415. Telegram From the Ambassador in Chile (Lyon) to the Department of State1
50. Minister Finance called me this morning and reviewed his problems. He stated deficit by end of year will be 39 billion pesos. He hopes cover 19 billion pesos of this by new taxes, savings etc. One optimistic note was increase in tax collections partly due to more stringent methods, 4.5 billion. He thus seeks loan for US dollars 30 million, but after some discussion admitted he could survive with 25 million if he gets first installment quickly, by end of July. If he doesn’t have some help by August, he will drown.
He referred to idea bringing IMF into picture. He said this would only be helpful if fund money available on same basis as terms EXIM Bank might establish, including authority use peso product to balance budget. He did not seem optimistic about getting such terms and indicated hope EXIM Bank might undertake entire transaction.
He read me cable just received from Puga describing interview with Secretary in which latter indicated awaiting Turkel’s return make decision and difficulty of persuading banks.
Minister determined have balanced budget next year and getting all facts to present Congress.
I am convinced stabilization effort cannot continue in absence assistance approximate dimensions mentioned above. I do not want to see constructive gains anti-inflation program lost. Looking at broad picture here including (1) improved climate for major American investments during past two years, (2) many courageous acts this government has taken to achieve stabilization including most recent politically dangerous removal subsidies, and (3) the many extremely [Page 843] unfortunate repercussions, not only here but in rest of continent, of failure this stabilization program, I strongly recommend that prompt action be taken to provide funds to enable Chilean stabilization effort reach successful conclusion. In order safeguard US interests and induce Chile take proper belt-tightening measures I also recommend reasonable and feasible conditions on loan calling for Chilean efforts help themselves.
- Source: Department of State, Central Files, 825.10/7–1257. Confidential.↩