Full text of the propaganda report created by John Clements Associates

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REPORTONGUATEMALA
JOHNA, CLEMENTSASSOCIATES
959 Eighth Avenue,
New_Yorl<, N. Y.
1952

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TABLE OF CONTENTS
Foreword
rntroductfon
I __ The Guatemalan Economy
chapter
II __ General Political Survey of Guatemala
chapter
t er III -- Guatemala: A Case History
c11ap
ter IV -- organized Labor in Guatemala
chap
chapter v -- Guatemalan Agrarian Reform Program
chapter VI -- Rights and Duties of Foreigners
chapter VII -- Treatment of Foreign Investors
chapter VIII -- U. S, Policy Toward Guatemala
Chapter IX -- Notes on the Arbenz Regime
Index
3-5
6-12
13-26
27-43
44-7'7
'78-111
112-165
166-192
193-201
202-208
209-221
222-235

4. -
FOREWORD
A Moscow-directed Communist conspiracy in Central America
is one of the Soviet Union's most successful operations of
infiltration outside of the Iron Curtain countries.
Following their customary tactics, the Communists are using
Guatemala as a proving ground ~or the whole of Latin America,
and so successful have they been in their work in that country
that, unless checked, they will gain yet more control over the
government within a reasonably short time.
While the government of Guatemala is not at present wholly
Communist, it represents a coalition in which the Communists
are the dominant element, with no likelihood of their being
eliminated unle~s strong and immediate measures are taken.
In their campaign to entrench themselves in the government
of Guatemala, and to move from there to neighboring countries, •
the Communists have followed a well-defined and tested operational
method.
There are four principal vehicles through which the Communists
are functioning in Guatemala.
The first and basic vehicle is the Guatemalan labor union
federation. This, the Communists control completely.
The second vehicle is the recently enacted Agrarian Reform
Law, This, too, represents a basic item in Communist strategy
which has been used with marked success in other parts of the
world.

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Third is the propaganda campaign carried out continuously
through Communist control of publicity outlets. This extends
into the government-owned radio and the government-owned news-
paper and periodical field. These media of communication pour
forth a constant stream of pro-Communist propaganda.
The f ourth is the Guatemalan Foreign Office. This vital
department of the government is in Communist hands and utilizes
its world-wide diplomatic network, especially the Guatemalan
Embassy in Paris, to carry out Soviet espionage.
It must be remembered in evaluating the Soviet conspiracy
in Central America that many individuals are deeply involved who
are ostensibly anti-Communist or neutral. This, too, is a part
of the Communist plan for infiltration, These individuals can be
identified only by extensive research and an over-all survey of
their activities over a protracted period. In many instances,
of course, they will remain undetected.
It will be noted that Chapters IV and V of this report,
dealing with Organized Labor in Guatemala and the Agrarian Reform
Law respectively, contain far lengthier discussions than other
chapters of the report,
The reason for the extended discussion of organized labor
and agrarian reform is that these two are the foci of the
ellipse of Communist infiltration in Guatemala, If the Communists
ever take over completely in Guatemala, the solid foundation of
their conquest will have been laid in their administration and
control of the labor union federation and the Agrarian Reform
Law. Most of the Communist bureaucrats in the Guatemalan

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government are concentrated in the administration of these.
rt is for this basic reason that a more elaborate discussion✓
of these two instruments of Communist infiltration has been
given in this report. Their importance cannot be over-emphasized.
Many of the statements contained herein may appear to be
stressing the obvious since m~ny of the facts related are so
well known to those who are informed on Guatemala. It was though
advisable, however, to present a rounded view of all of the
important and relevant factors without stopping to make a
specific judgment from time to time as to what was obvious,
what was new, what was known, and what was unknown.
The present Soviet operation in Guatemala represents a
phenomenal degree of success in infiltration. There is every
reason to believe that it will be eminently successful unless
drastic, immediate, and intelligent counter-measures are put
into effect.

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I ntrod uction
Communist Practice
In examin ing t he subje ct of t he Communist penet ration and
infl uence in t he Cent ral American Republi c of Guat emal a --
admitte dly a complex subje ct -- it will be neces sary fr equen tly
to make excur sions into the areas of Communist dogma and to
elu cidate the examination with references to Communist practice.
A few observations of this nature seem to be relevant at
the ver y beginning of this report.
This fact should be underlined as one of paramount im-
portance: If there is a Communist plan of operations already
worked out for Guatemala, or, in other words, if the inter-
national Communist conspiracy has reached into this largely
primitive and tropical territory of the Western Hemisphere, we
may not be able (as persons outside the conspiracy) to identify
all or many of the individual conspirators who are charged with
the execution of the plan, but we are able to ascertain and
describe the facts of the conspiracy itself.
It must be borne in mind that Communist conspirators are
frequently not to be identified by any open revolutionary
activity or behavior at certain stages in the development of
their conspiracy. For strategic reasons, it may be necessary
for them to behave like other members of the community.
The master minds of the Marxist-Leninist- Stalinist world
conspiracy are notable for their attention to details when they
undertake the formulation of strategy and tactics to be employed

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in a given country. Concretely, when the top strategists plan
their revolutionary activities and objecti ves for Guatemala,
there is not a emall factual detail about that country which is
ignored or overlooked.
Conspirat ors who seek to subvert an exis ting social order
are often much better informed with re spe ct to factual details
concerni~ that country than is the case with the defenders of
the statu8 quo.
It gees without saying that the elementary facts of
geography, topography, population, economics, lan gua ge, and
hlstory of Guatemala have been assembled by the master planners
l
of the Cominform. These facts are on file in the headquarters
of the Cominform in Bucharest, Rumania, where they are periodic-
ally reviewed and brought up to date. Furthermore, they are
analyzed with respect to their significance for revolutionary
purposes. The subject of geography, for example, is not simply
a question of locating Guatemala on the map by latitudes and
longitudes. It is also a matter of the country's stragegic
situation with respect to neighboring areas of revolutionary
activity or potential activity -- areas such as Mexico, Cub.a.·,
and the Panama Cana 1 Zone.
In addition to those less complex subjects of study named
in the preceding paragraph, the master planners of the Cominform
give the most thorough attention to such subjects as the following:
l The -Cominform, abbreviation for Communist Information, is the
international successor to the Comintern or Communist Inter-
national,

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the structure of the national economy; the level of industrial
development hich bas been attained; the balance of production
bet een agriculture and industry; the role of foreign capital;
foreign economic dependency; the relationship of social classes
with each other; the growth of organized labor and the extent
f class consciousness; standa r ds and habi t s of consumpt i on;
political tendenc ie s and ideolo gies; psyc holo gical fac tor s su ch
as national pre jud i ces and phobias; education and illitera cy ;
and the ro le of reli gion and clericalism in the established or d~r .
The sub je cts enumerated in the pre ceding para graph do not
exhaust t he topics in which the professional revolutionaries of
the Cominform interest themselves, but they should indicate that
th ese Communist world conspirators set for themselves the task
of knowing everything that is to be known about a given country.
In the present instance, the country is Guatemala.
All that has been said about the thoroughness of the master
planners of the Cominform in their gathering and analyzing of
the facts about a country applies equally or almost equally to
the World Federation of Trade Unions.
The World Federation of Trade Unions, referred to frequently
hereafter as the W. F. T, U., is a Communist world apparatus for
advancing the Kremlin's conquest of the entire globe,
Thew. F. T. u. ranks in importance with the Cominform as
an agency of Communist world revolution.
Thew. F. T. U. is especially important with respect to the
present situation in Guatemala. Its agents, thinly disguised as
trade unionists, move freely in and out of Guatemala,

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Patriotism is ~ubversion in Guatemala
A simple but shocking fact is thnt it is subversive to be
anti-Communist in Guatemala.
Any Guatemalan who loves his country so much that he wishes
to protest publicly against its being under the yoke of the
Kremlin now or ever -- must face the startling fact that he
is held to be subversive.
To engage in any public expression of anti-Communism is to
be guilty of subversion or un-Guatemalan activity.
Such a situation does ~ot prevail in any other country in
the world outside the Iron Curtain. In this respect at least,
Guatemala is unique.
Day in and day out, the Guatemalan government's own media
of communication -- radio and newspapers -- have dinned it into
the public mind that anti-Communism is synonymous with subversion.
It may, therefore, be considered the official government view-
point.
The proposition may sound fantastic and unbelievable to
the ears of people in the United States, but it is nonetheless
true that the Guatemalan govornment -- acting under the dominant
influence of the Communists -- has already conditioned the great
majority of the people of that country to scorn and hate their
fellow citizens who oppose Communism.
On January 5, 1952, the Guatemalan government radio, TGWA,
broadcast the following news item:
"This morning the Minister of Government Lchavez Nackmann7
reported having been called on by a group of anti-Communist

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students who requested authorization to hold anti-Communist
demonstrations ffinderlining not in origina17', Minister Chavez
Hackmann said that he had turned down the students' request
on the grounds that demonstrations of such a nature would only
disturb the public and possibly lead to the disruption of
national peaee and order ."
Pro-Communist demonstrations may be held anywhere at any
time , without int erference fr om the government, but anti-Communist
demonstrations are held to be disruptive of peace and order.
It may wel l be that this fact is the best of all measures of the
extent to which Guatemala has come under Communist influenc••
On June 21, 1952, Guatemalan President Jacobo Arbenz himself
publicly charged that the opponents of the newly-promulgated
Agraria~ Reform Law " today take shelter behind the anti-Communist
slogan. 11 ffinderlining not in originald
On June 20, 1952, Station TGWAreported that the Minister
of Interior and the Director of the Civil Guard held one Colonel
Alejandro Estrada to be guilty of having sent telegrams to
"known members of the anti-Communist group." ,LUnderlining addedJ
On June 81, 1952, the Communist-dominated labor federation
(CGTG) held a mass demonstration, and Station TGWAreported that
the speakers at this demonstration "expressed the firm determi-
nation of workers, peasants, and students to defend the revolution
and the Guatemalan people, threatened by anti-Communist reaction."
ffinderlining not in or1ginal~7
It is, of course, evident where this identification of
anti-Communism with subversion started. It comes right out of
the shrewdly calculated plans of the Communists themselves.

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The Communists have attempt ed the same thing in many other
countri e s, bu t they have succ ee ded only in Guatemala. For
many years, th e Communists of the United States, with the help
of the so- called l i berals, tri ed to make red-baiting (1. e.,
anti- Communism) a thing to be despised by all decent citizens.
For a time, they seemed to be approaching success in this
attempt, but that time has gone, although relics of it remain
here and there.
In the preparation of this study of Guatemala, an exhaustive
examination of the country's periodicals and radio broadcasts
has been made, covering the past 18 months. Hundreds of examples
of the identification of anti-Communism with subversion could be
quoted. The few which have been quoted, however, are typical,
and it would be pointless to extend the evidence indefinitely.
In conclusion, it may be said that a country is far gone
on the road to Communism where public opinion has been so
completely regimented as to accept the proposition that it is
subversive (or un-Guatemalan) to be patriotic (or anti-Communist).
Variations in Communist Practice
World leaders and theoreticians of the Communist movement
have warned their Communist parties against what they call
"a dilettante universalism which may tend to base the tactics
of the Communist parties on general tendencies of development
without considering the peculiarities of each individual country.''
/Jrom the Thirteenth Plenum of the Executive Committee of the
Communist International -- December, 1933 -- by D. z. Manuilsky.J

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Manuilsky declared furth er: "The tasks of the Communist
parties must be strictly differentiated in conformity with the
concrete situation of the present day and with the given
correlation of forces in their own country."
In simpler language, Manuilsky meant that Communists do
not pursue identical tactics in all countries at all stages of
the revolutionary movement.
It must not be assumed, therefore, that every tactic pursued
by the Communists of Guatemala is one that has been, or will be,
pursued everywhere else in the world.

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CHAPTER I
The Guatemalan Economy
SUMMARY:General financial condition of the country --- The
agricultural nature of the economy --- The Mission
of the International Bank --- The status of foreign
inv estments --- Const ruction projects --- Tourist
trade --- Inflation --- The national budget ---
Important economic developments in Guatemala during
1951.

15. CHAPTER I
!!!_eGuatemalan Economy
ed government
After seven years unde r a Commun1st -1n fluenc
f so cialist
end the adoption of numerou s sweep in g measur es O a
nature , the Guatemalan economy prese nts a mi xed pi ct ure.
111 und thanks
The country ' s exte rnal cond itio n is st so •
Of Coffee and t he ex ce ll ent mark e t
1argely to the hi gh pr ice
condit io ns fo r Guatem alan cof fee , pa r t ic ul a rly i n t he United
states ,
at the end Of 195 1 wer e $41,925,000,
Foreig n ex chan ge res erves
compar ed t o $39 ,4 00,000 at the end of 1950,
Despi te a flurry of rumors hinting a t devaluation, a year
ago, the quetzal continues at par with the U, S, dollar.
EXpor t s during 1951 r eached an all-time high of $ 76,085,000.
Coffee exports totalled $ 58,463,000. Imports also set a new
r ec ord in 1951, totaling $64,145,300.
The overwhelming proportion of Guatemalan trade is with the
United States. During 1951, eXports to the United States were
valued at $66,687,000; imports $ 54,300,000.
Internally, however, the country's economy is commencing to
show signs of stress. The adoption of the Agrariea Reform Law
this year (June 1952) caused a sharp business recession and a
sudden flight of capital from Guatemala to more secure havens in
the banks of New York, New Orleans, Havana, and s~it~erland.
During the past six years , there has been a st eady fligct of
capital from the country as a result of the policies of the
Ar~valo and Arbenz re gimes. One authority estimates that between
$50,ooo,oooand $60,000,000 of Guatemalan capital is on deposit
in foreign banks, or invested abroad.

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The reluctance of Guatemalans to invest their capital in
local producti ve enterprises has had a most serious adverse
effect on the coun tr y' s econo my .
Potentially, Guatemala is a very rich agricultural country.
Economists of varyi ng pol it i cal fait h s who ha ve studied its
potent ia lit ies agr ee that under wise pol ti cal and business
leade r sh ip, Guatemala, with i n a r easo nably shor t period of time ,
could ac hieve rel a tively high and progressiv ely incr easing
standards of living for all of its people. The country possess e s
l arge areas of rich soil that have never been utiliz ed. Its
climate ranges from tropical in the lowlands to one of the mos t
temperate year-round climates in the world in the central hig h-
lands and on the Pacific and Atlantic slopes. It has vast
undeveloped forest reserves. Although they never have been
properly surveyed, the country's mineral resources are believed
to be far beyond those indicated by current production. More-
over, there is reasonable basis to assume that Guatemala has
adequate petroleum deposits to supply at least the needs of the
domestic economy. Government policies, however, have discouraged
the exploration and exploitation of petroleum reserves.
There are, of course, seri ous obstacles, completely inde-
pendent of the political situation, , that r etard develo pment. The
princ i pal one is the country's topography which has made the
development of transportation fa ·cilities extremely di ff icult and
expensive. Another serious problem is the pr evalence of various
tropical dis eases, pa r ticularly in the lowlands. The illiteracy
of the people and their lack of modern agricultural and industrial
tec hn iques seriously i mpede the development of the country.

17. Al t hough the country as a whol e ls sparsely populat ed ,
cer tain sect i ons i n th e hi ghland area s .ar e over-populated.
-16-
I n i t s prese nt s t a t e , t he development of ele ctrical power
can be exte nded to new areas only on a ba sis so costly as to
make rates almos t prohibitive, unless dir ectly subs i dized by
t he st a te or indirectly at the expense of the consumers in the
mor e conce ntrated areas.
None of thes e problems, however, are insurmountable, given
wise lead ership and a reasonably safe climate for business and
inv estment.
A survey by a mission of the International Banlc, conducted
two years ago, resulted in the recommendation to the Guatemalan
government of a six-year investment program totaling expenditures
of $62.2 million. During the early stages of the program, the
Banlc recommended that the gov ernment concentrate on the develop-
ment of transport, agriculture, and public health services (par-
ticularly the expansion of sanitation systems and the elimination
of tropical disease). As the program progressed and new areas
were opened up, it called for increasing expenditures for the
expansion of electrical power, tele-communications, and, eventu-
ally, the creation of an irrigation system.
The banlc estimated that $41.6 million of the $ 62.2 million
necessary to finance the program should come from internal sources.
The remaining $20.5 million should be secured from foreign sources?
It also contemplated that as the program developed it would be
supplemented by an increasing amount of direct private investment
in such productive enterprises as the development of agricultural
lands and the establishment of various processing, light manu-
facturing, and service industries.

18. - -1 7 -
The I nt e rna t ional Bank Mi s sion s tron gly ur ged that the
government concen tra te it s ener gi e s in thos e e ssential economic
activities whic h, a t t his tim e , i t b eli ev e s are of no attraction
t o private inv e s t or s , su ch a s th e fo l lowin g : building of a
ne t wor k of h ig hways and sa nitat io n sy s tems; un de rtakin g pro grams
f or t he e limination of tro p i cal di se ases; reloc a ting substantial
pro port i ons of the rural p opulation from the ov er-developed
h i ghland area s to the more f ertil e , und e r- de ve loped lands on the
Atlantic and parti cularly the Pa cific s lopes; the colonizing of
/
Pe ten; improving port facilities; and subsidizing or directly
un dertaking the extension of elec t rical power to those areas now
considered unfavorable by private companies. For instance, it
would be the government's job to build hi ghways. Private enter-
prises, it was hoped, would establish the ne cessary bus and truck
lines for the actual trans p ortation of goods and people.
The Bank Mission strongly warned that the over-all program
would fail in its ultimate achi evement unless the government took
proper steps to create a climate favorable to private domestic
investment, private foreign investment, and to the sound financing
of its own obligations. All this the government has ne glected to
do, As a matter of fact, its p olicies have had exactly the
opposite effect~ as is attested by the fact that such a large
amount of Guatemala's limite d supply of investment capital is
invested abroad and that an unduly large proportion of that which
is being invested locally · is being attracted into such unproduc-
tive channels as real estate and inventory speculation.
It cannot be said objectively th a t this is alto gether the
fault of the present government. Although the treatment of

19. - 18 -
private foreign investors over a. period of generations ranged
f rom highly f avorable to mildly discriminato r y, f ormer Gua te~ ~ ~
governments frequently resorted to poli cies that t ende d t o dis-
cour age their own in vest or s f r om risking the ir funds i n s ound
pr oduct i ve ent er rises .
Poli t ic al i ns t ability; th e prac tic e by ce rt ain r evolu t i onary
regime s of confis cating pr ope rtie s of politi cal opponents ; ax
fis cal policies; the resort to monetary inflation to pay off
public obligations; and the exorbitant "mordita 11 extra ct ed by
grafting politicos: - a.11 tende d to weaken the confi dence of th e
investment classes in lon g-t erm projects. Althou gh a rela t ive ly
sound fiscal a.nd bankin g system was est ablished during th e r eg ime
of Ubico, the memory of previous practices has lingered on. As
a result, there is firmly ent r enched, in the minds of potential
Guatemalan investors, an investment philosophy which is currently
de s cribed by the "liberal" s chool of ec onomists as "u n-social, "
and by their more conservative collea gues as "un-economic. 11 They
se ek the maximum profits in the minimum time, and at the least
possible risk---practices which contribute to high prices and
which retard economic expansion.
Accurate statistics on the relative earnings of foreign-owned
enterprises in Guatemala and those which are domestically owned
and operated are lacking. Neverthel ess, it can be stated with
reasonable certainty, that the maximum profits earned in recent
yea.rs by the foreign "ex ploiters" a.re a small fraction of those
expe cted by the Guatemalteco wh o undertakes comparable risks,
whet her such profits are calculated on the basis of the total
capital investment or the gross receipts of the company.

20. -
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The reluctance of Guatemalans to in v est their capital in
local prod u ctive e nt erprises has been, of c ours e , greatly
in reased as a result of the extension of Communist influ ence
/
over the Arevalo o.nd Arbenz go ver nments. Some slight ef'f orts
have been made by the Arbenz go v ernme nt to ease th e su spic ions
of' the capital-owning classes an d to induce th em to undertake
new investments. In their public sp ee ches and of'f icial state-
ments , gove rnment of'fi c ials pay li p s er vi ce to th e "establ i shment
of a cap italist e c onomy ."
The Industrial Development Law (Ley de Fomento Industrial)
adopted in 1947 authorizes the g ov e rnment to extend substantial
tax concessions and credit assistance to new industrial and
a gricultural enterprises which it believes contribute to the
Guatemalan economy. Although some advantage has been taken of
this law, the broad discretionary powers which it grants to the
arbitrarily-minded government has caused most potential investors
to regard it with suspicion.
Moreover, the sweeping rights granted the labor unions by
the Constitution and spelled out in the Labor Code, the flagrant
abuse of these rights by the Communist leaders of the unions, and
the Communist domination of the Labor Courts have more than offset
the g estures which the government has made towards private capital .
In their words and in their actions, the leading government
offi ci als clearly demonstrate a deep-seated hostility to the idea
of private profits, They regard the investment of private capital
as a necessary and a highly desirable thing. They merely do not
want the investor to be paid for the ris~ he undertakes.
Thus far, little has been done to carry out the recommends-

21. --- -20-
tions made by the Internati onal Bank Mission. Whi l e numer ous
details of th e Mission ' s re port ar e the sub j e ct of considera ble
controversy and its obje c ti ves are de scrib e d as over-am bitious,
the consens u s of economists who ha ve studied t h e si tu ati on is
that the Mission ' s basic recomme nd a t ions are sound. A commission
of public officials a nd private business men was app oint ed to
study the r e commendations and the commissi on r epo rt ed favorably
to the gov e rnm ent .
The only specific projects that have been undertaken, how-
ever, are the proposed Atlantic highway from Guatemala City to
Puerto Barrios-- which would virtually parallel the railroad --
and the completion of the Guatemalan link in the Pan-American
highway. The Guatemalan government exp0cts to get substantial
financial assistance from the United State s government for both
of these projects a nd recent reports in Washington indicate that
such assistance may be forthcoming.
While many nationalistic politicos in Guatemala are sincerely
desirous of developing the economic potentialities of the country
and raising living standards, nevertheless, as has been pointed
out previously, one of the key objectives of the Communists with
whom they collaborate is to disrupt the econ omies of every
country in Latin America in which they gain sufficient influence.
Despite the relatively strong external position of the country,
the effects of Communist-instigated policies on internal business
are becoming increasingly manifest.
The once lucrative tourist trade, which had already begun
to dwindle as a result of adverse publicity it received abroad,
has been literally throttled by the abortive strike against

22. - 21-
pan American Airways . Hotels, shops, restaurants , and native
industries in Guatemala ity, Anti gua, and Chichicaste na ngo are
suffering severe losses . Even though the stri k e has b ee n
se t tled an d s e rvice resumed, the hotel owners and shopkeepers
see lit t le prospect of sub stanti a l improvement.
The gains achie ved in the coffee ind ustr y have been par-
tially offset by the gr a dual weake ning of the country's once
flouri shing banana indu s try. The operations of the United Fruit
Compan y , which had alrea dy been h ampered and r e stricted by
government policies and labor difficulties, were seriously
a ffec ted by a s e ries of "blow-downs." The exports of bananas.
which were valued at $ 18, 20 0, 000 during the fiscal year 1947-48,
slumped to $6 ,010,000 during the fiscal year 1951 and, as a
result of the prolonged labor dispute during the early part of
this year, are likely to go even lower in 1952.
As a result of the inflationary policies of the government,
living costs have increased almost 30 percent during the past six
years, and the cost of foodstuffs more than 50 percent. Whole-
sale prices of food during 1951 were 313.9 percent of the 1937
average. These figures were issued by the Director General of
Statistics and are not regarded as reliable by u. ~. officials,
who state they have been ri gg ed to minimize inflationary trends •
.,
During the administrations of Arevalo and Arbenz, a treasury
surplus has been quickly dissipated and a national debt now
estimated in excess of $27,000,000 incurr~d. In fact, not even
the Guatemalan government knows exactly what the national debt
is. A commission was appointed recently to study the problem

23. -
-22-
and determine the amount of the debt, and the $27,000,000 figure
is said to be based on a partial report by the commission.
ince the overthrow of the dictator Ubico, the Guatema lan
national budget has zoomed from $11 ,808, 384 in the fiscal year
1944-45 to $63,395,475 for the current fiscal year. The
Guatema lan governmen t does not give a detailed breakdown of its
budget estimates nor a detailed accounting to the public for a
substantial portion (estimated at 30 to 40 percent) of its
expenditures. Unconfirmed but reliable reports indicate that
large amounts of the unaccounted funds go into graft for govern-
ment and labor officials and the financing of various Communist
and Communist-front organizations and activities.
The economy of Guatemala is predominantly agricultural.
Because the country depends heavily, however, upon imports for
many necessary products and raw materials, the service
industries are also important. Most of the adverse effects of
governmental policy have been felt in the service and merchan-
dising industries and in the foreign-owned agricultural enter-
prises that produce for the export market.
Important economic developments in Guatemala during 1951
include:
1. Agricultural export crops, with the exception of
bananas, were good. Coffee production reached an all-time high,
as did essential oils. The production of abaca quadrupled the
output of the previous year, and despite a slump in prices the
total value of abaca export increased from $1,636,000 in 1950 to
$2,029,000 in 1951.

24. - -23-
2 , Th e p r od u c ti on of ba s ic domestic food cr ops was
sa t isfa c t or Sli ght in cr ea se s in output of cotton and tobacco
we re off set by d e clin e s in the produ c tion of sugar , rice, an d
wh ea t . Corn rema i ned a bout the same as for 1950. A curious
su gar sh orta g e caus e d th e ov ernment to take over th e distri-
bution of sugar during August,
3 . Domestic price co ntrols continued on staple foods.
4. Production, sales, and profits of most industries
incre a sed in 1951. Sh arp declines set in, however, during the
final quarter and continued during the early months of 1952.
Increases fo r the year were reported by the electric power,
cement, match, meat, and cigarette industries, and declines
were recorded by the construction, lumber, flour, alcoholic
bevera ge , and tourist industries. The decrease in production
of beer and alcoholic beverages resulted from difficulty in
obtaining equipment and raw materials rather than from lack of
demand. Cement sales, although up for the year, slumped during
the final quarter as the result of a decline in private
construction and building activities of the government and the
United Fruit Company. Lumber production was the lowest in years,
5. Mineral output increased substantially in 1951, as the
result of booming world market prices for most metals, The
production of lead ore tripled the 1950 output, chrome ore
production was quadrupled, and zinc ore increased considerably.
A United S tates-owned firm completed its preparations to commence
large-scale production of lead and zinc con centrates from
extensive deposits in the Department of Huehuetenango, The

25. -24-
company expected to enter fulJ-soale production early in 1952.
Another United ~tates -own ed fi rm operating i n the Departmen t
of Alta Verapaz more than trebled its 1950 output of lead-z ino,
sulphide ores, and zinc carbonates . The company is undertaking
further exploration work in adjacent areas , but its operations
are seriously hamper ed by transportation di ffic ulties. Chrome
deposits in the Department of El Pr ogreso ar e also worked by a
United ~tates mining firm. Despite the increases reported in
1951 and indications of further increases during the present
year, mineral production in Guatemala is not a si gn ificant
industry.
6. Explorati on and anticipated exploitation of petroleum
deposits in Guatemala have virtually ceased. Policies of the
government during recent years have compelled foreign (mostly
American) companies to abandon their concession agreements.
Appropriations for the National Petroleum Industry, a state
agency which was instituted to replace foreign companies active
in exploring potential petroleum deposits, were cut so. severely
that its operations during 1951 practically ceased.
No wells were drilled, no reserves proven, and, of course,
no oil produced.
Although Guatemala increased its imports of gasoline and
kerosene -- despite heavy consumer taxes -- imports of Diesel
oil and fuel oil dropped considerably, as a result of the
serious decline in the activities of the United Fruit Company,
which directly and indirectly consumed large amounts of these
products in shipping bananas to the coast by rail.

26. -25-
7 . en r io r t t he Pa n Ameri can Airways strike, there
wa s a harp dr pin pa sse n e r t ra ffi c t o and from Guatemala
y t h e i nt e rnati onal air s ervi ce s. Guatemala's state-owned
airline, Aviateca, also suffered a loss in rev enu e , further
indi a ti n of the slump in internal business. A requ e st by
Avia t e ca for a ten percent increase in passenger and freight
rates as denied by the Min i st ry of Economy on the gro u nds
that it would increase living costs. As a result, Aviateca,
which has been described by foreign residents as well as local
nation als as a reasonably well-managed airline, ls now operat-
ing at a substantial deficit.
8. Despite various adverse effects, the local financial
situation remained relatively stable. Interest rates were
unchanged as were the reserve requirements of Guatemalan banks.
The currency and other circulating media were up 1.3 percent
over the pr evious year. Loans, di s counts, and investments of
banks had increased 14.4 percent, partly as a result of rising
prices of import and export commodities, but total means of
payment were increased only 5.2 percent.
9. The cost of living in Guatemala City rose 4.5 percent
above 1950 compared with the average increase of 7.2 percent
during that year. As has been previously noted, however,
these are figures issued by the government and are inaccurate
and slanted to minimize the inflationary aspects.
10. Customs collections increased 31.3 percent above
1950 to $ 12.7 million on imports and $ 7.186 million on exports.
This was the result of a combination of factors including

27. -26-
sha r ply rising prices of expo rts and imports and an increase
of the duty on cof1'ee. The in re sed coffee export tax boosted
revenues rrom this source to $8 .7 million.
ll, The financial positions of Int ernational Railwa ys
and the government railway deteriorated substantially dur ing
the year. The forme r because of labor difficulties and the
loss of banana traffic resulting from the decline of the United
Fruit Company 's oper ation; the government-owned railway, a.s a
result of a combination of factors, principally inefficient
management.
12. Guatemala's basic transportation difficulties were
further ag gravated during the year by the continuing neglect on
the part or the government of existing highways and their
failure to construct the necessary new highways. Landslides
and neglect have had a serious deteriorating effect on the
country's existing primary highways. Secondary roads, mostly
unpaved, have been rendered impassable at various times during
the year, particularly during the rainy season, because of the
government's failure to maintain them.

28. - 27-
CHAPTERII
General Political Survey of Guatemala
SUMMARY:The United States as principal target of Communist
propaganda in Latin America --- outright control of
Central American go-,re1•nments 1 including Guatemala,
not the Communist objective --- Immediate objectives
of' the Communists -- ·- Situation in Costa Rica ---
Situ ation in El Salvador --- I s Arbenz tiring of
Connnunists? --- Nationalism and anti~Ye.nquism ---
Collaboration between Communists and non-Communists
basis of Guatemalan government.

29. - 28 -
CHA TER II
General Political Survey of Guatemala
The most important and most inc ontrovertible fact in the
current Central American political situation is that t he
United States -- particula r ly United State s pr i vate in vestment--
has become t he principal tar get of a Communist-insp i red, Com-
munis t -infl uenced, and, i n some r espe ct s, Communist-dominat ed
conspi rac y .
A sec ond obvious and highly important fact is that the
conspirac y is not confined t o any one country, although toda y
it flouris hes most successfully and most openly in Guatemala.
I t is active, t o a greater or lesser degree, in every country
south of the Rio Grande. At the moment, for a variety of reasons
that will be dealt with later, the conspirators are concentrat-
ing their most i ntensive efforts in Central America and the
Caribbean area.
Every informed person consulted in this study--off1c1al and
unofficial, North American and Latin, in Washington, in Mexico,
in Guatemala, and in Cuba~-stressed t he fact that the situation
prevailing in Guatemala today simply discloses the pattern of
what may occur in any of the Central American and Caribbean
republics (with the possible exception of Nicaragua) at any t ime
within the next few years.
A third important and equally incontrovertible fact is that,
aside from the efforts of u. s. di plomacy, no organized effort
is being made in Central America to fight the conspiracy and to
disclose the falsity of anti-u.s. propa ganda. Furthermore,

30. -2 9-
no ody admi s more freel y than do our diplomats that they cannot
do th j b al ne . For th rt y years th e Oonnnunists have hammered
away at tl looal opulatlons wi th b rrag after barrage of
cleverl o noeived ropa ganda against t he "ruthless Wall Street
im erial i sts 11 whose sole interest in Central America, the Com-
munists claim, is the "exploitation of its people and i t s re-
ouroe s ." Save in isolated instances, these char ges ha ve gone
virt uall y unanswered. No American f irm operating in Centra l
America can be said to have conducted a long-range, careful ly -
planned pro gram to counteract Communist charges and to build up
goodwill :for u. s. investors among all segments of the local
populations. Such sporadic efforts as have been made were tem-
porary or local in character or aimed solely at the particular
company's employees or at some other special group.
As a result, populations who for generations have had strong
resentments againt the United States, now have accepted as es-
tablished facts the most fantastic Commu.ntst charges against
u. s. investors. "Wall Street imperialists" are freely blamed
for nearly all of the political, economic, and social woes of
the countries. Local u. s. private i~vestors have become the
logical whipping boys of any self-seeking politico. In many
cases even the local nationals who are privately sympathetic to
the u~ s. and to u. s. private investment, hesitate to disclose
their feelings for fear that public resentment will be turned
on them.
The experts agree that the present Communist program for
Central America does not include attempts to gain outright
control of any government. On the contrary, orders ave said to

31. - 30-
have been handed down the line from the Kremlin to t he Communis t
leaders in Latin Amer ica that they must move slo wl y an d ca utio us -
ly to avoid any act io n t hat migh t pro voke r et ali at or y measur es
by the u. s. or by t he Or gani zat ion of Americ an States.
The innnedia te obj ect i ve of t he Connnun i sts i n Lat i n Ameri ca,
and par ti cularl y in Central America, is to create situations
t hat ca n be exp l oited to the advant age of the Soviet Union in
the eve nt of all-out war with the Unit ed States. This the y
hope to do by the followin g pro gram:
1. By gaining contr ol of the labor and agrarian movements;
2. By ag gravating to a maximum degree the deep-seated
animosity t hat exists in all of thes e countries toward the
United States and especially toward u. s. private investment
t here;
3. By gradually driving Uo s. private investment out of
that area; and
4. By slo wly disrupting local economies to the point that
political and social chaos can be quickly and easily created.
The pattern is already clear in Guatemala. There the Com•
munists first got control of the labor movement. Using this as
a lever, they gained control of the major political parties.
Finally, through use of their pol i tical power, they secured a
dominant voice in the forming of government policies. Thus, the
Communists are in a position slowl y to squeeze one after another
of the major u. s. companies operating in Guatemala. At the
insti gation of the Communists, a series of costly, ill-advised
social and agrarian reforms is gradually sapping the economic
strength of a country that even today has one of the stron gest

32. -31.-
currencies i n the world (thanks principally to the high price
of coffee ) and which only a :rew years ago could boast of that
rarity in modern fiscal af'fairs, a treasury surplus. The Com-
munists want a weak Guatemala.
There is little doubt that if the pre sent course of events
remains unchecked, the United Fruit Company, Int ernational Rail-
ways, Empressa Ele ctrica, and Pan American Airways, will, one
ai'ter the other, be forced out of Guatemala and their properties
eventually nationalized.
Followin g a recent conference with high government offici•
als, a t op executive of Empressa gloomily told friends that he
fu lly expects his company to be nationalized within two years,
the investors to be paid off in 25-year bonds which, he said,
would be worthless within another five years.
Except in the utility field, however, the Cormnunists have
cleverly avoided agitating for immediate nationalization of
foreign properties. They realize t he disastrous effects that
withdrawal of foreign capital would have on the country's
economy. While this is exactly what they want and are planning
/
eventually to achieve, they do not want to be blamed by the dis-
illusioned workers and farmers. For the most part, therefore,
they will probably continue the present tactics of slowly bleed•
ing the foreign companies, making their operations unprofitable.
If and when the companies finally suspend operations or with-
draw, the Connnunists will place the blame for the economic
disaster that is sure to follow on 11Wall Street bankers, who
would rather sacrifice their investments than accept the le g i-
timate demands of the workers."

33. That, briefl, is the Communist design t hat has been
almost o mpl etel y unf'o l ded n Guat emal a .
-32-
A s imi l ar situation appears t o be tak i ng shape in Cost a
Ri ca. Ther e t he Communists are re ported t o hav e negot ia t ed a
deal wit h t he lea ding candid at e for t he pr es id ency 1n t he el eo-
. /'
tions next spr ing , Jos e Figu eres. In return for the su pport of
the orkers and f armers under Communi st ini'luence, Fi gueres i s
sa id to be willing to give control of the lab or and social
r eform po licies of his governments t o the Communists.
Pr ese nt in dicat i ons are -that Figu eres is practically cer-
ta i n to be elected. He has publicl y boasted that when he takes
office one of his first programs will be to force the United
Fruit Company out of Costa Rica~ Many United States observers
doubt t hat h e would go that far, at l east immediately, because
of the adverse economic effects suc h a move would have upon his
countr y . .fore probably, he would simply follo w the pattern al ..
read y laid out in Guatemala, of squeezing, bleeding, and harass-
in g the United Fruit Company to t he poi nt where its operation
becomes unprofitable.
Conservat i ves in Costa Ri ca who are diatrubed at the pros-
pect of a Communist-ini'luenced government under the presidency
of Figueres are reported to be exerting heavy pressure on the
t wo opposition candidates in an effort to persuade one or the
other to withdraw so that a united front may be presented
against Fi gu eras. At the moment, however, Figueras i s so strong
that even such a united front seems rat her a forlorn hope.
Special emphasis is given to the fact that the Communist
menace is general throughout Central America and not restricted

34. ►
-33-
t n or two countries. Grave oonoern is felt regarding
Honduras and El Salvador, despite the existenoe of strong and
mUite..ntl anti-Communist governments t here. Povert y , 1ll i tera-
o, and sooial unrest are so widely prevalent and are bein g so
activel and adeptly exploited by the Communists that a political
e losi n is feared in either or bot h countr ies at almost any
time.
Recently Pre sident Oscar Osorio of El Salvador suddenly
placed his country in a state of siege, closed the borders, and
rounded up and arrested some 1,200 Communists, left-wingers,
and political malcontents, whom he charged were conspiring to
overthro w his government.
There is an interesting prelude to Osorio's sudden move.
About a week previously he met with President Jacobo Arbell% of
Guatemala in a widely publicized conference at the border be-
tween the two countries& The two were photographed in the
traditional La.tin embrace, and the Communist-controlled news-
papers and radio in Guatemala jubilantly hailed the meeting as
a conciliatory move on the part of Osorio, who has spearheaded
a diplomatic campaign to try to unite the Central American
Republics in a fight against Communist penetration. These
accounts stated that Osorio had come to the border to assure
Arbenz that he was not anti-Communist.
The Salvadoran Ambassador to Guatemala, however, .gave the
Reuters representative a statement for publication that
Osorio's real purpose in attending the meeting was "to make it
perfectly clear to Arbenz that El Salvador intends to use every
weapon available to combat Communist infiltration, although we

35. -34-
have no inte ntion of interfering in the in t er nal af fairs of
Guatemala . 11 Osorio's crackdown came exa ctl y e. week le. t ar. For
at lea st three days , i t was c ompletely ig nor ed by t he Communis t -
contr olled press i n Guat emala, alt h ough i t was front page ne v,s
in ever y ot her ci t y in Le.tin America. The day after Osor io ' s
declarati on of a state of s i ege, t he Salvadoran Ambassador t o
Guatemala stated, also for publicat i on, "we are goin g to clear
out ever y damn Communist in Salvador and either jail them or
deport t h em back to Guatemala."
The si gnificance of the Osorio-Arbenz meeting and the high-
l y undiplomatic statements issued by t he Salvadoran Ambassador
(many a diplomat has been declared persona non grate. for less )
is this:
The president of tiny Salvador felt it necessary, or at
least desirable, to confer wit h Arbenz before moving to smash
a Communist-inspired conspiracy in his own country. This, plus
the Ambassad or's "deport-them-back-to-Guatemala" statement,
strongly confirms the studied vie ws of every informed person
official and unofficial-• consulted in this investigation:
(1) that t he situation in Guatemala today cannot be considered
as a local problem but is merely one phase of a Communist-
inspired consp i racy aimed at all of Latin America, with special
emphasis, at the moment, on the Central American and Caribbean
Republics; and (2) that the Communists are usin g their foothold
in Guatemala as a base for their operations in neighboring
countries.
There is another aspect to this i ncident that is worth con-
sideration~ even though it falls within the realm of speculations

36. -
-35-
Alt hough nothing aut hentic except t he Salvadoran Ambassador•s
statement ha s been r eve al ed r ega rd in g t he Osor i o-Arbenz meet ing ,
it was desc r ibed by observer s as "c ompletely ami cable," and t he
two president s apparentl y dep arted in f r i endly f ash i on. Osor io
t hen proc eede d with his plan (which the Ambassador's stateme nt
af t er the meet ing tipped off) to br eak the Communist conspirac y
i n his countr y . Among the 1,200 persons arrested were a number
(t he exact figure i s not yet available) of Guatemalans and
nationals of various other countries using Guatemalan passports.
In the past, Guatemala has seldom hesitated to use diplomatic
pressure t o protect Guatemalan Communists and fellow travelers
who were i n trouble abroad. Thus far, however, no representa-
tions are said to have been made by the Guatemalan government in
behalf of their nationals caught in the Osorio crackdown. Nor
has any rebuke been delivered to the Salvadoran Ambassador to
Guatemala for his unusual press statements.
Added together, these facts would seem to strengthen the
reports being circulated in Guatemala by some of Arbenz' per-
sonal friends that he is becoming restive at having the policies
of his government manipulated by the Communist leaders and that
he is waiting for an opportunity to make a similar crackdown
of his own.
Whether or not the reports regarding Arbenz are true, they
highlight a fourth significant faot of Central American poli-
tics, probably the most significant of all: in order to achieve
the objectives of their conspiracy in Central America, 2
Communists are f orced to rely on the collaboration of politicos
labor leaders, and "masses" who have little or no sympathyI

37. -36-
either for Communist ideology or the Soviet Union.
The successes that the Communists ha ve achieved thus far .
and those they hope to achieve in the near future , are dependent
solely on the ability of n small handful of skilled, energetic
agitators to enlist in their oonspiraoy a conglomeration of
bemused idealists, fanatical nat ionalists , strictly venal poli-
ticos, and -- pr obably the most important of all -- large num-
bers of impoveri shed, illiterate, and restless peons and laborers.
After gen erations of misrule, these poor people tend to regard
nearly all pliticos, whether of the Left, the Right, or the Cen-
ter, with a.n ap athetio mixture of hope and cynicism.
The Communist leaders have capitalized on the hopes of the
people simply by making the loudest and most lavish promises,
by claiming credit for every development that might conceivably
improve the lot of the worker and peon, and by stirring up dis-
content, many reasons for which ·exist throughout Central America.
They draw in the idealists and chronic Leftists by making them-
selves the most articulate advocates of social and economic
reform. They enter into cynical deals with ambitious politi-
cians and labor leaders, deals which even when expQaed are
cynically accepted by substantial (though varying) proportions
of all classes o~ the people. Most important, the Communists
have managed to identify themselves, to a surprising de gree,
with the intensive nationalistic aspirations so prevalent in
Latin America, through the simple expedient of being the most
blatant exponents of "anti-Yanquism."
In a aitus.tion filled with paradoxes, the outstanding
paradox is that so many divergent non-Communist groups can be

38. -37-
ld d into an evil alliano 1th international Communists to
d the Kremlin' dirty lork. It s , at one and th e same t ime,
th Communists' gr at st asset and t heir most vulnerable weak-
nes •
Th fact t ha t many lo~al national ists and reformers join
in the Communlets 1 propaganda barra ges lends the m a credibilit y
t hat the Communists alone could never aohieve. Policies and
rograms t hat mi ght be viewed with suspicion if advanced s olel y
by r ecogn.ized Connnunists are given a certain respectability when
put for ward by, or in conjunction with, ini'luential non-Communist
stooges. Particularly in Guatemala, the Communists have been s o
successful in man.ipulating liberals, nationalists, and profes-
sional politicians that even the most seasoned observers are un-
certain whether various key political figures are actually con•
Tinced Communists or are witting or unwitting dupes. The Com-
munists have so successfully identified much of their propaganda
with anti•Yanqui nationalism that it ~s virtually impossible to
determine, with any degree of certainty, just where the Communist
conspiracy ends and the local nationalism begins.
On the other hand, the very faot that the Connnunists have
to depend heavily on non-Connnunist politicians, presents to
American diplomacy an opportunity to smash the conspiracy
throughout La.tin America. The basic reason for the success of'
the Communists in obtaining non-Communist collaborators is the
lack of understanding among all claases--even among the very
rich--1.n Central America as to what Connnunism is, what its real
obj ectives in Central and South America are, and of the extent
to which their local Communists are controlled by the Kremlin

39. for the s le enefit of the Soviet Union . No s i ncer e nat iona -
list, ho eve r much he might ha te t he United St at es, would know-
ingly llab orate with t he Communi sts if he r ealiz ed t he i nco m-
patibility of the fundamen ta l dogmas and polic ie s of i nter-
nationa l Communism with his own aspira t ion s. Few pol i tico s ,
no matter how ven al, woul d enter i nt o deals wi t h t he Communi st s
if t hey were aware that disru ption of their economies and
pol i tical an d social chaos are the goals of the Communists.
Fewer st i ll would dare to enter int o suoh deals if' the facts
were r eco gniz ed by substantial segments or the public.
It should not, of course, be for gotten that the State
Department in Washin gton conducted a campaign or pressure to
force t he diplomatic recognition of the Soviet Union by the
governments of Latin America.
The obvious opportunity presented to American diplomacy is,
as one diplomat expressed it, "Throu gh persistent, patient, and
tactful employment of the art of persuasion, to convince Latin
Americans in general and Latin American off'icials in particular,
first of the tr ue character of the Communist conspiracy, and
second of the genuine good will felt to ward all of their coun-
tries by the u. s. government and the vast majority of u. s.
citizens."
This strategy has already produced results in Mexico and
Cuba, where the governments have ousted Communist leaders--at
least temporarily--from key labor unions. On the official level
at least, it has produced results in El Salvador and Honduras,
whose governments seem fully alert to Connnunist methods and
Communist tactics. The same strategy apparently is now being

40. -39-
followed by .Ambassador Schoenfeld in Guatemala , though wit h no
apparent r esults as yet . Favorabl e r esults in oounteracting
Communist penetration have also ooourred in other Latin .Amerio an
countries not included in this stud y.
However f avorable t hese develo pments may be in compar i son,
they should not be overemphasized. They have r esulte d prin-
ci pal ly from convincing a few key offioials of the nature of
the Communist conspiraoy. As long as social unrest prevails
on a broad scale in these countries--and that is likely to be
for some time••and as long as most of the general public remains
unaware of, or oomplaisant toward, the Communist threat, any
gains in those countries must be re garded as strictly temporary.
Thus far, the Voice of America pro[Wam and the State Department's
other mass propaganda efforts have failed to produce any tan-
gible results.
Although the opportunity exists and is recognized by every
top u. s. official in these countries; although · strenuous ef•
forts are being made; and although valuable, even if, perhaps,
only temporary results are being achi~ved, we, as a nation, are
not exploiting our advantage to the utmost. While the primary
responsibility is theirs, it is doubtful that our diplomats can
produce the maximmn results, unaided. Our embassies in Central
America do not have the staff, the necessary specialized talents,
nor the time to undertake effective, long-range programs to
change the thinking and the prejudices of large nwnbers of
illiterate and semi-literate people.
The effects of thirty years of Communist propaganda
directed against u. s. investment, most of it unchallenged, are

41. evident among all classes in Central America, even those most
hostile to Communism, and in all countries, even tho se in which
the Connnunists themsel ves have never been able to · gain a foot-
hold.
"The time has long since passed," one American remarked,
"when all we had to do, when au. s. firm got i n trouble down
here, was to walk into the office of some politico, bang our
fist on his des k, and, if he seemed obdura~e, threaten to call
a regiment of Marines."
It has been strongly recommended that firms with large
stakes in that area innnediately undertake long-range public
relations programsD designed:
1. to counteract the Communist propaganda against them;
2. to build up good will for u. s. investors,@:lnerally;and
3. to convince all segments of the local populations that
the firm is genuinely interested in the economic development ot
their country and in improving the living standards of the
people.
Views varied as to what form such public relations programs
should take. There was general agreement, however, that they
should be based on careful study of existing political, economic,
and social conditions in the countries •involved; that publicity
should be only a minor phase of the general programs; and that
such programs should be prepared and directed by men possessing
a fairly high degree of political astuteness as well as the
ability to get along with local officials and the officials of
the u. s, embassies.
In discussing the public relations policies of u.s•.firms

42. operatin g i n Central America, most of f ioials emphasized that
they should sorupulously avoid meddlin g in local politics. "Ir
they do f eel they have to get i nvolv ed i n local elections, they
must use a l i ttle caution and judgment," one official in
Guatemala Ci t y said. Several Americans there reported that the
united Fru i t Company is openly backin g the candidacy of a non-
Communist labor leader named Gonzalez, who is running for Con-
gress in the Tiquisate district. Gonzalez made an unsuccessful
attempt to lead his wiion out of the Connnunist-controlled CGTG
a few months ago.
The view of Americans in Guatemala City was that Gonzalez
did not have a ohanoe of being elected and that the United Fruit
Company's open support might well finish his career as a labor
leader, since his principal job as head of his union is to
negotiate with the Company. An ironic, and typically Central
American, tvn.st to the incident was a report from an official
source that Gonzalez was making f'r-antic and apprently unsucoess•
ful peace overtures to the Communist union bosses in an effort
to obtain their political support.
The need of private firms to undertake their own programs
to build up pub1ic and official good will in Central America is
increased by the fact that the one overriding responsibility of
the embassy staffs today is the preservation of our national
security. The United States regards the presence of an aggres•
sive, well-organized, Communist-influenced conspiracy in
Central America as the greatest threat existing in this hemi-
sphere to our security. As long as our relations with the
Soviet Union continue at anything approaohing current tensions,

43. embassy offioials 111 subordinate all other pro blems to t heir
efforts t w o influential Central Amerioan politioos away from
the C0Jm11uniat• As muoh as they may be irritated by fanati oal
Latin nationalists, ur diplomats prefer them to aotual Com-
munists. While nobody puts it in so many words , it 1s obvious
that~ if making strong representa t ions in behalf of au.s. priva te
investor might ruffle the fe el i ngs of th e offlo ia ls they are
trying to win, the i nte r est s of t he in vestor will be shunted
aside in fav or of the national inte r est.
Hence the y f eel it is up to the lar ge investors to under-
ta ke t heir own pro grams to influence f avorably publio as wel l
as official opinion, just as they do in their public relations
pro gr ams her e at homee
Whet her or not the embassies are wise in subordinating the
interests of private investors to what they consider the nation-
al intereat 6 is a serious problem. It is imperative that
methods be devised to foster better understanding and at least
a minimum of cooperation between American residents abroad and
their official representatives.
Relations bet ween American businessmen in foreign countries
and their diplomata have always been more or less strained.
Now, particularly in Guatemala, they have become so bad as to
constitute a danger to both the United States government and
u.s. investors, at a time when both are under constant attack.
The American colony in Guatemala City ls seething with fury
at t he Embassy and especially Ambassador Schoenfeld for his
"timid" handling of the united Fru i t Company and Pan American
situations. The Ambassador, his staff, and the u.s. government

44. --43-
are be i ng cr i t i ci zed by Ameri can res i dents, in be.rs, in clubs,
and at so c i al gather ing s, often 1n terms that equal the Com-
munist s i n sheer vi tu pe r ation -- and al ways to the unconcealed
del ig ht of t he Guatemalteoos prese nt.
No propa ganda barrage hurled by t he Communists can damage
t he pr est ig e of the United States government in Guatemala half
so much as the vehement attacks in public by u. s. citizens.
Clearl y , u. s. investors and businessmen in Guatemala have
nothing to gain and a lot to lose by helping to tear down the
prestige of · their go·rnrnmentn
Very probably, further serious differences will arise
between the Embassy and private u. s. firms in Guatemala and
perhaps in other Central Ameriean countries. It is essential
that some way be found of thrashing out those differences in
private and not airing them in the hearing of local nationals.

45. -44-
CHAPTERIII
Guatemala: A Case History
SUMMARY:Communists aim at control of labor unions --- They
have an iron grip on the Social Security Institute
They control key congressional committees --- Arms
shipments rumored --- Communist control of publicity
and radio --- Communist control of Guatemalan press
Communists in the educational system --- Communists
in the Foreign Office --- Communists in the Public
Health Department --- The assassination of Arana ---
Pro-Communist actions of Arbenz -- The National
Agrarian Council -- Growing political power of the
Guatemalan Communists --- Guatemala in the United
Nations

46. -45-
CHAPTERIII
Guat emala: A Case History
Guatemala today provides a case history of what the
communists hope to achieve in every Central and eventually every
Latin American country.
The Communists have complete control of the powerful
Guatemalan labor movement. They have an influential voice in
all of the five pro-government parties and a dominant voice in
the strongest one, PAR ,LPartido Accion Revolucionariy.
They control the strong teachers union, which in turn
dominates the Department of Education, and this in turn is
already heavily larded with avowed Communists.
In addition to their own official daily newspaper, Octubre,
they control the editorial policies of the government-owned
daily, Diario de Centro America, a government-subsidized daily,
Nuestro Diario, and the government-owned radio station.
They have an iron grip on the Social Security Institute,
control of the Labor Department, and dominate the Labor Courts.
The Foreign Minister is a fellow traveler, the Foreign
Office and Foreign Service are salted with professional Communist
agitators, and Guatemalan foreign policy seldom departs from
the Moscow line.
The Communist Party has four declared members in Congress
and dominates or controls the key Congressional Committees.
Victor Manuel Gutierrez, regarded as the brains of the Party,
1s chairman of the important Agrari~ Committee.
;
Jose Alberto
Cardoza, a professed Communist now in Peking attending the

47. •rnte ational Peace C n.f ranee," is chairma n of the Labor
ommittee. Fallo tr a veler Paulino Ovalle Herrera is chairma n
of the on racts Committee~ he President of Congress , who
-46-
uld succeed to the presidency of the country should Arbenz
die, is Julio Estrada de la Hoz (means sickle ) who hews so
enthu$1astically to the Party lin e that few Guatemalans believe
his claim that he is not a Communist. The same is true of
Roberto Alvar ado Fuentes, former president of Congre s s and now
co-chairman of PRG, ffartido de la Revolucion Guatemaltecy
one of th e two strongest political par ties. Certain to be
elected to the next Congress are Jose ' Manuel Fortuny, secretary
general of the Communist Par ty and th e editor of Octub~e) and
Carlos Manuel Pellecer, rega r ded by some as the rising star
of the Party in Guatemala. Though both are runnin g as Communists,
they have been endorsed by all of the government parties.
The Communists have an influential, if not dominant, voice
on the Nat ional Agrarian Council, and control three of the eight
members. They have made the capture of the agrarian reform
program their current number one project.
The Communists are so strong that few candidates for public
office dare to defy them. Their position is not invulnerable,
however. To all apparent purposes, they control President
Jacobo Arbenz, but they do not own him. Arbenz is said to be
get ting restive. Nor do they own Captain Alfonso Martinez,
head 0 1' the Agrarian Department, regarded by many as the coming
strong man of Guatemala, though they do make deals with him.
Martinez is said to be getting quite ambitious.

48. Nor do the Communists own the Army, although with bribes,
f avors, and re war ds they have gained the complaisance of most
senior offi cers. The young er officers are becomin g restless,
however , and increasingly resentful of the Communist domination
of their country .
Also, there is in Guatemala a strong, though loosely
organi zed anti-Communist sentiment. This is particularly true
in Guatemala City, wher e the gove rnment-endorsed candidate for
mayor received a surprise trouncing from opposition candidate
Juan Luis Liz za ra lde, in a recent election.
Moreover, the Communist control of Gua temala h as aroused
the wrath of neighborin g governments, particul ar ly El Salvador.,
and reports have been current in Central America th a t Salvador
and possibly Honduras would actively collabor-ate wit h Guatemalan
dissidents in event of an uprising.
Durin g the past several weeks there has been a crescendo
of rumors in Guatemala, all pointing to some sort of a change
or attempt to change -- the _government.
There was a confirmed report of a mysterious shipment c£
arms to Costa Rica from France and accompanyin g rumors that it
was destined for re-shipment to Guatemalan dissidents. Some
reports had the weapons destined to followers of Carlos Castillo
Armas, Guatemalan politico in exile in Hondur as, whose activities
are being closely and ne r vously watched by the Arbenz government.
A series of student demonstrations against Communism last spring
was touched of f when Arbenz suddenly arrested Frederico Paz

49. - 48-
Herr era, a student le ade r and a nephew of Armas , who had bee n
journey in g t o Hondur as r at her frequently to visit his un cle .
Arbenz sus pe c t ed Her re ra. of conspiri ng with Armas ag ain st the
governm ent .
Anot her r epo r t, howeve r , had th e Costa Ri c an a1•ms sh i pmen t
destined to th e Caribbe an Legion, which was s a id to ha ve spl it
with Ar ben z. If such a split h as occurred, there ls no outw ar d
evid ence of it. Leader s of the Legion were prominently in
evid enc e at Arben z 1 Palace reception on Indep endence Day.
Anothe r arms shipment was reported to have been landed on
the Pacific Coast of Guatemala late in August, destined to the
Communists. In specul a tin g on this report, Guatemalans recalled
th at when p ar t of the Army revolted in protest of the assassina-
tion of Arana two yea r s ago, the Arevalo government armed the
wor kers who helped subdue the rebels. There have been numerous
rumors, chiefly from pe rsonal friends of Arbenz, that the
President ha s no sympathy for the Communist ideology, resents
th eir control over his government, and is simply biding his
ti me, waiting for an opportune moment to throw them out. These
reports hav e caused speculation that the Communists themselves
may attempt a putsch in an effo r t to seat some non-Communist
stooge whom they regard as more reliable than Arbenz.
Shortly before Independence Day there was talk in Guatemala
tha t Arbenz' Palace reception had been chosen for an attempted
coup d1 etat. Then came a rumor th at Arbenz had learned of
these plans and so greatly feared as sassination that he would

50. - 49 -
not even attend his own r ec eption . The day before the celeb r ati on
a fairly relia ble authority s aid t hat Arbenz had call ed in th e
plotters and thr ea tened to resi gn and turn over the gove r nment
to a military junt a . This so dismayed the pl otters that they
dropped their scheme and persuaded Arbe n z to stay on .
Whatever the basis f or thes e rumor s, Ar benz di d appe ar at
his rec eption an d stayed until t he unu sually l ate hour of t wo
in the mornin g , but th e Palace was ali ve wi th tux edoed body-
guard s and eac h one kept his hand on his gun throu gh out the
eveni ng . Arbenz wa s said not to have cracked a smile all evening.
Rumor s of mysterious arms shipments and planned coups are
al ways rife in countrie s such as Guatemala. u. s. political
experts feel, however, that there has been such an increase in
these rumors in Guatemala that some pre s sure seems to be building
up, but they do not expect any action in the near future.
Regardless of the plots and counterplots that mi ght be in
the making, to all out war d appearances, at least, the Communists
ar e firmly entrenched and are proce edin g with plans to wreck
foreign-owned firms, to bleed the country's economy, to infil-
trate into neighboring republics, and to bombard Guatemalans with
daily blasts of anti-United States propag anda over the government-
owned radio station and in the ne wspapers they control.
The Communists gained their first foothold in Guatemala
following the overthrow of the Dictator Jorge Ubico in 1944 by
a mixed group of idealists, leftists, young military of ficers,
and just plain revolutionaries. A junta took over the government,
composed of tow young army captains, Jacobo Arbenz y Gusman and

51. - 50-
?rancisco Aran a, and a civilian, Jorge~ rie l he Communists
p aye a a m·nor but noisy role in the revol i nay movement .
One f t he fir st acts of the junt a as to pr mise to hold
free elect ion s , and , to the surprise of everybody , they did . The
revolutionary parties joined to el ec t as president Juan Jose
Arfval o, a sc hool teach e r ho had spent years in exile in
Argent ina an d who r et urn ed to Guat emal a follo wing th e over thro w
of Ubic o, preach i ng a vagu e politic al and e conomi c doctrine which
he call ed "spir it ual socialism. 11
':net her or not Are valo is actually a member of the Communist
Part y -- and t ha t is still in some dispute he ce r tainly is the
spir it ual father of the Communist movement in Guatemala. One of
his first acts on t ak ing office was to push t h.rough Congress an
el abora t e labor reform law. He then invited Vincente Lombardo
Toledano, head of the Communist-dominated CTAL and spearhead of
the Communist movement in Latin America, to come to Guatemala
and organize the workers into unions. This, Lombardo did along
strictly Communist lines, and he did it so quickly and efficiently
tha t almost within a matter of months the political strength of
t he Communist-dominated unions was such that th eir leaders were
able to demand, and obtain, seats in the councils of the major
political parties.
Control of the labor movement has been the basic source of
strength of the Communist movement from the beginning, and it
remains so today. It is this voting strength that enables the
Communist le aders to make the deals with non-Communist politicians
as necessary to carry out their program. This was Arlvalo's
major contribution to the Communist cause.

52. Lombardo entrusted the direction of h is ne wly organized
unions in Guatemala to a young and very able professor, the
aforementioned Gutierrez, and to Manuel Pinto Usaga .
- 1-
About two years ago Lombardo and oth er members of the
Communist high command in Latin America decided that top-level
control of the Guat emalan labor movement needed tightening. Blas
Roca, the Cuban Communist leader, was sent to Guatem al a City
to make the arrangements fo r a labor meeting to consolidate the
I
unions into the Confederacion General de Trabajores de Guatemala
(CGTG) of which Guterriez is the he ad. Pinto Usaga was the second
in command, prior to his app ointment as Consul General to Mexico.
It is significant that three of the four top Communist
leaders in Guatemala, Guterriez, Pinto Usaga, and Pellecer are
leaders of the CGTG. (Pinto Usaga sometimes denies he is a
Party member, but he has publicly professed sympathy for
Communist ideals and is known to sit high in the movement's
councils.) The othe r t op Communist is Jose Manuel Fortuny,
the secretary General, and alon g with Pellecer, Communist Party
candidate for Congress.
The importance that the Communist high command attaches to
the Guatemalan labor movement is further emphasized by the fact
that Louis Sail~ant, of France, head of the Moscow-controlled
World Federation of Trade Unions (WFTU), and Maurice Carrone,
another Frenchman, his second in command, attended the Guatemala
City meeting at vhich the CGTGwas set up. Other well-known
Communist leaders who attended were Lombardo, Roca, Rafael,
Avila, and Jose Morera of Cuba, Rudolfo Gusman of Panama, Pablo
Neruda of Chile, and Rafael RQJnirez y Ramirez, all officials

53. -52 -
1n Lombard o• s CTAL (Confedera c i on de Tr aba j a do res de America
Latina), and Car l os Fernand e z of Co st a Ric a , a di r e cto r of t he
wnu .
The me e ting was h e ld in conjunctio n wi t h a con f e r en ce of the
Interna t i on al Fede rat i on of Tr anspo r t worke r s, i n a gover nment-
owne d aud i t or i um, the Ministry of Communicati ons. The Red
de l ega t e s we r e welcomed offici a lly by Maj. Paz Tejada, then
Mi niste r o f Communications.
Only t wice since Lomba r d·o Toled ano first organized the
Guate malan workers, ha s the Communist leadership been seriously
challen g ed. Once wa s the ill-fated effort of Gonzalez to break
his United Fruit Company union awa y from t h e CGTG, an effort his
members voted down, but only by a nar r ow mar gin, and only after
Gutierrez himself went to Tiquisate to lead the fight against it.
The other was when Leon a rdo Castilla Flores, former school teacher
and he a d of the Confederacion Na cional de Campesina de Guatemala
(small farmers), de fi e d Gutier r ez, by pullin g his union out of
the PAR, charging Communist domination. Castilla, ho wever, has
made his peace with the Communist leaders, and has accepted a
post as vice-president of the Communist front, Partisans for
Peace Committee.
The labor mo vement was not the only gift that Arevala gave
to the Communists. From the very be ginning he made his country
a haven for Communist refugees from other Latin American countries,
among them Jose Zamora of Salvador, Virginia Br a vo Letilier of
Chile, Vicente Saenz of Costa Rica, and Cesar Gody Urritia of Chile
(who later went to Mexico to lead an unsuccessful effort to organ-

54. Arevalo made Zamor a hi s publicity chief, and in th at
capacit y he pla yed an impor t ant rol e in orga nizin g t he govern-
ment pr opaga nd a agenc ie s, placin g avowed Communist s 01 • thoroughly
re l iab le fello w t ra vele rs in key positions. So completely did
Zamora do h is job th at th e government-o wned newsp aper and radio
station ha ve been the mos t e ff ective propa ganda outlets the
Communi st s have i n Guatemala.
The present director of the radio station TGWA 1s Carlos
Alvar ado Jerez, and avo wed Communist and at present in Peking as
a dele gate to the International Peace Confe r ence. Under his
di r ection the station makes free time available to the Communist
Party, Communist front or ganiz ations, and labor unions for
propa ganda purposes, particula r ly to indulge in hate camFQigns
against the United St ates and u. s. inve stors in Guatemala. In
its own newscasts and educational programs, the station follows
the Party line just as faithfully as does Octubre, the official
Party newspaper. The same policy was followed by Jerez'
predecessor, Gelada Martinez Zalaya, also a Communist or a
Communist sympathizer. With equ al fidelity the same policy is
followed by Diario de Centro America under the editorial direc-
tion of Leopoldo Castillo Saenz, a faithful fellow traveler if
not a member of the Party.
Another useful propaganda outlet for the 0:>mmunist is
Nuestro Diaro, until about eighteen months ago an independent
daily of slightly Leftish leanings. About that time the govern-
ment-supported, fellow traveling Diario de la Manana folded and

55. -54-
Nuestro Diario commenced leanin g farther and farther to the Left.
Final l y one of the political writers slipped into the paper an
article criticizin g the government fo r its pro-Communist policies.
He was immedia t ely discharged, and the enti re editorial staff
resigned in protest. They set up a new daily, Prensa Libre,
which, al though financially weale, is vigorously independent and
anti-Communist. Nuestro Diario was restaff ed with "reliable"
editors and writers, the paper abandoned all pretenses at
independence, went all out for t he government and the Communist
Party, and is now said to be receiving a subsidy of 7,000
quetzals ($7,000) a month from the government.
In the long run, the Communist inroads in the Guatemalan
educational system may be almost as important as their capture
of the labor movement and the government pr·opaganda outlets.
For this, too, they are heavily in debt to Arevalo, the former
school teacher. Shortly after the arrival in Guatemala of
Senorita Bravo, the Chilean Communist, she was appointed head of
the rural education ppogram. She is said to have played an active
role in organizing the school teachers into a Communist-dominated
union. The head of the union, Raphael Tischler, is described as
a fellow traveler and signer of Communist-inspired petitions.
His union is said to be an obedient follower of the policies of
Gutierrez. one of Senorita Bravo 1 s early moves was to lead a
fight against an educational mission sent to Guatemala at the
government's request by the In s titute of Inter-American Affairs
of the State Department to advise the Depwtment of Education on
reorganizing and improving the sch9ol system. As a result of

56. senorita Bravo •s at tacks , the mission was forced to withdraw.
The Communists are proceeding with cuution in their infil-
tration of the educati onal system, fe ar ful of arousing public
re action. Their objectives are obviously long range, and no
tan gible results of youth indo ctrin at ion are apparent. In fact,
the university students are among the few groups in Guatemala
that have spoken out against Communist domination of the country.
WhenPresi dent Arbenz appointed Hector Morgan Garcia, a notorious
follower of the Par ty line, as Minister of Education, the move
was so unpopular that Morgan resigned shortly thereafter and was
replaced by a professional civil servant, Mardoqueo Garcia
Asturias. Garcia's political leanings have not yet been accurately
determined, but he is said to be completely subservient to the
teachers I union.
Garcia has allowed government school buildings throughout
the country to be used for meetings by Communists and Communist
front groups. Recently he allowed the government normal school
to be used for the first showing in Guatemala of the Communists•
bacteriological warfare propaganda film, one of the most vicious
attacks on the United States yet devised by the Cominfonn and
one that has been completely discredited. This film is now
being shown throughout Guatemala in government-owned buildings run
off on government-owned projectors by government-paid operators.
Acting as master of ceremonies at the first gala showing was
Jerez, the director of the government-owned radio station.
Of more immediate value to the Communists, however, than
their influence in the school system, is the domination given

57. - 56-
to them i n the Foreign Office by Areval o and con t inued under
Arbenz. Areval ot s Forei gn Minister , Dr . Enrique Munoz Meany,
was, t o al l outward appearances at least , a complete sympa thizer
with the policies and ob j ecti ves of the Sovi et Uni on, and the
same is true of his su ccessor , Manuel Gal i ch. In t he councils
of the Unite d Nat i ons and t o an eve n gr eater degree i n tho se of
the Organi zat i on of American State s , they have pur sued a per-
sistent l y an ti-Unit ed state s line.
Munoz sent the Costa Rican Communist, Saenz, to the important
Bogot a Conf erence where the Constitution of the OASwas fin ally
dr af ted and t he plans for hemi sphere defense mapped out, as
adviser to the Guatemal an delegation. At this conference
Guatemala was s econd only to Argentina in efforts to obstruct
the agreement. One achievement of the Guatemalan delegation was
to kill, for all effective purposes, a proposed pledge of fair
treatment for foreign investors, earnestly sought at the time
by United States business groups. Although the pledge was
accepted by the gre at majority of attending nations, Guatemala,
in signing the agreement insisted on a "Calvo Doctrine" reserva-
tion to the effect that the local courts would be the sole
authority for deciding disputes between local governments and
foreign investors and that such matters · were not a proper subject
fo r di plomatic negotiation • . Guatemala was immediately joined by
fi ve or si x other Latin Rep~blics who filed similar reservations,
and the pled ge was effectively killed. The economic agreement,
of which it was a part, was quietly sh elved.
When Galich returned from a recent OAS conference which

58. -5?-
drafted plans for defense of the hemisphere from Communist
infiltration, he publicly boasted th at he had inserted so many
qualific at ions and forced the United States so to weaken the
pr ogr am that it was, in effect, meaningless. No Communist, he
said, need have any fears of the OASprogram. That was in a
public statement.
Under Munoz and Galich the Guatemalan diplomatic corps has
become hon eycombed with Communists and Communist sympathizers.
They use their diplomatic immunity to carry Communist propaganda
from one country to another. They are suspected, for sound
reasons -- the recent appointment of Pinto Usaga to Mexico is
one-• of using their embassies in Mexico City, Paris, and
Uruguay to maintain liaison with the Soviet and other Iron Cur-
tain embassies and to transmit, via diplomatic pouch, orders and
instructions to Communist leaders and agents in Central America.
In the countries to which they are assigned, they brazenly
agitate for communi st policies.
During th e past few years three Guatemalan diplomats have
been expelled from their assigned countries because of Communist
activity:
Ambassador Bone, to Panama, recently was given 48 hours to
leave the country or be declared persona non 5rata because c£
his p::rsistent agitation for the Communist cause.
Alfredo Chocano, formerly first secretary to the Embassy
in Nicaragua, had his luggage searched upon his arrival there
despite his claim of immunity, and a suitcase filled with
Communist literature was found and confiscated. Chocano was

59. - 58-
permitted to ass ume his pos t, but si x mon th s l ate r he was
declared pe rso n a non gra ta by the Nicarag uan gover nment becaus e
of subversibe act iv i ties. Chocano is now f i r st secret ary in the
·as ington Em ass , and prior t o the arrival of Amba ss ador
uillenno orie l lo , he was charg e d1 a.ff a1r s. Choca no 1 s back-
g un is not r eas surin g . He is said t o ha ve se r ved a term f or
mur der i n Honduras bef or e j oi ni ng t he Guate malan di pl omati c
corp s . He is t he bus i ne s s part ner in Guat emal a City of Miguel
Gerenaes , head of th e Hungari an government's tr adin g corporation
in Guat emala .
Car los Manuel Pell ecer tr an sferred his t alents from the
di pl omatic corps to the l abor movement after being declared
pers ona non gra ta by France where he served as secretary in the
Guate mal an Embassy. While workin g in the Embassy, Pellecer
grante d Guatemalan visas to some three hundred Spanish refugee
Communists, mos tly veter ans of the Spanish Republican Army.
These have since scattered th r oughout Central Al!lerica, agitating
f or the Communist cause. A few got jobs on the Guatemalan govern-
ment payroll. Some joined the Caribbean Legion and took part in
the attempted coups in Costa Rica and the Dominican Republic.
Pellecer was expelled from France when two suitcases of Communist
propag anda were found i n his lug gage upon his return to Paris
afte r a trip out of the country.
In addition to the work done by the Guatemal an diplomatic
corp s i n spreading the CommW1ist doctrine th r oughout Central
Amer ica, experts say tha t the government maintains dozens of
pr ofe s sional agitators on the civil service payrolls. These

60. -59-
agents move freel y and f r equent ly back and forth to Hondur as ,
El Salv ador , and other nei ghbor in g s t at es, di s t ri butin g propa-
ganda , orga ni zin g l ab or unions, ag it atin g for ag r arian r eform,
and engag in g in oth er Communi 8t a c ti vi tie s . El Salv ador became
so i ncen sed at th es e activities tha t t he gove r nmen t cancelled a
t our is t car d ag reement, now insi s ts upon vis as, and carefully
scr eens all vis a applications from Guatem al a . When President
Osor io decl ared a st ate of siege in his recent crackdown on t he
Communist conspiracy, his first act was to seal the border.
Though the borders have since been reopened, Guatemalans enter-
ing El Salv a dor are subjected to an intensive search that in-
cludes stripping to the skin.
Even more important, the thoroughly angered President of
El Salv ador, in a neat diplomatic reposte, turned one of
Guatemal a 's pet foreign policy projects into a source of acute
embarrassment to th a t Communist-inf l uenced government and a
pos sible source of real danger to the Communist manipulators.
He formally advised the other four Central American governments
tha t at the next mee ting of the Organization of Central American
States, El Salvador would introduce a resolution calling for united
action to defend Central America from Communist infiltration.
Although an organization of Central American republics had
been a subject of discus ,sion among tho se countries for years,
it was Guatemala that took the first concrete step to bring it
into being. At the suggestion of Galich, the foreign ministers
of the five republics (Guatemala, El Salvador, Honduras,

61. -60-
Nicaragua, and Costa Ric a ) met a t San Sal vador a ye ar a go and
agreed to set up an or ganization to coordinate their economic
prog rams and to exchange views on othe r policies . The or ganiza -
tion consists of a top-le vel Council of Pr esidents, an executive-
le vel Council of Foreign Ministers , and a secret ar i at with he ad -
quarters in San Salvador. At the conclusion of the meeting of
the foreig n ministers last Janu ar y 9 1 it was agreed th at the
next meetin g would be held in Guatemala City withing a year an d
th at Guatemala, a s the host government, would fix the specific
date.
Galich had tentatively fixed October 15 as the date for the
meetin g, but when President Osorio broke his little bombshell,
Galich immediately postponed the meetin g indefinitely, claiming
that the proposed Salv adoran resolution for defense against
Communism is not a proper subject to include on the agenda.
Osorio stood by his guns, however, and insisted the resolution
would be introduced. Furthermore, the Salvadoran government
announced that during August it had seized more than nine
hundred pounds of Communist literature as it was being smuggled
in from Guatemala.
It appears certain th a t the other three Central American
republics will support the Salv adoran resolution. Thus,
Guatemala is faced with three alternatives:
1. Dropping the Organization altogether and risking that
the other four countries (and Panama) may go ahead without
Guatemala. This could be seriously embarrassing to Guatemala

62. -61-
in many ways. Those governments might take effective joint
action to check Guatemalan-sponsored Communist infiltration.
2. Holdin g the meetin g and trying, by diplom atic tech-
niques, to re duce the Salvadoran resolution to a meaningless
statement of principles. Even this, however, coming from the
organization they p~ayed the leading role in creating, would be
a severe blow to Guatemala 1 s sensitive Latin pride.
3. Trying to persuade Osorio to withdraw his resolution.
Even if this succeeded, one of the other countries might inject
the resolution at any time.
Nevertheless, the last was considered the least of the
three evils, which is why the Communist-controlled press of
Guatemala first hailed the border meeting between Osorio and
,Arbenz so jubilantly. Based on the Salvadoran Ambassador 1 s
statement, howeve1 •, the most Arbenz got was Osoriots assurance
that Salvador would not interfere in the internal affiars of
Guatemala.
While it is still too early to evaluate this incident with
any finality, it certainly presents the possibility that the
Organization of Central American States might become a most
effective weapon in combatting the spread of Communism in that
area. President Hemon of Panama has publicly expressed his
approval of the Salvadoran resolution and has indicated an active
interest in the Central American Organization.
The development of this Organization is worthy of careful
study by foreign inv e stors in that area. One objective of the
Organization is to become a Central American Federation. If

63. -62
the central American states weld themsel ves together into a
strong organization 01• federation , under r easonably sound l eader -
~• it might have the effect of increasing i nvestme nt
opprotunities in those area~ es wel l as of streng th eni ng the
countries against Communist i nf il tra t ion . However , such an
organization under the l eader ship of Communistao r f anat ic al
nationalists coul d make a bed si tuation even wor se.
one man in th e Guat emalan Foreign Of fice is str ate gic ally
ilJlportant beyond his of f ici al status, The tr anslato r of the
Foreig n Office, Cas taned a , is said to be an avowed Communis t.
He par ti cip at es i n all important conferences and diplomatic
di scu ss ion s and has access to all Guatemalan diplomatic corres-
pondence. Thus, when a represent ative of the United States
Embassy calls on an of ficial of the Guatemal an Foreign Office,
the convers at ion is frequently carried on through a Communist
inter preter, One of his t asks is said to be to keep an eye on
Galic h, who denies he is a Communist and who occasionally shows
sig ns of gettin g out of hand.
Anoth er important branch of the government which was taken
over by the Communists during Arivalo 1 s regime and upon which
their grip t ig htened under Arbenz is t he Guatemalan Institute of
Social Security, The head of the Institute is Alfonso Solorzano,
who, although he denies Party member ship, is former secretary
to Lombardo Toledano and is regarded as one of the most dan gerous
communists in Guatemala, His office manager, who has charge of
personnel, is Abel Cuenca, a Salvadoran Communist. Natul

64. Asuirre Cook, a member or the Institute•s Board of Directors,
is described as st rongly pro-Communist. Under their direction,
non-cooperative officials on the lower levels have been gradually
squeezed out and replaced by Party members or faithful fellow
travelers, especially in positions operating closest with the
seneral public.
some inroads have been made by the Communists in the Public
Health Department, although not as openly as in the others.
Nevertheless, the Minister of Public Health did sign the Stock-
holm peace pledge, as did the Ministers of Fcreign Affairs and
Education and the President of Congress.
Most of these gains were made during the Presidency a:
Arivalo, but they have been consolidated, and, in some cases,
extended under Arbenz, There .are still some in Guatemala who
believe that Arevalo was the victim of his own Frankenstein,
that brought Lombardo in to organize the unions because he
wanted a strong leftish labor movement to balance the power of
the army which he feared and that by the time he realized the
danger of the Communist conspiracy, it had become so firmly
entrenched he was unable to resist the increasing demands of
the Communist leaders.
This picture of Arevalo as a sort of Guatemalan Henry
Wallace can certainly be discounted if there is any truth to
reports of his current activities. Since the election of
Arbenz he has been serving as roving ambassador, visiting
nwnercus countries in Latin America and Europe, He is said to
be a frequent caller at the Iron Curtain diplomatic missions

65. -64-
10 tbe countries be visits, particularly in Uruguay and France .
A recent report in Guatemala had him slipping quietly away from
biS present residence in Switzerland for a secret visit to
11oscoWwith a stopover in Prague.
Toward the end of Arevalo 1 s six-year t erm (Guatemalan
Presidents by law cannot succeed themselves) t wo candidates
8 erged to succee d him: Colonel Arbenz, who was then Minister
of Defense, and Colonel Arana, Chief of Staff of the Army, both
members of the junta that overthrew Ubico. Arevalo, the
Colll!llunists, and the extreme leftist elements threw their support
to Arbenz. Arana, however, not only had the support of the Army
and conservative elements but also enjoyed considerable personal
popularity among the people of Guatemala.
A fe w months before the election Arana received a report
of an arms cache near Lake Amatitlan , about 35 miles from
Guatemala City. The report is said to have come to him either
from Arbenz directly or from his o1fice. Arana decided to
investigate personally, and he so advised Arbenz . His car was
S111bushedon the road to Amatitlan , and Arana was murdered,
Chicago-style, by two men with submachine guns. His chauffeur,
however, escaped and made his way back to Guatemala City where
he named as the tv10 machine gunners, Captain Martinez and a
member of the Caribbean Legion, Francisco Morazon. As was
previously mentioned, the assassination of Arana provoked a
brief revolt by a portion of the Army which was put dovm with
the help of workers armed by Arevalo . According to unconfirmed
reports these arms were never retumed to the government but are
being held by the union leaders in secret caches.

66. -65-
The murder of Arana left Arbenz virtually unopposed, One
of biS first acts on assuming the Presidency was to appoint
wartinez as his secretary, Martinez has since be en elevated to
the important post of chief of the Agrarian Department, is
regarded as the number two man in the government with growing
aspirations of becoming Number One, Morazon, the other alleged
assassin, is serving as Arbenz 1 personal bodyguard ,
~espite the scandal surrounding Arben~ alleged participation
in the assassination of Arana, many conservative Guatemalans
viewed his election with real hope, chiefly because of his Army
background and his personal wealth, He is regarded even now as
being motivated by politica l expediency rather than havin g any
real sympathy for Communist ideology,
Arbenz is described by personal friends as an intellectually
and idealistically inclined Army officer who came from a middle
class family and who nurses an impl acable hatred for the Guatemalan
elite because of the snubbing he and his wife receiv ed socially
prior to his rise to power, He married the daughter of a wealthy
Salvadoran fami ly which reg arded him as a social inferior, re-
fused to accept him as a member of th e family, and, for a time,
virtually disowned the daughter, Arbenz and his wife are said
to have had an extremely hard time for years trying to live on
the pay of a junior officer, Since his rise to power, however,
his wife has been taken back into the bosom of the family,
suitable financial arrangements have been made, and Arbenz is
now considered a very wealthy man, Nevertheless, the memories

67. -66-
of the privations and snubbing of his early days are said to
to this dav and to influence Arbenz • entire politicalrankle J
and social outlook,
Like nearly all Guatemalans of all classes , Arbenz has a
deep suspicion and hostility for the United States . And despite
his recognized intelligence, he has little knowledge or interest
in world affairs and has never been out side his nati ve country ,
save for occasional visits to El ~alvador. He is described as
lacking awareness of th e international Communist conspiracy and
the policies of the Sovi et Union. Although, as was previously
mentioned, Arbenz is said to be slowly awakening to the Communist
danger and planning to crac k down on them at the opportune time,
there is no outward indication of it as yet,
Si nce his inau guration Arbenz has taken the f ollowing pro-
communist actions:
l, He has continued in office the Communists and fellow
;
trave lers appointed by Arevalo or replaced them with other
Communists or fellow travelers,
2, He named as one of the three judges of the Elections
Board, Jaime Diaz Rozzotto, who helped organize the Moscow-
inspired Partisans for Peace Committee in Guatemala and served
as its first general secretary, One of the other judges is
Alfonso Orantes, co-chairman of the Partisans for Peace Committee,
Thus the Communists have control of the politically powerful
three-man Board, which has final jurisdiction in all election
disputes,
3, He promoted Rozzotto to the secretary of the Presidency