Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

385. Telegram From the Chargé in Chile (Sanders) to the Department of State¹

Santiago, December 28, 1955—6 p.m.

370. From conversation with Vassallo reported Embtel 354 December 21² and from magnitude their request PL 480 assistance (Embtel 368 December 28³) it appears he has persuaded President and Minister Economy that there no possibility of effective and immediate help to Chile in easing impact proposed program combat inflation other than large increase PL 480 assistance. It apparent they look upon availability considerable assistance of this kind as playing important if not decisive part in government’s ability to put program into effect.

They apparently convinced likewise that government’s plan, approved by Klein–Saks mission (as Embassy informed by mission), and government’s declared determination to carry through on it are sufficient guarantees to satisfy requirements we have mentioned as prior conditions our help and that legislative enactment and administrative implementation of all major elements plan should not be required as condition precedent at least PL 480 assistance. As indication firm intent government Vassallo told me President extremely pleased with prospects success price-wage bill and is determined to push ahead with program on broad front, including exchange rate liberalization recommended by Klein–Saks mission, and will if necessary obtain state of siege powers to accomplish objectives. Government’s satisfaction over developments no doubt arises in part from fact it able persuade liberal party it has realistic comprehensive program, which was basic condition set by party for its support.

Vassallo made clear that in his own thinking Chile entering buyer’s market in attempt obtain PL 480 assistance. In so many words he said United States urgently needs rid itself of these excess commodities and Chile desperately needs them to carry out anti-inflationary program. In response my reservations concerning “usual marketing” requirements PL 480, Vassallo said he aware requirements and felt sure they would present no difficulties in view expected reduced wheat harvest Chile and inability Argentina and perhaps other suppliers satisfy demand wheat and for other commodities.

Vassallo appears convinced that there are divisions within United States Government re disposal policies which favorable to Chile in obtaining help of magnitude desired.

Sanders

1. Source: Department of State, Central Files, 411.2541/12–2855. Confidential.
2. Supra.
3. Telegram 368 contained Chile’s suggested modifications of the P.L. 480 program proposed by the United States. (Department of State, Central Files, 411.2541/12–2855)