32. Memorandum from Belcher to Edwin M. Martin, July 251
TO
- ARA—Mr. Martin
THROUGH
- ARA—Mr. Goodwin
FROM
- WST—Mr. Belcher
SUBJECT
- Ambassador Cole’s Position on Chilean Situation
The following is a summary of Ambassador Cole’s analysis of the situation in Chile and his position as to what US policy should be in view of that situation, for your background information during the Ambassador’s consultations.
Our basic objective at this juncture is to prevent the victory of a FRAP candidate in the 1964 elections. Since the FRAP forces do not have a majority, their chances of victory depend on obtaining support of either the Christian Democrats, or the Radicals. [illegible in the original] the chances of defeating the FRAP are almost assured if the Radicals, Christian Democrats, and the far right unite. While less certain, in a three-way race between FRAP, Christian Democrats, and Radical-Liberal-Conservative forces, the latter probably would win.
The chances of achieving a coalition of the parties to the right of the FRAP are more likely if affairs in Chile are going [illegible in the original] well. Also, the chances of the victory of a Radical candidate, if supported only by Liberals and Conservatives, are more likely under these conditions. [illegible in the original] our policy to avert crisis, to insure progress, and to create an [illegible in the original] lack of progress will only strengthen the FRAP and make it more likely that the Christian Democrats or Radicals will join it.
The Department’s policy seems to be to provide minimal assistance just sufficient to keep the Alessandri Government from collapsing, and to cut such [illegible in the original] further if the Government does not do what we want in the way of reforms and [illegible in the original] to come through on stabilization and reform, it still would be necessary [Typeset Page 76] for us to continue aid to Chile. We are going to have to continue to give aid to prevent the situation deteriorating in a fashion that would strengthen the left.
[Facsimile Page 2]We must seek to keep the Radicals in the Alessandri Government, and seek to prevent a joining of either Radicals or Christian Democrats with the FRAP. Therefore we should help the Chilean Government in avoiding the following developments:
1. Economic deterioration in general.
2. Exchange and budget crises.
3. Failure to advance with the Ten-Year Plan.
4. Lack of visible indications of economic and social improvement.
5. Inflation, with accompanying labor troubles and disorders and declining real wages.
6. Anything that creates a sense that the present Government (and therefore any government of the Right Center) cannot cope with Chile’s problems.
7. Anything that creates an atmosphere of general discouragement.
In general, then, our aid policy should be designed to prevent the developments listed above. Our aid therefore should not be minimal. In fact it probably should be more massive than planned. In addition, it must not be slow in coming, have too many strings attached, or be continued with too many pressures.
At the present moment, the political situation is serious and [illegible in the original]. President Alessandri feels he is not receiving the assistance promised him in March, a feeling justified by the serious reduction in the PL–480 agreement, and the delay in providing the AFP loan through CORFO. Alessandri wants to see President Kennedy, to explain the political problems arising from economic difficulties. The Embassy recommends that Alessandri be invited to visit the US at the earliest opportunity, and that we provide direct balance of payments support to Chile, insisting on a devaluation simultaneous with announcement of such support.
The Ambassador also believes that relations between the Chilean Government and the IMF are at an extremely crucial stage. If we can inform Alessandri just exactly how much he can expect to receive [Facsimile Page 3] from the US this year and next, from the Moscoso-Goodwin understandings, Alessandri will then be able to make budget plans and calculate what adjustments must be made in order to reach agreement with the IMF. If Alessandri does not know how much he can count on the US providing, he will be unable to move on the IMF problem. We should, therefore, tell Alessandri how much he will receive from the PL–480 agreement, from the CORFO loan, and from the second $40 million tranche. The latter implies resolving the issue of whether the Export-Import [Typeset Page 77] Bank will furnish $30 million only for imports from the US; the GOC always has maintained that this does not help it in its budget problem.
Finally, in viewing our problems with Chile it must be remembered that there is an inherent difficulty in Chile’s democratic system for the Executive to get action through the Congress. Many of the delays and compromises affecting reform measures (and the 1960 earthquake recovery measures) have not sprung from willful neglect on the part of the Alessandri Administration, but from the need to obtain parliamentary support. There is a similar misunderstanding in Chile regarding the role of the Executive in the U.S., and a tendency to expect too much too rapidly.
- Ambassador Cole’s position on the situation in Chile. Confidential. DOS, CF, 725.00/7–2562.↩