Foreign Relations of the United States, 1977–1980 Volume XXIV, South America; Latin America Region

178. Interagency Intelligence Memorandum¹

Washington, November 6, 1978

[Omitted here are a note regarding the paper’s scope and the table of contents.]

KEY JUDGMENTS

We expect the administration of President Joao Baptista Figueiredo to continue the effort begun by President Geisel to open the political system to greater civilian participation. Figueiredo could even be the last strictly military president.²

—This “liberalization” process, though, will be subject to setbacks and its ultimate success is by no means guaranteed. There are still, for example, important military officers who oppose liberalization; moreover, civilian pressures for further progress could eventually unnerve either Figueiredo or the military establishment as a whole and lead to a conservative backlash.

—We expect the new government to continue the policy of export-led economic growth that has characterized recent years, and there could be new emphasis on developing Brazil’s agricultural sector. The Brazilians will remain highly dependent on and receptive to foreign investment.

—We also expect the new administration to scale down—but by no means abandon—Brazil’s massive nuclear development program, whose centerpiece is the 1975 deal with West Germany. Financial problems will probably force the Brazilians to cut back, but their determination to master nuclear technology is in no way diminished.

—Finally, we believe Figueiredo has an open mind with regard to relations with the US, and clearly hopes that recent tensions between the countries over nuclear non-proliferation and human rights can be overcome. Nonetheless, the new governing team will be very wary of US intentions in these areas, which will continue to be seen in Brasilia as potential stumbling blocks.

INTRODUCTION

Brazil has entered a period of significant change. Over the last several years, civilians have begun to achieve a greater impact on national affairs than at any time since the mid-1960s. This trend appears likely to continue, because of both growing civilian assertiveness and government tolerance, even encouragement.

As a result, the administration that assumes office next March will encounter a political situation more complicated and more fluid than at any time since the military takeover in 1964. The new team’s political acumen will most likely be tested early, and its success—or failure—could well set the tone for the rest of its six-year tenure.

Moreover, while the basic thrust of Brazil’s economic policy is unlikely to change drastically in the near term, it is nevertheless clear that economic policymaking will become more complicated because of the problems it must address and because of the changing political environment. The heady days of the so-called economic miracle—when annual growth regularly averaged over 10 percent—are gone, probably forever. Brazil now faces the likelihood of substantially lower—though still respectable—growth. Such a prospect could have serious implications, however, for an economy that must accommodate large numbers of new workers each year. Inflation, now running at 40 percent, is also a serious problem. Brazil’s large debt service, though manageable, could prove troublesome as well. The country’s foreign indebtedness is already large, and may reach $40 billion by the end of this year. Even more than before, the Brazilians will be compelled to maximize export earnings and they will be even more sensitive than before to the balance-of-payments situation.

Given the changing political environment, the new administration will have to deal with the variegated demands of many sectors of society, something the military-backed government has not had to do throughout most of its tenure. At the same time, given economic problems, policy planners will increasingly have to reconcile conflicting objectives, notably attempting to curb inflation while encouraging growth.

President-elect Joao Baptista Figueiredo, a retired general handpicked by President Geisel, takes office next March. Figueiredo, the fifth military president to govern Brazil since 1964, has proven controversial, and some Brazilians wonder whether he is capable of governing Brazil effectively in a period of change and increasing complexity.

[Omitted here is the body of the paper and two annexes.]

1. Source: Central Intelligence Agency, History Staff Files, “Brazil: Short-Term Prospects for the New Administration,” NI IIM 78-10023. Secret; [handling restriction not declassified]. Prepared in the Central Intelligence Agency; drafted under the auspices of the Acting NIO for Latin America by the Office of Regional and Political Research and the Office of Economic Research, CIA; coordinated with the Departments of State, Defense, and Treasury. Forwarded to Vance on November 20 under covering memorandum from Turner, who wrote that it “responds to the question you raised with me in our conversation on 9 November.” Turner also wrote at the bottom of the memorandum, “The one page of ‘Key Judgments’ on page 2 summarizes the policies we believe Figueiredo will follow.” (Central Intelligence Agency, Office of the Director of Central Intelligence, Job 80M01542R, Box 2, Folder 62)
2. In a memorandum for the record, November 13, Turner noted that during a November 9 conversation, Vance said: “He would also like us to look at the impact of the new president in Brazil on Brazilian/U.S. relationships. What is the outlook like here? I told him I thought we had seen a marked decline in Brazil’s relations with the United States, as well as Argentina’s. He agreed with that. He wondered what the future looked like.” (Central Intelligence Agency, Office of the Director of Central Intelligence, Job 80M01542R, Box 22, Folder 422)