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December 20, 2016
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May 2, 2007
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February 20, 1969
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provedrFor Rely ~~5(j}2 ,~~~ D P79 R00904AQ~ _ Ib original to be Flled in~,~~ ._ Dncer~trallxad Files. TO I7epartrracnt of State BACKGRQ'~9ND~ llSE ONL` Ar2MY NAVV- AM p/ PO Ecor, CCN7~ AIC1 usls I=RON American .>rmbassy SANTIAGO DA1"E:>ruary GZ, 1`~~cJ National Intelligence Estimate on Chile ~fk94 - i?~ REF __ ~>=,Ilv~.r~Is C4?+:PY NO. -, ~,~I~1S ~_,_,_., 1. The referenced docuznezit wasrecei.ved i.n Santiabo ]'cbruary :i"l. I am taking the unusll.a! action of commenting; on it in same; clctai.l. because of the possible influenc:c it wa~uld have r}n a nr_w;xa.- tion, becaxzse of the distorted view it could provide of tric: results of the nationwide Congressional. elections in a week's time and bc:cause> frankly, I an~~ di.slna.y:~ed by the lack of attentionz to words and. their significanr.c. O:r perhaps the; wards were c}iosc~n to r-rla.).:c: some kind of case whioh is eve:xl warsr.. ;since th.erz all. sclic,lr_arlincss is negated. 2. I am listing below statements froxz~ the document which. are dernanstrated to be false or inaccurate. 1 am doing so not v/ith the purpose of challenging any conclusion, but simply t:o draw attention to the quality of the argum.erztation on which. the. conclusions are based. 3. Before doing so I would only add that the dacument gives na importance to the constitutional and dem.acratic nature of Chile; perhaps in strategic terms it dues not merit any particular importance, but I for one do not share a view that perhaps involuntarily denigrates the significance of a still viable democracy. The report i.gna:res, understates c>:r mis-states some of the positive aspects of a situation that i.s not 'black nor whit. The report c;r.hoes in lanhuage and in tone wh~zf: is tl~c, FOF2M _.~~~~{ ~.~~~ ...._ I"nr (7 n,rlmnut Llav f nl Inltlala: 10,.ggDS 323 - _. _...,.~w..._.. ~r i .. i ~ r, .. AMB:Ti;MKorry fTb ,t ~.- Z z!~, 6g Kit: [? ~I I"I"I K~ ~ (. 1400030028-6 Approved For Release 2007/05102 :CIA-RDP79R00904A001400030028-6 Approved For Release 2007/05102 :CIA-RDP79R00904'A0.01400030028-6 SEC.:RFT/LIMDIS Santiaga's A-60 _.__ Pa,g ~: #~ 2 prcclox-rti.nant view of the Naticaxial P.xrty, the.; xttost right wing lx~x.rty i.n Chile, which it then says "does not have a popular basr`" in Chile, STATEM~;N'.C'S VERSUS "'.ACTS ~. Page #1 ? "' J~;conoxnic prospects arc: blc,ak.... the elections approach pressures t'or ~;ovcrnx7zc:nt spending oxi wal;c>s and welfare will almost certainly intc~xxsify and businc;ss confidence will probably reach anew low. 'r Facts: a. The stcaclz market of Santiago has just rc?~cchcy.d the highest- recorded 1e;ve.1 evc;r ~iat. constant prices anal t17a highrast voluz:zxc of transactions in at le~a,st; five yc,ars see 1~:mbtel b~0), tlxe cuf.rxxinatian o? a steady rise during the least six rn~~xtths. .Average gain i.n. yi.c:ld an shares in 1968 was rztore thanL5'jo in :;real terms. b. With anythixil; al7proachix~g norxr~al rai.ntal.I tlxi.s year, a growth rate of 5'Jo ~or 3'/o pc:i? ca.~;i.t~.c~ is 1~iglxl.y p.x?obs have just received a wage increase of only three?faurths the 1968 inflation rate. Trade liberalization is increasing; controls over use of short term foreign credits have been tightened bath, by .law and by regulation, 5. Page }~~, para 2 "Frei is sore beset. " Facts: a. Frei has less difficulties currently t1^ian at xx~ar~y times during the .last three years. Far the first tune he hari thf the opposition parties to the .1.cft and to the: ~?iglxt. " 3:"act: a, The right has sorx7c: x~a.oinentum -.. per.lxaps 20% of th.e c,le:ctoratc*, which wiJ.l be an i.rr~proverrxent cif a I~sw pc;rcen.:a~c~ poix;f:s. 13ut the ,Socialists axed Radicals ar. c, s.orc~cse:1: ley 1'r_LCt:i.c>nal.i..,m anal totally undc;cided as to which wa;r to jump i.n 1070. 1'1~c Ccxr7-rrn:~xri:i_sts have no nromenturrr. 'There is no great e;vi.ue.nt i.ntercy:~t by the: electorate in ax~y party as ucli. ~. Page ;~~:, para ? .. '=The party which. oppasc.d 1 rei from the Right as a si7lin.ter in 1904 :has since acquix?ed leftist leadership. " Fact: a. Only a sophist wuulcl describe the candidacy of Duran in 1964 as of "Radical Party" in o:E the special circumstances ghat pertained and in fact it is generally agreed a sx-rlall. rxzinority a.f Radicals voted for hix7r. The ?.s, are neither rightist nor leftist, only opportunist. Thee have. led popular front coalitions several times since the Popul~~x Front government of 1938. 8. Page #6, para 6 .. "The.: deficit 1x1 gooci:~ and services clirnt~c;cl. to $181 million in .1967.... this deficit ~;rcw by wxnc>t; $1..00 rxril.l:ion in 1968. " a. The figures arc in fact 119 and 94. b. Chile had trade. surpluses in 1965, 1066 and 1067 anal a deficit in 1968 due to growixr~, imports. In 1968 hovrever, Chile hat a balance of payments surplus of close to $130 million. ~.Che authors chose a different forxnulation balled on goods and services, we assume in order. to include debt interest payments contracted by earlier administrations, as we11 as profit remittances by US companies from. copper and other products amounting to approximately $129 million isr 1968 to arrive at their loaded statement. ~Nhy too refer to the flow of US copper investment money into Chile in the following sentences' BAGKGROU~10 ~1SE ONLY SECRE'T'/LIM T)L5 Approved For Release 2007105!02:CIA-RDP79R00904A001400030028-6 BACKGROUND USE ONL _~a.I~:;GRL'.L'/I.,IMI)IS S~xxxtagc>~s A-bt) ]~aag c: ~ 1'otir years {unadjYZSl:ec1 for tern..xls o:f tx~~~ we.rr. f.,, 1(). 5, ~ {cr,tin~at:c~~l} axzd we estimate a}~o~,t 3. 5?,1o for 1'jb~t? 1~'cr cai~ita fi_gurc>; were about 3. 7, 8, 0 and 1. 5% {cstimated~. Per capita average is tlx.erx 3. 3% for four years. {l suspect tlxis figux?e to be considerably higher than the average fox- .i.,atiz~ America, t;he d.eLails o.f arc not available here. j 10. Page f~6, para S - "'I'lxe: poorest workers have bensolxil,-e l~exie.f.its in psychalagical f:c:rzxxs certainly the xrxost significant individual benefits. We estimate the four..year transfer of income as a percentage of C}NP to the wage-.earning sectors as being; abo~zt 'lofo; the War1cL E3ank studies put it at 9?fo. Whichever figure is correct, it irxlplies a :rxxajox? social change in line with the major goals of the It was accomplished without uph(:aval, without military intervention and within democratic conatituti.araal process. I am amazed that the: authors of the report fail to understand the significance of carz~pasino unions, higher minimurri wages, zrxar, e caucation, and thc~ profaned, irreversible ziatu:rc of these; nc~r.:ial changes, BACKGROUND USE ONLY S E CIt. E T /.LIMDIS Approved Far Release 2007105!02:CIA-R?P79R00904A001400030028-6 Approved For Release 2007/05102 :CIA-RDP79R00904_A001400030028-6 BACKGROUND USE 01' ..~~,; ,rJ"i ~ t..v S.ECRE`I' I.,IMDIS ~f -? ~r) Fate ~~5 11. Page #~6, para 9 - "The A.drxxinistration's xz-zajor econoxrxi.c: success has been in securing agreex~icnta for substantial. new foreign investments i.n capper " Fact: a. Considering t17c: windfall l7rofits for the US capper companies as a result of the> extraordinary high. pri.c,h total of remittances to the US} it would 'lae a:} accurate. t:o sa.y that the US rra.ajor cconox7xic success was in changing a t:ax rate of 87mfo .levied by the Al.essr~ndri govcrnx7lent on the copper companies to one of an average c~L abol_,.t 55?fo during the first two of a copper investment t~rcagraxz~. iVio-reover, that progr.anl has another two years to go before more copper is produced.. If copper pri.ce:s remain relatively high, the capper companies already here may coxr7e close to recovering their new investment by the Lirxie the increased production comes cui stream. It would also 'bc more accurate to say that the major US and Chilean success was to arrive at an. acceptable non-.confrontation settlement, even. of transitory nature, which was highly favorable to the US owners of the major asset c>f Chile. 12. Page #7, para 7.0 ~ "Despite :C'rc,i's ccaxZC;eraz with C17i:tc's corrx.plex and enduring agrici~ltu.r~~l problexi~s ~ lac has xx~adca l.ittlc~ progress in resolving thcxxl. Promised im.provernents in faun prices were shoxt-lived and so.lutians have neat been found for deep.-seated problems such as inadenuate credit, storage axict marketing mechanisms. In additioxz, the ixxsecurities associated with Frei's agrarian reform programs have served further to discourage 1ong~.needed private inveatrn.ents. " Facts: a. The US Department ~,f Agriculture has estimated, ., setting 195759 at 100, that aE;ricultural production rose to l.ll, 111 arxd 114 for the years 1~J65~-b7 ~e~celusive of drought-.ridden 19ta8}. That is pxobably the highest average for any period i.n the last few decades. The previous si.x ye-ar index was about 106. I'arxrt prices in the Frei. Government have averaged 17?fo 1-iigher in real terms adjusted fpr inflation} than trie pruviotis adn.~ixzistration, incl.udi.ra~; 16?~o higher in wllcaat without inr,luding lg6y which projects a still aECR,.ET% LII~ZDIS BACKGROUND USE ONLY. Approved Far Release 2007105!02:CIA-RDP79R00904A001400030028-6 Approved For Release 2007/05102 :CIA-RDP79R00904A001400030028-6 BACKGROUND USE ONLY SEC ,~ f ' _ R.]?' r LIMDIS Santiago' a A..60 Page #~6 greatc?x increase. The: World I3an.1?~: agricultural survcvy teaxzx here three months a,go reported to me capital investxr~Gnt in private farms had increased in 1968 over the average of 1966..67 and was on the rise. b. Dist the aut-hars expect a change in t.hU 19. Page X10, para 16 ? lnclizdes the statement-that education i.s "social welfare. " :Fact: a. It rn.ay we11 bc, but is that a11.? The q?alification is contrary to all t.hc.: econ.c+xt~ics that the US preaches i.n the less-? developed wC~r1d anal x?epresc;~.zts a nco].ithic v:i.c:w of clevcylopnlent. 20. Page #~10, para 17 ~ Speaks of a ".;rv~re ti.};htc~xiin.t, of crr,clit except for pxojects being }~rumo'~e~l. by i:hc gover.nxricrLt i~~ certain industries. " I~ act: a. Private, c,re~:lit cxJ~s.nsion in l.g6f3 wa.5 abo~it ~0?,10? VJ~h}rul;z.r h~tse c}i.d. not suffi:r~ sc~ li: w~i:; t~,~~ c].cutoral rc;forir,s thai; produced. a r~rlrclr. lwidr.y~ l>a.aac~ tiinc.a :i.t entr.hl.c;d Hearty nz.or.i~ Chi.].c:ans oL rr~odcst r.rLCari:> t.o voi:e in J.c)~~4 arrrl taincc. 'Tl,c National.5 tlc; havt; {;hc Nat;icr~x;.c]. t?~a,rty anct othor Chilean consc:rvati.vev tc, cax? c?y trot la.~a.si_r. rul~c~x?x~~rs by roxlstit~a.tior~al means hay not- rtx.actr, cc>risua~v:.tii;is?1~ in the country bu.i; rathr,.r h zs the sc:nt:i.xrtc~xrt fo:r. :radical Chang c~. " Fact: a. The prcrriisc, rx~ay 1. t~ c.orrec:t, 17~it tl~c concl.Y{si.on is unsubstantiated and. at variance with. c~a:r]ic:r. clisrt~ssion in the same docuzxxent about tha rc~action;~ of the middle class to tk~c~ squeeze of ta.Yes and inflation, Recommendation Since the quality o1. tl~c. referenced doc?exxxxcnt is of such demonstrably dubious value:, T would recoznm.end that the authoring agency send some competent economists to Ghile to study the facts. 7n view of the extraox?dinary gap between their views and the views of this Mission which was not consulted at any tirrxe~, 1 would welcome such a visit. My second recornm.endation, ancl. earnc;st hope, is that this airgram will be circulated tc: a1.1 who :rc.~ci~ivcrd the original dociznzent. SL:CIt.ET Ll.MDIS BACKGROUND USE ONLY Approved For Release 2007/05102 :CIA-RDP79R00904A001400030028-6