CH–13. Telegram from the Ambassador in Chile (Howe) to the Department of State1
199. Discussed financial and other problems facing new government at luncheon meeting today with [illegible in the original], Foreign Relations, Defense, Banco Central [illegible in the original], and others. They view financial problems as time bomb certain explode by March next year unless they obtain substantial outside assistance to enable them meet obligations in both foreign exchange and pesos until measures which they are determined take begin having effect.
Feeling situation urgent GOC was planning send mission Washington next week to lay groundwork for negotiation necessary loan agreements. We have succeeded in dissuading GOC from this premature action but as alternative have agreed recommend that [illegible in the original] mission come here from Washington study situation on the ground. Vergara has promised have statistics and program available study such group within a week. Have continually stressed importance having such program designed cope with difficult situation faced through 1959 and even more importantly to show Chile’s real determination do what she can for herself. Vergara and others appreciate this and have repeatedly indicated [Typeset Page 245] their determination develop and carry through realistic, austere program.
GOC has reached agreement with IMF mission now in Chile under which drawings will be permitted through end of year (Embassy telegram 189). This includes: 1) adjusting banking exchange rate to realistic basis, which Vergara said and 2) new agreement on credit restrictions and government borrowing from Central Bank would be done promptly. Agreement with IMF mission represents important first step and shows willingness new administration come to grips with certain financial problems. Believe [Facsimile Page 2] this and any other help which IMF may be able extend most useful. However, scope IMF mission too limited provide comprehensive analysis situation on which United States policy could be based.
Urge United States mission arrive here if possible on December eight. Suggest it have both economic and political representation from Department and that representatives also be included from Treasury, EXIM Bank and possibly DLF. Believe such mission would be extremely helpful because greater accessibility factual information and key Chilean personnel in Santiago will provide opportunity assess financial crisis in relation to over-all politico-economic situation and fiscal program new administration. Would also give chance working with GOC officials while formulation their program in early stages. Realize that such a mission would not be in position to make commitment, but would hope that if facts developed by mission confirm urgent need, Washington would be prepared to act promptly.
I feel prompt despatch to Chile of such a mission is absolute minimum we can do to support and bolster confidence of new government at this stage. I am having lunch with President Alessandri probably on Monday next week and I feel it is important to our position in Chile to be able to tell him at that time that a mission will arrive early in December.2
- Source: Department of State, Central Files, 398.13/11–2458. Confidential.↩
- In telegram 199 to Santiago,
November 28, the Department stated that it was pleased that the
Embassy had been successful in dissuading the Chilean Government
from sending a special mission to Washington, and instructed
Howe to urge Alessandri
to lay through groundwork without publicity through diplomatic
channels for early discussion of the issue. The telegram concluded
as follows:
“Dept wishes emphasize there full realization here that new Administration faces serious problems. U.S. agencies pleased note GOC has reached agreement with IMF mission and hopeful Chile will fulfill program interim targets. Embassy should continue encourage GOC look to IMF for advice on payments and stabilization problems. U.S. disposed cooperate with a sound, constructive program which holds out the premise of lasting achievement and encouraged believe Alessandri Administration provides basis for such cooperation. At same time Dept concerned that unrealistic expectations may be developing on part GOC and Chilean public as to extent Chile “entitled” to and may expect obtain U.S. financial assistance particularly for balance of payments problems. Believe you should emphasize to GOC desirability avoiding continued reliance on balance of payments assistance (while Chile maintaining highest levels imports in history, in large part for current consumption) in view limitations this likely place on obtaining productive development credits.” (398.13/11–258)↩