CH–11. Memorandum from the Assistant Secretary for Inter-American Affairs (Rubottom) to the Under Secretary of State for Economic Affairs (Dillon)1
SUBJECT
- Chilean Financial Situation.
I suggest that you read the attached telegram from Ambassador Howe in Santiago.2
The Department has consistently taken a firm line with regard to Chilean compliance with the undertaking agreed to with the IMF and the Export-Import Bank a few months ago. In fact, our line has been tougher than that taken by the IMF itself, which, when confronted with a decision in New Delhi regarding last month’s drawing, overruled the recommendation of its staff and permitted the drawing. We had fully supported the staff recommendation.
Now, however, it seems doubtful political or economic wisdom to deny Chile the funds which it desperately needs just as the new administration is coming in, given the fact that a firmer line was not taken against the Ibanez regime. It is our hope that President Alessandri will have a much more business-like administration than his predecessor, and his new Minister of Finance, Roberto Vergara, strengthens our hope. But the new administration should not be put in a financial straight jacket in its first days and weeks in office. Even though the real culprit would be the previous regime and its lack of fiscal discipline, the tendency would be to place the blame on the IMF and the U.S. for denying this drawing.
We hope to have a favorable decision from the IMF today, based on: (1) Chile’s formal request for the drawing, and (2) Chile’s request that the IMF send an official there immediately to review her situation.
I shall be in touch with you if we encounter difficulties.
- Source: Department of State, Central Files, 398.13/11–358. Confidential.↩
- No telegram was found attached to the source text, but the reference may be to telegram 169 from Santiago, printed as Document CH�10.↩