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w 2 July 1964 OCI No. 0338/64A Copy To. SPECIAL REPORT ECONOMIC ASPECTS OF STATE SOCIALISM IN CHILE CENTRAL INTELLIGENCE AGENCY OFFICE OF CURRENT INTELLIGENCE SECRET GROUP I Excluded from automatic 520060 raking and declassification Approved For Release 006/12/16: CIA-RDP79-00927AO0450QO60002-7 THIS MATERIAL CONTAINS INFORMATION AFFECT- ING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAWS, TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS- SION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW. DISSEMINATION CONTROLS This document MUST NOT BE RELEASED TO FOREIGN GOVERNMENTS, If marked with specific dissemination controls in accordance with the provisions of DCID 1/ the document must be handled within the framework of the limitation so imposed. Approved For Release 2006/12/16: CIA-RDP79-00927AO04500060002-7 Approved For Release 2006/12/16: CIA-RDP79-00927A004500060002-7 SECRET 2 July 1964 ECONOMIC ASPECTS OF STATE SOCIALISM IN CHILE The heavy cost of Chile's inefficient state en- terprises is one of the country's serious economic problems. The financial drain has been a factor in recurring budget deficits and in inflation which has risen more than 40 percent in each of the past two years. The prospects for reducing the deficit and the inflationary spiral would improve if the net loss from the operations of state enterprises were cut substantially. However, in an election year with a pro-Communist candidate as a strong contender, the government is not likely to consider--much less im- plement--any required long-range corrective meas- ures. These would include more efficient management of state enterprises free from political pressures, elimination of surplus employees, closer control of the allocation of investment funds, and a realis- tic rate policy for goods and services provided by state agencies. In some instances, a radical re- duction or liquidation of unprofitable operations might be essential. The Growth of State Enterprises The government's involve- ment in large-scale economic ac- tivities dates back to 1939, when the Corporation for the De- velopment of Production (CORFO) was established as the central agency for economic planning and development. It still substan- tially controls the administra- tion and investment programs of most of the so-called autonomous agencies relating to fuels, power, transportation, and manufactur- ing. prises in Chile are government owned and operated. In addi- tion the government now either operates or has substantial money invested in a number of "mixed" (government and private) enter- prises. These include invest- ment banking, oil and electric power production, air, rail and maritime transport, port services, international and domestic market- ing, mineral refining and sev- eral manufacturing fields, such as the production of steel, chemi- cals, and fertilizers, and sugar refining. The long-range trend has been toward the gradual expan- sion and increasing diversity of state economic activity. Exclud- ing the copper and nitrate indus- tries, 8 of the 12 largest enter- Political Views of Statism In Chile, as in many of the larger Latin American countries, prevailing economic theory and political sentiment favor a SECRET Approved For Release 2006/12/16: CIA-RDP79-00927A004500060002-7 Approvec,Qr Release 2006/12/16: CIA-RDP79-27A004500060002-7 SELECTED STATE ECONOMIC ENTERPRISES IN CHILE GOVERNMENT- OWNED ENTERPRISES' Corporation for the Development al Production !CORFOI Notional Electricity Enterpise, Inc. (ENDESA) ACTIVITIES EXTENT Of CONTROL ,lcnni rag, i;nancrn;t of economic Chiles leading economic deveiop- ,,; e;tmant caching; twat igenc/; has extensive control 4939. nest lieaxing of new Industries and ~,.;;rein :p-:aloe+; andrei:as ^ - Fra v.pele , o,IK1 control r n ,lI p:Vernrnent a,W _.,.td'Lnntcritieee_ 'r,oIfc niil.ty rlectrte power pro- .tuctia, o.l di=a,;Lutian; est. 1941. Non. uv rs for over h f%at puo- lic utility elecnic power generotian, ;m*r? with 48% in 1953; govern- s .. r..n< ooi.e hos prevented new .... -l% r.. ,ne uaivute sector. Operates aL---1 bu.of tool lean: mltectge in Clone and all of public rill." ;,.,a I.. w:e Wxsasv :n a nw~sLxr of cities. Mornop ly of dotrsestlc routes until 1049; xdxequently, 3 slnoll prf- ._t. _ i lincensed for nan- ..r~N.r ~rvo .calms. Chilean Port Enterprise (EPCh) Docking, wrnehouninq and related pall eer.tce.. National Mining Enterprise (ENAMI) Copper rhinrrg to smolt producers. Hu 0x.s .t-:z a .mail troclion of Chitcne capon, pradectfm. of the Pacific (( AP) St l Cam wn Iron and rt-i; :reel irsbricat;on; Accauntn our over 9Ua ai ee p y