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

THE MULTILATERAL DEVELOPMENT BANKS ANO THE SUSPENSION OF LENDING TO ALLENDE'S CHILE(*) By JONATHAN E. SANFORD The World Bank and Inter-American Oevelopment Bank are institutions which playa significant role in funding development activities in Latin America and other parts of the world. Organized as autonomous and independent international financial institutions, the banks were intended to be non-political organizations whose lending activities were geared to the economic needs and economic performance of their borrowing countries rather than to any political or foreign polícy goal s of their donor and other member countries.(1) Notwithstanding its small size and population, Chile has been one of the major borrowers of funds from these international institutions, with over $480 million lent to that counjry by the banks since their creatíon, including nearly $375 million since 1961. Because the multilateral banks are supposed to operate as non-polítical economic institu– tions, there is great significance to the charges raised by the Allende government and others that the banks effeetively terminated their lending to Chile once Salvador Allende assumed power because the institutions did not approve of his socialist government's economie reorganization and expropriations policies, and because the banks were acting as foreign policy instruments of the United States rather than as independent entities not beholden to the national poliey interests of member governments. This paper inquires into the stated reasons why multilateral bank lending to Chile ceased during the period (1971-1973) of Salvador Allende's presidency in Chile. It díseusses trends and íssues in Chílean economic affairs and bank lending to Chile during the deeade prior to 1971 and during the period of Allende's government, and details the resumption of multilateral bank lending to that country sinee the eoup which overthrew Allende's socialist government in September 1973. The study concludes with some observations regard'ing patterns of multilateral bank lending to Chile during this 1961-1974 period and sOrPe judgments regarding the accuraey of allegations that bank loan aetivities towards Chile were discri– minatory and politically biased during the Allende periodo THE ISSUE OF SUSPENDED LENDING Following the election of President Allende, the World Bank and IOB ceased making new loans to Chile. After two modest IOB loans to non-governmental universities in the first two weeks of January 1971, the boards of executive direetors of these institutíons did not consider any other new loans to Chile throughout the whole period of Sr. Allende's adminis– tration, though their staffs continued to give at least ongoing formal consíderation to a few Chilean loan proposals. (')Study published by the Congressíonal Researeh Serviee, The Library 01 Congress. August 6, 1974, (1 )For additional information on the operations and polieíes 01 the multilateral development banks and on United States polícy towards them, see: U,S, Congress, House, Committee on Foreign Alfairs. The Uníled States and Ihe Multilateral Development Banks, (Committee prinl) Prepared by Margarel Goodman and Jonathan Sanlord, Foreígn Affairs Divísíon, Congressional Researeh Serviee, U.S, Govt. Print. Offiee. March, 1974, 123