CH–25. Memorandum from the Director of the Office of West Coast Affairs (Coerr) to the Assistant Secretary of State for Inter-American Affairs (Rubottom)1
SUBJECT
- Alessandri Administration Celebrates First Anniversary
According to Embassy Santiago, probably the single greatest accomplishment of Alessandri during his first year has been the reestablishment of public confidence in the dignity, seriousness of purpose and honesty of the Government. This confidence is not only felt in business circles, but even by the average man on the street, even though he may not have voted for Alessandri. The greatest failure of the Administration has been its inability to control the continuing upward surge in the cost of living.
Alessandri’s first year has been devoted in large part to bringing order to the chaotic financial situation which he inherited from President Carlos IBAÑEZ, and in laying the basis for reorganizing the haphazard structure of the government and planning the specific programs to be carried into effect during the second year of his Administration. The Government has shown itself friendly to, and desirous of cooperating with, the United States both in international affairs, and in matters concerning Chile’s internal economy. If President Alessandri can bring Chile’s inflation under control, he gives promise of providing the nation with one of the most effective governments it has seen in decades. Most of the basic changes envisaged by the Government are being effected under the special powers law which gives the President power to act without Congressional approval.
So far, major Government efforts have been concentrated in the economic field. The Government has sought to: 1) bring order to the public finances (it has set up a revised, single budget system, refinanced the public debt, and claims to have presented the country with a budget for 1960 which for the first time in many years will be balanced); 2) stimulate production (by setting a more realistic exchange rate; lowering import deposits for essential machinery and goods; obtaining foreign loans some of which have been made available to private businesses for purchase of machinery and other essential imports; and reinvigorating the Development Corporation (CORFO), giving it the task of directing the country’s overall economic plan); 3) initiate more effective controls over the banking and credit system (limited expansion of the means of payment and instituted stricter controls over banking rediscounts); [Typeset Page 271] 4) liberalize foreign trade (eliminated lists of prohibited imports, maintained a steady exchange rate, increased general confidence [Facsimile Page 2] in the economic future of the country, and announced plans for the reform of the customs structure); 5) obtain foreign loans and aid (mostly from the United States and the Federal Republic of Germany). The Government has also initiated much needed steps to improve the efficiency of Chile’s agriculture, to stimulate the construction of low-cost housing, and has announced plans for development of the country’s transportation, electric power and steel industries. Plans are also under way to reorganize many government organizations, including the expensive and often mismanaged social security system.
WST Comment:
The air of confidence which Alessandri has managed to inspire cannot last indefinitely if his administration fails to deal more effectively with the continuing increase in the cost of living (up 36.9% in ten months of 1959 vs. 32.5% in all of 1958). The Government has already publicly abandoned its position that there should not be a new round of compulsory wage and salary increases in 1960, and in all probability this will unbalance the 1960 budget (despite a balance on paper), with further inflationary implications. The magnitude of the Government’s problem in attempting to curb inflationary pressures during 1960 will depend on a number of factors which cannot yet be measured, e.g., copper prices, foreign exchange reserves, level of wage increases, etc.
- Source: Department of State, ARA/WST Files, Lot 62 D 31, “Economic, General.” Confidential. Drafted by Phillips; initalled by Coerr. The following notation by Rubottom appears on the source text: “Thanks.”↩