187. Telegram 3829 From the Embassy in Guatemala to the Department of State1
3829. Subject: President Laugerud Gets Set: Thoughts on the Future.
1. Summary: As President Laugerud begins his first year in office, there are increasing indications that he intends to be the undisputed leader of Guatemala from the very start, and that he has made good initial progress towards that goal. He is well aware of the economic and social problems which his government faces and of the difficulties he will encounter in handling them. We expect that his approach to these problems will be less conservative than those of his predecessor and will include serious attempts at tax reform.
2. To accomplish his goals, which include curbing inflation, stabilizing basic grain prices, improving health and educational services, increasing agricultural production, and furthering the Central American integration movement, the President has chosen a cabinet made up largely of respected, nonpolitical, qualified individuals, and the majority of his sub-cabinet and agency head choices have been good ones. Laugerud will encounter tenacious opposition to reforms from Guatemala’s powerful economic elite, and he may well have serious difficulties with his Congress. How he will go about dealing with this opposition is not clear, but we believe he will have the all-important support of the army in pushing for reform.
3. Laugerud is favorably disposed toward the U.S., and will actively seek our support for his economic and social development programs. He is also, however, highly nationalistic and may prove difficult to deal with on some individual bilateral problems which he believes involve national self-respect and honor. We believe that U.S. policy should be to encourage Laugerud in his efforts to achieve the reforms which he and we believe are essential for long-term stability, to cooperate with him in improving the implementation of economic and social development programs he has inherited from his predecessor, and [Page 523] to be prepared to assist him in new programs if we conclude that such programs represent a real and effective commitment to meaningful economic and social development and if, as now seems more likely than not, the Laugerud administration does not pursue a policy of repression of its political opposition. End Summary.
4. As President Laugerud begins his first year in office, there are increasing indications that he intends to be the undisputed leader from the very start and that he has made good progress towards that goal. He has rationalized the electoral fraud which put him in office and now appears fully convinced that he is the best man for his present job and that it is in the national interest that he lead the country. He does not feel beholden to his Vice President, Mario Sandoval, for engineering the fraud which achieved their victory, nor to the politicians who worked on his campaign. In fact, by refusing to accept any of Sandoval’s suggestions for cabinet positions (this in the face of a threat by the VP to resign) and by vetoing Sandoval’s choice for president of the Congress and imposing his own man, he has gone a long way toward neutralizing the MLN kingpin in the first phase of the new government. MLN appointments have also been scarce in secondary positions. The only important Sandoval man to get a reasonably important job so far has been Mario’s brother Armando, who was named to the Agrarian Reform Institute. Mario Sandoval is not a man to be counted out just because he is down, however, and he will be a continuing problem for the President—who fully recognizes that fact and intends to keep careful watch on him.
5. The future relationship between the new President and his predecessor and mentor, ex-President Arana, is less certain, although Laugerud has made clear to the Ambassador that he does not intend to allow Arana to become a controlling influence in his government. Arana, who has not been heard from since he departed for his retirement home in Chiquimula immediately after leaving the inauguration, is scheduled to stay there until mid-August, return to his new home in Guatemala City briefly, and then go off on a several month’s safari in Africa. In the meantime, Laugerud has changed the entire officer corps of the presidential staff and presidential guard. Our present estimate is that Arana will not be able to become a dominant force in the Laugerud administration should he try—and we are not sure he will.
6. Laugerud has worked hard, skillfully, and successfully to consolidate his position with the army. Among other things, he has made telling personal appeals for support to assembled officers at all the major commands, emphasizing his disillusionment with the politicians and his need for his fellow officers’ support for his reforms; he has eased out the politically ambitious head of the military academy, sending him as Ambassador to El Salvador; he has refused political and [Page 524] other pressures to do likewise with the head of the Center for Military Studies, who is widely respected by many of the more liberal (and talented) field grade officers; and he has appointed an officer he respects highly as the chief of the strategically important Honor Guard Brigade stationed in the center of Guatemala City. Laugerud has from the start considered the army his most important ally and will, we are sure, continue to do so.
7. The new President is well aware of the economic and social problems which his government faces and of the difficulties he will encounter in handling them. We expect that his approach to these problems will be less conservative than that of his predecessor and, if he and his cabinet follow through on their stated intentions, will include serious attempts at meaningful reforms, including tax reform. He has told the Ambassador he fully expects to be attacked as a Communist for pushing for reforms and programs to help the poor, but that he intends to forge ahead nevertheless.
8. To accomplish his goals, which include curbing inflation, raising wages, stabilizing basic grain prices, improving health and educational services, increasing agricultural production, developing natural resources, reducing wasteful government expenditures, reducing crime and violence, and furthering the Central American integration movement, the President has chosen a cabinet made up largely of respected, nonpolitical, well-qualified individuals. The majority of his sub-cabinet and agency head choices have also been good ones—men who are technically well qualified. One disadvantage of the non-political cabinet is that containing no figures with political strengths of their own, it will probably be of little help in generating support for Laugerud’s programs. Nor is it yet clear how much administrative capacity is represented in the cabinet officers. Laugerud has summed up his policy on a number of occasions, including his inaugural address, as creating well-being (bienestar) for those who lack it without taking it away from those who already have it. He has, however, not been very specific about how he plans to accomplish this. The only concrete step we expect in the near future is for him to comply with his promise to raise government wages, and to jawbone industry and commerce into doing the same.
9. Laugerud’s economic team, which has been charged with coming up with specific recommendations for an action program, has former Planning Director Rosenthal’s partially completed second five-year plan to use as a starting base, and has the expertise to come up with solid recommendations. We believe that it will probably be 4 to 6 months, though, before Laugerud will have a concrete set of proposals to act on. It will probably also take at least that long for the new president of Congress to get the legislature sufficienty organized to be able [Page 525] to tackle any significant new legislation which may be called for. The 4 to 6 months’ time frame is not so bothersome as we would previously have imagined, however, because current Embassy soundings indicate that while inflation is a serious problem, wages are rising even before Laugerud’s jawboning has had its full effect, with the result that demand deflation has not yet emerged to dampen commerce and industry.
10. Notwithstanding the existence of an able team and a better-than-anticipated economic situation, we feel sure that if and when Laugerud does propose any serious reform programs, he will encounter tenacious, skillful and, at times, unscrupulous opposition from the powerful economic elite which has successfully avoided any such reforms over the years. He may well have particular difficulty in the Congress.
11. How Laugerud will meet his opposition is not clear, but our present estimate is that he will indeed press much harder for reform than his predecessor did. He recently told the Ambassador privately that he hoped to achieve his goals through education and persuasion, but was prepared to move ahead by compulsion if necessary. We do not discount the possibility that he would threaten to dissolve the Congress, as President Arana once did, if he were to believe it necessary. And if he were to do so, he would very likely have the support of the army which, through years of indoctrination, has become increasingly more convinced that it should not support the status quo of great inequities in Guatemala’s income distribution.
12. In this connection, we have been told by a key officer on Laugerud’s military staff that the inaugural day speeches of Presidents Arana and Laugerud, admonishing the rich to share or face extinction represent the line which is, and has been, the official policy of the top officials of the Ministry of Defense. We were also told by Chief of Staff Lucas that he and the senior military staff would support Laugerud in his attempt to make social progress through democratic means, but would also support him fully if he should decide to dissolve the Congress. We emphasize that we see no indication that Laugerud intends to govern undemocratically at present and, indeed, do not expect the question to arise for at least six months.
13. In fact, we now believe that the new President, who as noted previously is quickly consolidating his position, will probably have at least a six-month breather before he faces serious problems of instability. This is for two basic reasons. First, as noted, the economic picture, although obviously not rosy, does not look as bleak as it did previously. Preliminary indications of the Embassy’s business survey, now in full swing, suggest that while inflation is as bad as expected, a number of industries are raising their wages voluntarily and thus both [Page 526] relieving pressure from the have-nots and maintaining consumer demand. Furthermore, future contracts for commodity exports are being made at a level which will be even better than last year. We are also getting preliminary reports that the corn and bean crops due around August will be good ones. This news in itself is having a salutary effect on present prices. Second, on the political front the opposition simply is not recovering quickly from the demoralizing effects of its failure to take effective action to preserve its March electoral victory. FURD leader Ponciano has just declared that the FURD is dead, and he is going to concentrate for the moment on being mayor; the PR is once again thrashing around in internal struggles involving an attempt to unseat its Secretary General, Carlos Sagastume; and the Christian Democrats are talking about naming their leader, Rene de Leon Schlotter, as their Presidential candidate in 1978. It is perhaps symptomatic that a number of political and military figures are already thinking in terms of the 1978 elections.
14. On the security front, the level of violence is down and there are indications that Laugerud intends to curtail government use of illegal violence. There appears to be an internal struggle going on within the left-wing insurgent groups between those who want more terrorism, and those who don’t. The result of that struggle will, of course, materially affect the security situation, including Laugerud’s actions.
15. Laugerud is favorably disposed toward the U.S. and will actively seek our support for his economic and social development programs. He is also highly nationalistic and may prove difficult to deal with on individual bilateral problems which he believes involve national self-respect and honor. Airline and shipping matters are foremost in our mind in this area.
16. We believe that present U.S. policy should be to encourage Laugerud in his efforts to achieve reforms which we and he believe are essential for long-term stability, and to cooperate with him in improving the implementation of the development programs he has inherited from his predecessor. We do not think the new government will come up with any concrete new development programs for at least 4 months. If and when Laugerud does produce such programs, we should be prepared to give positive consideration to further assistance, if we conclude that such programs represent a real and effective commitment to meaningful development and if, as now seems more likely than not, the Laugerud administration does not pursue a policy of repression of its political opposition.
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Summary: The Embassy analyzed the situation in Guatemala at the outset of the Laugerud administration and concluded that although he might prove difficult on individual bilateral issues, the U.S. should encourage the new President in his efforts to implement social and economic reforms.
Source: National Archives, RG 59, Central Foreign Policy File, D740192–0359. Secret. Repeated to San José, Managua, Panama City, San Salvador, Tegucigalpa, and Belize City. In telegram 3541, July 1, the Embassy reported that Laugerud had indicated that he anticipated no solution to the Belize problem during his term in office. (Ibid., Nixon Presidential Materials, NSC Files, Country Files, Latin America, Box 785, Guatemala, Vol. I)
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