Chile: the balanced view : a recopilation of articles about the Allende years and after

ding issue of compensation for the copper properties. A World Bank mission was sent to Santiago from mid-September to mid-October, in order to study the question of credit– worthiness. When Chile objected to consideration of the copper compensation, the Bank repl ied that the very large eXCE 3S profits determination raised a question whether the "reasonable progress" toward th 3 settlement of nationalization disputes required by the Bank's long-standing lending policies was likely to be made. When the Bank's mission returned from Chile in mid-October it reported that declining investment, the rapid randown of Chilean foreign reserves, and the creation of sharp inflationary pressures put in doubt not only the effective utilization of any loans, but also Chile's ability to continue to service past debts. This prediction appeared to be confirmed in November when Chile suspended service on all debts except those to internationallending organizations, and (although this was not publicly announced) past military assistance loans. At the 1972 annual meeting ofthe Bank, in September, Alfonso Inostroza, the president of the Central Bank of Chile, attacked the Bank's actions on these matters as "manifestly precipitate and prejudiced," and argued that they demonstrated that the World Bank was acting "not as an independent multinational body at the service of the economic develop– ment of all its members, but in fact as a spokesman and instrument of private interests in one member country." Replying to this criticism at an emotion-Iaden meeting of the U.N. Economic and Social Council in October, President McNamara of the World Bank recalled that in instances involving Bolivia, Guyana and Iraq the Bank's board of directors had approved projects despite natiortlalization disputes, but that in the Chilean case "that question has not yet arisen because the primary condition for Bank lending-a soundly managed economy with a clear potential for utilizing additional funds efficiently has not been me!." Whether it was due to its lack of credit-worthiness or its nationalization policies- or, more likely, to both -the Allende government did not receive any further new loans from the World Bank, although it continued to receive disbursements from loans approved earlier. In the three fiscal years between July 1, 1970 and June 30, 1973, Chile received a total of slightly over $46rnillion from the World Bank. At the time of Allende's overthrow, $22 million still remainerl undisbursed under existing loans to Chile. On the other hand, neither the issue of credit-worthiness nor that of copper compensa– tion seemed to discourage the International Monetary Fund from lending to Chile in the same periodo In December 1971, it lent Chile $39.5 million and in December 1972 $42.8 million in three-to-five-year loans to offse! the drop in the price of copper on the world marke!. The Fun.d's willingness to aid Chile doubtless reflected the fact that it is not a bank but a mechanism to assist member-countries with foreign exchange difficulties; I\loreover, since the Fund had clear authority to make compensatory loans for this type of foreign exchange shortfall, the United States did not objec!. However, the Fund was not able to enter into a so-called "stand by" agreement with Chile for the provision of additional foreign exchange, since under standing Fund practice this would have required austerity measu– res whiph the Chilean government was unwilling to undertake. A verdict on the relative weight of credit-worthiness and copper compensation as factors in denying Chile assistance is clearer in the case of the U.S. Export-Import Bank than in the case of the World Bank. The sequence of events and external evidence both clearly ind icate which factor was operative. In mid-August of 1971, one month after the nationalization of copper and two months before the final decision on compensation, the Export-Import Bank informed the Chilean ambassador that a pending request for $21 million in loans and loan guarantees for the purchase of three Boeing passenger jets for the Chilean airline was being deferred, pending, it was said, further information on the com– pensation question. The ambassador immediately held a press conference in which he denounced the deferral decision as a blatant attempt to pressure the Chilean governmen!. On August 14 aNew York Times story quoted an anonymous State Department official to the effect that the decision had been "basically political" in nature and made "at the White House level" under pressure from business interests. The head of the Bank then commen- 115