Foreign Relations of the United States, 1969–1976, Volume E–10, Documents on American Republics, 1969–1972

488. Airgram A–5 From the Embassy in Nicaragua to the Department of State¹ ²

Managua, January 18, 1970

SUBJECT:

• Country Analysis and Strategy Paper for Nicaragua

REF:

• CA–6146, CA–6590

As requested in CA–6146 the Country Team has prepared, and herewith submits, the FY 1972 CASP.

INDEX

		Page
Part I -	Statement of Rationale and Basic Strategy	1
Part II -	Assessment of Current situation and Near-Term Prospects
	Political Assessment	5
	Economic and Social Assessment	10
	Security Assessment	13
Part III -	General Objectives	17
Annex A -	Cost Summary Tables	29
Annex B -	Supplementary Data on Defense Activities	32
Annex C -	Constitutional Provisions for Presidential Succession	33
Annex D -	Structure and Deployment of Guardia Nacional Ground, Sea and Air Force	34
Annex E -	Peace Corps Nicaragua: Summary of Program Memorandum	36

Enclosure

Country Analysis and Strategy Paper

NICARAGUA

Part I—Statement of Rationale and Basic Strategy

Nicaragua has long had friendly relations with the United States and has consistently supported U.S. policy objectives in Latin America and elsewhere. While its rate of economic growth has slowed markedly in the last four years, Nicaragua still constitutes market for U.S. exports and an attractive locale for U S. investment. The Nicaraguan Government and private sector have effectively contributed to the process of building, and currently—in the wake of the Salvadoran-Honduran conflict—the salvaging of the Central American Common Market. Finally, Nicaragua continues to be of considerable strategic importance, and its control by an unfriendly or hostile government would constitute a significant threat to U.S. interests in the area.

The basic U.S. objective in Nicaragua is to support the continued economic, social and political development of the country. The United States has a possibly unique advantage in Nicaragua; U.S. prestige has historically been high, and the U.S. orientation of many Nicaraguans, from the Somoza family on down, has served to sustain this prestige. Nicaraguans tend to look to the United States for technical and indeed political leadership, and to believe their country has a special relationship with the United States—which, they tend to feel, carries with it certain U.S. responsibilities for the political, social and economic well-being of their country. While this “special relationship” has obvious advantages in terms of achieving U.S. objectives, it also has disadvantages, and our influence must therefore be utilized with caution since we likewise are interested in encouraging Nicaraguans to resolve on their own the many economic and political problems which confront their country.

The GON development effort has not fulfilled the expectations held out for it following the installation of President Somoza’s “businessmen’s government.” The planning function has been dismantled, coordination within the Government is badly lacking, and the GON has only begun efforts to solve the fiscal problem brought about by an economic downturn, delays in implementation of Common Market agreements, and inefficient tax administration. Our task becomes one of helping the GON to face up to the realities imposed by external factors: to shift to a greater reliance on internal (and direct) taxes; to tighten its budgeting process; to improve development planning and coordination so as to make the best use of scarce domestic resources; and to orient economic policy more towards export promotion.

The country’s development prospects for the short and medium terms are also limited by a decline in confidence in the nation’s economic future on the part of investors (particularly since the Salvadoran-Honduran war), political figures, and industrial and commercial leaders. This is linked to a growing concern over the political stability of the country, as fears are expressed—and not only by opposition political leaders—about President Somoza’s ability to get the country moving forward once again after four years of standing still, and despite the passage of 2 1/2 years of his team in which to try to counteract the nations stubbornly persisting problems.

We conclude that economic conditions have deteriorated to a serious though not yet to an alarming extent. The basic problem seems to us to be for the short and medium term, with long-term growth prospects still remaining favorable. For the short and medium term the prospects seem bleak indeed—there is no export buoyancy, no known impending major private investment, no likely major resurgence in trade either inside or outside the CACM, and no presently anticipated significant increase in internal or external resources to expand the country’s development program. President Somoza, increasingly frustrated by these seemingly intractable problems, is seeking relief in at least two areas: (1) in negotiations with CACM partners to restructure the Common Market and increase revenues to the five governments, and (2) in approaches to State/AID (and other lending agencies) to seek emergency financial assistance.

The political situation seems similarly characterized by little likelihood of change over the short term. In this regard one recent development has been a gradual erosion of President Somoza’s Liberal Party power base, but without any concomitant gains being made by other Liberal leaders or opposition parties. President Somoza continues in a strong position, supported by most leaders of the majority Liberal Party and by the Guardia Nacional. We foresee no abrupt deterioration in the short term, but as with the country’s economic prospects no major improvement either.

Our dealings with the Somoza Administration are central to the advances which Nicaragua—as assisted by the U.S. Government and all other external sources—can attain in the next few years. President Somoza is an energetic and aggressive president who has committed his administration to the economic and social growth of Nicaragua. He has likewise encouraged isthmus integration efforts in the political, economic and military areas, and his current active role in negotiations to restructure the Common Market is on balance a constructive and helpful contribution. President Somoza—deriving from his long experience in handling his family’s business interests, in leading the Liberal Party, and heading up the Guardia Nacional—brings considerable experience and background to bear upon this nation’s problems and opportunities. He and his principal advisers, who as a group are reasonably capable and forward-thinking, seek to infuse energy and purpose into their nation’s development efforts. In this regard one of Somoza’s personal characteristics costs his administration dearly, namely his reluctance to delegate authority and related failure to portray confidence in the abilities and judgment of his subordinates—some of his ablest advisers have resigned or have been fired, and others may be inclined to leave in coming months. There are as well some other less favorable aspects to the Somoza administration, such as the fact that yet another Somoza—with a number of less than admirable personal characteristics—is the chief executive. We also believe that Somoza sometimes has difficulty distinguishing between the national economic interest and his personal interests. Moreover, another possible complication in our relations with Nicaragua is President Somoza’s rather heavy-handed effort to identify himself with the United States—which would appear to be an almost unique type of problem in the present-day world—but this attitude on his part does serve to complicate our relations with, for example, Liberal Party leaders other than Somoza, the Conservatives, and other anti-Somoza elements in this country. Nonetheless, Anastasio Somoza Debayle is the President, and this fact alone has to figure importantly in all of our decisions as to the use of the U.S. Government’s human and material resources in support of this country’s development and other objectives. Our problem remains, then, to try at one and the same time to work toward mutually agreed objectives in cooperation with the Somoza administration, and to keep open our options as to working with other Nicaraguan leaders now and in the future.

Part II Assessment of Current Situation and Near-Term Prospects

Political Assessment. There has been little change in Nicaragua’s essentially stable political situation over the past year. While there will be several difficult and potentially unsettling questions facing the country in 1970–71, especially on the economic front, the general political outlook is for continued stability with slow but discernible progress toward political maturity.

Externally, except in the field of Central American economic integration, Nicaragua has few problems. It has no outstanding border disputes with its neighbors and its hemisphere relations are generally excellent. There has been some difficulty with Colombia concerning conflicting claims to Quita Sueno and other off-shore banks, but this problem has not become acute. Nicaragua’s willingness to follow the United States’ lead in global and regional political affairs has been of value to us, and the country’s recent election to the United Nations Security Council adds considerably to the importance of this cooperation. There are, however, some areas of actual or potential differences between Nicaragua and the United States. By far the most difficult and immediate is the rapidly mounting pressure from virtually every sector of the Nicaraguan political spectrum for either abrogation or substantial revision of the Bryan-Chamorro Treaty of 1914 which gives the United States the right in perpetuity to construct an interoceanic canal across Nicaragua and related rights for 99 years to a lease of the Corn Islands and the construction of a military base on the Gulf of Fonseca. Of less immediate significance but still potentially troublesome are (1) Nicaragua’s claims to exclusive fishing rights 200 miles from its coast, (2) Nicaragua’s claim to Quita Sueno, to which the United States, as well as Colombia, have in the past laid claim, and (3) President Somoza’s now dormant but still latent proclivity for meddling in the affairs of his neighbors.

Internally, President Somoza has not suffered the reverses in the political field that he has in the economic. There has been some chipping away and deterioration through neglect of his political base in the Liberal Party, but he clearly remains its dominant figure. The opposition continues to be fragmented, with its principal element—the Conservative Party under Dr. Fernando Aguero—actually seeking some sort of accommodation with the Liberals for the 1972 elections. The Social Christians, while hopeful for the long term, are frank in admitting their movement has not become a major force on the local scene; the only other party of any significance, the small Partido Liberal Independiente, may well break up next year because of the incompatibility of its non-communist and pro-communist wings. On the legislative front, the Congress, except in the most exceptional cases, rubber stamps the President’s proposals with little debate. From time to time there are signs of discontent within the other principal pillar of Somoza’s strength, the National Guard; however, Somoza’s control of the organization appears to be intact, although possibly less personalized and less tight than in the past.

Somoza is undoubtedly frustrated with the failure thus far of his administration to move the country forward as rapidly as he would like despite his good intentions and the new programs he has launched during the first 2 1/2 years of his administration. The present economic recession may well deepen in the coming year, and Somoza realizes that further decline will reflect badly on his administration and cut somewhat into his popular support. Much of Somoza’s inability to bring about the constructive changes he desires lies in economic realities beyond his immediate control; however, his adverse personality traits (including an arrogance about his own ability), his aversion to delegation of authority, and a tendency to overact and lash out in his response without thorough consideration of the full implications of his acts have been contributing factors to his lack of success. His administration has also had its share of serious scandals including four cases involving his close staff.

Presidential succession is at present the consuming issue on the local scene even though the next elections are not due until early 1972. Apart from the possibility that Somoza may stand for re-election, the most frequently mentioned individuals as candidates for the office within the Liberal Party are Ramiro Sacasa Guerrero, who has launched a quiet but active campaign to block any possible re-election attempt by Somoza as well as to further his own candidacy; Vice President and Minister of Public Works Alfonso Callejas Deshon; Vice President and Minister of Public Health Francisco Urcuyo Maliano; and Chamber of Deputies President Orlando Montenegro Medrano. However, the key question at the moment in the speculation about 1972 is whether or not Somoza will try to continue in office for another term.

Many factors work to encourage Somoza to try to succeed himself. First and foremost, largely because of the long Somoza family dominance of the local scene, the task of transferring power to new hands and insuring that the country does not go to pieces in the process is an extremely difficult one. Somoza may believe that the risks of such a transfer at the present time are too great and that the safest way to maintain his family’s interests is to remain in office. Other factors encouraging a re-election bid by Somoza are his personal motivation to outshine the presidential performances of his father and brother; his possible inability to visualize himself in any role in the country other than as number one; and the urgings of friends and admirers. Somoza would probably prefer that his successor not be too independent-minded, yet he is also aware that a puppet president probably would not be a satisfactory solution in trying to maintain the nation’s political stability.

On the other hand, there are solid reasons arguing against his seeking another term. First, the burdens of the presidency plus those of running the National Guard and the Liberal Party and managing the family’s vast holdings (together with a strenuous social life), are heavy and wearing. Secondly, Somoza knows the intensity of feeling in certain quarters to his re-election and must take into account what might well become a much more serious problem regarding his personal security. Somoza’s father was assassinated shortly after announcing his own re-election plans in 1956, and that event as a possible historical precedent deeply troubles his family. Thirdly, he may well be concerned about U.S. Government opposition to his reelection. Somoza also knows that if he commits himself prematurely not to seek re-election, he will open himself to criticism from all sides and find himself in a difficult “lame duck” position.

If Somoza does decide to try to remain in office beyond 1972, he will have to find some way around the present constitutional, provision barring re-election. Congress can dissolve itself and thus open the way for a constituent assembly which could revise the current limitation. Our current reading is that the pro-Somoza forces in the Congress have the necessary votes to do this. Since the constitution provides that a constitutional change of this type be approved by the two consecutive sessions of the Congress, Somoza would likely make his move to change the constitution in 1970 or early 1971. The pressure on him for a decision can be expected to mount steadily during the year. In the unlikely circumstance that the opposition parties and dissident elements in the Liberal Party would be able to muster enough votes to stop a Somoza bid for a constituent assembly, Somoza could probably mount a military coup if he were that intent on continuing in office.

If Somoza decides not to seek another term, there remains the question of what he will do in the future. He still retains his title as Jefe Director of the Guardia Nacional and may elect to remain in that position as the best way to protect his interests. This would be a controversial step since almost any new Liberal President would then be viewed as a puppet; however, there are individuals in the Party strong enough to act independently and to gain popular support if Somoza does not try to manipulate the government as if he were still the Chief Executive.

There have been several ideas put forward regarding a possible “transition government” after Somoza which would include Liberals and Conservatives. Thus far, however, none of these ideas have crystallized into a movement of substantial strength.

Given the uncertainties of the re-election question, pus the ever present possibility of Somoza’s sudden demise or removal from the scene, the Country Team continues keenly interested in the succession problem.

On a more fundamental level some change is apparent in Nicaragua in the development of democratic concepts. Several factors have been at work, but perhaps the most important has been the growing influence of the ideas of young entrepreneurs and professional men (including the Somozas), many of them educated in the United States, and the increasing exposures of individuals at the lower levels of society to new ideas as the result of better means of transportation and communication. The encouragement of this development has been an important U.S. policy objective, and in this connection the United States has sought to assist in selectively building and strengthening certain institutions as one means of nudging the country away from personalism and toward more representative democracy.

The United States enjoys a generally favorable climate in Nicaragua for achieving many of its major psychological objectives. There is little overtly-expressed anti-Americanism. The professional and leadership groups, many with relatives in the United States or with travels for study or business there, look to the United States for guidance and leadership. Both the Liberal-controlled government and the noncommunist opposition traditionally understand and support U.S. policies. While “socialism” still wins adherents among the university students and intellectuals, Castro-communism has lost much of its appeal with the passing of time.

Despite the foregoing, the United States faces two potential psychological problems. The first is growing nationalism, drawn upon periodically to criticize the United States over such issues as area trade policies and the Bryan-Chamorro Treaty. The second is a careful balancing act between Liberal and opposition political factions arising from the historic sensitivity of the opposition to what it deems partisan U.S. support of the Somoza “dynasty.”

For the past several years, Nicaragua has enjoyed freedom of the press and radio, in spite of a law on the books permitting government sanctions against publishers and broadcasters for the dissemination of information prejudicial to public security and order. While government radio monitoring is widespread and station directors are occasionally called on the carpet, the opposition daily press remains almost free of government pressure.

The organized labor movement in Nicaragua has not made enough progress to be considered either a significant force in the country or a serious threat to the government. However, communists are strong in several key areas—including the country’s primary school teachers’ union—and capable of causing the government problems.

With regard to youth, the majority of students at Nicaragua’s two universities—the National University and the Central University—remain politically apathetic. However, there are signs of increasing dissatisfaction end restiveness among students, including the recent victory of the university communist party over the Social Christians; the latter had dominated the student political scene for the past four years after ending a long period of communist control. Student leaders exist who have the capability to shut down both universities through strikes on popular issues and to force confrontations with the government.

Economic and Social Assessment—Through the first half of the sixties Nicaragua achieved a rapid and dramatic economic growth. Riding the crest of a cotton-led export boom, the growth rate from 1961 through 1966 averaged more than 8 percent per year. In the second half of the decade, however, growth has slowed to about 4.5 percent per year—little more than a standstill in real, per capita terms and the trend is toward further slippage in 1970. Lower world prices for cotton, tight credit conditions, increasing production costs, poorer crops, unsophisticated marketing practices, and other factors all combined to halt the expansion of cotton exports—the principal engine which powered Nicaragua’s growth in the early sixties. The basic conditions which caused this leveling off of Nicaragua’s growth rate continued, and in fact worsened, in 1969. A fiscal problem, developing for some time, has reached what the GON feels is a serious situation. Despite encouraging prospects for coffee, and growth in the new export industries of beef, shellfish and an array of individually small operations, the dismal prospects for cotton point towards even further economic deterioration in 1970. Nicaragua’s inability to benefit sufficiently from the Central American Common Market, and the effects of continued uncertainties in the CACM—due both to the war and to other, more basic problems—have also inhibited economic growth. It would require a very rapid recovery indeed for a reinvigorated CACM to be able to offset to any significant degree the poor economic prospects in view for Nicaragua in 1970.

An idea of what the Nicaraguan economy faces in 1970 can be had by projecting the downward trend of cotton exports, and comparing this with similar estimates for those exports which are in ascendance.

PRINCIPAL EXPORTS ³

(in millions of US dollars)

	1968	1969 (estimated)	1970 (projected)	Dollar Change from 1968 to 1970
Cotton	59.7	47	34	-26
Coffee	22.7	24	324	+ 9
Meat	15.9	20	20	+ 4
Shrimp & Lobster	5.1	6	8	+ 3
Total Exports5	162.3	157

Source: Central Bank, Customs. 1970 figures are Embassy projections.

With the sharp rise in coffee prices during the last quarter of 1969, prospects for Nicaragua’s second most profitable traditional export look bright for the next two years or so, at least until Brazil recovers from its crippling frost. Nicaragua will enjoy an excellent crop in 1970, and will have no trouble in filling its world quota, which has already been expanded by the automatic triggering mechanism of the International Coffee Agreement. Moreover, Nicaragua has recently gained a foothold in new markets, principally Japan which is not a member of the ICO. It is not beyond the realm of possibility, if the present high prices for coffee should hold, that Nicaragua’s 1970 coffee exports may surge beyond $3.2 million. This helps to offset the effect of the disastrous drop in cotton earnings, but it could also cause coffee growers to give less attention to diversification, and might even lead them to increase coffee acreage.

Nicaragua’s long-term economic development will depend to a large extent on the success with which it is able to diversify its export economy away from the traditional commodities of cotton and coffee. It has in fact had remarkable success at this diversification over the last decade. Ten years ago Nicaragua’s rapidly developing second line of exports—beef, shrimp, lobster, bananas, tobacco and industrial products—were either small or non-existent. In 1970 it is likely that the export of these items, taken together, will exceed $60 million. There is still ample room for expansion in all of these export products, although for some of them marketing is becoming a serious problem.

The National Development Institute (INFONAC) has not recently been as successful in developing diversified exports as it was in the earlier part of the decade. One promising project which will soon be undertaken is an investment by the Standard Fruit Company, through INFONAC, in a 5,000-acre banana operation in the Chinandega area. This project will produce bananas for export to the west coast of the United States through the port of Corinto. Production will probably begin sometime in 1971.

While Nicaragua’s trade with other Common Market countries is only a small percentage of its total trade (15 percent of its exports and 25 percent of its imports), the development of Nicaragua’s economy, both for the short and the long term, is closely tied to the development of the CACM.

While Nicaragua has long been skeptical of the benefits which it has derived from the CACM to date, it believes its interests would be best served by rapid completion of the integration process, but in a somewhat altered form. Specifically, it wants rapid implementation of a system of common fiscal incentives to industry (a system was agreed upon in March, 1968, but never implemented); agreement on some formula by which those countries which suffer fiscal losses due to the integration process would be compensated by those countries which gain revenue through the integration process; and establishment of an arbitration commission or other juridical entity which would insure greater automaticity of the integration process and reduce the number of bilateral negotiations necessary to maintain the flow of free trade.

Beginning in 1967, the Government of Nicaragua instituted a tight credit policy in order to prevent further deterioration of the balance of payments and in response to IMF conditions stipulated in Standby Agreements. This has been eminently successful in contributing to a reduction in imports, but at the same time has resulted in a general slow-down of economic activity, exacerbated by uncertainties in common Market developments. In turn, this resulted in a decline in imports from outside the Common Market and a concurrent reduction in import revenue. The continued stagnation in the money supply also has helped slow down economic activity.

The fiscal situation remains serious and the GON has been unable to generate sufficient revenue to meet all its development objectives. In March 1919, in order to prevent a serious shortfall in revenue and compensate for an anticipated decline in customs revenues, the GON instituted an array of indirect taxes on products produced in CACM countries and in Nicaragua. Although these taxes did result in an increase in specific revenues, the increase in total ordinary revenue has been minimal (some seven per cent). In December 1969, the GON received technical assistance from USAID-financed advisers in the area of indirect taxes in order to rationalize and improve collections in this area. The GON is continuing to improve the administration of internal direct taxes (income and property) and is being strongly urged in this direction by the USAID. The Central Bank has appointed a high level liaison officer to work with the Ministry of Finance on fiscal problems. As a result of the coordinated approach of the Government to its fiscal problem and the actions being taken in the tax field, we believe that an improvement in the fiscal position will be seen in 1970.

Security Assessment. President Somoza’s administration has taken a firm stand against communist subversion, and the GON has continued to combat and root out communists and communist-inspired terrorists. These terrorists remain weak, but nevertheless are capable of carrying out isolated acts of urban terrorism.

The small, illegal Partido Socialista Nicaraguense (PSN), the Communist Party of Nicaragua, continues to be divided between rival factions. PSN adherents have made some headway in labor unions and the party may develop some new strength on the return of the approximately sixty Nicaraguan students completing studies in the Soviet Union. Communist activists have made additional progress in taking over control of the small Independent Liberal Party, and at the end of 1969 the communist slate carried student council elections at the National University for the first time in four years.

The Frente Sandinista de Liberacion Nacional (FSLN), a Castro-oriented terrorist group, has suffered additional reverses but continues active and represents a continuing challenge to the Office of National Security. The FSLN specializes in bank robbery, but has recently carried out a successful aircraft hijacking and may attempt some political or ransom kidnappings.

Threat Analysis: Rural Insurgency. The northern mountain areas of Nicaragua, “Sandino country,” have traditionally been chosen by insurgents who wish to maintain a rural guerrilla presence in Nicaragua and there is some evidence of FSLN activity there. The area offers good refuge and has convenient access to haven in Honduras. During the past year it was also the scene of considerable cattle rustling and banditry. In the absence of problems elsewhere, the Guardia Nacional can probably handle any guerrilla insurgency likely to get underway in the near future. The Guardia enjoys a measure of rapport with the nation’s campesinos who staff its ranks. Moreover, the GON by its land titling, credit and other programs has devoted particular attention to the “Sandino country” with an eye to counter insurgency dividends. We do not consider guerrilla insurgency to constitute a serious threat at this time.

Urban Terrorism. Urban terrorism represents a more immediate and far more serious danger to Nicaragua than rural insurgency. At the time that Nicaraguans trained in communist subversion are returning home from bloc countries in greater numbers, the ability of the Guardia to deal with them and carry out its law enforcement responsibilities is diminishing. In Managua, for example, 465 poorly-trained policemen are responsible for protection of a population of over 300,000.

Although the urban terrorism apparatus of the FSLN has been dealt repeated and serious blows, it is our belief that a well-organized urban terrorist campaign could be successfully carried out, principally in the capital city. Nicaraguan security and police organizations are not geared up to combat this sort of activity. Given the low level of police protection and the lax administration of justice, together with ready availability of recruits and firearms of all types, such a campaign could conceivably result in widespread civil disorders.

Nicaragua suffers from serious deficiencies in the maintenance of law and order and there is an ominous increase in armed robbery with occasional brutal overtones such as murder and rape. Crimes of this nature in the outlying areas of Managua appear to be increasing at a rapid rate and the traditional sneak thief appears to be giving way to armed groups of three or four men, particularly in house robberies. If the Guardia fails to keep pace with the increasing number and mobility of the country’s population and fails to adopt more effective police techniques, lawlessness is bound to increase—although we would estimate not to the extent that this factor alone will pose a threat to basic national security.

Other Internal Disorders. There are signs of growing activity in the labor movement, in part due to communist organizing efforts and the effects of the current economic downturn. In addition, university and secondary school students have been showing an increasing propensity to demonstrate to back up their political beliefs, for example by seizing control of high school and university buildings to protest the policies of the GON or of foreign governments. Thus there could be an outbreak here in the next few years of the strikes and demonstrations which have plagued other Latin American nations.

However, there would have to be a considerable increase in popular discontent for any revolutionaries to be able to count on widespread support. Even in this event, persons supporting any effort to overthrow the government would probably gravitate towards the non-communist opposition.

Capabilities Analysis. The 6,000-man Guardia Nacional and the Ministry of Defense have responsibility for all police and military functions as well as several non-military functions including civil aviation, customs, immigration, postal service, and telecommunications. The Guardia has a modest anti-subversion capability having demonstrated an ability to control small-scale threats to internal security. It is not a conventional military organization and could not contain a well-organized level of insurgency without external assistance. (A breakdown of the Guardia Nacional ground, sea, and air forces is given in Annex II.)

The primary mission of the Guardia Nacional is internal security, from maintenance of law and order to operations for detection and destruction of insurgents, including all public safety (police) responsibilities for the nation. Perhaps the most serious immediate security problem facing Nicaragua is the absence of adequate public safety. The Guardia’s archaic procedures, together with corrupt judicial processes, are simply unequal to the task of maintaining law and order. The Country Team has determined that it is important for the United States to encourage the improvement and quality of the police forces, particularly those in the principal cities, even if this means limited increases in the Guardia’s budget.

The GON and the Guardia Nacional have, with relatively little U S. assistance, achieved the minimum standards necessary to meet the current limited internal subversion threat. Nicaragua has avoided excessive military expenditures and the acquisition of sophisticated military equipment. Any substantial reduction of the currently limited budget (including support for communications, postal services and civil aviation, etc. ) would impair security most seriously.

With the outlook for a continuation of the current economic recession—and with the limitations in budgetary outlays for police and other purposes this implies—it is probable that without continued U.S. assistance, including limited materiel assistance, the GON will be unable to maintain proficiency of its security and police forces at even the modest level which they have reached. Their awakening to a need for planning also seeks encouragement.

Historically the Guardia Nacional has been loyal to the Somozas who have controlled the organization in a highly personalistic manner. While today it remains dependent on President Anastasio Somoza Debayle and is the strong influence for stability in Nicaragua, this personalistic nature of the Somoza-Guardia relationship appears to be tapering off somewhat. This condition can partially be attributed to the multiplicity of demands on the time of the President which precludes his giving as much attention to the Guardia as had been customary. While this condition does not of itself lower the capability as a police and military unit as the new generations of officers seek positions of responsibility, it does somewhat lessen their pro-Somoza motivation.

[Omitted here are Part III—General Objectives and Annexes A through E.]

1. Source: National Archives, RG 59, Central Files 1970–73, POL 1 NIC–US. Secret. Stamped notations on the Airgram indicate that it was received at the Department of State at 8:27 a.m. on January 21 and at the Bureau of Inter-American Affairs on January 22.
2. The Embassy provided an overview of U.S. policy toward Nicaragua. The security assessment noted that President Somoza faced continued urban and rural threats from Sandinista insurgents and concluded that the Guardia Nacional would need continued U.S. assistance.
3. Only four principal export commodities, which constitute nearly 2/3 of total export value, are listed separately. The remainder made up of a variety of products, the behavior of which cannot be accurately projected.
4. Assumes average price of $46 per cwt for “other milds” in New York.
5. Total of all exports, including those not listed separately.