299. Information Memorandum From the President’s Special Assistant (Rostow) to President Johnson 1

SUBJECT

  • The Cabinet Resignation in Chile
[Page 654]

Ambassador Korry reports that President Frei’s Cabinet resigned last night.2 He accepted the resignations and is expected to announce a new slate of Ministers by tomorrow.

This is the long-expected Cabinet reshuffle. It is designed to give Frei a free hand in shaping new policies for coping with mounting political and economic problems.

To continue his stabilization program, Frei needs new legislation regulating wage increases covering last year’s inflation (about 22%) and some retrenching of his more ambitious programs. His wage readjustment proposal, which would have substituted bonds for most of the cash, was withdrawn after the Senate made clear it would not approve. Prospects for getting any non-inflationary proposal through are not encouraging.

The Senate opposition comes not only from the “outs” on the right and left, but from elements inside his own party. In his three years in office. Frei has not cultivated support from the non-communist parties. On the contrary, he has alienated them. He now finds he has less support in the Congress than he did when he started out.

Complicating matters further, a President in Chile begins suffering from “lame-duckitis” after he passes the half-way mark in his term. Ed Korry in a cable today3 describes the situation in these terms.

“Chilean politics have descended into pre-electoral arena with all parties maneuvering for advantages prior to the 1969 Congressional elections. It is painfully clear that all opposition parties are putting partisan interests ahead of the country’s; their determination is to discredit Frei as a governing force; their belief is that the PDC can be blocked from renewing its mandate in the 1970 presidential vote, if Frei is paralyzed or severely limited from executing his proposals.”

Korry is working closely with those who will form the new economic team. How they will work out a sound economic program for 1968 within the existing framework is not clear. It is reassuring to have a smart operator on the scene.

Walt
  1. Source: Johnson Library, National Security File, Country File, Chile, Vol. V, 8/67–11/68. Confidential. A notation indicates that the President saw the memorandum.
  2. Telegram 2474 from Santiago, February 15. (National Archives and Records Administration, RG 59, Central Files 1967–69, POL 15–1 CHILE) The Embassy also reported that the key figure in the new cabinet was Raúl Sáez, the Minister of Finance. (Telegram 2494 from Santiago, February 15; ibid.)
  3. Not further identified.