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

however, as much was earmarked for tied purchases from nontraditional suppliers or else linked to the construction of major capital intensive projects which had lengthy preparation periods. Many sources contend that Chile lacked the short-term credits needed to finance its normal imports and that this sh xtage placed a heavy burden upon the national economy throughout the Allende periodo While 1972 and 1973 were years of considerable strain on the Chilean economy, 1971 -the first full year of the Allende government- was one of relative prosperity and growth. Under the government's policy of "socialist consumerism," Chile experienced a 8.5% ovérall rate of economic growth that year and a 6.6 "1;, rise in per capital GDP, substantially higher levels of growth than in any of the previous ten years. Though export income declined, the physical volume ofexports grew 6.6 % while imports grew only 1.3 %, and there was a slight decline in the proportion of the national income devoted to imports. Unemployment in the Greater Santiago area declined from 8.3 ~'1, to 3.8 % during 1971, and the government's injection of new demand and redistribution of income produced a nominal 53'\, rise in wages and a 12 ';;, growth in real consumption. Compared to the 1966-1970 annual average, the rate of agricultural growth in Chile doubled in 1971 (up 6%, l, the industrial growth rate nearly quadrupled (up 12%), and the construction rate grew ten-fold (up 12'\,)(55) Though the Allende government stimulated this significant surge of growth a.nd deve– lopment during its first year in power, persistent underlying ptoblems continued to exist. Growth in demand continued to Dutstrip growth in supply, leading to major economic dislocations, and the composition of demand shifted towards consumption: personal consumption rose 12 u·;,(to 77 ";, of GDP), gross fixed investment declined 2.2';{, (to 15'10 of GDP), and machinery and equipment investment fell ?Q % for the year.(56) While experiencing considerable growth in 1971, Chile also saw "the development of internal economic conditions that. as the end ofthe year approached, appeared fundamen– tally unsound for the longer term."(57) The unemployment rate continl!e(j to fati through the remaining years of the Allende government (to 3.3 ';1" in 1973), but in most other respects the economic indicators signaled grave problems. The growth of industrial production fell to 3 ".;, for 1972, growth in fixed investment fe 11 to 12'\, of GDP in 1973, and real income fell by 9 ''-;, in 1972 and 53 u,;, in 1973. Prod uction of goods declined 25 ';1," and livestock output fe 11 10% in 1972-3, partly due to the Allende government price controls and partly due to the ongoing agrarian reorganization (in which the Chilean government expropriated over 64 % of the total land involved in the 1965-1973 land reform program). Due to the increase in demand stimulated by tl;¡e income redistribution program and monetary expansion, and because of this decline in domestic agricultural production, Chilean expenditures for food imports increased substantially, from $168 million in 1970 to $556 million in 1973.(58) THE BANKS AND CHILE SINCE ALLENDE; RECENT DEVELOPMENTS On September 11, 1974, the military forces of Chile overthrew the government of Salvador Allende. Among the several reasons given by the military for its coup against Allende were the severe economic dislocations and hardships which many Chileans were experiencing as a result of the 1972-3 inflation and the necessity of reestablishing econo– mic stability and order if the country was not to be permanently damaged by those economic changes and pressures. Since assuming power, the new government has alrered several of the previous regime's economic policies: it has moved towards a free market and (55)CIAP, 1972 report, pp.,51-6. (56)lbid., p. 87. (57)Paul E. Sigmund. The "Invisible 810ckade" and Ihe Overthrow 01 Allende. Foreign AHairs, Vol. 52, N.O 2 (January 1974):326. (58)lnt. doc. See lable 4. 133