THE CHILEAN SITUATION AND PROSPECTS

Created: 10/3/1963

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LBJ LIBRARY Mandatory kc Case#NLJ. Document #

NATIONAL INTELLIGENCE ESTIMATE

he Chilean Situation and Prospects

Soli-y the DIRECTOR OF CENTRAL INTELLIGENCE

Concurred in by ffie UNITED STATES INTELLIGENCE BOARD Ai Indicated3

DISSEM

The following intelligence organization! participated in the preparation oi thit estimate:

The Ctrnrrol IrittJSgenot Aaency ond me inreHigeeca onjaruzatioa* of meof Srota, Doi'onm, me Army.Navy, the Air Force, and NS*.

Concurring; '

Director of Intelligence and Research, Daporftnsmt of Stole * Director, Defense Intelligence Agtncy

Assistant Chlsf of Slot! for Intelligence, Department of thaChief of Naval Operation*epartment of theChief of Staff, Intelligence,

Director" of the Natlonol Security Agency

'y'k

Abstaining! . :

The Atomic Energy Commission Repraientariva to the USIB, and the Assistant Director, Fedaral Buroau of Invalidation, the svbject being outside of thoir jurisdiction.

This material contains Informationfloilorioi Dtfuruo of the United States within the mcan:n0 of theSC,, theor revelation ot wKicmonnor to an unauthorized person fs piohlblled.

NATIONAL INTELLIGENCE ESTIMATE

The Chilean Situation and Prospects

TABLE OF CONTENTS

Page

THE 1

CONCLUSIONS 1

I. THE SOCIAL BACKGROUND 3

IL THE POLITICAL TRADITION AND 4

IU.4 PRESIDENTIAL 1

IV. THE ECONOMIC 8

V. FOREIGN RELATIONS13

VL CONTINGENT POLITICAL PROSPECTS14

ANNEX A: Political Organizations and Pressure: The Armed Forces and Internal23

THE CHILEAN SITUATION AND PROSPECTS

THE PROBLEM

To estimate the situation and prospects in Chile withreference to the4 presidential election.

CONCLUSIONS

ongstanding tradition of respect fororder and civil liberties. It has accomplished apolitical evolution by electoral means. Its human andresources are adequate toecent living forgrowing population. Nevertheless, for half thereal wages have been decliningnd aof the population is ill-housed, ill-clothed,S)

increasing popular dissatisfactionteadily leftward political trend. In theelectionalvador Allende, the nominee ofof electioninor candidate diverted fromsmall part of the leftist vote. These election returnsthat4 presidential electionovernment under strong Communist influence,control. (Para. 7)

congressional and municipal electionsthat the leftward trend in Chile is continuing, butpresent beneficiary of this trend is not FRAP, butChristian Democratic Party. This hitherto minoris attracting the votes of frustrated reformistslittle hope in tho traditional political parties and areby the communistic tendency of FRAP. (Para. 9)

deoalition of the Communist and Socialist parties.

outcome of4 presidential election cannota year in advance. The political situation isAllende's candidacy now appears less dangerous thanThe campaign of Duran, the candidate of thethe traditional parties, has failed to gather momentum.showing, Frei, the Christian Democratic candidate,to be the leading contender.

Duran should be elected, the Chileanand performance would remain much as they haveAlessandrt. The government would profess reformistbut the effectiveness of its reform measures wouldby its need to placate various vested interests, Freito transform the economic and social structure ofhe would be resisted by the vested interests. )

through the defeat of AUende, the CommunistsSocialists should be frustrated in their once-livelyof achieving power by electoral means, theprobably would not turn at once toThe Carabineros and the military would almostbe able to cope with any attempt at either urban orThe Communists would prefer to preservelegal status and bide their time, trusting thatpolitical influences will continue to prevent effectiveand that the cumulative frustrations andthe masses will eventually bring them to power.)

I. THE SOCIAL BACKGROUND

Chile's rapidly growing population now numbers about eight million. Racially and culturally, it ia one of the most homogeneous in Latinboutercent of the population are at leastRoman Catholic. Aboutercent of the adult population are literate. Three-fourtha of the people live in the central one-third of theertile arealimate like that of California. (Seeboutercent live in urban communities. Almost allin the money economy.

Chilean national unity la Impaired, however, by strong classThe upperlandholders, and commercial and industrialto the pattern of conspicuousfamiliar elsewhere In Latin America. It Is able to maintain this style of living in part through the avoidance of direct taxes. These magnates have had to share political powerapidly growing middle class, one of the largest in Latin America, now aboutercent of the population. Within this middle class there are divergencies of interest between independent professional and business men on the one hand and white collar employees on the other. These politically effective social elements have defended and promoted their respective Interests without much regard for the generally deplorable lot of the lower class.

Chile's regressive tax system and chronic Inflation have borne heavily upon theesser degree, upon the white collar employees of the lower middle class.0 the real wages of unskilled and unorganized workers have declined. Although some organized workers, such as the employees of the US mining companies, live relatively well, an estimated half of all industrial workers are Ill-fed and ill-housed. The employment and housing problems are rendered increasingly acute by the high rate of population5 percent per annum) and by the migration of peasants to town ln search of economic and social betterment.

ercent of the population) are or predominantly Spanish stock, but, except In trie upper class, moat have some Indian admixture. The only considerable group of unasslmllated Indians are the Araueanlans of south-central Chile, who were not finally subduedn the same general area there isonsiderable native-born community of German origin and culture.

II. THE POLITICAL TRADITION AND TREND :

Chileongstanding tradition of respect for constitutional order and civil liberties. Resort to force in politics has beenlection results are normally accepted. Consequently, it haa been possible toignificant political evolution by electoral means. In contrast to the executive domination characteristic of most Latin American countries, in Chile the legislative and judicial powers are respected andighly competent national constabulary, the Carabmeros, is normally able to maintain law and order without the Intervention of the military.'

The upper class monopoly of political power was broken by the presidential electionut the political predominance of the middle class was not consolidated until the. In the electionshe largely middle class Radical Party won the Presidency with the support of the Communists and sometimes with that of the Socialists as well. This period of Radical administration illustrates the Chilean adage, "Elect with the left, rule with thence elected, Radical Presidents usually followed moderate policies and often appointed conservatives to cabinet positions. The Radicals enlisted conservative support for their program of rapid Industrialization by tacit agreement not to press lor agrarian reform. The Communists received three cabinet positionseward for their support in the electionut, when the Party proceeded to foment industrial and agrarian unrest, the Radicals combined withto pass legislation outlawing it. In general, as upper middle class Radicals have prospered, politically and economically, their interests have come to coincide with those of the upper class.

The Radicals' program of rapid industrialization failed to live up to expectations, and the distortions which it introduced into the economy resulted in uncontrolled inflation. Consequent popular distress and dissatisfaction defeated the Radical candidate in the presidential electionhe winner of that electionationalistic and demagogic "strongman" without party affiliation, General Carlos Ibanez delhe voters who elected him evidentlytrong patrdn who would enforce order and relieve distress without reference to any ideology. During Ibaflez' administration, however, real wages con-

'escription of the principal Chilean political organizations and pressure groups, see Annex A.

generalization is not true for the. which was marked by disturbances attributable to economic dislocations and to the strains Inherent in the transition from upper class to middle class political predominance.

ummary description of the Chilean armed forces, see Annex B.

the legal proDrleUes were observed, Ibafieis had ruled Chile asa military, first as Minister of War, then aa elected President.

tinued to decline and unemploymenterious problem In their disillusionment and despair, lower class voters began to turn to the ideological left for salvation.

Leftist candidatesajority of the popular vote In theelectionalvador ADende, the Socialist candidateeftist coalition Including theailed ot electiona minor candidate diverted frommall part of the leftist vote. This fortuitous circumstance permitted the conservativeJorge AlessandrV to win the Presidency. Nevertheless,8 election returns foreshadowed the possibilityoalition including the Communists might eome to power by electoral means

In the face of this threat, and In keeping with his campaign promises, Alessandii has striven to increase production, reducecurtail Inflation, and carry out moderate agrarian and tax reforms. To obtain needed congressional support, he took Radicals into his cabinet; they stipulated that sufficient reforms must betoood recordadical candidate to run on in the presidential election The administration's reform program,

THE COMPOSITION OF TEEenate Mats, distributed as shown in parentheses below, andseats will bo subject to election ln Uareh

ConaervaUra

Liberal 10

13

Christian 4

National DernocrBllo

People'a Vanguard

Communist 4

Independent t

48

1 The Frenln at Accldn Popular (FRAP). Bee Annex A.

'Although tho candidate of the Conservative and Liberal partial (teelessandrlood reformist name. Hit Liberal father had been Chile'sproponent of reform, twice elected to the) with Radical support.

'The resignation of the Radical cabinet members Ln3 will reduce the pressure for reform within the Alessandrl administration. Although tbe Radicals remain disposed to support further reforms, not much more Is likely to be accomplished before4 election.

however, has been hindered and watered down by the resistance within the government coalition, whose controlling members are not by nature enthusiasts for reform. Although some progressive measures have been adopted, the administration has not accomplished enough to arrest the leftward trend ln Chilean politics.,

he congressional election1 and the municipal elections ln3 have shown that the leftward trend in Chile is continuing. The municipal elections show also, however, that at present the principal beneficiary of this trend Is not FRAP, but the Christian Democratic Party (PDC). In the Chilean political spectrum, this reformist offshoot

Democratic Front (FD)

Radicals (PR)

Liberals (PL)

Conservative* (PUC)

Democrats <PD)

Totals

Popular Action Front (FRAP)

Communists (PCCta)

Socialists (PS)

National Democrats

(PADENA)

People's(VHP)

Totals

Christian Democrats

Independents

The Democratic Front was not yet operative in1 elections but the totals of the parties now comprising it are listed together for comparison with3 totals.

' In Chile, as elsewhere, municipal elections are normally dominated by local factors.owever, the national party organizations fought them on national political Issues,emonstration of party strength in anticipation of4 presidential contest. The estimatetrong trend toward the PDC does not depend solely on3 returns, but is confirmed by other current Indications.

'Partido Democrdttca Nacional. Bet Annex A.

of the Conservative Party stands generally to the left of the Radical Party, but it is explicitly anti-Communist, Its present emergence as the strongest single party In Chile has coincidedecline in the voting strength of the Conservative and Liberal parties, and also ofhe non-Marxist member of FRAP. The PDC is increasingly attracting the votes of frustrated reformists who see little hope In the traditional parties and are antagonized by the communistic tendency of FRAP. This trend is likely to continue, and to make the Christian Democraticormidable contender in the presidential election

III.4 PRESIDENTIAL ELECTION

Althoughresidential election, lo be held In September! Isear off, the three prmcfpal candidates havo already been designated. They are Senator Julio Durdnadical, for the Democratic Front fa coalition of the traditional politicalenator Salvador AUentUocialist, for the Popular Action Frontnd Senator Eduardo Fret Montalva for the Christianinor candidate, independent rightist Jorge Prat Echau-rren, is also ln the race.

ealthy lawyer and financier. Ills nomination was dictated by the inner circle which controls the machinery of the Democratic Front parties. Although his platform professes reformist purposes, he Is hardly crediblehampion of reform. For this reason, lie has little appeal for independent voters, or for the reform-minded elements of the Democratic Front parties. Moreover, many of the Conservatives, an explicitly Catholic party, may be alienated by the fact that he wasason. For these reasons, many voters who would otherwise have supported the Democratic Front are likely to switch to the other candidates.

Disgruntled elements within the Democratic Front now privately contend that Durin cannot win and that President Alessandri should be substituted for him as the Fronts presidential candidate. The trouble with this proposal is that the constitution does not allow an incumbent President to succeed himself. To amend this provision in the midstresidential campaign would antagonise many voters. Even if the substitute were not Alessandri, but, for example, the generallyformer President Gabriel Gonzalez Videla, the displacement of Duran would antagonize his supporters and might destroy the Front. It could spilt the conservative voto between two rival candidates, ensuring the defeat of both. In addition, because the Communists hate and fear Gonzalez Videla, who outlawed themhey might decide to support Frel covertly if Gonzalez Videla became the Democratic Front candidate. For these reasons, and for lack of an adequate substitute candidate, the party managers are presently disposed to stick with Duran.

s running for the third time as the nominee of FRAP.oderate Socialist, Allen de.andidate, hastrongly pro-Castro and pro-Soviet line. Some of his Socialist followers are more vehemently revolutionary than are the Communists. (The Communists' present policy, called the via padflca, is to pursue their ends by strictly political means, with special care to avoid thewhich they suffered8) Allende's identiflca-

tion with Castroism and communism is likely to antagonize somevoters and to cause further defections from FRAP. Already most members of PADENA have broken away, two groups declaring themselves for Frei and another for Duran. On the other hand, Allende is an established political figure with considerable personalactor not involved In the municipal elections. Moreover, he may gain the support of leftist Radicals unwilling to support eitherlutocrat, oratholic,

ell-known and attractive personality, is certain to benefit from the existing disarray within the Democratic and Popular Action fronts. Although his party won onlyercent of the vote in the municipal elections, as compared withercent for the FRAP parties anderoent for the parties of the Democratic Front, the tide appears to be running strongly in his favor. He will probably outrun Allende in the presidential election. He may even be able to surpass the vote which the Conservative, Liberal, and Radical party machines will be able to deliver for Duran,

trong rightist without organized party support. He is likely to attract votes which would otherwise have gone to Duran, or to Frei. Prat recognizes that he might thus bring about the election of Allende; he says that, if this result seems likely, he will withdraw his candidacy. In that event he would probably throw his support to Frei, since he supported the PDC In the municipal elections.

The Chilean constitution provides that, if no presidential candidateajority of the popular vote, the Congress (the Senate and Chamber in joint session) shall choose between the two leadingThis choice normally devolves upon Congress, as lt almost certainly willitherto, Congress has always chosen thewith the greater popular vote. The present Congress, which will hold office until the congressional elections composedepresentatives of the Democratic Front,epresentatives of FRAP,hristian Democrats, and two Independents. It would almostprefer Duran, but would probably elect Frei if he were to lead in the popular vote. It would not be likely to elect Allende unless he were to lead the polllear margin.

IV. THE ECONOMIC SITUATION

political future will dependery considerablethe ability of its economy to increase output and productivityto provide adequate levels of living for the rapidlyChile's basic resources are adequate for this purpose,if they are more rationally utilized, and if thereore equitable

distribution of the national income. Since the war Chile's economic growth has lagged behind much of the rest of Latin America.0NP increased by an averageercent per year, but this represented onlyercent increase per capita.the real wages of urban blue collar and rural workers declined over the same period. These workers and their families make up somewhat more than half of the Chilean population.

Chile's extensive natural resources include the world's largest known deposits of nitrates and medium-grade copper ore, and largeof high-grade iron ore. The country has sizable deposits of medium and low grade coal, but lacks cokingarge but little exploited hydroelectric power potential exists near the largestof population. Petroleum reserves ln the South areadequate to meet domestic requirements. The amount of arable land. If properly utilized, is more than adequate for Chilean needs. The country has extensive forests, and its rich fishery resources have barely been tapped. The largely homogeneous populationelatively well-developed educational system provide human resources that are also considerably above the Latin American mean.

Many of Chile's economic problems stem from the shortcomings of itsarge proportion of the best Chilean agricultural land is organized in large holdings; much of it has been underutilized. At the other end of the scale there are many tiny properties inadequate to provide moreare subsistence Uving. Agriculturehole has suffered from technical rjackwardness. Inadequate investment, and poorly developed distribution and marketing facilities. As late as thehileet exporter of agricultural commodities, but now it must spend an Increasing share of its foreign exchange earnings on agricultural imports, over half of which consists of foodstuffs that could be produced domestically. While agriculture accounts for onlyercent of GNP, it employs aboutercent of the country's labor force. Thus labor productivity is low and the cash income of the rural laborer is substantially below the national average.00 agricultural production grew at an average rateercent, less than the annual average population growthercent.

Industrial development has had the solicitous attention ofChilean Governments for most of the present century, and has8 received the principal emphasis in Chilean economic policy. The objective has been to provide employment opportunities for workers who could no longer be absorbed in agriculture, and to help conserve foreign exchange. Industry was assisted In various ways, including high tariffs, easy credit, and exchange policies favoring imports of raw materials and foodstuffs for the expanding industrial labor force. Favoritism for

dustry intensified the urban-rural imbalance and increased pressures from other sectors of the Chilean economy. Neglected agricultural Interests, penalized by low farm prices, fought to maintain their relative freedom from taxes. Lacking incentives for investment in farmlarge landholders Increasingly clung to unproductive estates primarilyedge against inflation. Organized labor secured periodic wage adjustments to compensate for steady rises in the cost ofdue in large part to increased food costs.onsequence, industry was allowed to raise its prices to re-establish working capital and profit levels reduced by increased wage bills. The result of this combination of the drive for industrialization and concessions to pressure groups has been unbalanced growth, declining productivity, and inflation that has ranged fromo as high asercent per annum.

There hasonsiderable growth ln industry since the war and lt now accounts for over one-quarter of ONP and providesercent of Chile's consumer goods. Industry has not. however, realized the hopes originally held out for it. It is heavily dependent upon imported capital equipment and raw materials, and, far from relieving the balance of payments, hasontinuing burden upon lt. Because much of Chilean Industry is monopolistic and inefficient, it is handicapped in competing for foreign markets, and Inflates the internal price structure. The limited size of the domestic market, so long as it is coupled with depressed living standards for nearly half the population, makes lt difficult for industry to achieve economies of scale, ln theseChilean industry has virtually exhausted the opportunities for substituting its own products for imported consumer goods and lacks the capital and know-how to compete with imported heavy industrial products. Industry has not been able to absorb moreraction of the annual additions to the labor force,

The inability of industry and agriculture to provide employment opportunities for the growing labor force has led to the developmentarge service sector, which accounts for overercent of GNP and about one-third of the labor force. Commercial activities make substantial contributions to ONP, but the balance of the serviceparticularly government andeservoir for surplus labor and is highly Inefficient. Successive nationalcommittedolicy of full employment and extensiveservices, have increased public expenditures torowing bureaucracy and other service sector activities. Althoughas well as unemployment have been reduced by the upturn of the economyoth persist as serious basic problems.

Inflation hasajor Chilean problem since the last century. It became particularly acute after World War II, despite recurrentby the government6 to curb it. The expanding role of the government in the economy hasajor cause of inflation as

revenues, largely dependent on foreign trade, have failed Io keep pace with the rising level of government expenditures. Inflation has been fed by easy credit policies and the success of politically Influential groups in repeatedly securing relaxation and subsequent abandonment of stabilization programs. Other basic causes of inflation have been the slow growth of Chileanong term worsening of the terms of trade over the pastears, and an official policy of annual wage increases to offset rises in living costs. In the yearhe cost of living Index roseercent, and even sharper rises have occurred during the past decade.

The persistent balance of payments problem has been aggravated rather than aided by efforts to protect both agriculture and Industry and by substantial flights of capital.esult Chile has not been able toizable foreign exchange reserve to cushion the impact of sharp variations in earnings from mineral exports, which provide overercent of export Income. Despite continued expansion in the output of tne mining sector, net deficit on current account6 million05 million2 the Alessandri administration was able to reduce the deficit5 million by Imposing severe restrictions on imports and by devaluing the escudo in October. Large-scale foreign financial assistance has been necessary, however, toerious curtailment of economic activity. The US, thesource of outside assistance, has committed0 million8 in support of the present administration's programs.

Foreign private investment by Europeans and Japanese isbut US direct private investment0 million) accounts forercent of all foreign investment In Chile. The US investment is located principally ln mining and public utilities, activities in which foreign capital Is particularly vulnerable to political attack in Latin America. Because the mining industry Is Isolated from the main stream of Chileanin geographically remote areas and employing relatively fewhas made little contribution to localor the modernization of business outlooks and management. These companies are threatened by proposals for nationalization and are subjected to discriminatory treatment such as the new tax boosts which,aused the two big US copper companies to postpone plans for large new investments to expand production.

The Alessandri aclrninis tra tlon announcedyearplan which would need to be supported by an estimatedillion investment,3 billion of foreign capital. The plan envisages an overall annual growth ln GNPercent throughInvestment in various fields with particular emphasis upon economicports, power, Irrigation, and housing. The plan has been criticized for its failure to address itself to the basic

problems of rural-urban Unbalance, to take much cognizance of Chile's increasingly urgent social problems, and to provide for the self-help measures called for under the Alliance for Progress.

1 The IMF standby agreement allows drawings upillion In balance of payment* aidhe US aidillion program support loan fromIS million balance of credits payment from the Export-Import Dang;illion exchange agreement with Uie US Treasury Department

1 Thisoan of over SW million for the Inter-Amerioan Development Dank (IDBI; loan*illion from the International Bank for Reconstruction and Developmentnternational Development Association (IDA) loans) million; and Development Assistance Commission (DAC) country assistance3 million.

Chilean efforts, since2 to carryew stabilization plan essential toyear plan's success are being supported by the International Monetary Fund (IMF) and the US has provided financial assistance for bothuch of the substantial aid Chile has received from other official Western sources has also been committed during the Alessandriowever, Chile stillajor problem in financing its development program because of itsability to service additional external borrowings on conventional terms. At present over one-quarter of the country's free exchange earnings go to service existing convertible currency obligations,at close toillion. Debt service will0 million39 millionnd is manageable only because much of the new external assistance coming from AID and 1DB is on "soft" terms.

Under urging from the foreign sources of needed credits and from domestic advocates of reform, the Alessandri administration has initiated agrarian and tax reform proposals, in accordance with the Alliance for Progress, some of which have been passed while othercontinue to face serious congressional opposition. Thehas made considerable progress in housing and schoolwhich hasalutary social effect but does nothing to produce needed foreign exchange. It has not been able to correct the underuse of land, which would increase productivity and improve Chile'ssituation.odest agrarian reform law has been passed, its implementation has been impeded by the political power of the large landholders.

At present, the Chilean economy looks healthy, with sales,mining, construction, and agricultural output at high levels. This stems principally from the large budgetary and balance ofsupport from the IMF, Ex-Im Bank, and IDB, and developmental assistance made available by the Alliance for Progress. At the same time, the political-economic obstacles to growth and stability still Any government coming to power will have to contend with the

vested interests which control agriculture, finance, and Industry. These interests have successfully resisted much of the present government's attempts at structural economic reform, and It can be expected to fight strongly any more far-reaching encroachments on their traditional privileges. Elements of the Right have come to realize that inflation will not generate lasting economic growth and that some rationalization of the country's economic structure is necessary. Nevertheless, thecontinue to dispute with one another and the rest of the population bow far and how fast the reforms which would achieve this rationalization should be Implemented. The present government can be expected to pursue sufficiently disciplined fiscal-monetary policies,oken rate of reform enactment, to qualify for continued US and IMF support. But afterhe direction the economy will take will depend heavily upon the ideology of the new President, and hislack ofpushing through economic and social reforms.

V. FOREIGN RELATIONS

Successive Chilean administrations, including Aicssandrl's. have ln general sought to maintain close and cooperative relations with the US, the major source of new investment capital and the country's most Important single trading partner. Underlying this general policy,thereidespread nationalistic concern to assert Chile's dignity and independence in foreign relations. This nationalistic sentiment finds expressionendency to criticize US policies and actions, and to pursue divergent policies on particular occasions.

Many factors contribute to Chile's nationalistic sensitivity and its anti-US manifestations. The Communists, of course, and manyalso, do their utmost to foment and exploit such sentimentsln order to Impair US-Chilean relations. They attack as Yankee economic imperialism not only such targets as the US miningbut also the Alliance for Progress. But economic nationalism Is also characteristic of the Chilean middle and upper classes. The hitter, ln addition, resent the self-help and reformist terms of thefor Progress. Thereidespread tendency to consider that Chile's economic difficulties result from US control of copper mining, Chile's major export industry.

The status of the US-owned copper mining companies Is likely to continue to cause serious difficulties tn US-Chllcan relations. The Chilean economy depends heavily on the export earnings of these copper mines. Their development has been beneficial to Chile, andto their Chilean employees, as well as profitable to the investors. Nevertheless, there ia agreement across the entire political spectrum, from Communists to Conservatives, that the copper companies should be made to contribute more to Chile. The question is how to derive

more Income and employment from the industry. Moderates recognize that the companies already pay more taxes and labor benefits than any other enterprise in the country. Moreover, they know that punitive measures only discourage new company investment that Is needed to support Chile's Ten-Year Plan of Development. Only the most radical elements favor outright nationalization, for which Chile would not be able to pay promptly, if at all, thus Jeopardizing its international credit. An approach which has considerable support would be to "ChUeanize" the companies by Insisting onncorporation under Chilean law with Chilean capital participation;se of more Chilean managers and top-echelon technicians;reater government control over copper production and sales; andn increase in the amount of copper refined in Chile.

Although Chile gave prompt and unequivocal support to the US during the missile base crisis oft is one of the five Latin American countries that still maintain diplomatic relations with Cuba. The Alessandri administration defends this position on juridical grounds. Its chief reason appears to be fear of the strength shown by the pro-Castro FRAP in the presidential election8esire not to Inject such an emotional issue into the electiont has also found lt beneficial to exchange Chilean agricultural products for Cuban sugar.

Chile maintains diplomatic relations with only one othercountry, Yugoslavia, but permits the USSR, Poland,Hungary, Bulgaria, and Communist China Lo maintain small commercial or cultural (propaganda) missions ln Chile. Thisreflects the official and popular view that Chile must develop new trade wherever It can. Thereersistent popular belief that the Communist countries could absorb far larger amounts of Chilean copper. Despite the best efforts of these missions, however, Chile's trade with Communist countries so far remains negligible.

Chile's territorial aggrandizement at the expense of Bolivia and Peru during the War of theesidue oftension In Chile's relations with those countries. It is this factor which has rendered so intractable Chile's dispute with Bolivia over the waters of the Rio Lauca. Chile's relations with Argentina are normally cordial,inor unresolved boundary dispute.

VI. CONTINGENT POLITICAL PROSPECTS

outcome of4 presidential election cannot beyear In advance. The political situation Is extremely fluid, withrife within both the Democratic Front and theFront, and with an apparent trend toward the Christianwho, however, start from behind. The electoral campaign, asmay produce further political fragmentation and realignments,

or mayallying effect. In these circumstances, we shall briefly consider post-election prospects in contingent terms.

If Duran should be elected to the Presidencyhe Chilean Government's policies and performance would remain much as they have been under Alessandri, but without the benefit of Alcssandrl's personal prestige and sincerity. The administration would profess reformist purposes, but Its reform measures would be watered down by its need to placate various vested interests. It would be interested in economic development, and any accomplishments on that line might produce some social amelioration.

If Frei should be elected to the Presidency, he would be dependent, at least initially, on the cooperationongress not under his control. It is likely, however, that the same trend which had brought him to the Presidency would giveympathetic Congresshere is no doubt that Frei would strive to transform the social structure of Chile through the constitutional enactmentar-reaching agrarian reformteeply progressive income tax, and through Increased government planning and participation In the economy. Frei would be generally sympathetic toward the self help and social goals of the Alliance for Progress, but selective with respect to the participation of foreign private capital in Chilean economic development, He would move toward the "ChUeanlzation" of the US-owned mining companies. In all this he would, of course, be strongly resisted by the affected vested Interests.

If Allende were to be elected, he wouldostile majority in Congress, at least until the congressional electionn return for patronage, however, some Radicals might be Induced lo collaborate with him in Congress, The Christian Democrats also might support him on some issues.

In office, Allende would be likely to moderate his extremism, at least initially, in order to obtain Radical and PDC support and also to avoidilitary reaction. The military commitmenton-polltlcal role is not unconditional, as was demonstrated during. If Allende should impatiently attempt to override Congress, the military would almost certainly intervene to preserve constitutional order. If he should too abruptly seek to impose his personal control on the military establishment, there might alsoeaction. Otherwise, the military and the Carabineros would be likely to support the duly elected regime,

Despite the tactical moderation indicated above, an AUendewould be strongly nationalistic and therefore, in effect, antl-us. It would, oi course, endeavor to gain control of Congress in5 election and move administratively to gain secure control of

the armed forces as soon as practicable. It would seek to consolidate leftist and nationalist support byrogram of radical social reform and economic statlsm, and by Increasing demands on the US copper mining countries and other foreign Interests. In this lt could count on the sympathy of some Radical and Christian Democratic elements. In the name of the independent foreign policy, it would also seek to expand relations with Cuba and other Communist countries.

If, through the defeat of Allende, the Communists and Allende Socialists should be frustrated in their once-lively expectation ofpower by electoral means, they might consider abandoning the via paciflca and seek toroletarian revolution in Chile. The odds are against their doing so. Despite peasant grievances, there Is at present no significant potential for rural insurgency In Chile. The landlords and the Carabineros have the rural situation under closeThere la greater dangerevolutionary explosion ln the slums of the urban proletariat, but this too could almost certainly bo controlled by the Carabineros and the military.

In these circumstances, the Chilean Communists' post-election strategy would probably be to preserve their legal status and bide their time, trusting that conservative political influences would continue to prevent effective aoclal reform and that the cumulative frustrations and resentments of the masses would eventually enable them to come to power, by election or by revolution. In the meantime, the Communists would, of course, continue their efforts to exacerbate aoclal tensions In Chile and to disrupt US-Chilean relations.

It Is hardly likely that any Democratic Front administration could satisfy the rising popular demand for social reform. The political effect ol increasing popular dissatisfaction couldontinuation of the current trend toward the Christian Democratic Party, with PDC gains ln the congressional elections59 and the electionhristian Democratic presidentt is equally possible, however, that the increasingly embittered lower classes would turn to the far-left for leadership, as the Communist hope and expect they will.

ANNEX A

POLITICAL ORGANIZATIONS AND PRESSURE GROUPS I. POLITICAL PARTIES AND COALITIONS

A. Tho Democratic Front (rVenfe

The Democratic Front, composed of Chile's three traditional parties, the Conservatives, the Liberals, and the Radicals, was formally organized inn order to regularize the existing informal collaboration of those parties in support of the Alessandri administration and toingle joint candidate in4 presidential election. These traditional parties, originally formed to contend against each other, nave common Interests in opposition to the rising new parties of the Left and realize that they must combine to have any hope of coping with the leftward trend in Chilean politics. Because Radical participation was indispensable, the Conservatives and Liberals had to agree toa Radical candidate

Despite this community of Interest, there are tensions andwithin the Front, not only among the three constituent parties, but also within them. These tensions have been accentuated by theof the Radicals from the cabinet in

The Conservative Party (Partido Conservadorprimarily the landed aristocrats who ruled the republic in Its earliest years and still exercise great social and political influence, no matter what party is in power. They determine party policy. Tbe party's voting strength Is provided by their tenants. It polled II percent of the vote In3 municipal elections. Every member of the party is required toracticing Catholic.

The Liberal Party (Partidowas founded2 by aristocratic youths who were Inspired by the tenets of contemporary French liberalism and desired to modernize Chile ln those terms. It has come to represent primarily the well-established commercial,and banking interests, upper middle class professional men, and some substantial landholders. The party polledercent of the vote in3 elections.

The Radical Party (Partidowas founded2 by dissident Liberals advocating more radical political reforms. It became primarily the political vehicle of the rising middle class, although it includes also some elements of organized labor. It has developed the most pervasive party organization ln Chile, with particular strength

in the small towns, and was for years the largest single party in the country. It islose second, withercent of the vote in3 municipal elections.

Despite its elaborate organization, the Radical Party is noohesive political grouping. It is ledight-wing minority which controls the party machinery, but the bulk of the membership are centrists and theremall but vigorous left wing. The center and left-wing Radicals are uncomfortable ln coalition with the Conservatives and Liberals, but so far the party organization has held the Party together and there havo been no important defections.

Inasmuch as most Radical party functionaries are notwealthy, as are most Conservatives and Liberals, access toIs vital to the party. This consideration contributed to the party's decision to collaborate with the Liberal-Conservative AlessandriThe same consideration would move It toward accommodation with any other party inthe Christian Democrats, for example, or even with FRAP. Already there are some indications of Radical collaboration with FRAP to stop the Christian Democrats.

B. The Popular Action Front (Frenfe de Acc/onFRAP)

The Socialist Worker Party was organized2eans of proletarian protest against the status quo. From lt are derived both the Communist Party and Socialist Party. These parties participated with the Radicals In forming the first Popularhey formed the Popular Action Frontrimarilyevice which would permit the outlawed Communist Party to continue political activity, to the advantage of Socialistore recent adherent to the Front is the National Democratic Partyormed

The Popular Action Front, composed mainly of extremist elements, is far from harmonious. Although the Socialist party leadership, often seems more militantly revolutionary than the Communists, many Socialists have serious misgivings about close association with theon both ideological and practical political grounds, andbetween the two elements occasionally flare up. The Nationaladical, but non-Marxist, middle class party, have had even greater misgivings about political association with the Socialists and Communists.

he Communist Party (Partido Comunista dewas organized2ranch of the Third International. The party was severely suppressed during the Tbanez, reached the peak of its political influence In6 coalition with the Radicals, and was again. It has since regained strength, and

withembers tn Congress It Is probably the most influentialparty in South America.

The contrast between tlie political success which the party has enjoyed when pursuing popular front tactics and the suppression which it has suffered whenever It turned to subversive agitation and violence has led the PCCh toolicy called the viapursuit of revolutionary ends by peaceful political means. The party's overriding concern appears to be to retain its present legal status. It has refused to send members to Cuba for guerrilla warfare training, as the Socialists have done. It strongly supports the Soviet line in the Sino-Soviet controversy.

The Communist party leadership is of middle class origin; the party draws its support chiefly from industrial labor and lower middle class elements. There are estimated to be0 disciplined party members. The partyotes in3 elections, nearlyercent of the total vote. It was the only party except the Christian Democrats toerceptible gain in strength.

The Socialist Party (Partidois an amalgamation of socialist splinter groups formed3 following suppression during the Ibafiez dictatorship. The party is beset by strident factionalism. One leader, Salvador Aliunde, the presidential candidate, is outspokenly pro-Soviet and pro-Castro; another, Raul Ampuero, the party secretary, is unenthusiastlc about Castro and frequently critical of the USSR. The party membership and political support are drawn from the same elements as the Communists'; there Is latent competition between the two parties on this account. Separation of the Socialists from thewould Isolate the latter and reduce Cornmunist capabilities. The Socialists polledercent of the vote in3 elections.

The National Democratic Party (Partidorganizeds an agglomeration of radical middle class elements that had supported Ibanes for the presidencyADENA's bitter opposition to the traditional political parties brought It into the Popular Action Front, but its members feel increasinglyin company with the Allende Socialists and theespecially considering the party's losses in3 elections, in which lt polledercent of the vote. Since then most of the party's members have defected. Others may follow suit, or the partyhole may withdraw from FRAP.

C. The Christian Democrats (Partido Dem6erata

ome young Conservatives, having failed to persuadetoore progressive program based on the papalsplintered off toatholic party with someorganized labor. ther Conservatives, inspired by the con-

temporary Christian Democratic movement in Europe, also broke away. The appeal of this second group was primarily to middle class Catholics. The Christian Democratic Party was formed by the fusion of these two movements

The new party occupies the middle ground between theof the traditional parties on the right and the extremism of FRAP on the left. Itredibly reformist party, buthristian and democratic context. Its phenomenal growth in recent yearsthe strong attraction of this position to Independent, reform-minded voters who see little hope in the traditional parties and are repelled by the communistic tendency of FRAP. In3 election the PDCo become the largest single party in Chile. This trend Is likely to continue as the partytrong attraction, not only on independent voters, but also on the reform-minded elements of the traditional parties and the more moderatein FRAP.

The PDC's program callsevolutionary transformation of Chilean society, to be accomplished through constitutional processes. Itore far-reaching agrarian reform than that proposed by the Alessandriedistribution of wealthteeply progressive income tax, and Increased government planning and participation in the economy. It welcomed the Alliance for Progress with enthusiasm, but is cool toward US emphasis on the role of private capital. As do all other Chilean parties, it prefers intergovernmental financial assistance to foreign private Investment. The PDC does not advocate nationalization of the US-owned copper mining companies, but calls for their eventualeginning with localof all Chilean copper and more government participation in the deterrriination of copper sales policies.

II. OTHER ORGANIZATIONS EXERTING POLITICAL INFLUENCE

Interests. No matter what political party was ineconomic interests have continued to exert powerfulthrough personal relationships and through

a. The National Agricultural Society, foundeds composed by large land holders. It is by law represented on the boards ofof such public institutions as the Central Bank, the Production Development Corporation, and the National Labor Relations Board, The Society includes Liberals as well as Conservatives, inasmuch as success ln business is customarily demonstrated by the purchaseanded estate. Its influence is exerted against any change in the pattern of land tenure or any significant Increase In land taxes.

Central Chamber of Commerce, organizedsLiberal in political coloration. Il opposes statein the economy, resists wage increases as inflationary, andIncreased production as the cure for Inflation. It is lessthe Agricultural Society because there Isnited frontgroups regarding economic policies.

Society for Industrial Development, organizedstate Intervention in the economy to protect domesticto encourage foreign private Investments not competitive withIt includes Radicals as well as Liberals and was abehind the Radical program of rapid Industrialization,

Organised Labor. The Chilean movement Istrong political pressure group. Onlyercent of the labor force) are organized. Furthermore, the law discriminates between white collar and blue collar unions, imposing restrictions on the latter. The white collar unions have gained substantial benefits for their members through their association with the Radical Party. They have not been concerned with the interests of manual laborers. Lack of savings and the prevalence of unemployment have reduced the militancy of the workers in recent years and their willingness totrike call.

The political affiliations of most industrial labor unions haveindrance to labor unity and effectivenessressure group. Union leadership is more often used to serve party purposes than to advance the economic interests of the members. In consequence, the members are increasingly unresponsive to the leadership. For example, the Communists have captured "control" of the principal Chilean labor confederation,ut some members have refused to respond to Communist orders to strike. Nevertheless, the Communists are able to make political propaganda purportedly In the name of Chilean labor.

Student Organizations. All of the major political parties have formally organized youth groups; many current political leaders first achieved prominence as heads of university student associations. The oldest and most Important of these is the student federation at the University of Chile (FECh)hich was long controlled by Radicals or Communists.5 the Christian Democrats wrested control of the FECh from the Communists. Since then they have gradually gained control of the student federations at ChUe's seven other universities. While PDC-led student organizations occasionally criticize US policies, the strong anti-US animus which prevailed under Communistis no longer evident. The prevalence of PDC influence among the

'Central Unlca de Trabajadores de Chile, ostensiblyr-ganlzed workers.

' Federation de Estudtantes de Chile.

students has been an Important (actor in the support which the party has received from new voters in recent years.

The Church. Historically, the close Identification ol the Roman Catholic Church with the Conservative Party hasonsiderable anticlerical reaction among Liberals and Radicals, not to mentionand Cornmunists. Church and State were finally separated in Chileevertheless, the Churchervasive influence ln Chilean society.

Inevolutionary change in the attitude of the Church ln Chile was marked by the issuanceastoral letter in which the hierarchy, led by Cardinal Silva Henrfquez, cited the poverty and distress of the lower classes, charged the propertied classes with large responsibility for these conditions, and calledenuine reform of the social structure. The pastoral letter may not convert manybut it has tended to restore the credit of the Church among the general population and it may have had considerable bearing on the striking success of the Christian Democratic Party ln3 municipal elections.

Although the PDC is no longer an exclusively Catholic party (as are thet now has the support of anf the Catholic clergy. This clerical support may tend to alienate some potential recruits of Liberal, Radical, and Socialist antecedents, but on the whole lt will probably prove to be advantageous.

ANNEX B

THE ARMED FORCES AND INTERNAL SECURITY

The Chilean military forcea are distinguished in Latin Americaroud military tradition dating from the War of thend for continuing high discipline, morale, and military efficiency. Their equipment, however, Is ln serious need of modernization. The armed forces which they watch with particular sensitivity,tandard of comparison, are those of Peru and Argentina. To avoid the costs of rearmament, ln view of the urgent requirements of economicthe Chilean government occasionally proposes an arms limitation agreement under OAS auspices, but such proposals have met with no response.

The Chilean Army0 men; thend the Air. Primary responsibility for the maintenance of public order and internal security is assigned to theational constabulary0 men.

The Carabinerosighly professional force. They thoroughly patrol the country and are generally respected by the people: theof any insurgency would be unlikely to escape their notice and counteraction. Although fairly well equipped with small arms, they are somewhat hamperedack of adequate transportation and communications equipment,

Normally, the Carabineros have been able to cope with threats to public order and internal security. If and when situations arisethe intervention of the military, the Army assumes command. Although there is some inter-servlce jealousy between the Army and the Carabineros, their cooperation on such occasions has been reasonably good.

The rank and file of the Army Is composed of conscripts, but on entrance into service they are carefully screened for reliability. Recent and planned US-sponsored equipment and training programs areto improve the Army's counterlnsurgency capability. In the Airighter-bomberelicopter unit have received similartraining,

The Chilean military forces are proud of their role as the ultimate guardians of constitutional order and their corollary tradition ofin politics In support of party Interests. They would almost certainly uphold the authority of any duly elected government, unless.

In their judgment, the government itself had moved to subvert the established constitutional order. It is notable, however, that they did overthrow the constitutional governmentn circumstancesa radical departure from the previously long-established political normeneral economic collapse. Military intervention in politics can happen tn Chile, though not without strong provocation.

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