EFFECTS ON THE ECONOMY OF GUATEMALA OF A CESSATION OF IMPORTS (W/ATTACHMENT)

Created: 6/9/1954

OCR scan of the original document, errors are possible

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UNCLASSIFIED

AND RECORD SHEET

mSIHCIIOM:c*Ution> shoukl be used In tha 'TO" column. Undo each, no should be drawn atroii sheet and each comment numbered to correspond with Ihe number in the "TO" column. Eachshould initial (chock mark Insufficient)further routine This Routine and Record Sheet should be relumed to Refitrj.

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VIEW PROGRAM RELIASEAJ SANITIZED

CONFIQefiTIAL

RESTATED

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MEMORANDUM FOR: Special Deputy, DD/P

Effect* on the Economy of Guatemala, of

CesMtloa of lmporta

(a) Memorandum from Special Deputy, DDP,

to Chief, RQM/OIS, Subject: Economic Sanctions Against Guatemala,4

(b)

Attachedeport oa the probable effect upon the Guatemalan economyessation of Imports, as you requested In your memorandum.

The overall suspension of Imports Into Guatemala would have little effect upon th* Guatemalan economyhort term basis,

ong term basis, however, the suspension of petroleum imports. If undertaken so ae to assure the exhaustion of dicael and crude stocks at the time the coffee crop begins to move in December, could seriously affect the economy; coffee Is the primary exportaccounting for overer cent of total exports and therefore of foreign exchange. Obversely the shortage of petroleum products would also affect Imports by Interrupting the internal distributionrom the ports.

Chief, RQM/OIS

Attachment: The Effects on the Economy ofessation of Imports

RQM/OIf

Distribution;

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SE0RET

THt. iFFi-CTSOF

ASSATION O* iMi- RT5

Immediate economic effect upon Guatemalaessation of Imporls at thla time would be negligible. At tha end of two weeks, or even four weeks, there would be hardly any dislocation in the economy. It would be most unlikely thai the business community would suffer sufficiently to cause any business failures. At the end of two months, some shortages probably would appear, depending upon Inventories, but with the exceptionessation of petroleum products these shortages probably would have no appreciable effect upon the economy of Guatemala.

Xhe only Imports of major economic Importance to Guatemala arc petroleum products and machinery and metal manufactures. Xbe government has taken pains specifically to exclude these products from vsrLous Increases in duty and trade restrictions. Guatemala alao is entirely dependent on imports for newsprint.

Guatemala le totally dependent upon foreign sourcee for petroleum aad petroleum products, because no petroleum la produced or refined ln tbe country,essation of imports would bave aa Immediateonly if stocks were abnormally low.* Storage capacity within the country would provide, under normalday supply of motorix-month supply of aviation gas and upne-year supply of diced fuel. Shipments are received, however, at comparatively long Intervals,ew largeear rather than frequent smaller ones, and exact figures on current stocks are unavailable. Consequently, the effectack af Imports would be ln direct relation to the amount held In storage at the time an embargo was enforced.

1'ctroleum product! account for more thaner cent of the total energy supply and are used primarily to power the railroads, motor transport and for domestic lighting end cooking, Xhe only part of the transportation system which might feel any immediate affect of aa end to imports, however, would be the motor transport. Taxis In

Guatemala City, which use most of the motor gas, would feel tbe

report Petroleum Situation in Guatemala prepared byecret.

shortage most acutely. Current supplies are received from Aruba, Curacao and the US, with minor amounts from Venezuela and Mexico. The alternate sources of supply for petroleum products are:

Peru (International Petroleum Co.anadian-Am eric an Company in which Standard Oil of New Jersey owns an Interest)

Trinidad (British companies, probably affiliated with the Anglo-Iranian group)

Indonesia, and Borneo (Royal-Dutch Shell and Standard Vacuum Co.)

Middle East (American, British and Iranian Cos.)

Soviet Bloc (USSR, Rumania)

The tanker market is currently depressed, so that Guatemala could charter the necessary tonnage, although transport costs from these areas would be very high.

The effectessation of manufactured Import* wouldhort-term outlook. Imports of machinery consist pri* marily of earth moving equipment and farm equipment, almost ell of which come from the US.atter of months, without imports, machinery and metal products in use ln Guatemala would begin to need replacement and shortages would become apparent. Thehowever, has cut down on appropriations for the extensive public works program begun Thus the possibility of shortages being felt in that field to the government's disadvantage becomes even more remote. The alternate sources of supply ere:

Canada

Guatemala is entirely dependent on Imports for newsprint. Local production Is limited to paper suitablelat-bed press, and there is

United Kingdom JA'est Germany East Germany

no newsprint produced in Guater: ala suitable for roller presses. Theoo* required by Guatemala is supplied almost exclusively by the US sod Canada. Worldwide supply sod demand le approximately in balance, but there isdn unused capacity, principally Im

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Soviet >'

In additionons of estimated unused capacity exists ln the

US.

In the consumer goods field, wheat flour and textilea are among 'Guatemala's larger Imports by value, but the government is taking specific steps to curtail these Imports. Tbe technique usually is toequired ratio of domestic material in thell bread baked in Guatemala mustinimum ofer cent domestic flour. The US has complained officially to the Guatemalan government that these actions contravene the provisions of6 Reciprocal Trade Treaty between the US and Guatemala.

Tha third quart ar is notably the slack period in Guatemalanwith Imports in August being usually abouter cent below therch peaks. The catting off of imports would have, therefore, aubstantiaily less effect upon the Guatemalan economy at that timeessation during the active months of the first quarter.

Original document.

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