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

the Frei regime,(68) As things turned out, no new loans were proposed lor Chile even though 1971 was ayear during the inllation rate was less than during any of the previous years and in which the loss 01 loreign exchange reserves was not totally different (given the relative change in the size 01 the Chilean economy) from that experienced in 1961 and 1962, Furthermore, it is perhaps significant that Chile received no new lOS lending during 1972, ayear 01 substantial inflation, while Argentina and Urugúay -countries wilh compa– rable inflation rates that year- received $163 mili ion and $10 million respectively in new loans during thal year,(69) The lOS notes that a considerable sum was provided in 1971 lor relief and rehabilitation following asevere earthquake and that terms 01 one loan were broadened in order to permit greater participation in its benefits. As will be discussed, however, these were not new loans and their approval is 01 limited relevance to the more fundamental questions at hand here. It is difficult to give much credit to the argument that the lOS made no loans to Chile during most of 1971, 1972 and 1973 because no loans were ready to be considered by the lOS Soard during that periodo No other lOS member country experienced as long a linancial d rought during those years, and the institution had at least three proposals (Ior a petroche– mical plan!, for a liquilied natural gas export lacility, and lor the Antuco hydroelectric plant) under consideration lor substantial periods of time. II the Sank was ,continuing to consider loans to Chile throughout this 1971-1973 periodo then perhaps it was expecting them to be more completely prepared than is normally necessary. Usual practice would have the Soard of Executive Oirectors approval a well developed proposal which still contained minor problems, and those little details and minor arrangements would be resolved during the implementation and disbursement stage 01 Sank loan supervision.(70) The lOS argument is weakened by the lact that Ihe organization was able to move quite rapidly in considering Ihe two recent loans lo Chile notwithstanding the lact that one was proposed to the Sank only lour months belore it was awarded and the other had been under examination for seventeen months and had nearly all its financial and technical problems resolved during the middle 01 the previous summer (when Allende remained in power). It seems worth discussing these two loans in some detail in order to develop this point. The $22 million loan lor agricultural imports moved extremely rapidly through the lOS loan process. Such rapid consideration is most unusual, andit is not clear just why it occurred in this case. Sources said to be close to the internal operations 01 the IOB indicating that the Bank's management placed high priority on this loan and that the decision to agree to it had been made even belore the IOB team lirst visited the country in Oecember 1973. When asked concerning this contention, IOB officials responded that although the Bank had been considering lending to Chile lor agricultural purposes for some time and although the Chilean agricultural sector had long needed assistance, the IOB did not decide uñtíl March 1974 to make the loan. The agriculturalloan was awarded Irom the Fund lor Special Operations, a lund over which the Uniled States exercises a veto due lo ils large contribution quota: Sources informed about the lOB indicate that at the time the agriculluralloan first came under consideration by the IOB the U.S. Government indicated that jt would give serjous consjderation lo such a loan even though jt lel! that nejther the United States nor the Bank ought to "gel out Iront" in the resumption 01 lending to Chile. Bankofficials state thatthis story cannot be true, lor in as much as the project did.not apr')ear on the monthly operating summary untíl February and was not lormally distributed to (68)Ouring the regular 1971 CIAP consultations on Chile, the 108 staff may have received preliminaryWorld 8ank assessments ol possible ~conomic prOblems developing in Chile aHhat lime. The 108 has historically been more structuraiJst In Its economlC outlook and lending practices than the World Bank, however. and it would be reasonable lo expect that the 10B's economic judgement would not have been subslanlially influenced by macroeconomic pro¡ectlons 01 tha! sor!. (69)Lending data may be fC!und in the 10B 1972 annual report, p. 39, Inllation dala was provided on p, 2201 lhis study, (70)This is discussed more fuily in the House Foreign Aflairs Committee committee prínt The Unites States and the Multilateral Oevelopmenl Banks, p, 61, 138