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December 21, 2016
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September 15, 2008
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September 22, 1967
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Approved For Release 2008/09/15: CIA-RDP79-00927A006000050003-0 %wof Secret DIRECTORATE OF INTELLIGENCE WEEKLY SUMMARY Special Report Chile: A Crisis of Leadership State Dept. review completed Secret N2 ' 0 22 September 1967 No. 0308 / 67A Approved For Release 2008/09/15: CIA-RDP79-00927A006000050003-0 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 *00 SECRET CHILE: A CRISIS OF LEADERSHIP President Eduardo Frei's election in 1964 caught the imagination of democratic forces in Latin America by bringing to power an administra- tion pledged to widespread social and economic reform within a democratic and non-Communist framework. Frei has made progress in some areas, but parts of his program have been blocked or delayed by an obstructionist opposition in Developments of recent months, however, have finally forced Frei to react somewhat more vigorously against some of his critics. Late in August., the government arrested leaders of the conservative National Party for a party state- ment that criticized the government's foreign pol- icy and that could be read as giving encourage- ment to military intervention. The government has also brought suit against leftist extremists for a'Llegedly seditious statements, and has banned public marches and parades, a traditional leftist form of protest. Any further moves to silence leftist critics, however, would provoke strong protest from the left wing of Frei's own Christian Democratic Party (PDC) as well as from the Commu- nists and Socialists, whose coalition, FRAP, will be the PDC's chief opposition in the 1970 presi- dential election. Background President Frei took office in September 1964 as the head of a government pledged to tackle Chile's deep-seated economic and social problems within the con- text of the democratic tradition. He had the backing of the demo- cratic forces of Chilean society, and hoped to prove that a govern- ment of the non-Communist left could implement reforms that would Page 1 achieve the results promised by Communists. Frei pledged eco- nomic and social development, as well as an "independent" for- eign policy that would make Chile a force in the "third world." Frei's strong performance in the presidential election was fol- lowed six months later by an im- pressive party victory in the congressional elections. The PDC won a majority in the Chamber SECRET SPECIAL REPORT 22 Sep 67 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 Approved For Release 2008/09/15: CIA-RDP79-00927A006000050003-0 SECRET 25X1 of Deputies as well as all the Senate seats that it contested. The Senate majority is still in opposition hands, however, and Frei has had major difficulties in getting his programs approved. Since December 1966, the Senate has been controlled by an informal coalition of the Communist-So- cialist front, FRAP, and the oppor- tunistic Radical Party (PR), sup- ported to some extent by conserva- tives. It was this combination that in January 1967 denied Frei permission to leave Chile for an official visit to the United States, and that also stymied congressional approval for this year's joint US-Chile naval ex- ercise UNITAS. Problems With the PDC After Frei's victory, the PDC was faced with the problem of changing its outlook from that of an opposition party to that of a party with the respon- sibility for government. Frei took many of the most able, moderate party members into his government, leaving a leadership vacuum in the party itself. He considered himself president of "all the Chileans," not simply implementer of PDC policies and dispenser of patronage. As a result, the PDC found itself ex- pected to support Frei's programs without receiving the political and economic side benefits that many members expected after the election victories. The leadership vacuum with- in the PDC gave free rein to a left-wing "rebel" faction that could not adjust to the problems of a governing party, and accused the administration, because of compromises it was forced to make, of losing its revolutionary fer- vor. The rebels, led by Alberto Jerez, gained control of the party at its national assembly in July 1967. Their control, however, is based on cooperation with a less extreme "third position" group, and the rebels will be forced to make some compromises themselves in order to maintain their posi- tion. Even before their formal vic- tory, the rebels had exposed Frei's inability to control the party. Following the formation of the Chilean committee of the Cuban- sponsored Latin American Solidar- ity Organization (LASO), they en- gineered a party resolution ap- proving the committee. This dec- laration set off a storm of pro- test both inside Chile and in other countries such as Venezuela and Colombia that are actively fight- ing guerrillas supported-by Cuba and LASO. Shortly thereafter, Frei denounced LASO and condemned the Chilean delegates to the LASO conference as "traitors," but the party has never rescinded its dec- laration. Despite this early evidence of dissatisfaction with the moderate leadership, Frei took little inter- est in the intraparty maneuvering that had preceded the national con- vention. Although he clearly op- posed the Jerez group, he made no real attempt to influence the con- vention to accept the moderate candidates. Since then, Frei has attempted to regain some control over the party, but recent SECRET Page 2 SPECIAL REPORT 22 Sep 67 Approved For Release 2008/09/15: CIA-RDP79-00927A006000050003-0 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 Ifto SECRET reports that its leaders have been discussing legislative co- operation with the Communists suggest that he is making little progress. One of the first acts of the new governing group of the party was to approve the "Chon- chol Report," a PDC paper by a political-economic commission advocating large-scale govern- ment intervention in the econ- omy and nationalization of im- portant sectors of industry. Parts of this report conflict directly with Frei's announced goals. Shortly thereafter, the new party leadership attempted to force Frei to replace his minis- ters of labor and public health. Frei refused, emphasizing his confidence in his entire cabinet and reminding party leaders that the choice of the cabinet is his prerogative, not theirs. Subse- quent reports, however, claim that Frei did promise to get rid of Minister of Economy Santa Maria and another minister. Santa Maria has since resigned--whether under pressure or for personal reasons is not clear--but his successor is a strong supporter of Frei and will probably make few changes in policy. Frei's failure to keep his own party under control under- mines his position as leader of the country as a whole. He may come to believe that a showdown with the PDC leadership is the only reasonable course of action. Depending on the choice of is- sue, such a confrontation could split the party--the rebels may decide that they would have lit- tle to lose by bolting the party and throwing their support openly to FRAP, the Communist-Socialist coalition. Even if they do not, the strains will persist and will weaken the PDC's over-all position. At present, there is no con- sensus on a party nominee for the 1970 presidential election. Frei himself will be ineligible to run in the absence of a con- stitutional amendment. Moreover, there is no clear indication that the PDC candidate will be able to defeat the Communist- Socialist (FRAP) candidate, who probably will also be supported by at least the key leaders of the currently left-leaning Radi- cal Party. Other Political Problems Developments within the other Chilean political groups complicate Frei's over-all situa- tion. The Communist Party (PCCh), deeply involved in the current debate among Latin American Com- munists as to the proper means of achieving power, is one of the strongest backers of Moscow's position. PCCh Secretary General Luis Corvalan is one of the fore- most proponents of the theory that conditions in each country determine the best strategy to be followed in particular cases. He stresses that the local Com- munist party is in the best po- sition to evaluate the situation and to decide whether violent or peaceful methods will be more fruitful. Because of the bit- terness of the dispute, the PCCh SECRET Page 3 SPECIAL REPORT 22 Sep 67 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 SECRET will be pulling out all the stops between now and 1970 to prove that a Communist party can come to power through electoral means. To this end, the PCCh lead- ership is playing down talk of armed revolution in an attempt to make the party attractive to as broad a group as possible. In a defense of this position published in July 1967 in the World Marxist Review, Corvalan emphasized th e a vantages gained by Communist cooperation with the Socialists and Radicals. He claims, "The Communist effort gradually to win over the masses from the Chris- tian Democrats, delivering them from bourgeois influence and rallying petty-bourgeois support for the People's Action Front, is bearing fruit." If a FRAP- supported candidate wins the 1970 election, the PCCh and Moscow will have been vindicated. The Communist stake in fostering dis- sension within the PDC and in aggravating Frei's problems is therefore substantial. At the other end of the po- litical spectrum, the conserva- tive National Party (PN), an amal- gam of the two oldest Chilean political parties, opposes the government's reform programs and often, as in the case of Frei's proposed US trip, votes with FRAP simply to embarrass the government. Page 4 The Chilean armed forces are historically apolitical, and most Chileans are very proud of this fact. The provocation for any military action against the gov- ernment would therefore have to be extreme. A t ough President Frei has maintained a satisfactory re- lationship with the armed forces' hierarchy, his inability to con- trol the Senate and his commit- ment to an economic austerity program make it difficult for him to satisfy many of the military's aspirations. Economic Problems The current political uncer- tainties may seriously hamper the government's program of stabili- zation and development. Chile has suffered many years of rapid inflation, and price stability was one of the most important parts of Frei's campaign program. According to the official price index, which may understate the impact of inflation on consumers, austerity policies under the new government succeeded in cutting inflation from its 38-percent in- crease over the preceding year in 1964 to a 17-percent increase in 1966. The goal for 1967 was to limit the rise to no more than 12 percent but, as of the end of July, deficit financing, wage SECRET SPECIAL REPORT 22 Sep 67 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 Approved For Release 2008/09/15: CIA-RDP79-00927A006000050003-0 Nw~ SECRET increases in excess of government guidelines, and the effect of bad weather on crops had combined to drive the cost of living 17.3 percent above the level of De- cember 1966. The Frei administration has taken a relatively strong stand in defending its stabilization policies against attacks by FRAP and the FRAP-dominated Chilean Workers Central (CUTCh). The administration has taken a hard line toward illegal strikes, par- ticularly in the public sector, and has talked about organizing a rival labor federation,in hope of diluting CUTCh's power to tie up key sectors of the economy. The PDC has been unable to agree, however, on the extent of con- trol the party should retain over such an organization. The Chon- chol Report, written mainly by PDC left wingers, disagrees pro- foundly with these policies and, at least by implication, attacks the government's entire stabili- zation program. The assumption of party lead- ership by the radical wing of the PDC has increased the fears of private investors. Even though response from domestic investors has been weak, more than US $750 million in foreign private in- vestment capital had been sched- uled to come in during the next four years. Frei has reaffirmed his commitment to private enter- prise, but the effectiveness of his reassurances is undermined by his demonstrated inability to control the actions of his party. The Frei administration also has reaffirmed its intention to maintain a "controlled pace" of agrarian reform--a difficult course lying somewhere between the desires of the large land- holders and the radical left. Congress delayed this program for more than two years but the reform bill was finally passed this summer with FRAP support. Some resettlement has been under- taken since then, but the project has fallen far behind its origi- nally projected schedule. At the same time, the uncertainties attending the long delay dis- couraged investment by tradi- tional landowners and production stagnated. This situation, to- gether with the effect of an un- usually bad winter, will neces- sitate record food imports in 1967 and probably in 1968 as well. Outlook The net result of the devel- opments within the PDC and the other political parties has been to force most ambitious, non- rightist politicians to espouse a militantly leftist line in order to maintain any sort of organiza- tional following. The Soviet ambassador to Chile, who has done an effective job of persuading the Chileans to increase their ties with the USSR, reportedly com- mented recently that "even if" the PDC presidential candidate in 1970 should be elected, he would be more leftist than Frei. SECRET Page 5 SPECIAL REPORT 22 Sep 67 Approved For Release 2008/09/15: CIA-RDP79-00927A006000050003-0 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 moo, SECRET Although there are serious differences of opinion within the Radical and Christian Demo- cratic parties, the moderates in both have shown such ineptness at political maneuvering that the present leftist leaderships may retain control through 1970. In that case, only the lackluster conservatives will offer the voters an alternative, but their National Party is so discredited as a supporter of the old order that it commands very little pop- ular backing. Frei's reluctance to in- volve himself in party politics, combined with the strains that exist in other political parties, may serve eventually to downgrade the importance of the parties and to open the field once again to personalities rather than to party candidates. In any event, Frei is unlikely to have much control over the choice of the PDC candidate. Chile has a large and growing middle class that is primarily interested in maintaining the advantages it has obtained in recent years. Many members of this group, who voted for Frei in 1964 as an alternative to a Communist-backed government, are likely to be alienated by his de- lay in implementing promised re- forms and his continued inept leadership of the PDC. By fail- ing to respond to the expecta- tions of the moderate part of the electorate, the PDC is likely to lose substantial political sup- port, and could even lose the presidency to FRAP. SECRET Page 6 SPECIAL REPORT 22 Sep 67 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0 %w *00 Secret Secret Approved For Release 2008/09/15: CIA-RDP79-00927AO06000050003-0