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

CH–9. Memorandum from Robert K. Phillips of the Office of West Coast Affairs in the Bureau of Inter-American Affairs to the Assistant Secretary of State for Inter-American Affairs (Rubottom)¹

Washington, September 24, 1958

SUBJECT

• Position of Chilean President-elect on Major Issues

In public and private statements both before and after the September 4 Chilean presidential election, the apparent President-elect, Senator Jorge Alessandri, has been generally forthright in stating his position on most of the domestic and international issues facing Chile. His views on some of the more important problems:

Presidential Role—Expects to be a strong leader, not under obligation to anyone.

International Affairs—

Relations with U.S. and Free World—Would continue basic Chilean foreign policy as part of Free World. Friendly to U.S. but not subservient. Wants closer relations with neighboring countries and the rest of Latin America.

Relations with Communist bloc—Not stated, but not likely to favor closer relations with the bloc.

Defense—Would prefer to devote funds to economic development but feels he must keep forces at reasonable parity with Argentina and Peru.

Foreign Investment—Favors foreign investment as best means of increasing productive capacity without requiring new sacrifices from the Chilean people.

Foreign Aid—May seek some foreign loans in order to consolidate short-term debts, but hopes to rely primarily on better use of Chile’s own resources. Does not expect a “Marshall Plan” for Latin America.

Foreign Trade—import prohibitions should be eliminated, but certain (unspecified) import duties should be raised to protect national interests. Doubts feasibility of Latin American common market. Favors reciprocal trace arrangements.

Domestic Affairs—

Productivity—Chile’s basic problem is increasingly high cost of production. Wages and social security benefits should be related to productivity. Freer competition will encourage productivity. Agricultural production should be stimulated.

Government Finance—Government should decrease expenditures, take smaller share of business profits, and withdraw from fields more suitable to private enterprise. Administrative reform is essential. Tax revision and codification is urgent. When copper prices are high, part of copper tax proceeds should be reserved for periods when prices are low.

Credit Policy—Dislikes credit restriction as the main tool of inflation control since it tends to curb production.

Exchange Rate—Favors realistic exchange rate, but has not committed himself to freeing rate.

Housing—Wants a national housing program with centralized authority.

COMMENT: In summarizing Alessandri’s economic objectives, Embassy Santiago suggests that some over-enthusiastic U.S. press reports of his election may lead people to believe that he will follow a policy of austerity and will effect profound and favorable changes in the foreign investment climate. The Embassy believes that Alessandri, in view of his expressed resentment over credit controls, is more likely to loosen rather than tighten monetary controls. The strength of the leftist vote in the presidential election would also indicate that Alessandri may experience considerable difficulty in achieving many of his economic objectives, including the encouragement of foreign investment.

While Alessandri’s job will not be an easy one, we are somewhat more optimistic than the Embassy with regard to his chances of success in the fields of monetary policy and foreign investment. The IMF believes, and we concur, that the primary objective in attempting to control Chile’s inflation is the reduction of governmental expenditures. If Alessandri can make headway on this, there may be room for more relaxation of credit to the private sector. The restoration of financial stability in Chile, if Alessandri can achieve it (and his record as Finance Minister indicates that he is fully aware of the perils of inflation), would do more than anything else to restore the economy and to improve the climate for foreign private investment. How Alessandri will get along with Congress remains to be seen.²

1. Source: Department of State, Central Files, 725.11/9–2458. Confidential. Sent through Ernest V. Siracusa, Director of the Office of West Coast Affairs.
2. A handwritten marginal notation by Siracusa reads: “As far as stability is concerned, assuming he can do what he wants, Alessandri seems almost too good to be true. But I wonder if such a program can win political support and mass popularity.”