Created: 6/6/1975

OCR scan of the original document, errors are possible




The following intelligence organizations participated in the preparation of 'hm

TSe Central Intallloante Agency,ntelligence organization* of the Department, ot State, Detente, and Treaiury, and the Nnllonol Security Agency.


Tha Deputy Director of Central Intelligence repreientlng tha Centrol Intelligence Agency

Tha Director ol ItieHiganta ond Heieoreh representing the Department of Stole Tha Director, Defense Intelligence Agency Tha Director. Notional Security Agency

The Speciol AuUtanthe Secretary for Notlor>ol Security, Department of lha Treowry

Th. Deputy AitnMnt AdmmbtrotOf for Notionol Seci-nty,Beieorch oed OevetopTierTt Adminiproiwo


Iheuter.ii.en got o'

Also Participating!

Tha AuittoM Chief of Staff for Intelligence. Deportment of tha Army

ctor of Ncnrol Intelligence, Oeportnieiil of tha Navy

The Auitiant Chief of Staff, Intelligence. Deportment of tha Air Force






The Government and tbe Parties

The Leftist Opposition

Rightist Support

The Christian Democrats

Other Croupi







Peru and Other Neighbors



The armed forces arc determined torolonged political moratorium, to revamp the Chilean political ss'stem. and to restore Chile to economic health.

will thus remain under military rule tor some time to come, and the armed forces will be an important political force even after they relinquish direct rule.

The military government has begun to loosen its authoritarianand to move tnwaid less repressive rule

Substantial popular Hipjxirt for the regime and the absence of serious internal challengeontinuation of this

It could be slowed or even reversed, however, by theeconomic situation and the consequent loss of popular support.

Chile's serious ccmiiomiic situation is reflected in the prospectery large balance ofdeficit.

willurtailment of imports that willeavy negative impact on economic growth, emp!o> ment. and living standards,


efforts to cope with its economic problems are likely to leadajor change in economic policy,by considerable government control over output, prices, and foreign trade.1

The gloomy economic outlook portends increasedmore,dissatisfaction with the miliUrv government.

The greater the time interval between the full impact yfimports and the positive effectsecovery in copper prices, the greater the chances of significant popular unrest.

Over the next year or so, the government will probably have to deal with limited manifestations of discontent.

Moreover the chances of massive public unrest are substantial, perhaps on the order of one inhe most likely outcome wouldhrowback to the siege atmosphere of the early post-coup period,esort to harsh measures of repression.'

Chile is making slow progress in bettering its international standing as it improves its performance in the field of human rights.

Chile's leaders are probably overestimating what can be accomplished by the steps they are willing to take, and Chile willajor target of international protest groups.

Chilean foreign policy generally will be geared to overcomingisolation, gaining acceptance and respectability, and securing moral and material support.

the governments overriding foreignand considerable efforts will be devoted toand preparing to fight if necessary.

Maintenance of good relations with the USornerstone of Chile's foreignut could become less important as time goes on.

does not want to be prominently identified with USespecially on hemispheric issues.

Peparnaeal ol the Ttea*oiy eoasiden thai the estimate leave* tben that lira?lie controls and widespread civil unreal may occur ia tho fairly rear future. Trraniry agrees dial airong pressures in tills direction will develop over ihe neat Iwo years If the low price ol copper continue* to keep Chlk'i balance of payments in heavy deficit, but believes that Ihe itFrerntnaal hai ttiff-rteo, IWalbitry in tha abortostpone the need lor draaQt

Chile's interests could push it into economic alignmentsat odds with US interests.

Chilean resentment over the US failure to help it arm is causing some anti-US sentiment in the military, amid growing doubts that the US can be counted upon to help its allies.

ability of the US to influence the Chilean government will decrease as economic tics loosen and if (he unavailability of US arms is prolonged, but Chile will remain unable to afford the political or economic consequenceseriousin relations.


heightened awareness ol ihe Importance ol Chiles international image, are moving the government awaytrict authoritarian style of rule. This movement ll only fledgling, however, and by no means irreversible.

nternationally, Chile face* deep hostility ia tbe West as well as in the Communist world. Fearilitarily superior Peru will try to even old scores by force is heightened by the absence of allies willing and able to give Chile dcspernlely sought moral and materiel support.


a. There hasroad willingness among Ihe citizenry to let President Pinochet and the try their hand at pulling the country back from the chaos ol the Allende years. The level of activehas declined since the military takeover, but it remains considerable. This -upport. or at least acquiescence, is complemented by the nearly total ineffectiveness of violence-prone leftist fringe groups that would lie the first lo want to challenge the junta. Erosion of widespread gratitude tot order and stability after Allende is accelerating, however, with increasing economic hardships.

he armed forces want neither to rulenor to return to the traditional political system


allowed the kind* of abuses that occurred during tbe Allendeivilian commission tasked withew rorutitution Is at work, but military loaders lack both the time sod the background to grapple with the mechanicsew institutional framework. With more pressing problems at hand, their plans for Chile's political future wul remain vague for the lime being.

The armed force* do have the firm conviction that tbe key to solving Chile's basic problems lies in dcpolltici/atiori. They believe tbat traditional Chilean polities, as practiced both before and during the Allende period, breeds ideological fanaticism, demagogy, and moral turpitude. They havethat partisanship and politics lead Inevitablyation's decline and that all politicians, not merely leftists, arc suspect. Thus, fierce hostility toward Marxism Is paralleled by an abiding distrust for the Christian Democrats Some officers believe, however, that the military should not isolate itself from the non-Mann! political mainstream.

Tbe armed forces probably wouldontinued political moratorium. They realize, however, that the deterioratingsituation could have unfavorable pob'tical side effects and that it might become necessary to create political Institutions in support of the regime. They arc already under pressure tonational civic movement" for that purpose. Initially, at least,ovement wouldollection of interest groups friendly to the government. Impetus for thc civic movement comes from conservabve civilian! in theo have visionsorporate-statist future for Chile. They are trying to convince Pinochet that he would eventually find it usefulersonal political vehicle.

As his designation as President Implies.overshadows his fellow junta members. His responsibility for majoi policy decisions and ability to insure that they arc implemented down the line are increasing, and the junta as such is becoming less important. Navy and Air Force officers will be increasingly disquieted by thc declininn influence of their services, but they will not risk thc unity of the armed forces to prevent the accretion of more power to Pinochet. For his part. Pinochet willto seek consensus and to avoid actions that would cause divisiveness in the armed forces

The Government and the Poniei

he military government has outlawed the Marxist parties and the other members of the now defunct Popular Unity coalition led by Allende. These groups are officially dissolved; their property has been seized and they function onlyThe otherthc Christianand ihe conservative Nationalin

an involuntary "recess- that forbids them to encage In political activity and ostensibly restricts them to purely housekeeping functions."

nternal divisions, inabihty to lobby for their causes,ack of effective resources with which toollowing threaten to eliminatesome of the smaller groups as viable political entities. The government's ability to make lifedifficult for the parties saps thestrength of the larger groups, and asponsored political movement wouldurther drain. Yrt the ideas for which tbe mass-based Chilean parties stand are deeply rooted and are likely to survive to spawn new organizations even if the old ones eventually succumb to military suppression.

Tho leftist Opposition

* Decrm Uwf CMohrr3 specificallyall the partMu Id uV Popular UnityObbssssssSSS,Marf Popular Action MowawW. Radical ChmtiaB Left,ndependent Popular Aitkin -and ihe Popular Socialist Union. Deere* Uw( October3 tladored all other politicalnd jrcup*ater MlnWby ot IntoM decre* oVflned "row" asKoaOoo of inactivity whieh affects all attempt* to arhfeve the goals of tho paity. without actually coding Uw party'*pecifically prohibtfrd'-'iiabsttd. Dear* Lawas emended in* to provide criminal penalises for violstf-jni.

he efforts of Chile's leftist parties and groups to recover from the military takeover and the proscription of party activity have been severely hampered by unrelenting pressure from theservices and have been largely ineffective. The violence-prone Movement of the Revolutionary Left (MIR) is the military's prime target. It haseries of severe blows, including the loss of key leaders. The MIR is not completelybut it has been rendered irnpotent. The Socialist Piirty suffered from deep divisions even under Allende. It was heavily damaged in the coup and Is still in considerable disarray. TheParty, with its superior organization and discipline, is the least hurt. Even so. it must spend most of its energy merelyairlyclandestine existence.

he left stands to gain from the government's economic troubles, but It is unlikely toerious threat for some time to come. The same political disagreements that caused intramural battles wlien the Popular Unily coalition held power seriously complicate the left's outlawed, undergroundand impede efforts tonifiedfronr al home or among exiles abroad.

Rightist Support

ostile toward Marxists and suspicious of the Christianof whom do not want to lie closely associated wilh the regimemilitary government has found twogroups it believes it can trust. National Party members and politically unaffillaled members of the professional and trade associations have anti-Marxist credentials that mean almost automatic acceptability for advisory posts and other key|obs. Some older, tradition-boundParty leaders have misgivings over the long-term implications of the military's commitment to depoUticization, but many party members have shed their partisan identities to work enthusiastically for tho government.

The Christian Democrats

tunned by tbe military's determination ioonopoly of power, the Christianarc trying to cope with an unfamiliarof suspended political activity. Theinexperience with the techniques ofoperation bus hurt the party organizationally. Still, few of its supporters appear to havetheir commitment to the party.

ifferences among various Christianfactions compound the party's problems.want tho party actively to work with and for the govern merit. Left-wingers, by contrast, would have tbe party move into open opposition. Tlie party leadership and mainstreamiddle-of-the-road course that is increasinglywilhin the party as the Christian Democrats' best bet. The strategy is one of watchful waiting and preservation of the tacit modus slvcndi that

ha* developed between the party and tbe govcm-ment. Thc objective it to preserve the party'i identity and popular following, and its Imageuture alternative to military rule. The party thus wlD seek neither the governments fall nor awith thc rnihtary, but it will probe the limits of the regime's tolerance for criticism through increasingly' blunt commentary on govern ment policies, night-wing civilian advisers to thewill attempt to use such activities asammunition in their efforts to tarn thedecisively against the Christian Democrats, but the armed forces probably will continue to resist being provoked into outlawing the party

Other Groups

interest groups in Chile lack theor the ability to challenge theChurch has on occasion spoken out onhuman rights, hut Cardinal Suvathat private prodding ofstands the best chance of producingChurch is becoming more outspoken,on economic issues. Most traditionalactivity has been proscribed. Unionunder pressure to produce on bread andbut are reluctant to risk antagonizingIf. as expected, economicunions may become more willing towith the government. After themilitary government closed down or tooknumber of media outlets. Theystem of self-censorshipthe government and little that Istbe government appears. Thc Universitiesbeen purged and there is little evidencepolitical activity by either professorsIn the niral arras, extremistbeen rooted out, ami with thcland reform tbe countryside is quiet andremain quiet.


clearly will remain under militarysome time to come. The military might bewith economic and political reforms thaicountry firmlyound economic track and laid the groundwork for an acceptable civilianIf so, it would probably, before theof too many years, relinquish direct control of the government, though it would abnottremain an important political force and not, as in the past,onstitutional guarantor. The armed forces have expressed theirto cleanse the body politic irrevocably of what they consider the evils ofarty politics as practiced In the past. Such an attempt woulduch longer period of military rule; even so, the prospects for successfully de-politiclztng Chile would lie dim.

Over tbe shorter term, tbe chancci arebetter than even for continued slowat timesa less repressive style ofcaled down, less rigorous stale of siege and fuller observance of individual rights and procedural safeguards will be key milestones on this path The armed forces will probably continue toroader spectrum of civilian advice and to open more government ports to civilians, but they are likely to remainonly In individuals willing to renounce partisan affiliations. The military could evenreceptive to the restoration of some trappings of political life For example, the mm Marxist parties might be allowed to engage in limitedactivity, perhaps to contest local elections. But there Is little chanceeturn to anything like Iraditional Chilean politics In thc next several years.

A caveat must be added. Tbe evolution of the military government will depend in large part on economic developments, and on how well It deab with the country's very difficult economic problems. The continued deterioration of thesituation could resultassive loss of public support and deprive thc government of the chance to proceed in an orderly manner. Thedevelopments discussed in the next twocould change tho political outlook


eservoir of gratitude and good will the armed forces earned for bringing order out of chaos is being eroded by economic hardship. The government faces the Herculean task ofthe measures necessary to cope with Inflationery serious balance of payments problem with the need to avoid alienating thc mass of Chileans.

The armed forces inherited an economy In shambles. Lacking economic experience orof their own, they- turned to civilians. Finance Minuter Jorge Cauas. who heads the economicormer member of tbe Christianparty, but the civilians basically areand professionals without close political ties. Their prescription for recovery calls for movementostly state-dominatedixed economy, curtailed government spending to reduce budgetary deficits drastically, encouragement of privateand foreign investment, and reliance on market forces to allocate resources efficiently.

The government's economic program lias created serious hardships. Measures to fightby half4 from3 levelrealercent last year. Living standards remained below2 level. Hardship, however, is relative. The poor- -especially thestruggle just to feed, clothe, and house themselves, even though thc economic program was designed to mitigate tbe impact on those at the lower end of the iiscocrir scale- The better off are able to sacrificeor amenities long taken for granted.

The military is anxious to demonstrate Its concern with the nations economic problemsapability for effective action. Tbe desire to better the lot of the masses stems partly from aconcern with individual and collective welfare, but tt is also attributableractical realization that Marxism will not be eradicated solely through the repression of Hs mUitants. The military wants to slww that it can achieve results in areas where politicians lailed.

The armed forces accept the need for the country toainful period of economic adjustment, but are concerned over the timing, extent, and distribution of austerity, and worried about the possible politicalajor complaint about the recovery program is tliat there has been too much austerity too soon. Military men are distressed over the apparent ubility of moneyed interest* to insulate themselves from economicand even to profit from the government's policies. This is seen as contrasting unfavorably with the call for sacrifices by all Chileans and as belying the military's claim to be acting in the bcxt interest of all the people.

uch views have bad an impact on the market-oriented economists, but tbey and theirapproach continue to dominate economic policy. Tbe President recently added more civilians to his cabinet and gaveroad, new "super minister" mandate to battle inflation and lo cope with Chile's grave balance of payments problems. Cauas' policy is to reduce public spending sharply and to raise certain taxes in order to dampen the demand for imports and to ease inflationarytbe fact that this means Increased unemployment and more austerity, especially for thc poor. He has also, however, supported an ex-pawled program of assistance to the poor.

economic team fears that toowith thc recovery plan for the saketerm relief or thc appearance of equitythc program and Chile's chances ofIt has convinced President Pinochetgovernment's economic strategy remainssound, and thai ineffectivethe decline in copper prices are to blameto achieve the desired results mnreteam and its supporters believe that theof failing to meet the nation'sbead-on are potentially moreIhe regime than the unpopularity of themeasures of austerity.


most serious threat to Chilesstrategy is that posed by the balancesituation. The government4


ifficult one for the Chilean economy, but it had high liopes that the economic measures taken in that year would begin to produce resultsconomic and political forces beyond Chileshowever, have changed the outlook frombright to dismal Tbe sharp drop in world copper prices is likely to cut total esport earnings5ercent. If present trends continue. Chile is headed2 billion deficit in itsaccount this year,0 million due as interest on its foreign debt

Since there is no chance that Chile would be able tourrent account deficit of this magnitude, it will be coiifrontedassiveof payments deficit Deliveries of official aid this year probably will be limited to less0 million from the United States and international financial agencies. Private sources are not likely to provide much more than an0 million. Despite extensive promotional effort, the government has been unable toignificant amount of direct foreign investment. Commercial borrowing on the scale required is precluded by Chile's already enormous foreign debt and its lack of foreign reserves.

The balance of payments situation will be worsened by the need to make some payments on Chiles foreign debt. Principal payments0 million come due this year. Chile probably will get5 million in rollover debt relief from the members of the Paris Club willing to negotiate with it and from other countries. Despite its dctcrmina-tion to improve the nation's International credit rating, the government will probably decide to pick4 million in de facto debt relief by defaulting on payments due most Communist countries and to Paris Club members that refuse to renegotiate. These rollovers and defaults would still leave Chile0 million in debt service payments.

Currently, only Cauas" recent moves to restrict foreign exchange expenditures, the continuingof periodic mini-devaluations, and the general sluggishness of the economy are acting to restrain import growth; Chiles unfavorable prospects have so far had no discemable effect. Under thehowever, foreign sellers svill sooner or later begin to question Chile's ability to pay its bills. When sellers are no longer confident of securing payment and can no longer get third partyor decline to rely on them, supplier credit will begin to dry up and Chile will be unable toits current level of imports. Most of thewill ultimately have to come in fuel, rawintermediate products, and capitalthe items most needed to sustain economic activity. This will reduce output, add to unemployment,restrictinginflationary pressure. In the worst ofacutoff of supplierimportwould cause declines in output rangingercent in mining to as much asercent in industry.

The economy will suffer no matter how the import curtailment is administered. Broadlytwo approaches would be open to the Chilean government, one in effect an extension of current policies. In keeping with its current market ap> proach, the government is likely to react initially by devaluing the currency and relying largely onforces toeduced supply of imported goods. The devaluation and the drop in imports would add to inflation without providing needed control over the composition of imports. It would also deny the government control over how increased hardships are distributed. The alternative would be to impose exchange controls and radon imported goods. This would create difficult administrative problems but it would permit greater control over the prices of imports and give the government some power to insure that essential economicsuffer minimum disruption.

We believe thai as the effect of reducedtakes hold, the pressures to move in theof comprehensive exchange controls will prove irresistible. We also believe that exchange controls would be only the first step toward Increasedintervention in the economy; indeed, other Internal controls would be necessaryystem ol exchange controls to work elfectively.the result wouldajor change in current


economic policy, and an economy chaiacJrriAcdonsiderable degree of government control over output, prteei, and foreign trade.

The gloomy economic outlook portend*and more widespread dissatisfaction with tho military governmentrelatively lowwelfare measures arc unlikely to suffice to stem discontent among the poorer classes, but they will cause some resentment amongprincipally the middlewill have to foot the bill and endure further belt tightening.the government probably will move against thc individual* and economic groups thai manybelieve have been guilty of profiteering and other economic abuses. This will alienatewealthy interests that have been among thc govern mcnt't stau richest supporters.

The government wig be sensitive to tho limits of popular tolerance for hardship and will try to keep discontent below the flash point. The possibility of miscalculation is ever present, however. Themay be overestimating its popularity by giving too much credence to questionable indicators such as public opinion polls. No one can say withhow much Chileans will endure before anger and frustration overcome fear of open protest. Much will depend on ihe extent, mtensity, and duration of the economic downturn.

The effectsurtailment of imports would be felt gradually as oxwiestic inventories arcand would not reach their full extent until at least six months after imports were cut back- The duration of the curtailment would depend prirtci-pally on what happens lo world demand for copper and to copper prices, and thus on events largely beyond Chile's control. Economic recovery In theilium wnl ever.really hjv.usi'ivr effect, but copper production and prices willbe slow to recover because of large world stocks and excess production capacity. Thc key factor will be the interval between tho full Impact of curtailed Imports and significant increases in Chilean export receipts from copper. The greater this interval, the greater the chances that thegovernment will be faced with continuedproblems and significant popular unrest.

Over ibe next year or so the government will probably have to deal with scattered manifestations of discontent, such as work stoppages and relatively small, nonviolent demonstrations. Thc government would react defensively- with suppn-wtvc measures that wouldcould evenfledgling trendess repressive style of nde.

We believe that thc chances of massivea general strike, large and violent demonstrations, and thcsubstantial,on the order of one in four. The government's reaction ia this case is less predictable, much would depend on intervening events, on the scope andof Ihe unrest, and on the economic and other conditions of the time. The most likely outcome wouldhrowhack to the siege atmosphere of the early post-coup periodesort to harsh measures of repression. The use of such measure* against ordinary Chileans demanding redress ofgrievances would be certain to create seriuiis tensions within the armed forces. The protestors could include elements that now most stronglythc militarymiddle class and members of professional and trade organizations. The traumatic effect of having to eopo withpopular unrest could leadove from within the militaryhange in leadership,or both This could Include the replacement of Pinochet by another military leader and an attempt to reach an accommodation with non-Marxistforces. An actual return to the barracksbe completely exduded, but it would be by far the least likely outcome.'

international affairs

has long been viewed as aa broader struggle between contendingand political forces.istory of strong

1 Thn Depsrbrwnt of the Treasury eontlsleii (hnl the enUmite kavr* (he Impiewlon that drastic rontroU and wldripntad civil oncost may occur in llw -fairly nriii lulurr. Trenniry atjreat thai strong pressures fn dir. direction will develop over the next two yean if ihricr of cupper ronOnues lo keep Chile's balance of payments ia heavy ilrfinl. but believe* that the Botnrirnrnt ho> >ufficitut nViiliility in Ihe short run to postpone the need forn (roil


government which made It unique among Its Latin American ncigribon, It was seenodel for modemizatton andepresentative oVrnocracy. The Allende years broadened interest in Chile. Kuropranand Socialist parties followed closely the formation of Allendc's coalition, its die to power, and its stmgglo to socialize the country. Chile alsoero of non-aligned countries. It was viewedscourge'" ofhorn in the side of the "yankeeAllende'j formidable internationalspanned the Communist. Western, and Third Worlds.

ouster and death and tbefollowed provided fertile ground for ancampaign designed to discredit theand embarrass the US. The USSHcontinue lo lead the propagandameetings convened to condemnof Ihe fascist junta" attracta large number of countries. To many.replaced Vietnamcause celeb re "of CIA mvolverncnt in Chile havefor "solidarity" movements. Muchand misinformation about Chile haveby Soviet and Cuban media andexiles. All this has helped make Chileof an international pariaheavy cost topolitical and economicEuropean hostility to the Chileancomplicated the problem of renegotiatingdebt.

Human Rights

military government also bearsfor Chile's poor internationalof their initial preoccupation withChile's leaders failed to appreciatethat mass arrests, summary executions,incarceration of leading officiab of tbewould inflict on their country'srecently, there hasrowingwith its large economic and militaryiseavy priceesult of itsreputation.

A stable internal situation has enabled the government to relax Its security controls and to deny credibly any capitulation to foreign pressure. The prospect now is for further progress on freedom for political prisoners. The return of guarantees of due process for individuals, however, willengthy affair.

The prisoner release and exile programlast year was slow to get off the ground-but has begun to acceleratebe prime beneficiaries thus far have been those detained but not formally charged. The program has beento include persons tried and convicted, mostly for violations of the arms control law. The total number ofaboutshould shrink substantially this year, although some personsoo dangerous even for release into exile may be detained indefinitely. Seventeen of therominent figures of the Allende regime originally imprisoned on Dawson Island remain in custody. Guidelines on the treatment of prisoners have been laid down and some punishments have been dealt out to violators. There ore also new rules calling for prompt notification to tbe families of detainees and requiring that within five days of arrest prisoners be charged, released, or officially detained without charge under the state of siege

his is not to say that the total eradication of abuses is likely soon. The authorities in Santiago remain sensitive to the need for maintaining tight control over possible threats from elements of the Chilean left, and the junta itself cannot fully police or control the action* of tho security agencies. The military firmly believe that they foiled plans by extremists to massacre the officer corps and other

' As ofersons had been tried andby military tribunal* for various offenses including arm* control law violations and acts ofand were servingersons were inIndicia! processing,etainees were being held without charge under the stale of seloe,otalpolitical" prisoners. Tbe numbers in each category arc sub-feet to constantome people air Released, others detained, and still others convicted. Althoughorne inconsistency In the government prisoner statistics, wethese figures are roughly accurate.

Wc estimate the maiunum number of persons in custody at any one time since3 tn be

Opponent! of Allende and that groups like the MIR would mil do so if given the chance. In the final analysis, dissidents will continue to be handledanner commensurate with the threat they are thought to pose, and security considerations will take precedence over concern with Chilesimage.

prisoner release* have helpedimprove Chiles international standing andlikely to be some further progress asthe military takeover fade and internalare gradually relaxed. But Chile'sprobably overestimating how far this canBecause of Chile's poor image, theits critics will easily tie sustained by theof occasional abuses. Moreover, theinternational concern with Chile is shiftingto tbe restoration of due processrights, areas in which tbe junta isdisposed to move in the near term. Thecontinued criticism and harassmentsources, but it will continue toand frustrated over the failure ofopinion to be satisfied. Chileantheir critics will never be satisfied couldon civil rights.

Peru and Other Neighbors

* An iDietitency neoaoTinrhiin eetkaate* that hoaolroes between FVra and Cbflt are itnlssah-tbe aeal year or two. Fatfull discussion, see:, Fir. end CM* rurwsrssfneni of fhe folesmd for

Chiles chief foreign policy goals ate toits International isolation, gain respectability and acceptance, and secure moral and material support. Its principal foreign policy problem is its concern over the threat believed posed by Peru, with its rapidly improving military capabilities. This concern underlies much of what Chile Is doing to improve its international position and itsrelations.

Chilean military men are convinced that their Peruvian counterparts plan to avenge Peru'sat the hands of Chile in tbe War of tbehey also believe that Cuba and the Soviet Union, for reasons of their own. arcPeru to do so. Chile does not expect Pern to be ready to translate its revanchist dreams intountil late this year. In the meantime. Chile will continue to reinforce it* northern troopmake further defensive preparations in the border area, and desperately seek arms to defend itself from thc threat posed hy Peru's new Soviet tanks and other modern military equipment.

the Chilean perspective.ounterweight to neighboringource of support against an ideological ally on manyodel ofilitarycan achieve. Brazil did little to concealover the end of Marxist rule lnii has not become the large source ofeconomic aid that Chile had hoped for.Brazilian sympathy and support are

continues efforts to wooaway from its traditional alignmentby exploiting La Paz's obsession withaccess to thcyear break inwas endedeeting betweenPinochet and Banzer in February. Chileto lie considering plans to impart someinlet national status to the northern |iortArica. The purpose is lo accommodateto give Bolivia and othertake in deterring Peruvianwill object strenuously tochemeinvolves territory that once belonged tomight threaten to block it by force,of9 treaty between Peru andtreaty prohibits either side from cedingarea territory dealt with in the treatythe other's advance consent. The US wasparty to that treaty but did help arrangeand never objected to Inclusion ofthat disputes over its interpretation,resolved by Peru and Chile, would bethc President of thc United States. Becausethe US could be drawn into the dispute.


he perceived threat of conflict with Peru heightens Chilean concern over its long eastern flank. The government places great importance on matntaiiLing good relations with Argentina. It is pleased that Buenos Aires Is cracking down im Chilean exiles, but renuiins concerned over Ihe long-term prospects for Argentine stability.

Communist Connections

hile's inability lo procure arms fromsuppliers may lead to .some seeminglydevelopments. The government has taken pains to emphasize that its anti-Communism isomestic matter and that it seeks good relations with all who refrain from meddling in its Internal affairs. The message was mcunt for China and Romania. The government takes some prtde in its amicable relations with thesecountries, and has no ideological hangups

about developing closer ties. Chile is seeking 1

agreement to utilize economic credits offered to the Allende government.

Relations with the US

hilean leaders failed to recognize thethat would lie produced in the US by their repressive policies, and are keenly disappointed that their efforts to improve relations with the US have availed them so Kttle. The military'moved rapidly to rectify the damage towith the US suffered under Allende.settlements with the three nationalized US copper companies and ITTriority item in Chile's effort to oVmonstrate that it bad rejoined the ranks of responsible nations. It has also made strong efforts to meet its international financial obligations, particularly to the US.

ifficulties faced in obtaining US armsore point, particularly in liglit of continuing US sales to Soviet-supplied Peru. The Chileans are especially hurt and frustrated because they believe that the ouster of Allende not only saved Chile, butlow to international Communism for svhkh the entire free world, especially the US, should be grateful. Chilean resrntmcnt over the failure of the US to give it more arms is causing an clement of bitterness toward tbe US to surface, particularly among military officersndochina have added lo doubts that the US can be counted on to help its allies defend themselves from Communist-lnspircd aggression.

he Chilean reaction to the severe USon military aid has so far been restrained, for the government considers the US Its natural ally and most important political and financialChile's desire for good relations with the US is tempered, however, by wariness of contrasting too dramaticallyincreasing Latin American assert iveness in individual and collective dealings with the US. An overly deferent attitude toward the US would rebound against some of Chile'sefforts in the hemisphere ami rlvrwhcre. It also would set back attemptsegainas part of the less developed Third World.

Chile thus welcomes US initiatives toward Latinas the newhelp counter pressures from some Latin nations for the use of tactics of confrontation. Chile will want to cooperate with the US on many hemispheric issues, but Santiago will be careful to avoididentification with US positions and will not he inclined to lobby for them. In fact. Chile can be expected to monitor Latin attitudes closely and to join, albeit io some cases reluctantly, any strong Latin consensus in opposition to the US. If, foronsensus developsjitineconomic organization which excluded the US. Chile would probably join it.

Chile's desire to stay in tune with Latinprobably extends even to hemispheric policy toward Cuba. The military government despises the Castro regime and does not want to see the OAS sanctions lifted, but it would be reluctant to press bard for their retention in the face of an OAS consensus favoring lifting the sanctions Chile, of course, would not move to reestablish ties with Cuba even If the sanctions are lifted.

hile is actively weking privateiberal new investment Uw and hopes that US interests will make major new

mrtrtirrits. Potenlial invest on have been cautious, however, because Santiago has been slow to fill In the details of itt new foreign investment statute. Chiles economic difficulties are likely to damage the climate for foreign mvestment. Moreover, world economic trends, especially declining raw material prices, couldource of friction between Chile and the US. Chile alreadyember of an international copper cartel. Chiles Third World credentials may be tarnished politically at present, but it remainsroducer oi rawwhose vital interests could push it intoalignments potentially at odds with the US.

International Ouriook

rnoborul defenriveness will probablygive way to more rational appraisals of national interests in tbe shaping of Chileanpolicy. Chile has already stopped trying to match Soviet and Cuban invective in mternahoruil forums. There are indications that civilianswill return to replace military officers in the foreign service.

Peru will remain Chiles foreign affairs pre-occupation despite frequent and effusiveof mutual friendship. The search for sigriifi-cant quantities of modern arms will continue until the Chilean military is satisfied that it can defend its country's northern border.

The ability of the US to influence the Chilean governill decrease- as economic ties loosen and If the unavailability of US arms Is prolonged. Chilean cooperation on international issues ofto the US but not to Chile will be aChilo will become less inclined to value, almost automatically, the maintenance of optimum relations with the US over other considerations, particularly if it considers that the US is insuffi. csently helpful in the solution of its seriousproblems. These processes will accelerate if thereignificant breakthrough on armsfrom other sources. Barring, however, the unlikely discovery by Chileountry willing and able to replace the USolitical andpartner, any cstranRmsr-nt will remainlimited.

Original document.

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