IMPLICATIONS OF THE RECENT ELECTIONS IN CHILE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A004600070002-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 19, 2016
• Sequence Number: 2
• Content Type: REPORT

Release 2006/12116 :CIA-RDP79-00927A004600070002-5
2 October 1964
OCI No. 0351/64A
Copy No .; CJ C.~
SPECIAL REPORT
LMPLICATIONS OF THE RECENT ELECTIONS IN CHILE
CENTRAL INTELLIGENCE AGENCI~
OFFfCE OF CURRENT INTELLIG ENCE:
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IMPLICATIONS OF THE RECENT ELECTIONS IN CHILE
President-elect F,duardo Frei won an impressive
victory in the 4 September elections, but faces
some formidable problems when he assumes office on
3 November. He will have to deal with a serious fi-
nancial situation aggravated by inflation, a burden-
some foreign debt, an adverse balance of payments,
and inadequate agricultural production. He will be
handicapped by the weakness of his Christian Demo-
cratic Party in Congress, a weakness that will con-
tinue at least through the March 1965 congressional
elections. Frei must also balance conflicting na-
tionalist and company interests if he is to secure
a new agreement with the important US-owned copper
companies. Althauvh he expects to reach satisfac-
tory arrangements, his copper policy, zeal for so-
cial reform, probable recognition of the USSR and
satellites, and casual attitude toward domestic Com-
munist threats make Frei a potentially difficult,
although not impossible, ally.
In the Chilean presiden-
tial election of 4 September,
Christian remocrat Eduardo Frei
won 56 percent of the vote. The
Communist-Socialist Popular Rev-
olutionary Action Frant's (FRAP)
Salvador Allende secured only
39 percent, with the small re-
mainder going to the Radical
Party's Julio P,uran. Frei is
the first candidate since 1942
to gain an absolute majority.
A high 85.5 percent of the reg-
istered electorate voted, less
than ore percent of the ballots
were invalidated, and the elec-
tion proceeded with complete
calm and order .
Analysis of Election Returns
Frei ran surprisingly well
throughout the country's 25 prov-
inc.es and among all segments of
the population, His margins
of loss were slight in five of
the six provinces where he ran
behind Allende, whereas he out-
distanced Allende decisively in
areas of high population density.
Only in the depressed, coal min-
ing province of Arauco, long a
FRAP stronghold, was Frei beaten
badly. By c antrast, he accumu-
lated an overwhelming lead in
the key provinces of Santiago
and Valparaiso, where 51 percent
of the tots 1 valid votes wE~re
cast. Assisted by his unexpected
strength among the slum dwellers
and his unparalleled appeaA to
women voters, Frei outdrew Al-
lende by approximately 323,000
votes in these important dis-
tricts, tallying 60.5 percent
against Allende's 35.7. Tie
women voters, who never before
exceeded 35 percent of the
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presidential electorate, in-
creased their share to 46.6 per-
cent and rallied to Frei.
Allende's attraction failed
in historically leftist north-
ern Chile where he even lost
the support of the copper miners.
Apparently many of them feared
the loss of their privileged
position in the Chilean labor
force, and were apprehensive
that Allende's advocated na-
tionalization would reduce some
of their benefits.
Frei's sweep included vic-
tories in Valdivia, which had.
practically been written. off by
the Frei high command, and in
Curico, scene of the impressive
FRAP landslide in the March 1964
by-election. Frei also exceeded
all expectations by out polling
Allende among campesinos (peas-
ant.farmers), especially in the
central Walley of Chile.
Allende's defeat was undoubtedly
the people's :fear of Communism
which was exploited and drama-
tized during the campaign. Na-
tionalistic Chileans were de-
termined :not ~to let their coun-
try become a second Cuba. Both
,~llende and the Communist press
admitted -that fear of Communism
was the dominant factor in FRAP's
defeat. The democratsc press
commented that Fidel Castro was
the big loser in this election.
Despite FRAP's feebly contrived
efforts to-claim US Government
intervention, FRAP was never
able to regain the initiative
it began .i:o lose when the Cuban-
sponsored--and FRAP-supported--
Second Latin American Youth Con-
i'erence failed in 114arch 1964.
FRAP was kept on the defensive
throughout the campaign, with
the exception of a few weeks
after the Curico by-election.
The Communist Party (PCCh)
thesis of the peaceful route to
power (via Pacifica) received a
serious setback which may in-
crease the strength of Chinese-
line splinter groups. Allende,
however, nearly tripled his 1958
vote, increased his percentage
of the electorate from 29 to 39,
and confirmed that Chilean Marx-
ism remains a force to be reck-
oned with. PCCh chairman Sena-
tor Corvalan said that a "stage"
in the Marxist movement has
ended, but he insisted that the
movement itself is irreversible
in Chile.
The single- most important
campaign issue contributing to
The almost charismatic-
f.igure of Frei was presented
to the electorate as the face.
of change and the spirit of
hope. Frei, however, n-ust now
meet the realities of governing
a country that is a net importer
of food, is deeply enmeshed in
a serious inflationary cycle,
depends on copper earnings for
the bulk of. its foreign exchange,
has a chronic budgetary deficit
and a critical external debt,
and needs a continuous input of
foreign grants and loans. 1Yith-
out substantial foreign assist-
ance, Frei will find it dsffi-
cult., if not impossible, to ful-
fill the broad aspirations which
he has stimulated and is publicly
committed to satisfy.
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The first problem Frei
will face is the formation of
a government, which he said will
be composed of Christian Demo-
cratic Party (PDC) technicians
and independents. His party
has relatively few members ex-
perienced in public administra-
tion. His second problem, which
will endure at least until af-
ter the March 1965 congressional
elections, is that the PDC is a
minority party in Congress, hold-
ing only 4 Senate seats out of
45, and 28 deputies out of 147.
Frei, therefore, will need at
least the votes of the Conserva-
tives and Liberals in the Cham-
ber; :in the Senate, where the
situation is even less promis-
ing, he will need the backing
of Liberals, Conservatives, and
some Radicals if he is to have
effective legislative support.
Substantial assistance from
them is unlikely, however, and
Frei rejects all thought of FRAP
cooperation. This will make it
difficult for him to establish
a record of accomplishment on
his stated program prior to the
March congressional elections.
Frei might, although it is
unlikely, choose to run head-on
against the sense of the Con-
gress in his use of the interim
special powers which in recent
years new Chilean presidents
have been granted by Congress
for the period it is not in ses-
sion. He may thereby attempt to
carry through parts of his pro-
gram and to create the basis for
Christian Democratic gains in
March. He may seek to demon-
strate that he needs a PDC con-
gressional bloc strong enough
to sustain a presidential veto
if he is to implement his plans
for social and economic reform.
Fifty deputies would meet this
need. Frei has stated that af-
ter the congressional elections
he may find it necessary to make
changes in his cabinet to con-
form with election results,
In the fiscal field, Frei's
pressing problem is to renegotiate
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Chile's external debt burden
which he estimates at approxi-
mately $290 million annually.
By refinancing he hopes to re-
duce debt repayments and inter-
est to approximately $120 mil-
lion a year, which he feels
Chile can afford. In the event
the debt renegotiation is not
successful, Frei feels that he
will require $470 million from
all outside sources in the next
calendar year. Of this sum,
$290 million will be used for
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debt payment and $180 million
for- new social programs and
balance -of-payments financing:
He has said that large external
assistance will be ,justified
only by a proportionately large
Chilean internal effort.
Frei knows the escudo
should be devalued to bring it
close to the broker's rate, but
is apprehensive about such an
action's political feasibility.
Apparently, outgoing President
Alessandri is reluctant to take
this unpopular step, although
he is permitting some erosion
of the rate. Frei will try to
reduce inflation t-o less than.
10 percent a year by increasing
foreign exchange earnings, prob-
ably by raising copper pradue-
tion and cutting imports.
Fre's Program
Frei's program also in-
cludes ambitious plans for agrar-
ian reform, industrialization,
the construction. of 360,000
housing units in the next six
years, a broader educational
program, and other social meas-
ures. Although land distribu-
tion will continue at a delib-
erate pace, Frei; in his eco-
nomic program, will probably place
major emphasis on price policies,
higher tariffs, tax. and credit
measures,and the reduction of
imports. Generally speaking,
his reforms, assuming he has
the funds to implement them,.
are probably more in line with
Alliance for Progress objec-
tives than the program of the
Alessandri government.
With the United States,
Frei expect:s "the best possible"
relations. He stated that to
hate the US is "suicidal stra-
tegically,'y but he cautioned
that US-Chilean relations must
be on a basis of mutual respect.
There are, however, points of
potential conflict between the
United States and Frei's Chile.
The ambitious reform program
depends heavily on continued
US aid at the current level or
higher. Should this aid not
be forthcoming, Frei's domestic
program and politics will be
adversely affected and a certain
coolness in relations with the
United States may result.
Frei is primarily inter-
ested, as regards copper, in
new investment and increased
foreign exchange earnings, Ma-
jor elements of his copper pol-
icy are to increase the produc-
tion of copper in Chile, to in-
sist that all copper be refined
locally, to "associate" with
the companies in new investments,
and to exert some influence over
capper sales, The most diffi-
cult phase of this program is
marketing control. In return
for these concessions he seems
prepared to modify the capper
tax: structure and to provide
the copper companies with as-
sured stability. Bas_ical.ly,
Frei would like to create a more
favorable climate for badly
needed foreign investment, but
simultaneously he does not wish
to lose control of the economy
to foreign interests. He, there-
fore, insists an a strong measure
of government supervision. He
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expects to achieve his ends in
direct negotiations with the
copper companies, but if he
fails, miscellaneous threats
and actions, inevitably involy-
ing the US, might result.
Frei will probably grant
diplomatic recognition to some
Commu~.iist countries, although
he has stated that he will not
renew relations with Cuba or
recognize Communist China or
East Germany.
He has also publicly stated
that he will trade with any
country, regardless of ideology,
and has not excluded the direct
sale of strategically-important
copper to the USSR. Alessandri
has sold copper directly to Red
China.
Concerning the OAS and its
measures against Cuba, Frei
said that he admires the con-
sistency of Mexico's attitude,
and he believes that "after the
US elections" it may be possible
to "look for a peaceful solu-
tion to the Cuban problem within
a framework of nonintervention
and self-determination,"
Fx~ei's treatment of the
threat of internal Communist
subversion is unlikely to be
more vigorous than the pe~?mis-
sive attitude of Alessandri.
He recognizes, however, that
FRAP may resort to violence,
particularly in the labor field.
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Frei will be a less ac-
commodating and a more nation-
alistic ally than Alessandri,
because of his zeal for reform.
Frei's favorable attributes
more than offset this. He is
genuinely anti-Communist and
democratic, is close to the Eu-
ropean tradition of temperate
Christian Democracy, has dem-
onstrated a firm resolve to
remain in the democratic camp,
and follows policies that are
more in line with Alliance
for Progress objectives. Frei
has a keen awareness and a~~-
preciation of the vital imt~or-
tance of US and international
loans, and as a responsible per-
son with no trace of the dema-
gogue, it would appear that he
will be guided, in the loni; run,
by Chile's economic realities
and interests of hemispheric
solidarity. With some good
fortune and tactful handlirg,
Frei could become an outstand-
ing leader and statesman in
Latin America and n
all valuable,
Erie {
a es. (SECRET)
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