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

approximately at the same level ofthe preceding year, even ifthis level is still below the real average income of the year 1970. The strategy chosen by the authorities -which is to grant in January 1974 a nominalist mcrease of remunerations of around 55'.70 -Should allow to appraise the progress altained in the control of inflation before proceeding to a new adjustment, if necessary. If a new adjustment of adjustments are granted, it is very impor– tant to maintain them within reasonable limits and have them covered by tributary means, so that the acceleration of inflation, as inevitable consequence of January's adjustment, be a short-term one, and tha!, according to the goal which the authorities have appointed themselves, therate of increase otihe prices may descend to a réte of thjrty or forty per cent per annum, during the last quarter of the year. The tributary effort contemplated for 1974 is significant, as much for its magnitude as of' its redistributive condition. Specially the greater participation of income tax and tax to property, assures that the cost of economic adjustment will be fairly distributed among the different income groups. The elimination of nourishment subsidies are also a reason for satisfactlon --the cost of which, as is already known, was appeased in the case of wage. earners of low income by the increase of fam iIy assignmen't- and the adj ustmenrs of rates of the public enterprises, wherefrom it can be expected these enterprises will maintain their current operations in balance. Even so, the growth of public expense in 1974 is substantial and we are pleased with the authorities' intentions to maintain the greatest control regar– ding its increase and search for opportunities to make it descend from the calculated quantity. The loan policy seems to adequately second public Government plans and we think that monetary projections ·are consistent with the objectives of prices and 'balance pf payments. Regarding the balance of payments, the importance of maintaining a policy of elastic rate of exchange must be pointed out, as much to insure an eminently good distribution of resources as to protect balance of payments against the effects of internal inflation. Nevertheless, in this first year of stabilization and reconstruction, it is clear that the restor'ing of balance in Chile's external payments could not only be reached by the internal effort of the country. The prospects of copper export are encouraging, specially as to volume ofshipments, but the international prices depend in a great measure on the behaviour of economies of industrial countries, which is particularly difficult to predict this year. On the other hand, Chile will have to import around six hundred million dollars (US$ 600,000,000) in food in 1974, while reactivation of economy and the increase of import prices also could substantially rise the value of intermedium goods and imported capital. It is therefore likely that the deficit of the current account will exceed four hundred and fifty million dollars (US$ 450,000,000), while the account of capital will be seriously affected by the service of the foreign debt. In these circumstances, it is expected for Chile to obtain favorable terms for the renegotiations of its foreign debt with the member countries of the "Club de París". But, beyond the relief which could resutt of these renegotiations, Chile will also need a strong external assistance, as much in the form of program assistance as of financement of projects. The problem of external financement now looks compticated, because of the recent rise of the international prices of mineral oil. Even if it is still too soon to appraise the impacts of this increase on the balance of payments of Chile in 1974, it is to be expected that, apart from making another internal effort, Chile could have the benefits of an arrange– ment on international tevels. While ending this intervention, I want to express our most sincere desires of success to Chilean authorities, in the accomptishment of their goats of stabilization and reactivation of economy in the difficutt period they are going through and assure them once more that they shalt continue receiving the technical and financial assistance of our institution. Thank you very mucho 214