On April 11, 1972, the NSC Senior Review Group met under my chairmanship to analyze Chilean developments. A paper prepared by my new NSC staff assistant on Latin American affairs, William J. Jorden, accurately summed up our policy:
We have sought to isolate Chile as much as possible politically and economically, while avoiding actions that would support the charge we are acting out of simple anti-Allende spite.
We have been working hard to get prompt and fair compensation for and debt repayment to American companies, and to protect the principle of the inviolability of repayment of just debts and compensation for nationalized properties.
So far, we have been able to pursue these goals simultaneously. However, the Anderson affair has raised our posture and brought into question our political motivation. More important, the Paris talks on renegotiation of Chile’s debts force us to decide what blend we wish to make of “maximum pressure” and a “correct outward posture.”
To deduce the trend of American policy from government documents, one must go beyond the analysis to the operational decision facing the senior officials. In this case it was not how to influence Chile’s internal affairs; it was to decide the tactics for the next session of the Paris creditors. There was a dispute over whether we should seek binding arbitration of the expropriation disputes, particularly the compensation issue. This was favored by State, characteristically, because it would make a major contribution to international law. Treasury — for reasons no longer clear to me now — opposed putting forward arbitration as an American idea but was willing to accept it if it emerged as a Chilean proposal.
In the event, the outcome of the Paris talks was unaffected by the deliberations of the Senior Review Group. After all his tough talk, Connally accepted the strategy of not separating from the other creditor nations and not giving Allende an opportunity to saddle the United States with the onus for his debt problem. Connally went along with the consensus to reschedule Chile’s debts (amounting to roughly $250 million). In return, Chile accepted the principle that its international obligations were valid, a minimum requirement if it wished to retain any creditworthiness.
Chile also agreed to negotiate nationalization problems with each affected country — but on the basis of two criteria that canceled each other out. Chile expressed a willingness to pay “just” compensation for nationalized property in accordance with both Chilean law (effectively meaningless since Chilean law provided for the retroactive excess profits tax that could take away whatever sum might be defined as “just” compensation) and international law (which Chile immediately declared contained no principles to cover expropriation). The practical result was that without any change in its policies Chile obtained relief from nearly all its debts due for one year — a form of economic aid exceeding any received in one year by the previous democratic government. Pending negotiation of specific bilateral agreements with each creditor nation, Chile continued to benefit from a de facto moratorium on debt repayments.
Nevertheless, Allende’s domestic problems multiplied. The massive inefficiency of his administration and the galloping inflation promoted by his policies were eroding governmental stability and social cohesion with every month. Even a Communist Party leader, Orlando Millas, admitted in March 1972 that the central problem was how to make the nationalized enterprises operate “with the same immense profits that they had used to give the capitalists.” The fact was that expropriation seemed to magnify costs and reduce productivity. This in turn fueled inflation that reached an officially admitted annual rate of 163 percent in 1972 (and eventually climbed to 350 percent), with devastating impact on the economy and social fabric. Domestic political tensions reached such a point that at the end of March 1972 Allende suspended the Chilean Congress for a week.
All this happened while foreign assistance to Chile was in fact larger than during any earlier comparable period. The agreement to reschedule the $250 million of Western debts was accompanied by a steadily growing flow of credits from the Communist world. By the time Allende was overthrown, Communist credits had exceeded $600 million. And, contrary to the mythology, closer ties with the Communist world proved no obstacle to gradually improving economic relations with the West, with which Chile was again negotiating private credits. On June 12, Chile and a group of twenty-eight private American banks agreed to refinance $160 million in Chilean debts.VI American banks began to relax the restrictions they had imposed on short-term credits to Chile.9 One day later the Chilean government announced a $100 million credit from Brazil, Mexico, Colombia, and Peru to be used for the purchase of capital and consumer goods.
Neither the debt relief nor the new international assistance stemmed Allende’s rush toward confrontation with the United States. On April 13, he opened the third United Nations Conference on Trade and Development (UNCTAD) in Santiago with a passionate denunciation of the industrial nations — singling out the United States especially — for creating a world where “the toil and resources of the poorer nations pay for the prosperity of the affluent peoples.” On April 14, Chilean Under Secretary of Foreign Affairs Anibal Palma, in a speech to the OAS General Assembly, accused us of trying to block development loans for Chile in multinational lending agencies and — contrary to the record outlined here — of frustrating Chile’s efforts to win rescheduling of its debt payments. At a May Day rally, Allende charged that the United States was imposing an economic blockade against Chile. It was obvious that, regardless of what we did or did not do, Allende needed the demonology of a hostile United States to shore up support for the increasingly unpopular march toward his version of socialism.
Yet, if Allende’s domestic problems were not caused by the United States, neither could they be exorcised by focusing frustrations on us. His essentially unconstitutional procedures produced a running battle with the Chilean Congress of a bitterness unprecedented in Chile’s history. On July 5 the Chamber of Deputies voted to suspend Interior Minister del Canto for failing to enforce laws protecting private property and human rights, refusing to bring legal action against leftist agitators involved in land and factory seizures, and allowing the entry of thirteen mysterious crates from Cuba without proper customs inspection.10 The government maintained they were personal gifts for Allende. The opposition charged they contained illegal arms.VII The Senate held a special session on July 26 to discuss the issue and on July 27 voted (27–14) to censure and oust del Canto. Thus for the second time the democratic parties in the Congress removed an Interior Minister for violating the Chilean Constitution and flouting Chilean laws.
The summer of 1972 completed the polarization of Chilean society. In the guise of controlling inflation, Allende sought to push through tax increases whose practical consequence would be the expropriation of the middle classes and the nationalization of most of the remaining private sector. The Congress responded with measures to block these initiatives. Thereafter the government never seemed able to regain control over events. Every month from July 1972 until the September 1973 coup, prices increased while production declined. Dissension within the governing coalition and strong opposition from the legislature made it impossible for the government to pursue a coherent policy. The century-old Chilean tradition of civility between the government and the opposition parties came to an end. Relations between Allende and the judiciary collapsed after del Canto, on July 12, denounced the legislature and the judiciary for “collusion with the great imperialist interests.” The Supreme Court responded with an open letter to Allende protesting the executive’s actions.
The political process turned more and more into a test of strength between Allende and his opponents. On August 21, 1972, shopkeepers went on strike charging that inflation, the scarcity of goods, price controls, and other restrictions were forcing them out of business. Marches were held in Santiago and Valparaiso. After police clashed with the demonstrators Allende declared a state of emergency in Santiago province. The government denounced a “wave of sedition” by opposition groups and i
nstituted a series of repressive measures. The Los Angeles radio station was closed by the government; there was a police crackdown against right-wing groups; controls were imposed on the activities of resident foreigners. The Christian Democratic Party laid the blame for the disruptions on Allende and his “erroneous and socially negative” economic policies. Concepción was placed under army control on August 31, when thousands of pro-Marxist youths battled with opponents of the government in the streets.
This slide toward chaos owed nothing to American intervention. We had no involvement through the CIA or otherwise with the strike leaders or protesting groups. We authorized no overt or covert assistance to them; we offered them no advice.
On September 14 Allende repeated his earlier charges that “fascists” were plotting against his administration, but he could name only one retired major who was in exile in Bolivia. Rumors that the military might step in continued to circulate throughout September and were explicitly denied on September 29 by the army commander-in-chief, General Carlos Prats Gonzalez, who pledged support to the government.
As the confrontation grew, the Chilean Congress passed three laws seeking to limit the government’s nationalization program, to curb its assault on the media, and to halt its encouragement of terrorist activities. The first measure was a constitutional amendment to prohibit the expropriation of all landholdings under forty hectares (98.84 acres). A second bill provided public financing for the hard-pressed radio and press and guarantees against their expropriation. (This was prompted by the imminent bankruptcy of the Alessandri paper company, which had been allowed to raise its prices only 19 percent while having to absorb cost increases of 200–300 percent in mandatory salary increases. Another factor alarming the Congress was the government’s closing of two opposition radio stations for alleged distortion of the news.) Allende vetoed the media bill.
The third crucial action by the Christian Democratic Party was the introduction of a law aimed at halting the illegal importation of arms by Allende’s leftist supporters. The Arms Control Law gave broad powers to the armed forces to carry out searches and to prosecute violators in military courts. Although Allende had been expected to veto the bill and his own Socialist Party urged him to do so, he had no choice but to accept it. For starting in October 1972 he was faced with burgeoning strikes that he could end only with the assistance of the military, whose price for joining Allende’s government this time was the new Arms Control Law.
By then Chile had fallen into a classic revolutionary pattern. At some point in the disintegration of authority, there is not enough force left for repression nor sufficient legitimacy to derive any benefit from concessions. In fact, after that stage is reached, repression as well as conciliation tends to accelerate the collapse: the use of force because it will prove inconclusive and concessions because they are ascribed not to a generous policy but to the strength of the opposition. So it was in Chile. Allende could assemble the force needed to deal with the strikes only by enhancing the role of the military on whom in turn the democratic opposition relied to curb the government’s unconstitutional actions. When Allende yielded on the Arms Control Law, he encouraged other groups to press their claims. The method they chose was a strike aimed not at employers — indeed, some strikes were by employers — but against the government.
The most serious of these erupted on October 10, 1972, when the Confederation of Truck Owners called a nationwide walk-out to protest the government’s announced intention to create a competing regional public trucking firm. It quickly snowballed into a popular protest against the government amounting to a general strike. The Christian Democratic Party backed the truckers; its National Council declared the government in violation of the Statute of Democratic Guarantees — the negotiated preelection Bill of Rights that had enabled Allende to take office. Among its conditions for resolving the conflict, the Christian Democrats listed effective guarantees of liberty of expression. On October 16, the Engineers’ Association joined the strike, followed by bank employees, gas workers, lawyers, architects, taxi and bus drivers, doctors, and dentists.VIII The government established a curfew in twenty of Chile’s twenty-five provinces and took over all the radio stations.
The strikes finally ended on November 5, but only at the price of a further enhancement of the role of the military. Four representatives of the armed services were brought into Allende’s cabinet. The Interior Ministry responsible for public order was turned over to Army Commander General Prats, who had negotiated an end to the strikes. The breather proved to be shortlived.
In Washington, meanwhile, the 40 Committee had decided on October 26 to extend financial support to the democratic parties for the March 1973 Congressional elections. The sum of $1,427,666 was approved. Once again $100,000 was set aside for private-sector organizations (for voter registration efforts) subject to the approval of the Ambassador — approval that Ambassador Davis withheld. Eager investigators for a Senate Committee hostile to the CIA later struggled hard to find some violation of Washington’s strict guidelines. They discovered exactly one diversion of $2,800 to striking truckers, “contrary to the Agency’s ground rules.”12
On October 17 the responsible NSC staffer, William Jorden, passed on to me the CIA’s judgment that despite mounting chaos the odds were 60–40 against a military overthrow of Allende. Jorden, who had served in Washington for a long time (including a period as an assistant on President Johnson’s NSC staff), added: “My experience is that 60–40 means you are certain something won’t happen, but you don’t want to be too wrong if it does.” An interagency report came to the same conclusion. There would be no coup unless the government violated the constitutional order more unambiguously than heretofore.
Thwarted at home, Allende sought to restore his fortunes by departing on November 30 on a fifteen-day foreign trip that took him to Mexico, the United Nations, Algeria, the Soviet Union, and Cuba. He used the excursion to burnish his anti-American credentials and vent his usual anti-American themes. Addressing the Mexican Congress on December 1, he hit hard on ITT’s alleged aggression against Chile. On December 4, he delivered a blistering attack on the United States to the United Nations General Assembly in New York.
Allende continued his anti-American campaign during his nineteen-hour stopover in Algiers. “Future relations between Algeria and Chile will be those of revolutionary friendship because we have the same enemies,” he declared. In Moscow he was warmly received by Soviet leaders from December 6 to 8. Premier Alexei Kosygin declared that Chile and Cuba were blazing a new path for Latin American socialism. President Nikolai Podgorny assured Allende that the USSR and all socialist countries supported Allende’s “revolutionary renovation” in Chile. The final communiqué contained a Soviet pledge to continue political and economic aid to Chile.
In his spiritual home, Havana, Allende received an ecstatic welcome befitting the first head of a Latin American country to visit Cuba since Castro’s rise to power. The joint communiqué celebrating the end of the visit on December 14 repeated the call for Latin American unity against “foreign economic exploitation and oppression,” which it said sought to crush Latin America’s “struggle for emancipation” — all codewords for a revolutionary anti-American crusade.
Unfortunately for Allende, travels in radical capitals did not translate into approval at home. On his return to Chile on December 14, Allende immediately faced charges by the opposition Christian Democrats that he was “leading Chile to a dependence on and a subordination to the Soviet Union.” They demanded an investigation of all agreements concluded on the trip, calling them a dangerous threat to the economic future of Chile. The next stage in the struggle between the constitutional President bent on subverting the Constitution and the democratic opposition would be the Congressional elections scheduled for March 1973.
1973: Allende’s Final Crisis
ALLENDE’S collapse overlapped Nixon’s and it had the same doomed quality. In Chile in 1973, the intervals between govern
mental crises grew ever shorter. Allende reacted not by conciliation — perhaps he calculated that he had burned his bridges behind him; perhaps his even more radical allies on the left gave him no choice — but by speeding up the seizure of Chilean companies and muzzling the media — the actions that had triggered the convulsions in the first place. He behaved as if his only salvation was to drive matters out of control and then bend the resulting chaos to his will. The conflict turned more and more into a question of political life and death for all sides. It seemed to more and more people that either Allende had to go or democracy would collapse. On December 5, 1972, the highly respected former President, Christian Democrat Eduardo Frei, had opened his electoral campaign for the Senate by accusing the Allende government of bringing about a “catastrophic” situation, of seeking to divide Chileans irreconcilably, and of spreading hate and violence.
Frei’s forebodings were soon borne out. On January 10, 1973, Allende announced a new system for the distribution of basic foodstuffs — oils, rice, meat, sugar, coffee, and wheat — that amounted to government control over who could purchase these necessities, in what quantities, and at what prices. The plan assigned responsibility for retail distribution to “cooperating” neighborhood merchants. The system was to be run by Price and Supply Boards dominated by members of Allende’s governing coalition. While participation in the plan was to be “voluntary,” merchants and families outside it would not be able to purchase vital foods at the subsidized prices.
This was not only an assault on private enterprise; it amounted to a strict system of rationing. Inevitably, it led to a resumption of strikes. Equally predictably, Allende reacted by stepping up his abusive attacks on the United States. In part this was a device to rally support for his Congressional campaign. On February 5, Allende’s coalition published a campaign platform proposing once again constitutional “reforms” he had offered unsuccessfully in November 1971, subordinating the legislature to Presidential dominance. Even more ominously, Allende began uttering threats of violence. He declared in a speech that if the democratic opposition persisted in its obstruction, the “Chilean revolution would be forced to abandon the democratic road and embrace physical violence as an instrument.”
Years of Upheaval Page 59