45. National Intelligence Estimate 94–63, October 31
THE CHILEAN SITUATION AND PROSPECTS
THE PROBLEM
To estimate the situation and prospects in Chile with particular reference to the September 1964 presidential election.
CONCLUSIONS
A. Chile has a longstanding tradition of respect for constitutional order and civil liberties. It has accomplished a considerable political evolution by electoral means. Its human and material resources are adequate to provide a decent living for its rapidly growing population. Nevertheless, for half the population real wages have been declining since 1950, and a large portion of the population is ill-housed, ill-clothed, and ill-fed. (Paras. 1–6, 17, 18)
B. Consequently increasing popular dissatisfaction has been expressed in a steadily leftward political trend. In the presidential election of 1958, Salvador Allende, the nominee of FRAP,2 failed of election because a minor candidate diverted from him a small part of the leftist vote. These election returns raised apprehension that the 1964 presidential election might bring to power a government under strong Communist influence, if not control. (Para. 7)
C. Subsequent congressional and municipal elections have shown that the leftward trend in Chile is continuing, but that the present beneficiary of this trend is not FRAP, but rather the Christian Democratic Party. This hitherto minor left-center grouping is attracting the votes of frustrated reformists who see little hope in the traditional political parties and are antagonized by the communistic tendency of FRAP. (Para. 9)
[Facsimile Page 3]D. The outcome of the 1964 presidential election cannot be predicted a year in advance. The political situation is extremely fluid. Allende’s candidacy now appears less dangerous than in 1958. The campaign of Durán, the candidate of the coalition of the traditional parties, has failed to gather momentum. On present showing, Frei, the [Typeset Page 98] Christian Democratic candidate, appears to be the leading contender. (Paras. 10–16, 36)
E. If Durán should be elected, the Chilean government’s policies and performance would remain much as they have been under Alessandri. The government would profess reformist purposes, but the effectiveness of its reform measures would be limited by its need to placate various vested interests. Frei would strive to transform the economic and social structure of Chile, but he would be resisted by the vested interests. (Paras. 8, 37–38)
F. If, through the defeat of Allende, the Communists and Allende Socialists should be frustrated in their once-lively expectation of achieving power by electoral means, the Chilean Communists probably would not turn at once to revolutionary violence. The Carabineros and the military would almost certainly be able to cope with any attempt at either urban or rural insurgency. The Communists would prefer to preserve their present legal status and bide their time, trusting that conservative political influences will continue to prevent effective social reform and that the cumulative frustrations and resentments of the masses will eventually bring them to power. (Paras. 42–44)
[Facsimile Page 4]I. THE SOCIAL BACKGROUND
1. Chile’s rapidly growing population now numbers about eight million. Racially and culturally, it is one of the most homogeneous in Latin America.3 About 95 percent of the population are at least nominally Roman Catholic. About 80 percent of the adult population are literate. Three-fourths of the people live in the central one-third of the country, a fertile area with a climate like that of California. (See map.) About 60 percent live in urban communities. Almost all participate in the money economy.
2. Chilean national unity is impaired, however, by strong class distinctions. The upper class—large landholders, and commercial and industrial magnates—conforms to the pattern of conspicuous consumption familiar elsewhere in Latin America. It is able to maintain this style of living in part through the avoidance of direct taxes. These magnates have had to share political power with a rapidly growing middle class, one of the largest in Latin America, now about 40 percent of the population. Within this middle class there are divergencies of interest between independent professional and business men on the [Typeset Page 99] one hand and white collar employees on the other. These politically effective social elements have defended and promoted their respective interests without much regard for the generally deplorable lot of the lower class.
3. Chile’s regressive tax system and chronic inflation have borne heavily upon the lower class—and, to a lesser degree, upon the white collar employees of the lower middle class. Since 1950 the real wages of unskilled and unorganized workers have declined. Although some organized workers, such as the employees of the US mining companies, live relatively well, an estimated half of all industrial workers are ill-fed and ill-housed. The employment and housing problems are rendered increasingly acute by the high rate of population growth (2.5 percent per annum) and by the migration of peasants to town in search of economic and social betterment.
[Facsimile Page 5]II. THE POLITICAL TRADITION AND TREND4
4. Chile has a longstanding tradition of respect for constitutional order and civil liberties. Resort to force in politics has been rare.5 Election results are normally accepted. Consequently, it has been possible to accomplish a significant political evolution by electoral means. In contrast to the executive domination characteristic of most Latin American countries, in Chile the legislative and judicial powers are respected and effective. A highly competent national constabulary, the Carabineros, is normally able to maintain law and order without the intervention of the military.6
5. The upper class monopoly of political power was broken by the presidential election of 1920, but the political predominance of the middle class was not consolidated until the period 1938–52. In the elections of 1938, 1942, and 1946, the largely middle class Radical Party won the Presidency with the support of the Communists and sometimes with that of the Socialists as well. This period of Radical administration illustrates the Chilean adage, “Elect with the left, rule with the right.” Once elected, Radical Presidents usually followed moderate policies and often appointed conservatives to cabinet positions. The Radicals enlisted conservative support for their program of rapid industrialization by tacit agreement not to press for agrarian reform. The Communists received three cabinet positions as a reward for their support in [Typeset Page 100] the election of 1946, but, when the Party proceeded to foment industrial and agrarian unrest, the Radicals combined with conservatives to pass legislation outlawing it. In general, as upper middle class Radicals have prospered, politically and economically, their interests have come to coincide with those of the upper class.
6. The Radicals’ program of rapid industrialization failed to live up to expectations, and the distortions which it introduced into the economy resulted in uncontrolled inflation. Consequent popular distress and dissatisfaction defeated the Radical candidate in the presidential election of 1952. The winner of that election was a nationalistic and demagogic “strongman” without party affiliation, General Carlos Ibáñez del Campo.7 The voters who elected him evidently desired a strong patrón who would enforce order and relieve distress without reference to any ideology. During Ibáñez’ administration, however, real wages con [Facsimile Page 6] tinued to decline and unemployment became a serious problem. In their disillusionment and despair, lower class voters began to turn to the ideological left for salvation.
7. Leftist candidates won a majority of the popular vote in the presidential election of 1958. Salvador Allende, the Socialist candidate of a leftist coalition including the Communists,8 failed of election because a minor candidate diverted from him a small part of the leftist vote. This fortuitous circumstance permitted the conservative candidate, Jorge Alessandri,9 to win the Presidency. Nevertheless, the 1958 election returns foreshadowed the possibility that a coalition including the Communists might come to power by electoral means in 1964.
8. In the face of this threat, and in keeping with his campaign promises, Alessandri has striven to increase production, reduce unemployment, curtail inflation, and carry out moderate agrarian and tax reforms. To obtain needed congressional support, he took Radicals into his cabinet; they stipulated that sufficient reforms must be undertaken to provide a good record for a Radical candidate to run on in the presidential election of 1964. The administration’s reform program, however, has been hindered and watered down by the resistance within the government coalition, whose controlling members are not by nature enthusiasts for reform. Although some progressive measures have been [Typeset Page 101] adopted, the administration has not accomplished enough to arrest the leftward trend in Chilean politics.10
THE COMPOSITION OF THE CHILEAN CONGRESS
NOTE: 20 Senate seats, distributed as shown in parentheses below, and all Chamber seats will be subject to election in March 1965.
Party | Senate | Chamber |
Conservative | 4 (2) | 17 |
Liberal | 10 (5) | 28 |
Radical | 13 (7) | 39 |
Christian Democratic | 4 (1) | 23 |
National Democratic | — — | 12 |
Socialist | 7 (3) | 12 |
People’s Vanguard | 1 — | — |
Communist | 4 — | 16 |
Independent | 2 (2) | — |
45 (20) | 147 |
9. The congressional election in 1961 and the municipal elections in early 1963 have shown that the leftward trend in Chile is continuing. The municipal elections show also, however, that at present the principal beneficiary of this trend is not FRAP, but the Christian Democratic Party (PDC). In the Chilean political spectrum, this reformist offshoot of the Conservative Party stands generally to the left of the Radical Party, but it is explicitly anti-Communist. Its present emergence as the strongest single party in Chile has coincided with a decline in the voting strength of the Conservative and Liberal parties, and also of PADENA,11 the non-Marxist member of FRAP. The PDC is increasingly attracting the votes of frustrated reformists who see little hope in the traditional parties and are antagonized by the communistic tendency of FRAP. This trend is likely to continue, and to make the Christian Democratic Party a formidable contender in the presidential election of 1964.
[Typeset Page 102]Party Electoral Strength, 1961 and 1963 | ||||
1961 Congressional Elections | 1963 Municipal Elections | |||
Democratic Front (FD) | Percent | Percent | ||
Radicals (PR) | 296,704 | 22.0 | 427,842 | 21.60 |
Liberals (PL) | 221,361 | 16.5 | 259,683 | 13.11 |
Conservatives (PUC) | 197,151 | 14.7 | 225,075 | 11.36 |
Democrats (PD) | — | — | 19,409 | 1.00 |
Totals | 715,216 | 53.2 | 932,009 | 47.07 |
Popular Action Front (FRAP) | ||||
Communists (PCCh) | 157,451 | 11.7 | 254,178 | 12.83 |
Socialists (PS) | 149,420 | 11.1 | 224,071 | 11.32 |
National Democrats (PADENA) | 95,282 | 7.1 | 101,427 | 5.12 |
People’s National Vanguard (VNP) | — | — | 3,101 | .15 |
Totals | 402,153 | 29.9 | 582,777 | 29.42 |
Christian Democrats (PDC) | 213,559 | 16.5 | 452,843 | 22.86 |
Independents | — | — | 12,759 | .65 |
The Democratic Front was not yet operative in the 1961 elections but the totals of the parties now comprising it are listed together for comparison with the 1963 totals.
In Chile, as elsewhere, municipal elections are normally dominated by local factors. In 1963, however, the national party organizations fought them on national political issues, as a demonstration of party strength in anticipation of the 1964 presidential contest. The estimate of a strong trend toward the PDC does not depend solely on these 1963 returns, but is confirmed by other current indications.
[Facsimile Page 8]III. THE 1964 PRESIDENTIAL ELECTION
10. Although the 1964 presidential election, to be held in September, is still a year off, the three principal candidates have already been designated. They are Senator Julio Durán Neuman, a Radical, for the Democratic Front (a coalition of the traditional political parties); Senator Salvador Allende Gossens, a Socialist, for the Popular Action Front (FRAP); and Senator Eduardo Frei Montalva for the Christian Democrats. A minor candidate, independent rightist Jorge Prat Echaurren, is also in the race.
11. Durán, 45, is a wealthy lawyer and financier. His nomination was dictated by the inner circle which controls the machinery of the [Typeset Page 103] Democratic Front parties. Although his platform professes reformist purposes, he is hardly credible as a champion of reform. For this reason, he has little appeal for independent voters, or for the reform-minded elements of the Democratic Front parties. Moreover, many of the Conservatives, an explicitly Catholic party, may be alienated by the fact that he was once a Mason. For these reasons, many voters who would otherwise have supported the Democratic Front are likely to switch to the other candidates.
12. Disgruntled elements within the Democratic Front now privately contend that Durán cannot win and that President Alessandri should be substituted for him as the Front’s presidential candidate. The trouble with this proposal is that the constitution does not allow an incumbent President to succeed himself. To amend this provision in the midst of a presidential campaign would antagonize many voters. Even if the substitute were not Alessandri, but, for example, the generally popular former President Gabriel González Videla, the displacement of Durán would antagonize his supporters and might destroy the Front. It could split the conservative vote between two rival candidates, ensuring the defeat of both. In addition, because the Communists hate and fear González Videla, who outlawed them in 1948, they might decide to support Frei covertly if González Videla became the Democratic Front candidate. For these reasons, and for lack of an adequate substitute candidate, the party managers are presently disposed to stick with Durán.
13. Allende, 55, is running for the third time as the nominee of FRAP. Originally a moderate Socialist, Allende, as a candidate, has adopted a strongly pro-Castro and pro-Soviet line. Some of his Socialist followers are more vehemently revolutionary than are the Communists. (The Communists’ present policy, called the vía pacifica is to pursue their ends by strictly political means, with special care to avoid the suppression which they suffered from 1948 to 1958.) Allende’s identifica [Facsimile Page 9] tion with Castroism and communism is likely to antagonize some independent voters and to cause further defections from FRAP. Already most members of PADENA have broken away, two groups declaring themselves for Frei and another for Durán. On the other hand, Allende is an established political figure with considerable personal prestige, a factor not involved in the municipal elections. Moreover, he may gain the support of leftist Radicals unwilling to support either Durán, a plutocrat, or Frei, a Catholic.
14. Frei, 52, a well-known and attractive personality, is certain to benefit from the existing disarray within the Democratic and Popular Action fronts. Although his party won only 23 percent of the vote in the municipal elections, as compared with 29 percent for the FRAP parties and 47 percent for the parties of the Democratic Front, the tide [Typeset Page 104] appears to be running strongly in his favor. He will probably outrun Allende in the presidential election. He may even be able to surpass the vote which the Conservative, Liberal, and Radical party machines will be able to deliver for Durán.
15. Prat, 45, is a strong rightist without organized party support. He is likely to attract votes which would otherwise have gone to Durán, or to Frei. Prat recognizes that he might thus bring about the election of Allende; he says that, if this result seems likely, he will withdraw his candidacy. In that event he would probably throw his support to Frei, since he supported the PDC in the municipal elections.
16. The Chilean constitution provides that, if no presidential candidate receives a majority of the popular vote, the Congress (the Senate and Chamber in joint session) shall choose between the two leading contenders. This choice normally devolves upon Congress, as it almost certainly will in 1964. Hitherto, Congress has always chosen the candidate with the greater popular vote. The present Congress, which will hold office until the congressional election in 1965, is composed of 111 representatives of the Democratic Front, 52 representatives of FRAP, 27 Christian Democrats, and two independents. It would almost certainly prefer Durán, but would probably elect Frei if he were to lead in the popular vote. It would not be likely to elect Allende unless he were to lead the poll by a clear margin.
IV. THE ECONOMIC SITUATION
17. Chile’s political future will depend to a very considerable extent upon the ability of its economy to increase output and productivity and thereby to provide adequate levels of living for the rapidly expanding population. Chile’s basic resources are adequate for this purpose, but only if they are more rationally utilized, and if there is a more equitable [Facsimile Page 10] distribution of the national income. Since the war Chile’s economic growth has lagged behind much of the rest of Latin America. Between 1950 and 1960, GNP increased by an average of 3.5 percent per year, but this represented only about a 1 percent increase per capita. Nevertheless, the real wages of urban blue collar and rural workers declined over the same period. These workers and their families make up somewhat more than half of the Chilean population.
18. Chile’s extensive natural resources include the world’s largest known deposits of nitrates and medium-grade copper ore, and large deposits of high-grade iron ore. The country has sizable deposits of medium and low grade coal, but lacks coking coal. A large but little exploited hydroelectric power potential exists near the largest concentration of population. Petroleum reserves in the South are probably adequate to meet domestic requirements. The amount of arable land, if properly utilized, is more than adequate for Chilean needs. The [Typeset Page 105] country has extensive forests, and its rich fishery resources have barely been tapped. The largely homogeneous population and a relatively well-developed educational system provide human resources that are also considerably above the Latin American mean.
19. Many of Chile’s economic problems stem from the shortcomings of its agriculture. A large proportion of the best Chilean agricultural land is organized in large holdings; much of it has been underutilized. At the other end of the scale there are many tiny properties inadequate to provide more than a bare subsistence living. Agriculture as a whole has suffered from technical backwardness, inadequate investment, and poorly developed distribution and marketing facilities. As late as the early 1940s Chile was a net exporter of agricultural commodities, but now it must spend an increasing share of its foreign exchange earnings on agricultural imports, over half of which consists of foodstuffs that could be produced domestically. While agriculture accounts for only 12 percent of GNP, it employs about 30 percent of the country’s labor force. Thus labor productivity is low and the cash income of the rural laborer is substantially below the national average. Between 1950 and 1960 agricultural production grew at an average rate of 1.8 percent, less than the annual average population growth of 2.5 percent.
20. Industrial development has had the solicitous attention of successive Chilean Governments for most of the present century, and has since 1938 received the principal emphasis in Chilean economic policy. The objective has been to provide employment opportunities for workers who could no longer be absorbed in agriculture, and to help conserve foreign exchange. Industry was assisted in various ways, including high tariffs, easy credit, and exchange policies favoring imports of raw materials and foodstuffs for the expanding industrial labor force. Favoritism for in [Facsimile Page 11] dustry intensified the urban-rural imbalance and increased pressures from other sectors of the Chilean economy. Neglected agricultural interests, penalized by low farm prices, fought to maintain their relative freedom from taxes. Lacking incentives for investment in farm production, large landholders increasingly clung to unproductive estates primarily as a hedge against inflation. Organized labor secured periodic wage adjustments to compensate for steady rises in the cost of living—due in large part to increased food costs. As a consequence, industry was allowed to raise its prices to re-establish working capital and profit levels reduced by increased wage bills. The result of this combination of the drive for industrialization and concessions to pressure groups has been unbalanced growth, declining productivity, and inflation that has ranged from 15 to as high as 80 percent per annum.
21. There has been a considerable growth in industry since the war and it now accounts for over one-quarter of GNP and provides 75 [Typeset Page 106] percent of Chile’s consumer goods. Industry has not, however, realized the hopes originally held out for it. It is heavily dependent upon imported capital equipment and raw materials, and, far from relieving the balance of payments, has been a continuing burden upon it. Because much of Chilean industry is monopolistic and inefficient, it is handicapped in competing for foreign markets, and inflates the internal price structure. The limited size of the domestic market, so long as it is coupled with depressed living standards for nearly half the population, makes it difficult for industry to achieve economies of scale. In these circumstances Chilean industry has virtually exhausted the opportunities for substituting its own products for imported consumer goods and lacks the capital and know-how to compete with imported heavy industrial products. Industry has not been able to absorb more than a fraction of the annual additions to the labor force.
22. The inability of industry and agriculture to provide employment opportunities for the growing labor force has led to the development of a large service sector, which accounts for over 50 percent of GNP and about one-third of the labor force. Commercial activities make substantial contributions to GNP, but the balance of the service sector—particularly government and personal services—has become a reservoir for surplus labor and is highly inefficient. Successive national governments, committed to a policy of full employment and extensive welfare services, have increased public expenditures to support a growing bureaucracy and other service sector activities. Although underemployment as well as unemployment have been reduced by the upturn of the economy since 1960, both persist as serious basic problems.
23. Inflation has been a major Chilean problem since the last century. It became particularly acute after World War II, despite recurrent efforts by the government since 1956 to curb it. The expanding role of the government in the economy has been a major cause of inflation as [Facsimile Page 12] revenues, largely dependent on foreign trade, have failed to keep pace with the rising level of government expenditures. Inflation has been fed by easy credit policies and the success of politically influential groups in repeatedly securing relaxation and subsequent abandonment of stabilization programs. Other basic causes of inflation have been the slow growth of Chilean agriculture, a long term worsening of the terms of trade over the past 25 years, and an official policy of annual wage increases to offset rises in living costs. In the year ending 1 July 1963, the cost of living index rose 45 percent, and even sharper rises have occurred during the past decade.
24. The persistent balance of payments problem has been aggravated rather than aided by efforts to protect both agriculture and industry and by substantial flights of capital. As a result Chile has not been able to accumulate a sizable foreign exchange reserve to cushion the [Typeset Page 107] impact of sharp variations in earnings from mineral exports, which provide over 85 percent of export income. Despite continued expansion in the output of the mining sector, net deficit on current account totalled $186 million in 1960 and $225 million in 1961. In 1962 the Alessandri administration was able to reduce the deficit to $115 million by imposing severe restrictions on imports and by devaluing the escudo in October. Large-scale foreign financial assistance has been necessary, however, to prevent a serious curtailment of economic activity. The US, the principal source of outside assistance, has committed some $570 million since 1958 in support of the present administration’s programs.
25. Foreign private investment by Europeans and Japanese is increasing, but US direct private investment (est. $800 million) accounts for 70 percent of all foreign investment in Chile. The US investment is located principally in mining and public utilities, activities in which foreign capital is particularly vulnerable to political attack in Latin America. Because the mining industry is isolated from the main stream of Chilean life—located in geographically remote areas and employing relatively few workers—it has made little contribution to local technology or the modernization of business outlooks and management. These companies are threatened by proposals for nationalization and are subjected to discriminatory treatment such as the new tax boosts which, in 1961, caused the two big US copper companies to postpone plans for large new investments to expand production.
26. The Alessandri administration announced in 1960 a 10-year development plan which would need to be supported by an estimated $8 billion investment, including $1.3 billion of foreign capital. The plan envisages an overall annual growth in GNP of 5.5 percent through increased investment in various fields with particular emphasis upon economic infrastructure—roads, ports, power, irrigation, and housing. The plan has been criticized for its failure to address itself to the basic [Facsimile Page 13] problems of rural-urban imbalance, to take much cognizance of Chile’s increasingly urgent social problems, and to provide for the self-help measures called for under the Alliance for Progress.
27. Chilean efforts, since October 1962 to carry out a new stabilization plan essential to the 10-year plan’s success are being supported by the International Monetary Fund (IMF) and the US has provided financial assistance for both programs.12 Much of the substantial aid Chile has received from other official Western sources has also been [Typeset Page 108] committed during the Alessandri administration.13 However, Chile still faces a major problem in financing its development program because of its limited ability to service additional external borrowings on conventional terms. At present over one-quarter of the country’s free exchange earnings go to service existing convertible currency obligations, estimated at close to $1 billion. Debt service will take $110 million in 1963 and $109 million in 1964, and is manageable only because much of the new external assistance coming from AID and IDB is on “soft” terms.
28. Under urging from the foreign sources of needed credits and from domestic advocates of reform, the Alessandri administration has initiated agrarian and tax reform proposals, in accordance with the Alliance for Progress, some of which have been passed while other portions continue to face serious congressional opposition. The administration has made considerable progress in housing and school construction, which has had a salutary social effect but does nothing to produce needed foreign exchange. It has not been able to correct the underuse of land, which would increase productivity and improve Chile’s payment situation. Although a modest agrarian reform law has been passed, its implementation has been impeded by the political power of the large landholders.
29. At present, the Chilean economy looks healthy, with sales, employment, mining, construction, and agricultural output at high levels. This stems principally from the large budgetary and balance of payments support from the IMF, Ex-Im Bank, and IDB, and developmental assistance made available by the Alliance for Progress. At the same time, the political-economic obstacles to growth and stability still persist. Any government coming to power will have to contend with the [Facsimile Page 14] vested interests which control agriculture, finance, and industry. These interests have successfully resisted much of the present government’s attempts at structural economic reform, and it can be expected to fight strongly any more far-reaching encroachments on their traditional privileges. Elements of the Right have come to realize that inflation will not generate lasting economic growth and that some rationalization of the country’s economic structure is necessary. Nevertheless, the conservatives continue to dispute with one another and the rest of the population how far and how fast the reforms which would achieve this rationalization should be implemented. The present government can be expected to pursue sufficiently disciplined fiscal-monetary poli [Typeset Page 109] cies, and a token rate of reform enactment, to qualify for continued US and IMF support. But after September 1964, the direction the economy will take will depend heavily upon the ideology of the new President, and his success—or lack of success—in pushing through economic and social reforms.
V. FOREIGN RELATIONS
30. Successive Chilean administrations, including Alessandri’s, have in general sought to maintain close and cooperative relations with the US, the major source of new investment capital and the country’s most important single trading partner. Underlying this general policy, however, there is a widespread nationalistic concern to assert Chile’s dignity and independence in foreign relations. This nationalistic sentiment finds expression in a tendency to criticize US policies and actions, and to pursue divergent policies on particular occasions.
31. Many factors contribute to Chile’s nationalistic sensitivity and its anti-US manifestations. The Communists, of course, and many Socialists also, do their utmost to foment and exploit such sentiments expressly in order to impair US-Chilean relations. They attack as Yankee economic imperialism not only such targets as the US mining companies, but also the Alliance for Progress. But economic nationalism is also characteristic of the Chilean middle and upper classes. The latter, in addition, resent the self-help and reformist terms of the Alliance for Progress. There is a widespread tendency to consider that Chile’s economic difficulties result from US control of copper mining, Chile’s major export industry.
32. The status of the US-owned copper mining companies is likely to continue to cause serious difficulties in US-Chilean relations. The Chilean economy depends heavily on the export earnings of these copper mines. Their development has been beneficial to Chile, and particularly to their Chilean employees, as well as profitable to the investors. Nevertheless, there is agreement across the entire political spectrum, from Communists to Conservatives, that the copper companies should be made to contribute more to Chile. The question is how to derive [Facsimile Page 15] more income and employment from the industry. Moderates recognize that the companies already pay more taxes and labor benefit than any other enterprise in the country. Moreover, they know that punitive measures only discourage new company investment that is needed to support Chile’s Ten-Year Plan of Development. Only the most radical elements favor outright nationalization, for which Chile would not be able to pay promptly, if at all, thus jeopardizing its international credit. An approach which has considerable support would be to “Chileanize” the companies by insisting on 1) incorporation under Chilean law with Chilean capital participation; 2) use of [Typeset Page 110] more Chilean managers and top-echelon technicians; 3) greater government control over copper production and sales; and 4) an increase in the amount of copper refined in Chile.
33. Although Chile gave prompt and unequivocal support to the US during the missile base crisis of October 1962, it is one of the five Latin American countries that still maintain diplomatic relations with Cuba. The Alessandri administration defends this position on juridical grounds. Its chief reason appears to be fear of the strength shown by the pro-Castro FRAP in the presidential election of 1958 and a desire not to inject such an emotional issue into the election of 1964. It has also found it beneficial to exchange Chilean agricultural products for Cuban sugar.
34. Chile maintains diplomatic relations with only one other Communist country, Yugoslavia, but permits the USSR, Poland, Czechoslovakia, Hungary, Bulgaria, and Communist China to maintain small commercial or cultural (propaganda) missions in Chile. This permission reflects the official and popular view that Chile must develop new trade wherever it can. There is a persistent popular belief that the Communist countries could absorb far larger amounts of Chilean copper. Despite the best efforts of these missions, however, Chile’s trade with Communist countries so far remains negligible.
35. Chile’s territorial aggrandizement at the expense of Bolivia and Peru during the War of the Pacific (1879–1883) leaves a residue of underlying tension in Chile’s relations with those countries. It is this factor which has rendered so intractable Chile’s dispute with Bolivia over the waters of the Rio Lauca. Chile’s relations with Argentina are normally cordial, despite a minor unresolved boundary dispute.
VI. CONTINGENT POLITICAL PROSPECTS
36. The outcome of the 1964 presidential election cannot be predicted a year in advance. The political situation is extremely fluid, with dissatisfaction rife within both the Democratic Front and the Popular Action Front, and with an apparent trend toward the Christian Democrats, who, however, start from behind. The electoral campaign, as it develops, may produce further political fragmentation and realignments, [Facsimile Page 16] or may produce a rallying effect. In these circumstances, we shall briefly consider post-election prospects in contingent terms.
37. If Durán should be elected to the Presidency in 1964, the Chilean Government’s policies and performance would remain much as they have been under Alessandri, but without the benefit of Alessandri’s personal prestige and sincerity. The administration would profess reformist purposes, but its reform measures would be watered down by its need to placate various vested interests. It would be interested in economic development, and any accomplishments on that line might produce some social amelioration.
[Typeset Page 111]38. If Frei should be elected to the Presidency, he would be dependent, at least initially, on the cooperation of a Congress not under his control. It is likely, however, that the same trend which had brought him to the Presidency would give him a sympathetic Congress in 1965. There is no doubt that Frei would strive to transform the social structure of Chile through the constitutional enactment of a far-reaching agrarian reform and a steeply progressive income tax, and through increased government planning and participation in the economy. Frei would be generally sympathetic toward the self help and social goals of the Alliance for Progress, but selective with respect to the participation of foreign private capital in Chilean economic development. He would move toward the “Chileanization” of the US-owned mining companies. In all this he would, of course, be strongly resisted by the affected vested interests.
39. If Allende were to be elected, he would face a hostile majority in Congress, at least until the congressional election in 1965. In return for patronage, however, some Radicals might be induced to collaborate with him in Congress. The Christian Democrats also might support him on some issues.
40. In office, Allende would be likely to moderate his extremism, at least initially, in order to obtain Radical and PDC support and also to avoid provoking a military reaction. The military commitment to a non-political role is not unconditional, as was demonstrated during the turbulent years, 1924–1932. If Allende should impatiently attempt to override Congress, the military would almost certainly intervene to preserve constitutional order. If he should too abruptly seek to impose his personal control on the military establishment, there might also be a reaction. Otherwise, the military and the Carabineros would be likely to support the duly elected regime.
41. Despite the tactical moderation indicated above, an Allende administration would be strongly nationalistic and therefore, in effect, anti-US. It would, of course, endeavor to gain control of Congress in the 1965 election and move administratively to gain secure control of [Facsimile Page 17] the armed forces as soon as practicable. It would seek to consolidate leftist and nationalist support by presenting a program of radical social reform and economic statism, and by increasing demands on the US copper mining countries and other foreign interests. In this it could count on the sympathy of some Radical and Christian Democratic elements. In the name of the independent foreign policy, it would also seek to expand relations with Cuba and other Communist countries.
42. If, through the defeat of Allende, the Communists and Allende Socialists should be frustrated in their once-lively expectation of achieving power by electoral means, they might consider abandoning the vía pacifica and seek to foment a proletarian revolution in Chile. The odds [Typeset Page 112] are against their doing so. Despite peasant grievances, there is at present no significant potential for rural insurgency in Chile. The landlords and the Carabineros have the rural situation under close control. There is greater danger of a revolutionary explosion in the slums of the urban proletariat, but this too could almost certainly be controlled by the Carabineros and the military.
43. In these circumstances, the Chilean Communists’ post-election strategy would probably be to preserve their legal status and bide their time, trusting that conservative political influences would continue to prevent effective social reform and that the cumulative frustrations and resentments of the masses would eventually enable them to come to power, by election or by revolution. In the meantime, the Communists would, of course, continue their efforts to exacerbate social tensions in Chile and to disrupt US-Chilean relations.
44. It is hardly likely that any Democratic Front administration could satisfy the rising popular demand for social reform. The political effect of increasing popular dissatisfaction could be a continuation of the current trend toward the Christian Democratic Party, with PDC gains in the congressional elections of 1965 and 1969 and the election of a Christian Democratic president in 1970. It is equally possible, however, that the increasingly embittered lower classes would turn to the far-left for leadership, as the Communist hope and expect they will.
[Facsimile Page 18] [Facsimile Page 24] [Typeset Page 118]- “The Chilean Situation and Prospects.” Secret. 25 pp. CIA, ODDI Registry, Job 79–R01012A.↩
- Frente de Acción Popular, a coalition of the Communist and Socialist parties.↩
- The Chilenos (90 percent of the population) are of predominantly Spanish stock, but, except in the upper class, most have some Indian admixture. The only considerable group of unassimilated Indians are the Araucanians of south-central Chile, who were not finally subdued until 1887. In the same general area there is also a considerable native-born community of German origin and culture. ↩
- For a description of the principal Chilean political organizations and pressure groups, see Annex A.↩
- This generalization is not true for the period 1924–38, which was marked by disturbances attributable to economic dislocations and to the strains inherent in the transition from upper class to middle class political predominance.↩
- For a summary description of the Chilean armed forces, see Annex B.↩
- Although the legal proprieties were observed, Ibáñez had ruled Chile as virtually a military dictator, 1926–31, first as Minister of War, then as elected President.↩
- The Frente de Acción Popular (FRAP). See Annex A.↩
- Although the candidate of the Conservative and Liberal parties (see Annex A), Alessandri had a good reformist name. His Liberal father had been Chile’s outstanding proponent of reform, twice elected to the Presidency (1920–25, and 1932–38) with Radical support.↩
- The resignation of the Radical cabinet members in September 1963 will reduce the pressure for reform within the Alessandri administration. Although the Radicals remain disposed to support further reforms, not much more is likely to be accomplished before the 1964 election.↩
- Partido Democrática Nacional. See Annex A.↩
- The IMF standby agreement allows drawings up to $40 million in balance of payments aid during 1963. The US aid includes a $35 million program support loan from AID; a $15 million balance of credits payment from the Export-Import Bank; and a $10 million exchange agreement with the US Treasury Department.↩
- This includes a loan of over $50 million for the Inter-American Development Bank (IDB); loans of $97 million from the International Bank for Reconstruction and Development (IBRD); International Development Association (IDA) loans of $19 million; and Development Assistance Commission (DAC) country assistance of $173 million.↩
- Central Unica de Trabajadores de Chile, ostensibly representing 400,000 organized workers.↩
- Federación de Estudiantes de Chile.↩