Foreign Relations of the United States, 1958–1960, Volume V, Microfiche Supplement, American Republics

CH–36. Memorandum of Conversation, by the Ambassador in Chile (Howe)¹

Santiago, May 17, 1960

PARTICIPANTS

• President Alessandri
• Minister of Foreign Affairs, Enrique Ortúzar
• Ambassador Howe

I called on President Alessandri this morning in order to transmit personally to him the message from President Eisenhower included in DepCirTel 1419 of May 10, 1960.² President Alessandri had not been able to give me an appointment prior to this time because he has been devoting himself fully to the completion of the address which he will make to the Chilean Congress on May 21, which had to go to press yesterday evening. I had last week advised the Foreign Minister of the content of the message from President Eisenhower so that President Alessandri was, in general, informed. While Ortúzar was present throughout the conversation, he took no active part in it. Even though the events of the past few days made the message somewhat anticlimactical I repeated the contents of President Eisenhower’s message and President Alessandri expressed his deep appreciation and asked that I convey his assurance of sympathetic support for President Eisenhower in the difficult situation which he confronted at the Paris meetings.

The President went on to say that while the world situation was grave and the attitude of Khrushchev at Paris a cause for concern, he personally was not surprised, as Khrushchev’s attitude was just such as might be expected from one of his background, which Alessandri compared to the background and attitude of many members of the local opposition to his government here in Chile, with the common traits of irresponsibility and demagoguery. He emphasized the increasing danger of Communism in Latin America and said that no doubt the Communists would exploit the current increase of world tensions to serve their own ends here and in this continent.

Using these objectives and tactics of the opposition as a transition from world affairs to his own problems in Chile, the President mentioned the current situation relating to the wage and salary readjustment and his determination to explain it in the bluntest terms to the Congress in the course of his address this week. He blamed these difficulties primarily on petty political maneuvering within and among the various political parties, pointing out that with the congressional elections coming early next year many, if not all of the parties, were focusing their attention more on those elections than on the needs and welfare of the country. [text not declassified] He said that his failure to present to the Congress an administration-sponsored project for wage readjustment during the early months of the year was due entirely to the fact that at no time had he been able to get sufficiently clear assurance of support from the Radicals to provide such a project with a reasonable guarantee of congressional approval. He said further that in recent weeks the attitude of the Radical Party had further deteriorated. Its official leadership continued to recognize the basic validity of the government’s position and to be in general accord with its stability program. Due to the approach of congressional elections, the leadership was under more and more pressure from elements within its own party and less willing or able to offer the administration the support which it requires.

I remarked that I supposed that the Radicals, along with other parties, would have their own proposals relating to wage readjustments to introduce into the next Congress, after the 21st; the President replied, of course, there would be many, but stated with great vehemence that as long as he had the support of one-third of the membership of either Chamber he would veto and continue to veto any wage proposal that would endanger the government’s stabilization program.

I remarked that while this was undoubtedly a difficult and critical period which the administration was going through, that it had probably been inevitable from the beginning and that I had been pleased at the generally favorable findings of the Mission from the International Monetary Fund which was here last week. I said that members of this Mission had been quite laudatory in their assessment of what the Government had done in the past year and that actually the major danger they saw ahead was the problem of the budget. The President himself took this up and agreed wholeheartedly that the budget was the country’s number one problem and one that was going to be extremely difficult to solve. He emphasized the very greet need of not only continuing the present but expanding the whole public works program, and said that it was simply impossible to finance such a program from current income. This gave the President an opportunity to return to the theme which he has often developed, namely, the urgent need for reopening foreign sources of credits and financing comparable to those which existed prior to 1932. As he has said many times in the past, he repeated that in order to meet the real needs of Chile and other Latin American nations for economic growth, it was not sufficient for foreign credits to be made available by the international lending agencies or those of the United States to cover dollar costs of various projects, leaving the usually much greater costs in local currency to be met out of current operating budgets. He emphasized that he did not mean that such credits had to come from official government financed sources but rather that countries such as Chile should have access to the private lending market in the United States under such controls as might be necessary to avoid the mistakes and abuses which he quite readily admitted had existed during the 1920s. In the course of his remarks on this subject he recalled with some bitterness that many of Chile’s current troubles went back to the projects initiated by CORFO in the years after 1939, observing that many of these projects were in themselves highly useful to the country but that in initiating them with foreign credits for foreign costs CORFO had left the large balance of local cost to be met by the government out of current income, all of which had led to unbalanced budgets, deficit financing, and the consequent evils of inflation. He remembered that among the current leaders of the larger South American countries, mentioning especially Frondizi, Kubitschek, and Lleras, he was the only one who had continuity of practical experience which went back to the days of the late 1920s and ’30s. He repeated what he has also said before: namely, the apparent lack of understanding of the capable, theoretical economists and technicians connected with the international lending agencies and U.S. credit institutions, of both the pressing needs and practical realities of the growth situation in South America. He emphasized again that there was a critical need for more capital from abroad that could be converted into local currency for public works, both to finance the urgently needed public works themselves and to take up slack in the employment without which it would be increasingly difficult to hold the Communists in check and for governments such as his to succeed in their program. He mentioned also that such foreign credits, that could be converted into local currency, would also be of great assistance to the United States in making available more dollars to Chile and, by implication, her neighbors, which could be used for imports from the United States, and thus help to relieve our own current export problem.

When the President ended his comments on this topic I remarked that from recent conversations with Pablo Pérez, Minister of Public Works, and Roberto Vergara, Minister of Finance, I understood that the government was currently working on a program of public works, particularly in the fields of roads and irrigation. I said that I had expressed to both Ministers the hope that when they had their programs sufficiently developed they would make them available to us so that both the Embassy and our technical assistance people would have an opportunity to study them prior to any actual application being made to one of the international or U.S. lending agencies.

The President then returned to the international situation, repeating that he felt that the current crisis would be fully exploited by Communists in Latin America as well as other parts of the world. He expressed the view that Khrushchev’s belligerent attitude was determined at least in part by growing differences between Russia and Communist China. Indicating that as between the two he felt that Russia constituted the greater threat to the free world, he expressed the wish that the United States could find it possible to follow a more flexible policy with relation to Communist China, both in order to relax tension with Communist China and with the idea of increasing the tension between Russia and China. He said that information coming to him from non-Communist visitors to China suggested that Chinese Communism was different from Russian Communism in that many Communist enterprises were apparently conducted through a mixed form of public and private ownership. (Comment: While the sources of President Alessandri on this subject are not fully known, it is quite possible that he may have been influenced by conversations with recent non-Communist Chilean visitors to China, including Liberal Deputy Jorge Errázuriz, Juan Gómez Millas, Director of the University of Chile, Francis Walker Linares, Director of Cultural Exchange activities.) I expressed some surprise at this, saying that while I certainly did not claim to be a student of that area, my understanding was that, if anything, Russia showed some signs of emerging from the primitive and absolute form of Communism, while China was still more closely tied to doctrinaire Marxist and Leninist teachings. I also remarked that whatever adjustments might at some time be possible in U.S. policy, that a relaxation of tension required a willingness on both sides and that from all the information that had come to my attention there was no indication whatsoever that Communist China was seeking either a relaxation of tension with the United States or a less dominant role throughout Asia.

The conversation closed with the President once more expressing his appreciation for the message from President Eisenhower and saying that while he could add no suggestions that could be helpful as to the current difficulties with Russia, be fully shared the hopes and objectives of President Eisenhower.

1. Source: Department of State, Central Files, 725.11/5–1860. Confidential. Sent to the Department of State under cover of despatch 848, May 18, 1960, not printed.
2. The referenced circular telegram instructed the Embassy to convey to President Alessandri a description of the objectives President Eisenhower wanted to achieve at the Meeting of Chiefs of State and Heads of Government, held in Paris, May 16–17, 1960. (700.11/5–1060) Documentation concerning the meeting is in Foreign Relations, 1958–1960, vol. IX, Berlin Crisis, 1959–1960; Germany, Austria, Documents 63–240.