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

388. Deptel 279, January 4, niact.2 In Embassy’s view, proposed PL 480 program would be important stabilizing factor easing impact implementation government’s projected anti-inflationary measures. Klein–Saks mission has expressed similar views to Embassy.

Senate yesterday approved “in general” by one vote margin wage-price control bill which is considered important element government’s program. Expectation is that same margin will be maintained in final Senate voting next Tuesday, January 10. Since political positions re present bill have become fixed, it is difficult to see how announcement now of new PL 480 agreement would affect voting this particular legislation.

Although there of course no assurance anything we can do will keep government on present course, PL 480 assistance such as contemplated should encourage government proceed with other anti-inflationary measures by administrative action, much as credit control measures already taken, and by further legislative proposals. Government will be and is already under great pressures from both left and right sectors affected by anti-inflationary measures (e.g. CUTCH last night declared national strike starting Monday in initial move against price-wage bill). Political courage of a high order, heretofore lacking, will be required to withstand these pressures. PL 480 assistance could serve ease these pressures. Conversely, Embassy of view that refusal of United States to accede Chilean request by extending minimum economic assistance at this time such as available through PL 480 could have discouraging effect on government’s determination proceed on hard anti-inflationary road.

By same token, such assistance could favorably influence voting in Congress on other parts government’s program.

On foregoing reasoning, announcement PL 480 agreement should not be withheld pending further executive and legislative action. Government has announced that following approval wage-price bill it will press at this special session Congress for series of other anti-inflationary measures.

In view general lack understanding effects expanded and liberalized PL 480 assistance or prices and availability essential commodities, [Page 801] publicity, preferably by Chileans, concerning program would be required to achieve maximum political advantage.

[Here follow the Embassy’s specific and detailed comments regarding the Chilean economy’s capacity to absorb purchases of edible oil, wheat, milk, and forage seeds.]

Sanders
  1. Source: Department of State, Central Files, 411.2541/1–556. Confidential; Niact; Limited Distribution.
  2. Supra.