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

Chile continued to experience a current account delicit during al! but one 01 these years notwithstanding its high export earnings, and the country maintained a surpJus in its balance-ol-payments only because loreign investment and external lending continued lo be substanlial. In addition, as Chilean export revenues increased, there was an íncreased demand lor imported goods. The share 01 national income devoted to imports grew consistently throughout this period, with total import costs being equivalen! to 13 ";,01 GOP in 1964 and almost 17 "" 01 GOP in 1960.(46) This underlying weakness in the Chilean economy was noted on several occasions during the mid-1960s by international economists. They predicted that, with the imminent lall in world copper prices and the return of,the chronic defícit in the Chilean balance-of– payments, the couhtry would see a recurrance of the financial instability and developmen– tal constraí,nts experienced previously. Economists at one ínternational ínstítutíon predíc– ted ín 1966 that there would be a $900 millíon defieit during the 1968-1971 period (exclusive of foreign investments inflows), and that substantial ínternationallending would be requíred if payments stability was to be maintained,(47) CIAP economists predicted in 1968 that Chile would experience an aggregate payments deficit of $599 million for 1969-1971 and urged that at least that much external credit be supplied so that growth could continue, (48) In both these cases, the international economists suggested that the projected economic troubles be met by an íncrease in externallendíng to Chile rather than by international pressure for a reduction in the level of Chilean imports or a depression of Chilean internal demand, International economists generally favored the Frei government's program of restructuring Chilean economic and social institutions, and their conclusions amounled lo a recommendation that the international financial community support the pursuit of those policies and objectives, Th"E BANKS AND CIDLEAN ECONOMIC PERFORMANCE DURING THE ALLENDE PERIOD, 1970-73 Chile experienced severe economic problems during the 1970-1973 period, the inter– val in which Chile was for the most par! governed by the Allende administratíon. 80th the internal and external instability of the previous two periodswas in evidence during this time: serious international payments deficits were incurred, as during tf>e 1961-1963 timespan, and substantial domestic inflation occurred, as during the 1964-1969 interval. At this time, there was also a sharp diminution in levels of assistance from multilateral development institutions, and Chile was the recipient of only $33.9 million in new loans far the whole period: $19.3 million from the World Bank (all ordinary capital) and $14,6 million from the IOB (all concessional funds), The World Bank ceased making new loans to Chile in June 1970, and the IOB made no additiorlal loans after January 1971, The IOB did allow contractual arrangements lo be changed in a few instances, however, so that in one case funds could be made available far disaster rehabil itatíon and reconstruction and in another the program could have broader application than original!y intended. No new loans vvere agreed to throughout the Allende period by this institution either, however. Under the Allende government, Chile experienced an intensification of its chronic inflationary problem, spurred largely by large and persistent government budget deficits and by substantial increases in the domestic money supply. Between 1970 and 1973, the public sector share of total national revenues expanded from 41'0,;, to 67'~;" attributable primad Iy to the extent of the government's national ization programo Governmental expendi- (46)CIAP, 1972 report, p. 129 (table V-5). (47)lnt. doc. (48)CIAP, 1968 report, pp. 115-117. 131