It is misleading to examine developments in El Salvador outside the Central American and Caribbean context. Although policy statements and analyses routinely include references to regional concerns, seldom is an attempt made at relating domestic developments in one country with those within its neighbors'.

GUATEMALA

The trends below are pertinent to short term development in El Salvador:

Political power in the country is firmly in the hands of the hardline faction of the military, paramilitary and civilian elites. Among them there is near unanimous rejection of any reformist or moderating changes in regime composition or program.

* In recent years, the Guatemalan military have beenreferring to an expanded definition of their country's national and territorial interests that contemplates the possibility of intervention in neighboring Belize and El Salvador.

* Opposition forces have unified in a broad coalition which includes moderate reformers, parts of the church, and the marxist and populist guerrilla groups.

* A paramilitary strike force made up of former members of the Nicaraguan National Guard, anti-Castro Cubans, Guatemalan military personnel and mercenaries has been formed in the past year. Spokesmen for this contingent have expressed their intention to intervene in El Salvador "when the situation requires it."

* There has been a significant improvement of the military capabilities of the guerrilla forces in Guatemala. Their prestige and following among Indian peasants as well as among the urban middle classes has been will documented.

* Repression of moderate political and trade union leaders continues to accentuate political polarization and has led to the practical liquidation of the political center. Reflecting this internal situation, the international image of the regime continues to deteriorate.

* In the past year Salvadorean and Guatemalan opposition forces have increased contacts, communication and cooperation on political and military matters.

It should be noted that US intelligence has kept informed of the plans and capabilities of the paramilitary strike force in Guatemala. US intelligence has been in contact with Nicaraguan exile groups in Guatemala and in Miami and it is aware of their relationship with Cuban exile terrorist groups operating in the US. Charges that CIA has been promoting and encouraging these organizations have not been substantiated. However no attempt has been made to restrict their mobility in and out of the US or to interfere with their activities. Their mobility and their links with the US--it seems reasonable to assume--could not be maintained without the tacit consent (or practical incompetence) of at least four agencies: INS, CIA, FBI and US Customs.

HONDURAS

During 1980 DOD has devoted considerable resources to expanding communications and improving relations with the Honduran armed forces. DOD's stated objective has been "to create a new balance in the region" after the fall of Somoza's National Guard. The discussions with Honduran officers have been characterized as "encouraging," "fruitful," and "successful" at different stages of the process. These discussions included the following topics:

* Agreement on role of the US as mediator in seeking a settlement of disputes between El Salvador and Honduras.

* The need for increased cooperation between Honduras and El Salvador armed forces to reassert government control over disputed border areas currently held by Salvadorean guerrillas.