[104-10225-10027.pdf — page 69]
# Allende in RetrospectChile, Nathaniel Davis, remarked on the pattern of "brinkmanship" that the Chileans exhibited." Social and political tensions increased-but as long as economic deterioration was not reflected in runaway Inflation, the Chilean political system seemed able to contain them.## The Turning PointThe strains in the system only became unmanageable in mid-1972, when the lid blew off the fragile Chilean economy and let loose the pressures that had been building up for at least a year. As the deficit in government spending, rose, particularly because of its subsidies to the "social area," its foreign reserves dropped nearly to zero, and the growth of industrial output slowed down. Allende replaced Economics Minister Vuskovic with Carlos Matus and appointed Orlando Millas as Finance Minister. The Matus-Millas team sought to "find stability at another level," ordering a drastic currency devaluation, raising prices in the nationalized sector, and permitting limited agricultural price increases. The result was a sharp jump in the cost-of-living Index, which climbed from 27.5 percent at the end of June to 99.8 percent at the end of September. A wage readjustment to compensate for the increase In the cost of living only accelerated the inflation, so that by the end of the year the official consumer price index had reached 163 percent (see Table 1). In September, industrial output began to drop in absolute terms (i.e., not merely in terms of the rate of increase)-a drop that continued every month thereafter until the September 1973 coup." Agricultural production (excluding livestock) also commenced to decline, and mineral production registered precipitous drops, although copper production rose by 1.3 percent for 1972 owing to the fact that a number of new mines came into operation. (On other elements of the worsening economic situation, see Table 2.)Chile's economic problems were paralleled in the political arena: Several additional ministers were impeched, including the Minister of Interior, who was charged with abetting the illegal importation of arms from Cuba in March. (The Allende govern. ment claimed that suspect shipments from Cuba--"bultos Cubanos"-were "works of art," but after the September 1973 coup, the government White published an inventory of over 2,000 pounds of arms sent frorn Cuba in 13 crates which customsTable 1: Monthly Fluctuations in Consumer Prices and Industrial Output under Allende| Month    | Consumer Price Index | Industrial Output || -------- | -------------------- | ----------------- || **1970** |                      |                   || Oct.     | 35.6                 | -8.0              || Nov.     | 35.3                 | 4.3               || Dec.     | 34.9                 | -0.3              || **1971** |                      |                   || Jan,     | 28.1                 | -4.5              || Feb.     | 22.8                 | -7.3              || March    | 20.1                 | 6.3               || April    | 20.2                 | 1.6               || May      | 21.0                 | 13.5              || June     | 21.1                 | 10.7              || July     | 19.1                 | 6.7               || Aug.     | 17.4                 | 10.7              || Sept.    | 15.6                 | 25.5              || Oct.     | 16.5                 | 22.6              || Nov.     | 18.8                 | 22.1              || Dec.     | 22.1                 | 19.5              || **1972** |                      |                   || Jan.     | 24.8                 | 18.5              || Feb.     | 32.0                 | 11.9              || March    | 34.0                 | 10.2              || April    | 38.1                 | 12.6              || May      | 40.0                 | 11.4              || June     | 40.1                 | 2.5               || July     | 45.9                 | 5.0               || Aug.     | 77.2                 | 3.6               || Sept.    | 114.3                | -7.8              || Oct      | 142.9                | -7.7              || Nov.     | 149.9                | -8.1              || Dec.     | 163.4                | -11.1             || **1973** |                      |                   || Jan.     | 180.3                | -6.8              || Feb.     | 174.1                | -4.7              || March    | 183.3                | -2.8              || April    | 195.5                | -11.3             || May      | 233.5                | -11.0             || June     | 283.4                | -14.8             || July     | 323.2                | -10.7             || Aug.     | 303.6                | -11.9             || Sept.    | 286.0                | 22:9              || Oct.     | 528.4                | 18.0              || Nov.     | 528.9                | 5.1.              |* Percentage of change from the same month of the previous year.  SOURCE: Instituto Nacional de Estadisticas (National Institute of Statistics). Santiago: Sociedad de Fomento Fabril. (Association for the Development of Manufacturing), Santiago.[^1]: A secret cable from US Ambassador Nathaniel Davis to the State Department, published in Jack Anderson's column in The washington Post (Washington, DC) on March 28, 1972, commented that "the Chileans have a great ability to rush to the brink, embrace each other, and back off." On the same point see Mauricio Solaún and Fernando Cepeda, Allende's Chile: On the Politics of Brinkmanship, Bogota, Universidad de Los Andes, 1972.[^2]: The Allende government blamed the drop in production on the October 1972 strike, but this ignored the fact that production declines began betore October.