NATIONAL INTELLIGENCE ESTIMATE ON CHILE (#94 - 69)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R00904A001400030028-6
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 20, 2016
• Document Release Date: May 2, 2007
• Sequence Number: 28
• Publication Date: February 20, 1969
• Content Type: TELEGRAM

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original to be Flled in~,~~ ._ Dncer~trallxad Files.
TO I7epartrracnt of State
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I=RON American .>rmbassy SANTIAGO DA1"E: I~.cl>ruary GZ, 1`~~cJ
National Intelligence Estimate on Chile ~fk94 - i?~
REF __
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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 AdnZini.st;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,
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1400030028-6
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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.... r..is 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 particu.l.ar nromenturrr. 'There is no great e;vi.ue.nt i.ntercy:~t
by the: electorate in ax~y party as ucli.
~. Page ;~~:, para ? .. '=The itadi.cal 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 vi.cw 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,dica.ls 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;h.cr $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'
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]~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 tvh.ch arc
not available here. j
10. Page f~6, para S - "'I'lxe: poorest workers have bensolxil,-e l~exie.f.its ~xn.cl
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 A1.li.ance. 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,
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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 n~iin.ng. "
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 ye~~.rs 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
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Page #~6
greatc?x increase. The: World I3an.1?~: agricultural survcvy teaxzx here
three months a,go reported to me tl~.at 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~ xr~~n.ch. 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~ r.ro:rt: PoLru.la.r
in the country bu.i; rathr,.r h zs i.nr..rca.secl 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
tatal.ly 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.
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