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Document Creation Date: 
December 9, 2016
Document Release Date: 
February 12, 1999
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April 18, 1957
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PDF icon CIA-RDP79T00937A000500030032-0.pdf342.45 KB
Approved For ReleaaV000/08/07 : CIA-RDP79T00937A0005Q9p30032-0 "TrElligmaimi CENTRAL INTELLIGENCE AGENCY OFFICE OF NATIONAL ESTIVATES STAFF YEMORANDUM 24-57s (Draft for the Board SUBJECT*. Political Ce.sis in Chile 18 April 1997 DOCUMENTNO.____425 NO CHANGE IN CLASS. ri DECLASSIFIED . CHANGED TO: IS $ C NEXT REVIEW DATE: AUTH: HR 70-2 DATE: 1120410 REVIEWER: 0 09 2?54 1, Conclusions. Chile is in the throes of a political crisi most.Ta"..,..eraffiagaverio brought on by the Ibanez administrationgs determination to d al with the count!7U8 chronic inflationary Problem throdeh the brim:Mon of a stebilization programa This program appears to have caused severe economic sacrifices in the lower and middle classes. Between 28 March and 3 Aprils there occurred in Chileis two leading cities popular riots protesting an increase in transit fares. The army as called out to restore order and in the process 167 Chileans were killed. Although the government has renewed bus service at the old fares s potentially explosive social and political tensions remain 2. At issae io the govermientgs anti.inflation programs the key question beings who is going to pay for it? Rightist political forces In control of the Senate with whom President Ibanez is apparently Identified on the stabilization issue have so far been reluctant to accept a proportionate Ware of the sacrifice involved in the programs * The substanc of this memorandum has been discussed informally with.00I3 Approved For Release 2000/08/07 : Clialiaggica37A000500030032-0 Approved For ReleasV000/08/07 : CIA-RDP79T00937A000542p30032-0 SECRET including a more equitable tax structure ? The center and leftist parties controlling the lower house have taken the line that the workers? austerity burden should be reduced at the expense of the right. Since the two houses will probably have difficulty in agreeing uhen the new Congress debates the program next month, the Administration will be faced with these three alternatives: a. It can attempt to impose the program upon the Chilean ? population by force. It can reduce the severity of the austerity measures by a moderate enforcement of the program? It can abandon the program completely and return ta virtual ranawv enilation? Oe balanee, we believe that alternative CO will be the one which Ibanez will fellow? However, if Ibanez should follow either alternative (a) or (c), we believe that he would aave no better then an even chance of surviving the remaining 18 months of his tem? Adoption of the second alternative will not solve Chileos economic difficultiese and a period of economic and political unrest appears likely. 30 Haelwapund. Chilees severe inflation was the principal issue in the 1952 presidential election, won by elderly Carlos Ibanez del CaMp00 Despite his repeated, efforts at economic reform, inflation became rummy, The pesos, 132 to one dollar at the time of Ibanez inauguration, was 70 to the dollar by m14.19550 ? 2 . Approved For Release 2000/08/07 : CIA-RDP79T00937A000500030032-0 SECRET Approved For Releasfa000/08/07 : CIA-RDP79T00937A0005g2930032-0 SFVET A comprehensive economic stabilization program was then iritiated in January 1956 on the advice of an American investment firm, and it MB been moderately successful, largely because of support from the cvneervative parties and the relatively high price of copper. The costeofeliving rise last year was held down to 37% as compared with over e80% in 1955. Nevertheless, the real income of workers is steadily deotiningl, and the program has placed the heaviest burden on the middle ard lower classes? In general, the mageeprice stabilization law has not Nam strictly enforced, but it has been fairly effectively enforced in relation to wages. Recent price increases, previously delayed to give an.appearanoe of price stability before the 3 parch congressional elections, have be,n particularly unpopular, Mereovev, world copper prices have declined*, and this is threatening a budgetary deficit and creating a serious drain on foreign exchange reserves, already at a law level,' 50 In the elections, the parties supporting the governmentes economic program retained a majority in the Senate, but those opposing the program obtained a slight edge in the ChaMber of Deputies. The distribution of votes among the parties Bugg? ta thaethere was a considerable protest vote based upon economic discontent. The Agrarian Laborite Party, * The price of copper, which averaged 50 cents per pound in the first quarter of 1956, had felled to 30 cents by March 1957a SECRET Approved For Release 2000/08/07 : CIA-RDP79T00937A000500030032-0 Approved For Release4000/08/07 : CIA-RDP79T00937A0005W0032-0 the group most closely identified with the government9 lost about halt its strength. The relatively moderate parties the middle class Radical Party and the liberal Catholic National Falange, collected the protest vote. However, some satisfaction with the goiernment9s program ae evident in less substantial gains for the conservative parties* 6. Probable Developments 'bane probably still hopes to make the Mail,Z1~66.0