CHILE: PROSPECTS FOR PINOCHET

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00552R000200120004-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 22, 2016
• Document Release Date: February 18, 2011
• Sequence Number: 4
• Publication Date: May 1, 1983
• Content Type: REPORT

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Directorate of
Intelligence
Chile:
Prospects for Pinochet
ALA 83-10078
May 1983
Copy 3 01
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Directorate of Secret
Chile:
Prospects for Pinochet
An Intelligence Assessment
This assessment was pre ared by,,,
with a contribution by ice of African
and Latin American Analysis. It was coordinated
with the Directorate of Operations and the National
Intelligence Council. Questions and comments may
be directed to the Chief, South America Division,
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Secret
ALA 83-10078
May 1983
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Secret
Chile:
Prospects for Pinochet
Key Judgments The Pinochet regime will face continuing recession and mounting political
Information available pressures, in our view, through the rest of this year. We expect the
as of 17 May 1983 President's adversaries-unilaterally and occasionally in unison-to capi-
was used in this report.
talize on the poor economic outlook to significantly expand the level of
antigovernment activity. In particular, we expect opposition labor forces to
become more active. We do not believe, however, that the Chilean
opposition will be able during 1983 to form the kind of multiparty front
necessary to:
? Force the government to revise its policies.
? Offer an alternative political force.
? Effectively threaten Pinochet's hold on power by undermining his
support.
we believe that Pinochet will 25X1
respond firmly to the growing pressures and will avoid making significant
concessions, especially in the way of political liberalization. He will
reaffirm his commitment to the present timetable for restoring full civilian
rule in the 1990s and to reorienting the economy away from Allende's
socialist model. We do not expect that progress in stabilizing the economy
or restoring the government's international credibility will be rapid.
We assess that Pinochet will continue to threaten severe consequences for
any group attempting to disrupt his administration's course. Following the
nonviolent "Day of National Protest" on 11 May, for example, the
government arrested several hundred participants, ordered the prosecution
of protest organizers, and banned news broadcasts by a national independ-
ent radio network that reported on protest activities. Pinochet may balance 25X1
his hardline approach with cosmetic gestures calculated to reduce discon-
tent, deflect criticism, and keep the opposition off balance.
We believe Pinochet's popular support will decline in 1983, but we do not
expect this to pose a serious threat to his rule. The memory of the chaotic
Allende period still grips most Chileans and is a strong factor in promoting
stability. Further, and key to our judgment, is the belief 25X1
that the military will continue to back 25X1
the President. There may be occasional objections to specific policies,
particularly from the Air Force and the Navy, but the President's firm
control of the Army will enable him to dominate all the services. Moreover,
the civilian opposition still lacks a clear strategy for dealing with the
military's solid backing for Pinochet.
Secret
ALA 83-10078
May 1983
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Pinochet believes normalization of relations with the United States is long
overdue. We expect Chile's present economic crisis will lead Pinochet to
again look to Washington for various types of economic cooperation. But
he also wants renewed military ties and economic assistance, which require
US certification. If Argentina is certified and Chile is not, US influence in
Chile will decline significantly. Chilean nationalism would be aroused and
public support for Pinochet would probably increase because various
groups-including some of the moderate opposition-would regard such
action by Washington as discriminatory, harmful to Chile's national
security, and regionally destabilizing. Pinochet's responses could include
withdrawal from joint naval exercises, increased efforts to acquire arms,
more frequent anti-US stances at international forums, closing off US-
Chilean military exchanges, even less sensitivity to human rights than is
now the case, and a reduced voice for the moderates among his advisers.
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Secret
Key Judgments
The Christian Democratic Party's Key Role 1
Conservative Stirrings 4
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(Islas Malvinas)
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Boundary representation is
not necessarily authoritative.
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Secret
Chile:
Prospects for Pinochet
Introduction
Domestic and international setbacks have weakened
President Pinochet's position in the past year, accord-
ing to US Embassy reporting. After a six-year boom
(1976-81), Chile's economy suffered a serious reversal
induced as much by internal as external factors. In
1982 GDP dropped by 14 percent, unemployment rose
above 25 percent, and several large business and
financial institutions collapsed. This recession has
given the repressed and largely inactive opposition a
long-sought issue to exploit, in our view, and has
eroded public confidence in the regime. Government
failures on the economic front have weakened a
primary rationale for authoritarian rule and have
made the public-including some proregime ele-
ments-receptive to increased political activity
A less significant consideration in this changing cli-
mate is the regional trend toward democratization,
which has contributed to the regime's isolation at
home and abroad. The replacement of military gov-
ernments in Peru, Ecuador, and Bolivia and the
coming transition to civilian rule in Argentina and
Brazil could broaden sentiment in Chile to accelerate
the return to civilian rule. We do not believe that this
trend toward democratization, however, will have
much direct influence on Pinochet's thinking.
to the one that undermined the Allende government.
We believe the formation of such a front over the near
term is unlikely. The political parties (officially "in
recess"), labor, and student groups will continue this
year to explore points of convergence, but old personal
animosities and ideological disagreements will take
time to overcome. Meanwhile, the regime will place
roadblocks in the way of opposition unity. Thus, we
expect that opposition elements probably will cooper-
ate intermittently and coordinate some activities, but
probably will not merge into a unified movement by
the end of this year.
The Christian Democratic Party's Key Role. The
centrist Christian Democratic Party (PDC)-the larg-
est and most effective democratic force in Chile-will
play a pivotal role in any opposition endeavors, in our
view. Not only has the PDC stepped up activity in the
past year, but a number of PDC members have
become heavily involved in promoting a coalition of
political parties, students, and labor. The most active
opposition group to date, the National Development
Project, was formed by two Christian Democratic ex-
parliamentarians and receives strong PDC backing.
We believe that the Christian Democratic Party will
shy away from a formal alliance with the Communists
this year, even though the leftist faction of the PDC
This paper assesses the impact of the changing cli-
mate in Chile on the various opposition forces and
conservative progovernment groups, Pinochet's re-
sponse to the growing pressures on his regime, the
effects of growing political opposition on the Presi-
dent's base of support in the military, and the implica-
tions of Pinochet's problems for US-Chilean relations.
Resurgent Opposition
We assume that Pinochet's power base in the military
will endure through this year and that his greatest
problems would result from the formation of an
opposition front-broad-based, nonpartisan, and
drawn from the working and middle classes-similar
has promoted a formal pact for some time.
party would be subject to severe government repres-
sion if it became involved with the Communists.
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Following growth that averaged nearly 7 percent
during 1976-81, GDP nosedived by 14 percent last
year, undermining public confidence in Pinochet's
market-oriented policies. The slide began in late
1981, when falling export earnings coincided with
sharply reduced domestic demand, resultingfrom the
government's tight fiscal policies. Only the mining
sector grew significantly. Commerce, manufacturing,
and construction-sectors of large-scale employ-
ment-all contracted by 15 percent or more. The
economic slide reduced workers' living standards in
sharp contrast to the gains they recorded in the late
1970s. The rate of unemployment doubled to more
than 25 percent. The sharpest drops came in manu-
facturing and among skilled professionals. Following
a series of devaluations that began near midyear,
import price increases pushed inflation to over 20
percent in 1982 as compared to only 9 percent the
year before. As a result, the level of real wages in
December 1982 was down 16 percent from a year
earlier.
Reduced demand quickly translated into sharply
lower import levels. Plunging imports pushed the
trade balance into surplus from a $2.5 billion deficit
in 1981. Increased interest payments on the external
debt, however, partially offset the trade improvement.
Even so, the current account deficit declined to $2.4
billion-a 50 percent improvement over the previous
year
from a small surplus in 1981 to a $1.2 billion deficit
last year. Despite the drawing down of reserves to
cover the shortfall, gross foreign debt grew by.10
percent to $17.1 billion, adding to a rising debt
service burden. About two-thirds of foreign debt is
attributable to private-sector borrowing, and $3.3
billion of the total is payable within a year.
The financial squeeze sent Chile to the IMF for help,
and in January 1983 a package of $880 million was
approved. In addition to providing an injection of
foreign exchange, the Fund program was expected to
bolster the confidence of international bankers who
were being asked for $1.4 billion in new loans during
1983 as well as the rescheduling of maturing credits.
Government intervention in the troubled banking
sector and government spending and monetary expan-
sion in excess of Fund targets have brought at least a
temporary halt to additional draws from the Fund,
placing about $420 million as well as banker confi-
dence in jeopardy.
Santiago hopes to meet the June IMF performance
targets and regain Fund draws and banker coopera-
tion. We believe growth for 1983 will be in the range
of 2 to 4 percent. Gradually rising copper prices are
expected to help push up export earnings, but a
current account deficit of more than $1.5 billion is
likely to remain. Even assuming net capital flows do
not diminish further, reserves will continue to decline
this year.
A 75 percent drop in net loan inflows combined with
capital flight forced the overall balance of payments
We and the US Embassy believe that the moderate
PDC majority is likely to dominate the party's strate-
gy and actions. The moderates probably believe that it
is in their best interest to avoid any further polariza-
tion and radicalization of Chilean society as well as
any new civilian-military confrontation.
Pinochet and work out an accelerated plan for a
transition to civilian rule. The US Embassy points out
that the proposal rests on unproven assumptions, but
Zaldivar is a highly respected politician and could
represent the views of a large number of Christian
Democrats who wish to garner support gradually from
various opposition, progovernment, and perhaps some
the exiled centrist
former head of the PDC, Andres Zaldivar, recently
proposed playing down antigovernment activities, so
that the military might be encouraged to replace
military elements'
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Leftist Coalition. We and the US Embassy judge
that, although greater cooperation among the left is
likely this year, several problems will prevent the
formation of a potent leftist front. Ideological and
personal conflicts as well as the schism between exiled
and domestic leaders probably will continue to be
more acute among leftists than among centrists.
Disagreements over the doctrine of armed struggle
and acceptance of foreign support-Soviet and
Cuban-also will continue to impede collaboration.
The banned Chilean Communist Party (PCCH}-
which numbers between 10,000 and 25,000-will
continue to dominate the left, in our view. A well-
developed clandestine network has enabled the PCCH
to survive repression better than the other leftist
parties. The Communists have maintained contacts
with a broad spectrum of varties, including the PDC.
--]Because of the party's organizational
strength and commitment, it has been at the forefront
of opposition demonstrations. On 24 March the Com-
munist Party orchestrated the largest, most violent,
and best organized demonstrations since the military
came to power.
The longstanding internal-external split in the Com-
munist Party could be aggravated by what we expect
will be a period of increased opposition activity. For
some time, the internal leadership of the party has
paid only lipservice to the exiles' persistent calls for
armed revolution and has worked to restrain the
party's violence-prone youth wing. Continued eco-
nomic hardship, however, and the resulting increase in
opposition activities will, we believe, encourage exiles
and youth to push for a violent campaign, thus
potentially polarizing leftist opinion.
The numerous non-Communist leftist groups may
occasionally coordinate antigovernment activities but
are not likely to join in a united front. The Socialist
Convergence, a coalition of nonviolent Socialist par-
ties, has distanced itself from the Communists. Ac-
cording to US Embassy sources, the Convergence is
not subversive and it seeks a coalition with the PDC.
More damaged by repression than the other parties,
the Socialist parties will probably continue to be
hampered by lack of funding and organizational
problems.
Labor and the Parties. We believe the organized
political parties will have more success over the
coming year than they have had in drawing workers
into antigovernment activities. According to the US
Embassy, the PDC has made gains with the Demo-
cratic Labor Confederation, and the Communists 25X1
have increased their influence in the National Trade
Union Coordinating Group, which has been the most
active antigovernment labor group.
Although labor dissatisfaction will grow and wide-
spread labor unrest is a possibility, numerous factors
militate against the development of a massive, unified,
antigovernment labor offensive. Labor has borne the
brunt of military repression, and government restric- 25X1
tions on labor remain tight and effective. In addition,
the unsolved murder of a prominent labor leader 25X1
involved in promising efforts to unify the unions
undoubtedly has intimidated other organizers, who
believe that the government approved of and may
have ordered the killing. Moreover, ideological differ-
ences will continue to hamper unification efforts; the 25X1
democratic labor confederation, for example, refuses
to join forces with the Communist-influenced Nation-
al Trade Union Coordinating Group. Another factor
is the widespread sentiment against returning to the
intense politicization of the Allende years, when labor
interests were subordinated to political concerns.
Finally, the economic crisis has made many workers
afraid of losing their jobs if they take part in political
activities. All of these factors contributed to the
decision by the copperworkers union to call off plans
to stage a national strike on 11 May. The more
symbolic "Day of National Protest" that replaced the 25X1
planned strike-and included nonviolent streetcorner
demonstrations, horn blowing, pot banging, and
school absenteeism-was judged sufficiently success-
ful by its organizers to lead them to plan a similar
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action on 11 June. The government believes the
opposition will stage such activities monthly until the
11 September anniversary of Allende's downfall,
when large-scale protests are expected.
Students. Student groups, in our view, will play an
increasingly important role in opposition activities this
year. Despite government restrictions on political
organizing, the parties recently have had considerable
success in rebuilding campus affiliates.
Conservative Stirrings. We believe the regime is
.concerned also over growing discontent among con-
servative groups. Shaken by the economic crisis and
disappointed by the government's erratic response,
conservative democratic forces have begun to criticize
the administration. These groups have emphasized
publicly the necessity for economic adjustments to
restore growth and bolster their financial positions,
and some would like to see the transition to civilian
rule accelerated, we believe. In December, several
conservative groups demonstrated against some of the
regime's economic policies. The subsequent expulsion
from Chile of a conservative leader provoked vocifer-
ous reaction from all conservative parties and even
from some of the,progovernment press. Conservative
spokesmen and the leading daily newspaper-also
proregime-publicly counseled the government to be-
have moderately after the "Day of National Protest"
on 11 May.
PDC.
We believe that through 1983 the conservatives will
become more politically active, seek to influence
government policies, and take advantage of any politi-
cal opening. The conservatives will continue also to
discuss cooperation with other parties, principally the
regime.
Unless the economy collapses, we and the US Embas-
sy foresee little conservative involvement in. major
antigovernment movements this year. The democratic
right best remembers the chaos of the Allende years
and is fearful of a resurgent left. In this context, the
conservative groups still support the military regime
as a necessary stage in the transition to democracy. In
the face of mounting leftist-orchestrated activism,
they may feel compelled to close ranks behind the
Opposition Activities. At least through the end of this
year, we expect the opposition as a whole to step up its
activities, which to date have included demonstra-
tions, rallies, organizing, and publishing manifestos
calling for economic reform and democratization.
Such manifestos have been issued by a broad spec-
trum of groups: parties, labor, and the Church.
even the moderate parties may become more active-
in order not to lose support to the left.
We believe the chance is small that widespread
terrorism will accompany a surge in opposition activi-
ties. The terrorist Movement of the Revolutionary
Left (MIR) may renew isolated bombings and other
attacks, but lacks the capability to conduct a major
campaign.
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Pinochet Under Pressure
Policy Needs. Hardliners (duros) and moderates
(blandos) in the Pinochet government have debated
for years,such issues as the pace of restoring civilian
rule, restrictions on civil liberties, and responses to
opposition activities. Duros believe that Chile is the
target of Communist-inspired international subver-
sion, in the face of which only tough policies will
succeed. Blandos argue that repressive policies will
polarize society and weaken the regime by alienating
moderate supporters. The President has periodically
followed some of the advice of the blandos but has
never strayed from the fundamental strategy of firm-
ness that he believes has served him well during
difficult periods.
Although Pinochet is concerned about the economic
crisis and about present as well as potential levels of
unrest, he is at present showing no signs, privately or
publicly, of making major policy changes.
determination to proceed with the prescribed transi-
tion to civilian rule. He has insisted that accelerating
the transition would prevent true democratization by
subjecting the system to the machinations of nonrep-
resentative, self-aggrandizing parties. Finally, he has
promised to deal harshly with any groups that attempt
to disrupt his administration.
In the economic sphere Pinochet apparently intends to
continue to support free market principles, while
making adjustments to promote recovery and improve
public welfare. In its recent emergency program, the
regime included liberal domestic debt refinancing,
temporary tariff surcharges against predatory foreign
competition, and three bonuses in 1983 for public
employees. The measures reflect what we see as the
regime's determination to complement free market
mechanisms to correct economic deficiencies while
recognizing that an upturn in the world economy is
necessary to lift Chile from recession.
Pinochet's overriding priority, however, is to reestab-
lish at home and abroad the credibility of his regime's
economic policies. The economic plunge has shaken
confidence in Pinochet's free market policies, and 25X1
dismissing four Finance Ministers, including the ar- 25X1
chitect of the recently ended economic miracle, only
heightened public apprehension. The mishandling last
year of the peso devaluation also revealed some policy 25X1
confusion. After publicly insisting it would maintain a
fixed rate of 39 pesos per US dollar, Santiago deval-
ued by 18 percent in June. Subsequently, it switched
exchange rate policy-adopting floating rates and
then exchange rate bands-adding to concern about
disarray in economic policymaking and eroding sup-
port for Pinochet. The abrupt intervention in the 25X1
management of more than a dozen banks'-which
began only days after an agreement with the Interna-
tional Monetary Fund was signed in January-added
to the climate of uncertainty. We have seen no
indications that these problems have led to serious
divisions within the government, but neither do we
' Since 1980, the Chilean Government has responded to financial
mismanagement by exercising tighter regulation over banking
operations rather than placing these institutions under government
control
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expect Pinochet to achieve rapid progress in restoring
the economy or his government's international credi-
bility.
Even though Pinochet opposes a substantial political
opening, he is likely to make gestures designed to
deflect criticism and keep the opposition off balance.
Last year he established a commission to initiate a
process for the return of exiles. Intended primarily to
deprive the opposition of an issue, the program led to
the return of a few hundred politically insignificant
figures and ignored all prominent exiles. The process
continues, nevertheless, and we believe Pinochet may
be more generous on this front. In a speech last
March commemorating the second anniversary of the
constitution, Pinochet announced another high-level
commission-this one to study the implementation of
the constitution's specific provisions.
Military Attitudes. Public speculation and rumor-
mongering about military attitudes have grown along
with the economic downturn and opposition activity.
Opposition politicians are constantly looking for dis-
content among military officers
rumor claims that the US Government has been
urging the military to replace Pinochet. In February,
the international press reported-erroneously-that
the Air Force had arrested Pinochet and seized the
government.
According to the US Embassy, the armed forces are
deeply concerned by the economic crisis and growing
political pressures, but are not demoralized. Ranking
officers have urged the President to take corrective
action,
For the most part, however,
these officers have directed their criticism at the
economic team.
As a whole, the armed forces still share Pinochet's
distrust and dislike of politicians. Most officers are
dedicated to preventing a resurgence of the left in
Chile. Moreover, the military believes that the moder-
ate parties, in particular the Christian Democrats,
bear much of the blame for the ascendancy of Allende
and the ensuing chaos. Consequently, so far as we
know, no factions within the military have established
a working relationship with any political parties or
groups.
We believe that the military remains firmly behind
President Pinochet. The Army is the most loyal-and
powerful-service, while the Air Force has been the
most independent. Despite specific disagreements, the
services are convinced that Pinochet is running the
country efficiently and honestly and that most prob-
lems are externally induced,
An astute politician, Pinochet has handpicked
every general in the Army for a decade and has
retired any suspected of disloyalty or presidential
ambition. The prospect for a colonels' movement is
minimal, we believe, largely because of the Chilean
military's strong tradition of loyalty, service, and
strict observance of the chain of command.
Implications for the US
Chile's present straits probably will complicate its
relations with the United States. We believe Chileans
are likely to view bilateral issues primarily in the
context of their current internal problems. This means
that Washington's position on international and bilat-
eral financial and commercial questions will be evalu-
ated largely in terms of how it affects Chile's efforts
to stabilize its economy. Santiago will look to the
United States for assistance in this regard. Moreover,
although disappointed that full political-military rela-
tions have not been reestablished, the Pinochet admin-
istration probably expects eventual support from the
Reagan administration and will scrutinize US policies
for positive signals.
The questions of human rights and US certification
will become increasingly sensitive bilateral issues.
Chilean officials recognize the costs that hardline
domestic policies impose on the nation's international
standing.
Nevertheless, the President reportedly is
convinced that political intransigence is necessary and
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that Chile would gain little from making concessions
to gain US certification, which would in any event
remain subject to scrutiny by the US Congress.
Certification for Argentina at the same time it was
denied for Chile probably would, in our view, aggra-
vate Pinochet's siege mentality and significantly re-
duce US influence in Chile. The action would arouse
nationalist sentiment among Chileans, antagonize
pro-US senior officers, deepen anti-US feelings
among junior officers, and even upset some moderate
opposition leaders. These groups probably would view
it as discriminatory, harmful to Chile's national secu-
rity, and regionally destabilizing. Thus, Pinochet
could capitalize on this reaction to regain some of his
popular support. In reaction to such a US move, we
believe Pinochet would:
? Withdraw from the UNITAS joint naval exercise in
August, but not necessarily close the door on future
participation.
? Close off almost all exchanges and cooperation
between the Chilean and US militaries.
? Step up efforts to acquire arms from non-Commu-
nist sources.
? Increasingly oppose the United States in interna-
tional forums on issues that do not involve vital
Chilean interests or conflict with Pinochet's anti-
Communist principles.
? More frequently ignore moderate advisers and oth-
ers who have counseled him to court Washington in
hopes of gaining certification.
? Become less sensitive to domestic and internation-
al-especially US-pressure to respect human
rights.
Pinochet probably would not alter significantly
Chile's international economic policies, however, be-
From the Chilean perspective, US certification of only
Argentina would assure Buenos Aires's military supe-
riority and, by enhancing Chile's pariah status, spur
what the Chileans regard as the Argentines' aggres-
sive tendencies. We believe Pinochet's commitment to
peaceful resolution of Chile's disputes with Argentina,
Peru, and Bolivia would probably not change because
it stems from pragmatic recognition that Chile is
militarily vulnerable. Thus, Pinochet is unlikely to
engage in military adventures to divert public atten-
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cause Chile's needs at present are too great.
tion from problems at home.
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