274. Memorandum of Conversation1

SUBJECT

  • Meeting of Mr. Mann with the Mission of President-Elect Frei of Chile

PARTICIPANTS

  • Mr. Mann, Assistant Secretary, ARA
  • Mr. Solomon, Deputy Assistant Secretary, ARA
  • Mr. Rogers, Deputy U.S. Coordinator, AA/LA
  • Senator Radomiro Tomic, Member, Chilean Delegation
  • Sergio Molina, Member, Chilean Delegation
  • Jorge Ahumada, Member, Chilean Delegation
  • José Piñera, Member, Chilean Delegation
  • Thomas R. Favell, Counselor Economic Affairs, Santiago
  • John P. Robinson, Director, USAID, Santiago
  • William T. Dentzer, Jr., Director, Bolivian-Chilean Affairs, ARA
  • Harry H. Lunn, Jr., Office of Bolivian-Chilean Affairs, ARA

Mr. Mann welcomed the special mission sent by President-elect Frei to begin economic discussions in Washington with the U.S. Government and international agencies. Senator Tomic, chairman of the mission, responded and noted the informal and unofficial nature of the team’s visit since the Frei Government will not take power until November 3.

As an introduction to the economic program proposed by the new government, Senator Tomic described the political situation in Chile which had led to Frei’s election on a program of “Revolution in Liberty”. He noted that the March 15 by-election in Curico effectively had eliminated the candidate of the “status quo” government coalition and forced a choice between Frei’s democratic reform program and the Marxist alternative offered by Allende. While Frei’s decisive election showed the clear preference of Chileans for the democratic alternative, one could not ignore the nearly 40% vote for Allende. Chilean expectations for the Frei Government are high and immediate performance is necessary to consolidate the Government’s position in the March 1965 Congressional elections.

Senator Tomic then commented on the basic contradiction of a country with rich resources and a facade of effective democracy which had failed to fulfill its economic and social promise to the people. For the future, one of the strongest assets of the country in fostering [Page 601]democratic institutions would be the international solidarity enjoyed by Chile, especially within the Inter-American system inspired by Presidents Roosevelt, Kennedy and Johnson.

The Frei Government, Senator Tomic explained, would pursue parallel and inter-related economic and social programs. On the economic front, the government will attempt to spur development through doubling exports—primarily relying on increased copper production, but also emphasizing steel, paper, wood and fishmeal—and overcoming agricultural production and marketing problems. Priority social goals involve agrarian reform, education, housing and “promotion popular”, a broad scheme of community social and economic action.

This program necessarily will be extremely expensive and Chile must rely on international solidarity to make possible the future pledged by Frei to the Chilean people; in particular, Chile looks to the United States for assistance. In economic discussions this week, Chile will seek renegotiation of debt falling due in the next few years held by agencies of the U.S. Government—especially the Export-Import Bank ($75 million) and the Treasury ($21 million)—and will make a case for further credits from these agencies, including program assistance from AID of $150 million.

Mr. Mann thanked Senator Tomic for his frank exposition and indicated the interest of the United States in President-elect Frei’s objectives and the desire of the United States to provide significant assistance for a sound and realistic economic plan. He noted that we are far more prepared to give heavy assistance to a plan that will work than we are to contribute small amounts to a bad plan that merely increases a nation’s debt and postpones the day of economic reckoning. The sole question was whether a program would work and be effective. Mr. Mann expected that discussions this week would focus on such basic technical issues as inflation and programs for productive and social investment, and that a program could be developed that we would find possible to support within the limits of our ability. In this connection, Mr. Rogers noted that FY 1965 funds for the Alliance are limited and subject to considerable competition as the result of favorable development opportunities elsewhere in the hemisphere.

Senator Tomic asked that an understanding on levels of U.S. assistance be reached as soon as possible because the new government needed to act quickly and decisively in the five months remaining before the Congressional elections. Senor Molina raised the particular problem he will face in assessing external resources for the budget message he must submit as Finance Minister on November 18. Mr. Mann indicated his expectation that the current week of discussions would make it possible to move ahead on arriving at subsequent assistance projections as the program and its requirements become clear.

  1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, POL 7 Chile. Confidential. Drafted by Lunn.