ACHIEVEMENTS OF CHILE'S CHRISTIAN DEMOCRATIC GOVERNMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A005600040002-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 20, 2016
• Document Release Date: March 22, 2006
• Sequence Number: 2
• Publication Date: January 13, 1967
• Content Type: SUMMARY

Approved Focelease 2006/04/13 : CIA-RDP79-0092?0 600040002-7
ecret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Achievements of Chile's Christian Democratic Government
Secret
N2 40
13 January 1967
No. 0272/67A
Approved For Release 2006/04/13 : CIA-RDP79-00927AO05600040002-7
 25X1 Approved For Release 2006/04/13 : CIA-RDP79-00927AO05600040002-7
Approved For Release 2006/04/13 : CIA-RDP79-00927AO05600040002-7
 Approved FbwRelease 2006/04/13 : CIA-RDP79-0091A005600040002-7
SECRET
ACHIEVEMENTS OF CHILE'S CHRISTIAN DEMOCRATIC GOVERNMENT
Chile's Christian Democratic Government under
President Eduardo Frei, has moved steadily to im-
plant a reform program characterized by the slogan
"Revolution in Liberty." Since the 1964 election,
Frei has obtained much of the legislation necessary
for his program, although congressional obstruction-
ism remains a problem. He must now direct his major
effort toward implementing the laws he has gotten on
the books.
Economic reforms have been hampered by the con-
tinuation of Chile's chronic inflation, even though
at a lower rate. The anti-inflationary program has
caused resentment among population groups that be-
lieve their incomes have not kept pace with the
cost of living. Periodic strikes, supported by the
Communist-Socialist labor organization, have attacked
the government's wage adjustment policy.
President Frei will visit the United States the
first week in February. He does not intend to ask
for increased economic assistance and will probably
concentrate on a general improvement of US-Chilean
understanding. Preparations for the inter-American
summit meeting, tentatively scheduled for this
spring, will also be discussed.
Domestic Policies
During its first two years
of power, Frei's Christian Demo-
cratic administration has fos-
tered a reformist mentality within
Chile that well may be the key to
the success of the "Revolution in
Liberty." Frei has taken Chile a
substantial way along the road
to reform and there is little
likelihood that the country will
turn back, despite the cries of
anguish from traditional power
groups. Frei has not had to con-
tend with a strongly entrenched
oligarchy, but his attempts to
modernize certain facts of Chilean
economic, social, and political
life have been opposed by a va-
riety of forces.
In addition to the tradi-
tional conservative opposition,
Frei from time to time has faced
resistance from leftist elements
that believe either that he is
moving too slowly or that his
Christian Democratic Party (PDC)
will obtain credit for all re-
forms, and thus prevent other
reformist parties from scoring.
In general, however, Frei's pro-
gram has struck a responsive
chord in the previously ignored
segments of Chilean society.
SECRET
Approved For Relle se 2p06/QSA/12-ACfIA Pf f~,-009217 k0q?g0q(~j40002-7 Page
 Approved For Rel'ease 2006/04/13 : CIA-RDP79-00927A600040002-7
Composition
Of
Chilean Congress
SENATE
(PDC) Christian Democratic
(VNP) National Popular Vanguard
(PS) Socialist
(PCCh) Communist
(PADENA) National Democratic
(PR) Radical
(PN) National
CHAMBER OF DEPUTIES
Approved For Release 2006/04/13 : CIA-RDP79-00927AO05600040002-7
 Approved For Release 2006/04/13 : CIA-RDP79-00927A005600040002-7
SF'CRF'1'
One of the first problems
facing Frei after his election
in 1964 was to deal with a divi-
sion within the PDC that threat-
ened to hamper the conduct of
government. A left-wing "rebel"
element, led by Alberto Jerez and
Rafael Gumucio, nearly gained
control at the party congress in
1965, and consistently has criti-
cized the pace of reform. In
general, this faction is composed
of politicians accustomed to an
opposition posture and unwilling
to submerge their own views in
the interest of party unity. The
PDC congress held in August 1966,
however, gave Frei strong backing
for his conduct of the government.
Party Support for the government
is expected to continue at least
through 1967.
The PDC gained control of
the Chamber of Deputies in the
congressional elections of March
1965. It lacks a majority in
the Senate, however, and has
been forced to compromise with
other parties from time to time.
In addition, reform legislation
has been delayed or diluted dur-
ing extended congressional de-
bates.
Nevertheless, substantial
reforms have been accomplished.
Frei has obtained congressional
support for a number of economic
programs, and has improved pub-
lic health services and facili-
ties. Housing and school con-
struction have increased greatly
since 1964, and. the education
system has been improved through-
out the country. Frei undertook
some agrarian reform measures
under existing legislation while
awaiting approval of laws that
EDUARDO FRET
would facilitate a broader pro-
gram.
The government has felt pres-
sure outside its own party from
the Communist-Socialist Popular
Action Front (FRAP), both in
Congress and in the field of
labor. There has been some
friction in recent months between
the Socialists and the Communists.
In general the Socialists es-
pouse a harder line than the
Communist Party which from time
to time has advocated cooperation
with the government on certain
issues. The two parties seem to
be drawing closer together, how-
ever, as the April 1967 munici-
pal elections approach.
FRAP's power to harass the
government was strikingly evi-
dent in the recent election of
Socialist Senator Salvador Al-
lende as head of the Chilean
Senate. In his new position
Allende, a strong supporter of
Fidel Castro and Frei's chief
SECRET
Approved For Rol",se 2906/Q4i&7rALA- i9];0092177Q05S000'40002-7
 Approved For Re ase 2006/04/13 : CIA-RDP79-00927A00040002-7
SECRET
opponent in the 1964 election
will be able to guide Senate de-
bate and will represent Chile at
international parliamentary meet-
ings. His election resulted from
cooperation between the Radical
Party and FRAP. His tenure is
conditional upon the retention
of Radical support, however, and
this fact may hamper his freedom
of action.
FRAP controls the most im-
portant labor body, and the PDC
has shown little enthusiasm for
establishing a rival workers'
federation. Only about 15 percent
of the labor force is organized.
The government was confronted
during 1.965 and 1966 with several
serious strikes, but has resisted
the most extreme demands of the
leftist-dominated unions.
The PDC has encouraged the
organization of independent but
PDC-oriented campesino unions.
These have successfully chal-
lenged Communist influences
among rural workers, and seem
to have attained a relatively
secure base.
to how accurately this index re-
flects real changes in the cost
of living, as it is composed
mainly of items covered by price
controls.
The government has had vary-
ing success with its stabiliza-
tion policies. Improvements in
administration increased tax rev-
enues, in real terms, by 25 per-
cent in 1965 and by about the
same percentage in 1966. Govern-
ment expenditures rose by a
greater amount, however, neces-
sitating continued government
borrowing. Under the resultant
pressure the money supply in-
creased by 65 percent in 1965 as
compared with 51 percent in 1964.
Some progress has been made
toward wage stabilization, but
many workers object to having
their wage increases tied to the
change of the questionable price
index. Despite such problems,
however, the population gener-
ally supports the administra-
tion's economic stabilization
effort.
Economic Reform
Frei's economic policies
are centered around an economic
stabilization program that has
as one of its goals a reduction
in the rate of the inflation
which has plagued Chile for more
than 50 years. The inflation
rate--measured by the index of
consumer prices in Santiago--de-
creased from 38 percent in 1964
to 26 percent in 1965, and to
about 19 percent in the first
eleven months of 1966. There
is some question, however, as
Renegotiation and reschedul-
ing of Chile's external public
debt was an important early ac-
complishment of the Frei adminis-
tration. Payments relief during
1965 to 1966 amounted to almost
$100 million. In addition, the
maturity structure of the debt has
been reordered so that payment
dates are more evenly spaced. This
action, plus higher export prices
for copper, controlled deprecia-
tion of the value of the currency,
and import restrictions, strength-
ened Chile's international balance-
of-payments position in both years.
SECRET
Approved FGn elease 20 514 ,: 9 79-00?g7AA(56ff 040002-7
 Approved FoiwRelease 2006/04/13 : CIA-RDP79-009005600040002-7
SECRET
One of the most important
parts of Frei's program involved
the "Chileanization" of copper.
This program was conceived as an
alternative to outright national-
ization, which the leftist groups
advocated. Frei's plan called
for the Chilean Government to ac-
quire an interest in the three
largest copper companies, all of
which are owned by parent corpo-
rations inthe United States. This
program drew a great deal of
criticism from many sectors in
Chile. The leftists accused Frei
of selling out to American inter-
ests, whereas rightists feared
that the principle of government
participation would be extended
to Chilean businesses. However,
enabling legislation was passed
early in 1966, and by the end of
the year investment decrees were
signed which provided for the es-
tablishment of three new joint
corporations with a total invest-
ment of more than $400 million by
1970. The Chilean share in these
joint corporations is to be 51 per-
cent of the Kennecott operations
and 25 percent of the Anaconda
and Cerro companies. In addi-
tion to expanding mining opera-
tions the new corporations will
develop copper refineries and
fabricating plants so as to di-
versify the Chilean copper indus-
try.
Frei's agrarian reform pro-
gram was aimed at increasing the
productivity of agriculture in
order to make Chile self-suffi-
cient in food production. Be-
cause of legislative bottlenecks,
very little progress has been
made. Legislation aimed at giv-
ing the government more flexible
land expropriation powers, with
a view toward resettling 100,000
families by 1970 was introduced
in November 1965. This bill was
opposed by both the left and
right, and has not yet passed
Congress. In the meantime, the
Agrarian Reform Corporation, es-
tablished under legislation ante-
dating the Frei administration,
has conducted some resettlement
and has built some ancillary fa-
cilities such as road and water
distribution systems. These
steps have had little impact on
agriculture, however, and the
government's resettlement goal
will not be met.
The Chilean economy expanded
at a rate of about 5 percent an-
nually in 1965 and 1966 because
of gains in industry and mining.
Agricultural production continued
to be a major weakness, and the
economy remains highly vulnerable
to fluctuations in the world price
for copper--the source of 70 per-
cent of Chile's export earnings.
In a speech in December 1966,
Frei announced that Chile will no
longer require budget support
loans from the US. This develop-
ment marks an important step in
Chile's progress. Such loans
have amounted to $80 million over
the past two years. Chile will
continue to receive loans for spe-
cific projects, however, and will
benefit from other AID actions
from time to time.
Foreign Affairs
Frei strove early to demon-
strate independence from US in-
fluence in Chilean foreign policy
SECRET
Approved For RRe 2006/04
 Approved For Release 2006/04/13 : CIA-RDP79-00927AO05600040002-7
SECRET
since he assumed Dffice. This
led to differences of position
between Chile and the US o a
number of issues, including,
during 1965, action in the Domin-
ican Republic and the seating of
Communist China iz the United
Nations. Since 1)65, however,
there has been cl,;)ser US-Chilean
consultation. In 1966 Chile sup-
ported the US on :he Chinese rep-
resentation issue and on other
international que;tions.
),resident Frei is attempt-
ing to become a leader of the
movement toward c-oser Latin
American cooperat:_on. He at-
tended the "little summit"
meeting in Bogota in August
1966,, and has pronoted exchanges
of visits among South American
leaders. Chile gave evidence
of the strength o::' its advocacy
of economic intecrration at the
conference of foreign ministers
of the Latin Amer-can Free Trade
Association (LAFTI,) in December.
1966, when Frei's foreign min-
ister, Gabriel Va-.des, left
because the participants were
unable to agree on a mechanism
for making automatic reductions
on tariffs on goocs from member
states.
Chile's bilateral diplo-
matic relations with most other
Latin American stE.tes generally
have been friendly. It has main-
tained particularly close contact
with Colombia, Peru, and Vene-
zuela, and with Argentina until
the overthrow of the Illia gov-
ernment. The existence of mili-
Lary-backed goverrments in Brazil
and currently in Argentina has
hampered the development of re-
lations with those countries.
Furthermore, Chilean public opin-
ion traditionally has feared the
possibility of Argentine expan-
sion into Chile. The desire to
maintain at least a facade of
readiness has encouraged acqui-
sition by the Chilean armed
forces of modern equipment to re-
place older material.
Chile's relations with Bo-
livia have been strained ever
since Chile conquered the Boliv-
ian littoral during the 19th
century War of the Pacific. The
two countries have not had dip-
lomatic relations since they were
broken by Bolivia in 1962 during
a dispute over the waters of the
Lauca River. Periodic reports
of friction along the borders,
and of Bolivians "infiltrating"
northern Chile keep the situa-
tion tense. Furthermore, Boliv-
ian President Barrientos has
announced that he will not attend
the summit meeting of the Organiza-
tion of American States (OAS) planned
for the spring unless Bolivian ac-
cess to the sea is on the agenda.
Because of Bolivia's intransigence,
prospects are dim for an ameliora-
tion of relations between the two.
The Frei administration has
consistently criticized the OAS
as it is presently constituted.
Chile opposed OAS action in the
Dominican Republic and the crea-
tion of an Inter-American Peace
Force. Recently, it has advo-
cated transforming the OAS into
an organization primarily con-
cerned with economic and social
matters, leaving security and
peace-keeping functions to the
United Nations.
During the summer of 1965
President Frei visited Europe,
meeting with officials of France,
Italy, Great Britain, and West
SECRET
Approved For easy 20( 6 /1. C pWR79-0Qq2 Qi05 Q0040002-7
 Approved Foelease 2006/04/13 : CIA-RDP79-0092005600040002-7
SECRET
Germany. In addition to increas-
ing Frei's prestige in Chile, the
trip offered an opportunity to
acquaint European leaders with
some of the problems of Latin
America. Frei has no intention
of trying to substitute European
for American influence, but he
is anxious to broaden Chile's
diplomatic contacts.
Since 1964, Chile has re-es-
tablished diplomatic relations
with the Soviet Union, Poland,
Czechoslovakia, Hungary, Bul-
garia, and Rumania. Communist
China maintains a four-man trade
information office and a New
China News Agency office in San-
tiago. The establishment of re-
lations with Communist nations
was primarily an attempt to ex-
pand Chile's diplomatic horizon
and to enchance the country's in-
ternational prestige. Trade and
aid agreements between Chile and
the USSR probably will be signed
early in 1967. There has been
some trade with Communist China,
in nitrates and iodine, often at
prices above world market levels.
During his last four years
in office President Frei will
face problems different from
those that confronted him during
the early part of his term. With
much of the legislation vital to
his reform program now enacted,
the government will be concerned
primarily with enforcing the new
laws and following through on
the projects. Most of the con-
gressional battles still to come
will involve the extent of sup-
port to be given existing pro-
grams rather than new concepts
of governmental authority.
Frei's foreign policies probabl
will remain much the same.
SECRET
Approved For F else 2006/01/.13iz IArRDP -00927 W 606040002-7
 Approved For Release 2006/04/13 : CIA-RDP79-00927AO05600040002-7
S EC RET
SECRET
Approved For Release 2006/04/13 : CIA-RDP79-00927AO05600040002-7
 Approved For Fase 2006/04/13 : CIA-RDP79-00927600040002-7
Secret
Secret
Approved For Release 2006/04/13 : CIA-RDP79-00927AO05600040002-7