DOC CONCERNS PRESIDENT FREI AND THE HIGHEST LEVELS OF THE ARMED FORCES REMAIN U

Created: 10/14/1970

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SITUATION

A. Military

1. President Frei and the highest levels of the Armed Fore remain unable to pull themselves together to block Allendc. Even though Frei and the military arc not enthusiastic about turning the government overarxist, thevf* tion for st<

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B. Economic

1. The economy continues to deteriorate slowly and without dramatic impact. Some middle and upper class Chileans areto Argentina and oOier countries. eavy foreign exchange demand has caused the Central Bank to cut tourist allowances in half, and upward pressure on black market rates bas resumed. French and British business interests, however, have signaled their intention to conduct business under AUende byending financial plans before thr Congressional run-off,

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Political *

1, ALLENDE

a. At the recent PDC junta, Allendc received thendorsement on condition that he agree to aamendment guaranteeing democratic freedoms. The PDC national council and the UP national coordinating committee met and promptlyonstitutional amendment which was submitted to the lower house and will probably he passed this week. This constitutional reform package includes guarantees for: he right of political parties to organize and use publicly-ownedreedom ofreedom ofreedom ofreedom of movement in and out ofreedom of public assembly;he preserva fionrofessional Armed Forces .

b. Since the PDC junta, Alle^de has attempted to re-duce frictions within the UP and improve his image abroad. He has reacted to international press pressures bythe establishment of committees in foreign capitals to offset adverse criticism of the UP and himself. At the same

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