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

and reporls, this loan involved lillle in the way 01 current expenditures, This proposal was prepared exceedingly rapidly b'l the Sank's staft during Ihe July-Augusl 1973 period, when Allende was still in power. INTER-AMERICAN DEVELOPMENT BANK (IOB): The lOS has recently made tiNo substantialloans lo Chile, one lor agricultural moderni– zatíon and extension and another lor a large hydroelectric power ínstallation, The agrícultu– ralloan moved quite rapidly through the loan consideration cycle, with a loan committee being lormed in February or March 1974 and the loan being approved March 30,1974, by the lOS Executive Oirectors. The hydroelectric loan moved more slowly Ihrough the loan cycle: while the project had been under consideration lor some time, a loan committee was not created úntil July 1973, In late 1973, however, consideration seems to have been accelerated, and the loan was appwved by the lOS Executive Oirectors on April 25, 1974, These loans consisted 01 the following: , 1.0 a total $22 mili ion was approved by the lOS for agricultural activities. Th'ese funds expanded a program financed through a 1968 loan, widening the types of agriculture aided and the geographic scope (from eight provinces lo the whole country), Ouring the 1973-4 loan consideration process, the lOS did not make an extensive or detailed evaluation of the program for activities tobe financed by the 1974 loan because that loan was seen lo be basically follow-on financing ofthe previous loan, The Sank did examine the organizational integrity and capaciiy 01 the prospective Chilean borrower carefully, however, had suffered any ill elfects from the Allende government's frequent bureaucratic and governmental reorganizations, The loan is intended to provide funds with which the Sanco del Estado may , make loans to small farmers, agricultural cooperatives, and similar borrowers for shor!, medium and long-term agricultural investments, Though primarilyfor inputs such as seeds, insecticides, fer!ilizers, etc" the loan will also finance farm equipment imports and perma– nent improvements such as additional (rees and irrigation, On several occasions in 1972 and 1973, the Allende government informally raised the question with the 108 as to whether Chile might obtain just this sor! of a loan since its agricultural sector badly needed credit wilh which to refinance the agrarian reorganizalion then laking place and to replace recently dried up sources of supplier credil and short-term finance. Executive branch sources indicate tha! the lOS very strongly discouraged the Allende governmenl from making formal application for such a loan, telling the Chileans that their country's credit– worthiness was questionable and tha! Ihe loan would probably be denied. The March 30, 1974, loan was made from the Fund for Special Operations, !he concessionalloan fund of !he IOS.(59) 2.0 a total $75.8 mili ion was approved by the I(;)S as an ordinary capital loan for construction of the Antuco hydroelectric project. This loan had been under consideration by the Sank for well over ayear and the Chilean Government had indicated on several occasions that it found it to be of highest priority. Consideration was slowed, however, by the reluctance of the Allende government to raise electrical tariffs as much as the lOS wished,(60) Made from the Sank's ordinary capital resdurces, the loan finances the foreign exchange componen! of Chile's 1972-9 electrification programo (59)11 is ¡:,erhaps useful 10 note tha! Ihe more recent loan was in some ways less generous than the 1968 loan, The earlier loan for $ 9.575 million was disbursed $ 6.575 milllon in dollarsand $ 3 mOlíon in escudos. Secause thal loan contemplaled flnanclng only aboul $4 m:llion in lolal direcl and indirectforeign exchange expendilures. a surplus 01 $ 2,575 million was included in Ihis loan as free foreign exchange. available lo Ihe Chilean government lo linance olher imports. The 1974 loan conlemplales using Ihe lolal $ 22 millíon to finance loreign purchases relevanl 10 Ihe proposed project. and so il provides no free foreign exchange. Free foreign exchange is an indirecl Iype 01 program lending. and as such Is uselul lor offselling balance 01 paymenls deficits and for linanclng general imports ralher (han those relevan! lo any specific developmenl project. (60)The inleraclion between Ihe IOB and World Sank is 01 Inleresl here. Chile's slale power company ENOESA had been a long-lime borrower !rom Ihe ISRO (since Ihe 1940's), so Ihe application lor lOS financing here was 135