24. Interagency Intelligence Memorandum DCI/NIO No. 2721–741

Argentina: Prospects Over the Next Several Months2

Conclusions

Mrs. Perón has strengthened her position since our last assessment, and she is likely to remain in office over the next several months. [1½ lines not declassified] she is carrying out her day-to-day tasks with increasing self-confidence. The major power sectors in the country—the military, the orthodox Peronists, and the opposition parties—want the constitutional process she embodies to continue. There is little genuine public enthusiasm for Mrs.Perón as a national leader, but [Page 70]most Argentines continue to support her as the symbol of Peronism and constitutionality.

Discussion

1. This memorandum constitutes an update of an earlier memorandum, “Argentina: Prospects over the Next Several Months,” which was issued on August 7, 1974. It considers the strengths and weaknesses of the Perón government, economic prospects and the order of succession should Mrs.Perón decide to step down. The memorandum concludes with a section on US-Argentine relations.

Forces for Stability

2. Over the short term a majority of orthodox Peronists will stand behind Mrs.Perón. Infighting among Peronist leaders is continuing but has lessened as confidence in Mrs.Perón grows. The left began drifting away from the Peronist movement before its founder’s death, and as long as extremists in this wing threaten the center and the right, the latter two will hold together. Organized labor remains the backbone of the movement. It is potentially the most powerful pressure group in the country, but its leadership is divided and ineffectual, out of touch with its constituency, and susceptible to manipulation by Peronist politicians. Rank and file demands for wage increases are likely to cause strains between the government and labor chieftans, but barring an unforeseen economic crisis, labor will be the last sector to waver in its support for Mrs. Perón.

3. The Armed Forces also will continue to support Mrs. Perón, [5 lines not declassified], but they remain determined to stay out of the political arena. Mrs.Perón has worked hard at cultivating top military officers and they approve of her tough attitude toward the terrorists. The government’s current offensive against the terrorists pleases the military, but pressures from junior and middle grade officers for more aggressive action is increasing.

4. A fear of the left—and a desire to keep the military out of politics—will encourage the opposition parties to continue supporting the government. The Radicals have their sights on the 1977 elections and do not want the constitutional process disrupted. Playing the role of the loyal opposition has not been easy and is causing serious problems within the Radical Party as well as in other parties. The principal reason is that Mrs.Perón has not continued the dialogue with opposition parties that was started by her husband. Opposition political leaders will keep pressing Mrs.Perón to resume the dialogue, as well as to curb the excesses of the extreme right. Relations between the government and the opposition will be strained from time to time, but at least until the terrorists are brought to heel, opposition leaders will seek to keep Mrs.Perón in office.

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Weaknesses

5. Principal weaknesses of Mrs.Perón’s government are its lack of dynamic leadership and its almost total preoccupation with crisis management. Nowhere within the government, nor in the sectors supporting the government, has leadership emerged that appears capable of finding solutions to the country’s economic and social problems. The new ministers of interior, Rocamora, and economy, Gomez Morales, both appear to be politically stronger and more capable than their predecessors. Like the rest of the cabinet, however, they lack popular appeal and have yet to demonstrate the qualities of leadership that can give strong policy direction to the country.

6. The government currently has public support for its assumption of emergency powers under the state of siege, but this support could weaken unless legal and extra-legal repression is used judiciously. Mrs.Perón promised opposition leaders that she would crack down on right-wing death squads. Her failure, or her inability, to do so has provoked leftist charges of official sponsorship. Terrorist leaders also accuse US officials in the country of supporting counter-terrorist activities. The possibility of attacks against US embassy personnel has become a major security concern. This danger will grow as government pressure on the terrorists increases. Actions against US personnel would have high propaganda value and could probably be carried out successfully especially if limited to hit-and-run or kidnaping operations.

7. Terrorism of both the right and left is a serious problem for the government but not one that is likely to cause its fall. The struggle against the leftist extremists will be long and tough. After months of foot-dragging and soul-searching, the army is beginning to play an increasing role in the counterterrorist battle. Its participation in intelligence gathering and coordination is already paying dividends and could be the key to success. Active duty army officers now are heading police forces in two key provinces and the army has recently played a more active role in several others. Military leaders have given their support to vigilante action by military personnel, but they remain determined that the terrorists be defeated without a military takeover of the campaign.

8. [1 paragraph (15 lines) not declassified]

The Economy—A Mixed Picture

9. The economy has factors of both weakness and strength for Mrs.Perón’s government. The recent appointment of Gomez Morales to the economy portfolio has boosted hopes for improved financial management. Although political differences among Peronists over economic policies appear to have lessened, Gomez Morales will be under heavy [Page 72]pressure from Peronist labor to grant further substantial wage increases as inflation accelerates. At the same time, Gomez Morales is committed to the stabilization measures of the Social Pact until it expires in mid-1975. This means that he will have to restrain general price hikes by confining increases to sectors most hurt by higher costs and poor profits. His biggest challenge will come from the public sector, which is heavily burdened by deficit spending. He has already called for public and private austerity, but his efforts to impose monetary controls will be fought by vested interests in state enterprises and the federal bureaucracy.

10. While price hikes authorized by the government have given temporary relief to key industries, many firms face a bleak future. Private investment will continue to stagnate in most sectors as wages outstrip prices. Excessive demand and the lack of investment will continue to generate shortages of consumer and capital goods. Major disruptions of industrial production, however, are unlikely in the near future.

11. The most promising change in economic policy would be one which stimulated grain production. This would ensure the maintenance of a strong balance of trade and provide the currency needed to finance industrial development and service the external debt. It remains to be seen whether effective action will be taken, but Gomez Morales has said that he would pay greater attention to agriculture than his predecessor did. He has withdrawn the agrarian reform bill which was before the Congress, reportedly to include in it greater incentives for the agricultural sector.

12. As to the prospects for 1975, high consumer demand will probably generate economic growth of 5–7 percent, despite continued lack of producer incentives. The rate of inflation will probably increase somewhat. High prices for grain should continue to offset the poor prospects for meat exports. Lower oil consumption and the renegotiation of prices for imports from Libya should reduce the nation’s petroleum bill by 15 percent, to around $450 million. In sum, the economy will continue to be a problem area, but the immediate prospects are reasonably favorable and major economic deterioration and a serious crisis are unlikely.

Looking Further Ahead

13. While there appear to be no problems of such magnitude as to seriously threaten Mrs.Perón’s tenure, the possibility still remains that at some point she will want to step down. Her performance has exceeded the expectations of most observers, and there are indications that she is beginning to enjoy the job. [6½ lines not declassified]

14. If Mrs.Perón should leave office, the succession scenario outlined in our earlier assessment would still come into play, with one [Page 73]possible exception. It is now more likely that Mrs.Perón’s constitutional successor, Senate President Jose Allende, would step aside and allow Raul Lastiri, president of the Chamber of Deputies and Lopez Rega’s son-in-law, to assume the presidency. Lastiri would be bound under law to set within 30 days a date for elections. It is not specified how soon elections must be held, but they probably could not be delayed more than six months to a year. Lastiri is a Peronist and former provisional president. His government would be likely to continue Mrs.Perón’s policy of cooperation and close communication with the United States.

US-Argentine Relations

15. Relations between the US and Argentina are good, and bilateral problems are unlikely to have a major impact on domestic policies over the next few months. Mrs.Perón’s government will continue to cooperate with the US and make every effort to settle all questions amicably. The former economy minister, Gelbard, was an outspoken critic of the US. [2½ lines not declassified] Argentina’s nationalistic economic policy will be continued under Gomez Morales, but there probably will be some easing of the stridently nationalistic and restrictive economic measures that discriminate against foreign business interests.

16. Adding to the prospects for improved US-Argentine relations is the likelihood that Mrs.Perón’s government, and particularly Foreign Minister Vignes, will want to avoid any issue that could mar the meeting of foreign ministers in Buenos Aires next March. Vignes hopes the meeting will result in a settlement of the Cuban sanctions question, and to guarantee a harmonious and productive outcome he will seek the cooperation of the US. He will press strongly for Secretary Kissinger’s presence and thus will be anxious to put the best face on relations with Washington.

  1. Summary: The memorandum concluded that there were no serious threats to Isabel Perón’s leadership and that U.S.-Argentine relations would probably improve as Argentina revised nationalistic economic measures that discriminated against foreign investment.

    Source: Central Intelligence Agency, National Intelligence Council, Job 79R01099A: O/DDI Intelligence Publication Files (1965–1975), Box 20, Folder 7: IIM: Argentina: Prospects Over the Next Several Months. Secret; [handling restriction not declassified].

  2. This memorandum was prepared under the auspices of the National Intelligence Officer for Latin America. It was drafted in CIA and has been reviewed with representatives of CIA, INR, DIA, and Treasury and endorsed by them. [Footnote in the original.]