Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

400. Memorandum of a Conversation, Santiago, November 14, 1956¹

Santiago, November 14, 1956

PARTICIPANTS

• The President of Chile
• The Ambassador
• Vance Brand, Director, Export-Import Bank

SUBJECT

• Conditions in Chile in General

After an exchange of pleasantries in which Brand indicated his pleasure in being in Chile and the President indicated how pleased he was to have him here, Mr. Brand explained that the Export-Import Bank has been interested in Chile for a long time. He said that as Chile was a good client of the Bank’s and had received a number of loans from the Bank, particularly the large one to CAP,² the officials of the Bank liked to come and visit their good clients and to enjoy the famous hospitality of Chile. At the very moment Mr. Brand said that his engineer was in Concepción visiting the Huachipato plant with respect to a further application for a loan made to the Bank.

Mr. Brand then said that the Bank had been most encouraged by the first strong steps which the President and his Government had taken to control inflation and he hoped that the Government would continue to follow the same line and get the operation “back on the tracks”.

The President indicated that it was his firm intention of doing so, but that the road was a most difficult one. The President said there were two difficulties in Chile—social and political. When he took over office after the Radicals who had been in power for sixteen years, the Radicals had been granting labor’s every request. As a result nobody wanted to work, and there were strikes about everything. They would strike on the slightest pretension. However, after several major strikes which the Government had handled firmly, this constant threat of strikes had been eliminated and the social situation was under fairly good control.

The political one, however, was different, and Chile was like France in that there were far too many political parties.

Mr. Brand interjected at this juncture that there was one large difference. Chile had at its head a strong President, President Ibáñez, in whom the people had faith.

The President said yes that in spite of everything the people still had faith in him. However, there was far too much “politicing”. Congress took years debating laws that should have been passed in a few months. There were delays about all sorts of things. Referring specifically to the anti-inflation policy, he said that he had received a letter accusing him of deviating from his anti-inflation program. Actually he believed that the opposition tried to create the impression that he was deviating. He replied to this letter and made his reply public. He answered point by point the criticisms made and proved that he was maintaining his anti-inflation policy. He said that he had every intention of following it through to the end. It was Chile’s only hope. This published reply had had a good effect, he felt. Moreover, he had recently authorized Prescott Carter to appear before the Budget Committee of the Congress. He authorized Carter to tell everything since he felt that there should be no secrets from the people with regard to what the Klein–Saks Mission was trying to do. The people deserved this.

The President said that this had had the worst possible results. The political parties which had been supporting the plan said that Carter had been far too frank and they had come to the President and said that he should dismiss the Minister of Hacienda³ for having authorized Carter to talk as frankly as he had. The President told them that it was not the Minister of Hacienda who had so authorized Carter. It was he, the President, himself who had authorized him.

The President did feel, however, that in spite of all this rumpus that had been created the exposition had made a good impression particularly on those opposed to the plan and there were indications that certain elements of the parties in opposition were leaning now towards favoring the plan. Also the exposition had had a good effect throughout the country.

At this juncture Mr. Brand said that he was glad to hear the President say that he was determined to go forward with his anti-inflationary campaign, as this was exactly what the bank hoped he would do. He then asked the President if the latter intended to curtail dollar purchases by Chile in the future. The President did not answer quickly. After some little thought he replied that he had always been in favor of Chile’s commerce being with its continental neighbors both in respect to sales and purchases. By continental he also included the United States. The President said that he favored this policy since he feared that Chile would be cut off from European markets in times of war. No, the President said, he did not contemplate reducing dollar purchases.

Mr. Brand then said that he hoped the President appreciated with respect to credits that the Bank felt that too much credit was just as bad for Chile as too little credit. For example, the Bank would not consider it advisable at this juncture to lend Chile money for the purchase of agricultural machinery on a short two to three year basis. He mentioned two to three years, Mr. Brand said, for it was their custom to limit the loans more or less to the length of the life of the equipment offered. In the case of tractors, this was two or three years.

Mr. Brand continued that at a later date when further anti-inflationary steps had been taken, it might be possible to make these short term loans. To this the President replied that he did not want short term funds for Chile, because with the fluctuation of the value of copper, Chile could not pay in a short time.

The President also said that what he was particularly interested in was the bank’s help in his agricultural program which required new roads, new railroad equipment, new bridge equipment and new port facilities. These communication facilities were particularly needed in Chile.

The conversation was extremely pleasant and friendly, and the President was talkative. However, after making his declarations earlier in the conversation about his intention of continuing the anti-inflation policy, either by intent or perhaps he did not get the reference, the President did not pick up Mr. Brand’s remark about future credits corning available for agricultural equipment only if further anti-inflationary steps are taken.

1. Source: Department of State, Santiago Embassy Files: Lot 64 F 87, Economic Matters—General. Confidential. Drafted by Lyon.
2. On February 2, 1956, the Export-Import Bank authorized a $3.55 million loan to Cia. de Acero del Pacifico, S.A. (CAP) in order to help develop a fully integrated steel mill at Huachipato, Chile. For additional information on this and other Bank loans to Chile, see Export-Import Bank of Washington, Report to the Congress for the Period July–December 1956 (Washington, Government Printing Office, 1957), p. 42.
3. Reference is presumably to the Minister of Finance, Eduardo Urzúa Merino.