Inside Report (4)

El Salvador may back out of the second phase of its ambitious land-reform program -- The reason: opposition from landowners and businessmen and fear that further agrarian reform would seriously damage the economy.

Phase 2 would nationalize 30,000 farms, including many on which coffee, the leading export, is grown. It was to have been implemented later this year.

A confidential Economy Ministry memorandum argues that the government must make clear to the private sector its willingness to freeze Phase 2 "indefinitely" and to undertake no further "structural reforms" of the economy. Apparently, the government does not feel it can announce this publicly -- an action that would anger many landless peasants.

Phase 1 benefits as many as 15 percent of Salvadoran peasants but has run into numerous problems.

The Reagan administration reportedly has made clear that it has no interest in providing economic aid that could be used to subsidize P hase 2.m

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