln purpose, and that they have so far gone relatively unpunished. During April, ten rsports from several unrelated sources have indicated that pro-Castro groupsthe ELN)are preparing further insurrectionary operations for the near future. Moreovor, tho insurgents aro operatingountry which already has cer-tsln small parts of Itsvirtually closed togovernmentand control (tbe so-called Communist enclaves, ruled by armed, Communist-ledttempts now are being made to establish tiss between the ELM and othor insurgent groups and tbe ELN already has liaison with the Venezuelan Movement of tbe Revolutionary Left (MIR).

Although quite successful ln recent years againstbanditry, government law-enforcement agencies have had little success ln coping with the new political violence. They lack unity of commandthe army, the national police, and tbe Administrative Department of Securityll of which have counterin-surgency responsibilities. Morever, tbs countryuridical basis for adequate punishment of Insurgents. ly the morale of tbe law enforcement agencies is low.

Another slgnificsnt factor in the Colombian acene Is the mood of the oligarchy. Hitherto either inured to or relatively untouched by banditry and tbls wealthy andpowerful segment of tbe population is now pervaded by uneasiness sometimes bordering on panic because of the upsurge ofesses in tbe pastwhich the wealthy are the natural targets. The kidnap-murder of industrialist Harold fcder in Karen-April caused an emotional reaction against the military forto protect citizens against violence, but the government

was not seriously endangered by the reaction.

Now that kidnaping hasa popular form offor all types of outlaws, people in both rural and urban areas are becoming increasingly alarmed and angry. Their anger seems to be focused largely on the National Front government and the military for beingto protect Its citizens against violence. Since the people most highly concerned about kidnaping are politically the most powerful class, their anger is an Important factor in gauging the politicalof the government.

Outlook

The National Front under President Valencia haseries of crises and probably will manage to survive the one. Valencia, who has displayed unexpected resources of strength on several critical occasions In the past, may again prove equal to theby forcing compromise on the warring factions ln his own party and, through them, on the recalcitrant elements among the Liberals. Also, the current special session ofprobably will paasmeasures, which although only partly satisfactory could serve to regenerate publicto some degree.

If the National Front lasts until next Uarch, the future of Colombla'a political system will turn on the composition of tbe Congress to be elected at that time. The National Front must control Congress ln order to function at all, and, if tbe opponents of thecan control as little a&ercent of the seats inhouse, they could demolish tbe Front, or at least stymie the government if they felt such tactics would advance their cause. Under sucb circumstances, military leaders might (SfcUtCTfr.

Original document.

---

---