THE CHILEAN ECONOMY IN 1974

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001900010135-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 19, 2016
• Document Release Date: May 23, 2006
• Sequence Number: 135
• Publication Date: January 23, 1974
• Content Type: MF

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The Chilean rconc~;,~~~ in 1974
I. Chile will registcr a mode-:,t economic recovery in 1974
with a growth in GDP of 2 to 5 percent.
A. If the level of copper production in the last
quarter of 1973 is maintained in 1974, production
of major mines could exceed 800,000 tons and total
output could be around 1 million tons. In this
case GDP growth of around 5 percent is possible.
B. If, however, copper smelter furnaces must be
rebuilt, as has been reported, output could be
nearer 750,000 to 800,000 tons. In this case
growth of around 3 percent is indicated.
II. Higher world prices for petroleum and growing shortages
of petrochemical products could seriously dampen Chile's
1974 economic prospects.
A. Chile's imr crt bill for petrolewmi products is
expected to jump from $120 million in 1973 to
around $340 million in 1974. An increase of this
magnitude would add to Chile's trade deficit and
further erode its balance of payments.
B. By the same token, interruption in the supply of
intermediate goods derived from petroleum could
escglate domestic inflationary pressures and seriously
undermine government efforts to reduce budget
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L .'IL .
deficits and contain inflation to under 100
percent in the coming year.
C. The petroleum proklc'm and possi,blc lower world
copper prices could limit Chi1c's 1974 economic
growth to less than 3 percent.
III. Agricultural production is showinn signs of recovery,
but food imports will ccntinue to be a major drain on
foreign exchange earnings.
A. The freeing of most prices of agricultural products
has stimulated investment and e::pansion in agricultural
production.
B. Most major crops, however, were well along in the
growing season at the time of the coup and
significant chanties in output are not foreseen
before the 1974/75 crop year.
C. As a result, Chile's imports of agricultural
products will probably amount to srme $500 million
in 1974.
D. Thus far, Chile has received $24 million in CCC
credits for purchase of 120,000 tons of wheat and
an additional $i8 million in CCC credit for.
270,000 tons of corn. Chile has also requested
PL-480 assistance for an additional 400,000 tons
of wheat and an additional 200,0^0 tons of corn as
well as vegetable oil, cotton, and tobacco. Such
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PL-480 assistance would amount to some $150
million.
IV. Inventor and creditor confidrnce in Chile appears to
be strong as the result of junta policy initiatives.
A. Successful settlement of a 1,ilateral agreement
with the US on 1971/72 debts has received a
favorable reaction from Chile's major creditors
and bodes well for successful renegotiation of
Chile's 1973/74 debts at the Paris Club meetings
.
in Febru-lry.
D. The junta's decision to return most intervened
and expropriated property to investors and compensate
the remaining ha., engendered an impressive increase
in investor con!'idcnce. Large amounts of new
investment should occur during 1974 as companies
revert to original owners and copper compensation
talks progress.
V. Chile appears to have lined up sufficient fc.:.ign credits
for the first half of the year and more should be forth-
coming from both private and governmental sources.
A. Recently extended $50 million in Lrazilian credits
and renewed Argentine credits may be followed by
even larger amounts later in the year.
B. Private sources of credit in the US, Canada, and
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Europo appear to be reopening lines of credit at
levels comparable to pre-Allenc'.e days.
VI. Foreign military assistance appears to be an area of
continuing concern on the part of the junta,,and may
pose problems in hemispheric relations.
A. In addition to the arm n sought from the US, the
junta has negotiated large purchases of small arms
and ammunition from France and Belgium. They have
also shown interest in Spanish 106 mm recoilless
rifles. Deliveries of arms from Belgium and France
were interrupted for a while due to dockworkers
boycotts. Also, West Germany has suspended all
arms shipments to Chile since October. The Swiss
also appear unwilling to provide further armaments.
B. Chile's concern over military deliveries is tied
closely to recent deliveries of Soviet T-55 tanks
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