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There is conflicting data about whether or not Morocco competed in Mexico summer games in 1968. https://en.wikipedia.org/wiki/Morocco_at_the_1968_Winter_Olympics would claim that, yes they did compete. Whereas https://en.wikipedia.org/wiki/Morocco_national_under-23_football_team suggests they went but didn't play due to a political issue with Israel. Did they compete at all? What was the political problem they faced? Did they go but face other teams and do other events, or find that Israel was going to be there and turned away? I think the first place for research would best be the standing political issue of the time.
It appears that the relations were fine as far as they go, so I question greatly what the original article referring to "a politcal problem." During the time period surrounding the 1968, there were Israeli Jews that were French and Spanish all within Morocco and I've read outside sources stating a good relation between Jews and the state. I'm hard pressed to find anything that isn't wikipedia referring to the time period of 1968 and specific to Israel/Morocco, though operation Yachin brought various Jews from Morocco to Israel while Morocco leaglized immigration to Israel. Does anyone know of any archives that have noted certain changes in the political standing between Morocco and Israel to answer this question?