Kissinger and Chile - Page 24

opposition was able to survive under extraordinarily difficult economic circumstances--winning control of the Chilean congress in March, 1973--one can say that the Nixon administration prevented Allende from consolidating a totalitarian political project.

What followed—a right-wing dictatorship which crushed not merely the Allende regime but Chilean democracy itself—could not be and was not foreseen, partly because of the military's own apolitical traditions, partly because by mid-1973 the opposition was dominated by forces of proven democratic provenance. Washington's presumption—that in the 1976 elections, if in fact they took place, the opposition would win decisively—was amply supported by the facts. By mid-1973 a majority of Chileans had repudiated both Socialist and Communist parties and the end of the Allende era was welcomed by a broad spectrum of Chilean personalities, including former President Frei himself. It was only the savagery of the subsequent Pinochet dictatorship which altered matters by hindsight. As the years passed, the discredit into which Allende and his associates had fallen at the time of their overthrow was neutralized, then cancelled out, by martyrdom. In addition, the undifferentiated contempt with which the military subsequently treated all political forces except those on the far right threw people together who, in August and September 1973, were facing off for civil war. In that sense, General Pinochet—in spite of himself—is the unique progenitor of the Socialist-Christian Democratic coalition governments which have governed Chile from 1989 to the present.

The Allende regime also benefited retrospectively from its evident association with the old democratic order; it had, after all, been elected. How

Kissinger and Chile - Page 25

much longer it would have remained part of that order, which it was busily
undermining, must remain a matter of controversy. But to the day of its
demise, it enjoyed a marginal legitimacy which (logically) eluded its successor.⁵
There, too, General Pinochet and his associates have played an unexpected
role—rescuing for Allende and his government a place in Chilean history which
they did not earn and to which they could not otherwise have looked forward.
These are the pesky details which “revisionists” like Hitchens and the makers of
*The Trials of Henry Kissinger* seem at pains to avoid—if indeed they were ever
aware of them in the first place.

In the longer perspective, any reasonable reading of history might well
have anticipated a regime similar to Allende's coming to power in Chile sooner
or later. After all, it had the largest public sector of any government in Latin
America except Cuba; significant segments of the population, including
organized labor, were accustomed to government-sponsored entitlements, and
expected these to increase over time; it had two large, well-organized and
imaginatively led Marxist parties; the principal party of the center, the Christian
Democrats, had adopted a pseudo-leftist discourse which by 1970 rendered
impossible a joint presidential ticket, such as had defeated Allende in 1964. But
what might have been inevitable was not necessarily desirable—for Chile or for
the United States. Those who regret the consolidation of a Marxist regime in
that country are, of course, free to condemn the efforts of Nixon, Kissinger, and
the CIA, and they cannot be faulted on their own terms. But those with a more

⁵ We say “marginal” here because by mid-1973 the Allende administration had been found “outside the law” by the Chilean Congress, and many of its actions declared unconstitutional by the Chilean courts.

7

The United States and Chile, 1970–1973

At the time of Allende's fall in September 1973, there was widespread presumption throughout Latin America and in much of Western Europe that the United States had been deeply, perhaps crucially, involved in the turn of events in Chile. This presumption fed not only on a general mood of anti-Americanism generated by the Vietnam War, or even on the accusation of Allende's collaborators after the coup, but also on release to the world press in March 1972 of documents stolen from the files of the International Telephone and Telegraph Company (ITT), one of the largest American corporate investors in Chile.

These documents appeared to reveal, among other things, the existence of a plot hatched by ITT in late 1970 that, with the assistance of the U.S. Central Intelligence Agency (CIA), would "plunge the Chilean economy into chaos and thus bring about a military uprising that would keep Allende out of power."¹ As subsequent materials were published on successive days by syndicated columnist Jack Anderson, the Chilean Congress voted on March 28 to appoint a commission of thirteen members to investigate the matter; in Washington the Subcommittee on Multinational Corporations of the Senate Foreign Relations Committee launched an investigation of its own but delayed publication of its findings until after the 1972 U.S. presidential election.²

More information on the U.S. role came to light a year after the coup as the result of a congressional indiscretion. In the spring of 1974, CIA director William E. Colby briefed the Intelligence Oversight Subcommittee of the House Armed Services Committee on Chilean operations. For some inexplicable reason, the stenographer did not observe the normal practice of stopping the transcription of testimony at points when security-sensitive matters were broached. Representative Michael Harrington of Massachusetts, a liberal Democrat with a strong interest in Chilean affairs, presumed upon his membership on the House Foreign Affairs Committee to read the classified testimony, although he was not permitted to take notes at the time. In a subsequent letter

199

200 Modern Chile

to his committee chairman, Representative Thomas B. Morgan of Pennsylvania, Harrington reported that Colby had revealed the expenditure of nearly $8 million by the Nixon administration for covert political operations in Chile during the Allende period; the purpose of these activities, the letter explained, was to "destabilize" the Popular Unity government.

The ink on this correspondence was hardly dry before copies had found their way to the editorial offices of the *New York Times* and the *Washington Post*, whose subsequent publication of it forced President Gerald R. Ford to acknowledge publicly in a televised news conference on September 16, 1974 that the sums in question had indeed been deployed in Chile. But President Ford categorically denied any U.S. role in the coup itself.

At about the same time, Seymour Hersh, chief investigative reporter for the *New York Times*, published a series of articles that purported to outline the way in which covert action funds had been spent in Chile. The article of September 20, for example, informed readers—in the credit of unnamed “intelligence sources”—that

> more than $7 million [was] authorized for clandestine CIA activities in Chile . . . in 1972 and 1973 to provide strike benefits and other means of support for anti-Allende strikers and workers . . . Among those heavily subsidized, the sources said, were organizers of a nationwide truck strike that lasted 26 days in the fall of 1972 . . . Direct subsidies, the sources said, were also provided for a strike of middle class shopkeepers and a tax strike, among others, that disrupted the capital city of Santiago in the summer of 1973.³

On September 24 Hersh followed this story with another, attributing to "an administration source with first-hand knowledge" the information that shortly after arriving in Chile in mid-1971 to succeed Edward M. Korry as U.S. ambassador there, Nathaniel Davis received a message from Washington "saying, in effect, 'from now on you may aid the opposition by any means possible.' " Yet "another source" is quoted as saying simply that the ambassador "had been told to 'get a little rougher.' " Finally, still one more unidentified source confirmed "Ambassador Davis' direct involvement."⁴

Such charges, particularly in the light of what had already been revealed in the ITT documents before Allende's fall, could not be ignored, and a lengthy congressional investigation followed. The body constituted to look into U.S. activities in Chile during the Allende period was formally designated the Senate Select Committee to Study Governmental Operations with Respect to Intelligence Operations, but it has become better known through the name of its chairman, Senator Frank Church of Idaho. The Church committee was eventually responsible for the publication of four important documents: the hearings on covert action in Chile (December 4-5, 1975); a committee print (that is, a staff report that summarized testimony and presented committee

The United States and Chile, 1970-1973

findings); an interim report on U.S. involvement in an abortive military coup in Chile in 1970; and a final report that supplemented and corrected several aspects of the interim report.⁵ Somewhat parallel to the activities of the Church committee was a massive—and from a scholarly point of view, quite impressive—study of U.S.-Chilean relations during the Popular Unity period by the House Committee on Foreign Affairs, an investigation that actually began some months before the coup and continued for several weeks thereafter.⁶ It is upon these documents—which are based on a review of CIA materials of the highest classification, National Security Council records, and other highly sensitive files—that all that is said to be known for certain about the U.S. role in Chile must rest. Therefore, the findings of these committees, particularly the Church committee, must be examined with extreme care to see whether they are in fact congruent with the charges that have been made against the U.S. government by those sympathetic to the Allende regime or, at any rate, philosophically opposed to covert action on the part of U.S. intelligence agencies.

The need to compare charges with documentation is all the more pressing because high officials of the U.S. government and distinguished members of the American intellectual community have accepted in varying degrees the responsibility for Allende's failure. The most egregious case occurred on March 8, 1977, when Brady Tyson, newly named U.S. representative to the United Nations Commission on Human Rights in Geneva, declared to that body that "our delegation would be less than candid and untrue to ourselves if we did not express our profoundest regrets for the role some government officials, agencies, and private groups played in the subversion of the previous democratically elected Chilean government that was overthrown by the coup of September 11, 1973." Although his statement was immediately disavowed by President Jimmy Carter, and Tyson was abruptly called home for "consultations," the delegate insisted that his statement was "in the spirit of the Carter government foreign policy as I understand it."⁷ Three years later former Attorney General Ramsey Clark, attending a conference on alleged U.S. crimes against Iran in Tehran, cited the Chilean case as one other wrong for which the American people would yet have to atone.⁸ And historian Barbara Tuchman probably summarized best the views of many in the literary and academic world when she wrote that "a vicious tyranny . . . has degenerated upon Chile, with the assistance of the United States . . . For the United States to interfere in the domestic affairs of a neighboring state in an attempt to thwart their legitimate operation is intolerable."⁹

Although a certain edge of partisanship can be detected in these comments (was not "Chile," after all, one more indictment in the bill of particulars against the disgraced Richard Nixon?) it was actually left to a Republican to

202 Modern Chile

summarize most explosively the thesis of American guilt. In the midst of the Church committee hearings, Senator Richard Schweiker of Pennsylvania burst out in anger to former Ambassador Korry:

> I think your actions in Chile have proved the Communists right. The Communists argued that we capitalists will never give Communists a chance to get elected through democratic means, and Socialists can never succeed in our kind of government because we would never let them. I never believed it and I didn't believe it until we come up here and say in essence that we'll overthrow the government, even if the chief of staff [of the Chilean Army] gets killed in the process, even if we have to buy all the newspapers, we'll stop them coming to power. We have proved Castro and the Communists right by our inept and stupid blundering in Chile, and that's my opinion. I have no more questions. [General applause]¹⁰

It is of the greatest importance to both countries to examine critically the thesis of American responsibility for Allende's failure. For Chile it can determine the degree to which the policies of Popular Unity were or were not inherently self-destructive, and therefore whether they were well or poorly conceived. For the United States the implications are even broader, for in the wake of Allende's fall and subsequent revelations by congressional committees, new strains have been placed on the instruments of American foreign policy, and, what is perhaps of greater moment, the United States as a society seems to have lost the moral equipoise upon which its entire postwar foreign policy long rested. If this drift in American mood is well founded in fact, then obviously it is well advised. But it is vitally important to make sure that the lessons of history are precisely those that history actually teaches. The case of Chile offers a unique opportunity to find out.

## American Interest in Chile

Let us begin by noting that the United States had been deeply involved in Chile long before Allende's election. The motivation for that involvement, though certainly not devoid of economic considerations, went considerably beyond them. Chile was—in the words of Ambassador Korry—

> the most stable, tested, freest democracy in South America, a democracy which was of a totally different profile than any other country in Latin America . . . Democracy in Chile meant exactly what it meant in the United States. Even more: it meant an unfettered press. It meant a multipartied Congress. It meant an independent judiciary. It meant an apolitical army, an army that had never participated in politics.¹¹

That the Ambassador may have spoke more warmly of Chilean institutions than perhaps was fully warranted is irrelevant here, for his statement serves to

The United States and Chile, 1970–1973 203

depict quite accurately how Chile was perceived by American policymakers. Precisely because it was seen in this light—as a mature and open arena for the competition of ideas and systems—it was selected as a "showcase" for the Alliance for Progress under President Kennedy. One result of this was the receipt of nearly $2 billion of aid (loans and grants) during the administrations of Presidents Jorge Alessandri and Eduardo Frei. This made Chile the largest per capita beneficiary of Alliance funds in the hemisphere. But in the context immediately following the Castro revolution in Cuba, it also burdened Chile with the obligation to prove the most advantageous hemispheric battlefield on which to meet the Cuban challenge to Western ideals.

This aspect of U.S. policy meshed with the darker side of Chilean politics. For if American officials could celebrate the openness and civility of the political process in Chile, they had ample reason to be troubled by its highly ideological environment and the active participation of two large, well-organized, and (particularly in the case of the Socialists) imaginatively led Marxist parties. The situation was in some ways analogous to that of Italy, and it was indeed Italy that provided the metaphor for U.S. covert action in Chile during the 1960s.¹² This much is clear from the memoirs of former CIA Director William Colby, who had designed and executed such a program in Western Europe during the first postwar decade. As defined by him, it included efforts to "strengthen the center democratic forces—parties, cooperatives, women's groups, etc.—against the leftist challenge."¹³ In Chile this meant subsidies to a wide range of non-Marxist political organizations, publications, and labor unions, a practice that eventually ballooned to such proportions that it was frequently quipped in Washington and in U.S. embassy circles in Santiago—only half in jest—that an entire generation of Chilean public men and women had come to depend upon the CIA for maintenance of living standards to which they had, perforce, become accustomed.

The largest effort in the area of covert action made by the United States before Allende's assumption of power in 1970 took place in connection with the elections of 1964. On that occasion some $4 million was appropriated by the U.S. government in support of the electoral campaign of Frei, slightly more than half the victorious candidate's war chest, disbursed apparently without Frei's personal knowledge.¹⁴ According to Colby, "In the subsequent years [that is, 1964–1970] at least that much money was . . . spent by the CIA to keep Frei and other democratic forces in power," largely through "direct propaganda and election activities."¹⁵ Later agency evaluations found that Frei would probably have won the elections anyway, but the abundant subsidy covertly tendered to the Christian Democrats enabled them to secure a solid majority for their candidate rather than, as was more typical in Chile, a mere plurality.¹⁶

Two forms of covert activity contemplated during the Popular Unity period

204 Modern Chile

were clearly eschewed in 1964, however. On that occasion the CIA refused when asked to act as a conduit for contributions by American businessmen to anti-Allende electoral forces; the agency did, however, use one Chilean-based corporate executive to channel funds that were represented to be private, when in fact they were foreign and public.¹⁷ Nor did the agency explore the possibilities of a military coup in the event of an Allende victory. In fact, in the weeks before the elections of 1964, both the CIA and the U.S. embassy strongly turned aside such suggestions which in a sense were dangled before them by some apprehensive Chilean military men.¹⁸

Whatever one may think about the propriety of these actions, they were "covert" in name only. The source of funding was obvious not only by its very magnitude but by the techniques employed, which were wholly evocative of an American campaign. These included "polling, voter registration, and get-out-the-vote drives."¹⁹ As Ambassador Korry later recalled, during the period in 1967 when he was being briefed in Washington before taking up his post in Chile, "I was told, not asked, by well-known reporters of our leading media outlets, by Congressmen, Senators, and their staffs, of the very large United States role in the election of 1964 in Chile; that is, the large effort mounted covertly." If it was a secret, he added, for some years it had been one of the most poorly kept in Chile.²⁰

Covert foreign funding of Chilean electoral campaigns had become such a way of life in the period just before the 1970 presidential contest that Ambassador Korry was approached for contributions by representatives of several potential candidates, including Frei's foreign minister, Gabriel Valdés, Radomiro Tomic, Alessandri, and even Allende—whose campaign manager demanded a cool million dollars. All these proposals were sharply rejected.²¹ After the nomination process was completed, it was assumed that the United States would have no choice but to follow the by-then-established practice of providing massive financial support either to Alessandri or to Tomic. Instead, something quite different occurred—a lengthy series of delays, an eventual decision to support no particular candidate, and, finally, the allocation of sums estimated at between $425,000 and $1 million to fund a "spoiling" campaign, which would merely emphasize the dangers of a Popular Unity victory.²² In addition, the CIA in Chile produced what is called "black propaganda," that is, materials apparently originated in the constituent parties of the Allende coalition, with a view of sowing dissension among them. In this connection, CIA funds were channeled to an unidentified small political group—presumably the schismatic Democratic Radicals—with a view to reducing the number of Radical votes for Allende.²³

Although U.S. government policy did not lean to the support of a single candidate, the American business community in Chile not unnaturally pre-

ferred Alessandri, and as early as April 1970, a board of officers of various multinationals led by Chase Manhattan Board Chairman David Rockefeller began a series of representations in this sense to the State Department. Initially they offered to raise a common fund of their own—$500,000—to be dispersed by the CIA. When informed of this proposal, Ambassador Korry sent Washington what he has described as "a blistering cable of opposition." In addition, the ambassador found himself "subjected to the most intense, incessant pressures from the CIA and its Chilean allies (including Chilean-based U.S. business concerns) to have the United States commit its covert support to their candidate. I refused."²⁴

Having failed to exact a decisive commitment to Alessandri from the Nixon administration, the multinationals were nonetheless offered by way of consolation the assistance of the CIA in locating channels through which funds could be covertly passed to his campaign. In effect, however, ITT was the sole recipient of these services. The CIA and officials of ITT in Chile worked together closely in this sense, and eventually "at least $350,000 was passed by ITT to [the Alessandri] campaign." A roughly equal sum was passed through Chilean channels by other American companies, but, according to the Church committee report, "the CIA learned of this funding but did not assist in it."²⁵

Even if one accepts unhesitatingly the most inflated estimates of U.S. financial involvement in the 1970 elections, it is obvious that far less was spent on that occasion than in 1964. Nor do financial figures themselves fully account for electoral outcomes—in Chile or anywhere else. In any case, to evaluate their impact fully—in 1970, at least—one would have to know more about the countervailing efforts on Allende's behalf. On this, Henry Kissinger, then national security adviser to President Nixon, has simply stated that "throughout 1970 we received credible reports that substantial covert funds and assistance from Cuba and other Communist sources were being funnelled to Allende."²⁶ The Church committee report refers to "CIA estimates" that "the Cubans provided about $350,000 to Allende's campaign, with the Soviets adding an additional undetermined amount."²⁷ In addition, one must somehow factor in this unexpected twist: in 1970 Allende gained a considerably smaller percentage of the popular vote than he had in 1964, when covert support for his opponent was nothing less than massive. Undoubtedly, the U.S. decision not to support a particular candidate dispersed energies and resources that had been more effectively marshaled six years before; further, in the opinion of CIA Director Colby, the decision to focus on a "spoiling campaign," though "certainly a cheaper . . . tactic, also proved to be ineffective."²⁸ But all of this only suggests that the Nixon administration might inadvertently have contributed to Allende's victory; it does not tell us

206 Modern Chile

for certain what the result would have been had the U.S. government become
more actively involved in the campaign, as the American business community
wished it to do.

Precisely why a Republican administration would remain so impervious to
corporate appeals on matters Chilean is a very arresting question. The Church
committee report speculates that the Nixon administration's putative "mature
relationship" with Latin America— a deemphasis on aid and social reform—
possessed a covert action corollary that likewise dictated a less vigorous
involvement in the political process. In addition, the report suggests that the
activities of the United States in 1964 had become too obvious to be really
effective a second time.²⁹ Former CIA official Cord Meyer offers another,
simpler answer: "Nixon tried to avoid fueling a fratricidal rivalry between the
two non-Communist parties by denying funds to both of them."³⁰

A somewhat more elaborate and presumably more authoritative explanation
has emerged in the memoirs of Henry Kissinger, who cites three factors:
Nixon's and his own preoccupation with "so many other crises," domestic
and foreign; an incorrect estimate of the most likely outcome of the Chilean
elections ("I knew too little about Chile to challenge the experts"); and
bureaucratic infighting between the CIA and the National Security Council
(NSC) on one hand and the Latin American Bureau of the Department of State
on the other. The latter, according to Kissinger, disliked Alessandri for being
"too old, in reality because he was considered insufficiently progressive."³¹
So much was this the case, he insisted, that the bureau actually preferred the
risk of an Allende presidency to outright support of Alessandri. In addition,
Kissinger ruefully recounts, these people "chose at this moment [1969-70] to
attack the very concept of covert support for foreign democratic parties which
had for so long been a central feature of our Chilean effort." The resources
for any attempt to block Popular Unity's access to power, these people ar-
gued, "should hereafter be found entirely *within* Chile." What this meant,
Kissinger concludes, was the demoralization "of the very forces we wanted
to encourage. . . . In a close election the resultant subtle change in the
psychological balance could be decisive."³² (That Kissinger believes this
does not, of course, mean it was necessarily so. But it does provide some
understanding of the force and motives at work within the U.S. foreign policy
apparatus.)

In any event, the so-called 40 Committee of the NSC, the body charged
with monitoring covert action overseas, met to consider the Chilean elections
only four times—once in April 1969, when it deferred any decision; again in
March and June 1970, when it authorized the sums for the "spoiling" cam-
paign; and finally in August 1970, at which point it was decided that nothing
further could be done. Given the need for presidential approval of all its
decisions and the subsequent paperwork, Kissinger writes, it is unlikely that

even the relatively small sums allocated reached Chile "before the second half of July. And then the Embassy was constrained by instructions that made their effective use almost impossible."³³

These deliberations took place against the background of repeated polls that—until quite late in the day—reflected a substantial Alessandri lead. By the time Washington's perceptions of Alessandri's prospects began to match evolving Chilean realities, a massive covert effort "had been foreclosed without ever being discussed, first with the argument that a substantial program was unnecessary, and later because it was then too late." By early September Kissinger became convinced that he had been "maneuvered into a position incompatible with my convictions—and more important, those of Nixon."³⁴ Thus Chile went to the polls.

## U.S. Attempts to Prevent Allende's Assumption of Power

Allende's tentative victory on September 4—actually, a plurality that waited upon what was in effect a congressional runoff—fell upon the Nixon administration with an impact all the more explosive for being unexpected. The president, in Kissinger's vivid recollection, was "beside himself," insisting on doing "something, anything, that would reverse the previous neglect." Now that it was nearly too late, "all agencies threw themselves into a frenzied reassessment." Since the Chilean Congress was scheduled to determine the new chief executive on October 24, "we were forced to improvise . . . with no real preparation. With time running out, our actions were inevitably frantic."³⁵

On September 8 and 14, the 40 Committee met to shape a response to the prospect of an Allende presidency. That effort eventually ran parallel to—and at several points intersected—another that had been germinating for some months in the Washington, New York, and Santiago offices of ITT. For reasons of both chronology and clarity, the activities of ITT are discussed here first.

### Activities of ITT and the CIA

The Chilean elections were discussed at some length at the spring 1970 meeting of ITT's board of directors. At that meeting, there was a consensus that, as things then stood, Allende would win the popular election. In view of the company's large stake in Chile—which included a majority share in the national telephone company and two major hotels—this matter could not be viewed with equanimity. Hence board member John McCone, a former director of the CIA, was instructed to seek out the agency's chief, Richard Helms, to inquire what plans were under way to assist either Alessandri or Tomic. At their subsequent encounter, Helms informed McCone that the 40

208 Modern Chile

Committee had already decided not to undertake a major covert effort; some-
thing would be done within the existing budget, he said—alluding, appar-
ently, to the "spoiling" operation—but no additional funds were to be au-
thorized for other covert purposes.

McCone then informed ITT chairman Harold Geneen of his conversation, but, to blunt its edge of disappointment, arranged with Helms for a meeting in Washington on July 16, 1970 between Geneen and William V. Broe, chief of clandestine services at the Western Hemisphere Division of the CIA. It was at this meeting, according to Broe's later testimony, that Geneen offered to raise an election fund of "substantial size" for Alessandri, to be channeled through the CIA. Broe turned aside the offer, which, he said, was inappropriate in view of U.S. policy—that is, not to support any particular candidate in the election.³⁶ As noted, however, the CIA subsequently agreed to assist ITT in identifying channels whereby corporate funds could be covertly passed to Alessandri. A second conduit was opened for ITT to the National party through the good offices of the station in Santiago, and representatives of the company and the agency in Chile met often to coordinate their work in the months before the elections.³⁷

In the period after September 4 and up to the congressional runoff on October 24, ITT continued to be extremely active in exploring ways to forestall an Allende presidency. The most apparent opening was to persuade the Chilean Congress to confirm Alessandri rather than Allende. The former had, after all, won nearly as many popular votes as the victor, and if he could enlist a significant portion of the Christian Democratic representation in Congress, he could obtain the presidency. As conceived by ITT operatives and emissaries of Alessandri, and reported in a confidential cable from ITT's Santiago office on September 17, once confirmed by Congress, Alessandri would immediately resign. This would permit new elections, in which President Frei would then be eligible to succeed himself.³⁸ Although this was legal in the very narrow sense, it flew in the face of a well-established custom in Chile that the legislature confirms as president whoever receives a plurality of the popular vote; to break that precedent—with its attendant risks to the nation's political and institutional fabric—would require some additional persuasion.

To this end, at the September 9 ITT board meeting in New York, Geneen told McCone that the company was prepared to put $1 million "in support of any plan that [would bring] about a coalition of the opposition"—presumably a series of bribes to Christian Democratic congressmen. McCone then met with Kissinger and Helms to transmit the offer, but since Kissinger's office did not get in touch with him subsequently, he assumed that the tender had been rejected.³⁹ Meanwhile Jack Neal, director of international relations for ITT's Washington office, approached a member of Kissinger's staff and also the office of Charles A. Meyer, assistant secretary of state for inter-American

209

relations. Although some reference was made in these conversations to a "sum in seven figures," their burden seems to have been less an offer of financial assistance than an appeal to the Nixon administration to remain neutral "in the event other attempts were made to 'save the situation' in Chile."⁴⁰

In the final days of September there was a sudden shift in ITT tactics. A report from Santiago on the twenty-ninth cast considerable doubt on whether the "Alessandri gambit" would work, since "the prevailing sentiment among the PDC [that is, Christian Democratic congressmen who had presumably been individually canvassed] is said to favor Allende." These men would change their minds only if Chile seemed about to suffer an "economic collapse."

> The pressure resulting from economic chaos could force a major segment of the Christian Democratic party to reconsider their stance . . . It will become apparent, for instance, that there's no confidence among the business community in Allende's future policies and that the health of the nation is at stake. More important, massive unemployment and unrest might produce enough violence to force the military to move.⁴¹

The same day Broe met in New York with Edward J. Gerrity, senior vice-president of ITT, at the behest of his chief, Helms. It was apparent that some change of heart had occurred at the highest levels of the U.S. government, since it was now the CIA that was soliciting the help of the company. In New York Broe presented Gerrity with a plan following an identical logic, but fleshing out considerable detail what was already on its way in barest outline from the company's Chilean operatives. Specifically, he suggested that (1) American banks should not renew Chilean credits or should delay in doing so, (2) American companies should impose calculated delays on liquid advances, deliveries, and shipment of spare parts, (3) pressure should be applied to already foundering savings and loan institutions, and (4) all technical help should be withdrawn and no technical assistance promised in the future. Broe went so far as to suggest that companies in a position to do so should shut down their Chilean operations altogether. He then handed Gerrity a list of companies and suggested that ITT approach them in this sense.⁴²

When he reported back to Geneen, Gerrity expressed serious doubts that the plan would work, an opinion later seconded by McCone.⁴³ In any case, there were no takers among other multinationals or major financial institutions. This was foreshadowed at the September 29 meeting, when Broe told Gerrity that "of all the companies involved [that is, companies with investments in Chile] ours alone had been responsible and understood the problem."⁴⁴ On October 9, after some soundings had apparently taken place, Charles Merriam, ITT's executive representative for international trade, was complaining in a memorandum to McCone that

210 Modern Chile

practically no progress has been made in trying to get American business to cooperate in some way to bring on economic chaos. General Motors and Ford, for example, say that they have too much inventory on hand in Chile to take any chances, and they keep hoping everything will work out right. Also, the Bank of America has agreed to close its doors in Santiago but each day keeps postponing the inevitable. According to my source, we must continue to keep the pressure on business.⁴⁵

American banks proved particularly unreceptive to these appeals. Their executives, subpoenaed by the Senate Subcommittee on Multinational Corporations, or interviewed by its staff, categorically denied having been approached at this time by the CIA, ITT, or Chilean nationals. While strictly speaking this may not be true, the subcommittee itself could find "no evidence of [their] involvement . . . in a plan to block President Allende's election [either by the Congress] or in a concerted effort to weaken him by creating 'financial chaos.'"⁴⁶ Contrary to the Bank of America's promise to ITT, it did not "close its doors in Santiago."⁴⁷ Further, during this period, Manufacturers' Hanover Trust actually increased slightly its lines of credit to Chile,⁴⁸ as did the First National City Bank of New York; what makes the latter case particularly interesting is that the borrowers were Chilean government agencies rather than private individuals or firms.⁴⁹ Thus, for all the cable time, telephone calls, meetings, and lunches, and in spite of the undeniably dramatic flavor of the discussions, in an operational sense no joint ITT-CIA plan to bribe the Congress or unleash a financial crisis ever existed.⁵⁰

Although it runs slightly ahead of the story, something should be appended here concerning ITT's activities after Allende's inauguration. In early 1971 Merriam invited Washington representatives of major U.S. corporate investors in Chile to form an ad hoc committee to coordinate their responses to the new government. The first meeting—one of several—took place in January, attended by personnel from Anaconda, Kennecott, Ralston Purina, Bank of America, Pfizer Chemical, and W. R. Grace.

The purpose of this committee, summarized in a minute prepared by Ronald Raddatz, the Bank of America representative, was to apply "pressure on the [U.S.] government, wherever possible, to make it clear that a Chilean takeover [of American properties] would not be tolerated without serious repercussions following."⁵¹ This pressure, Merriam later testified, was expected to convince the U.S. government of the desirability of blocking loans to Chile by multilateral credit institutions such as the World Bank and the Inter-American Development Bank; this presumably would confront Allende with an early prospect of economic collapse and persuade him to become more disposed to negotiate with ITT on terms more favorable to the company than had been anticipated.⁵²

Apparently the Anaconda Corporation shared the notion that this was the best way to proceed against the new Chilean government.⁵³ It quickly became clear, however, that other companies were moving to cut their losses, strike the best deal with Allende they could manage, or collect their insurance from the Overseas Private Investment Corporation. For example, Ralston Purina's Washington representative, William C. Foster, attended only the first meeting of the ad hoc committee; thereafter he was forbidden by his superiors to continue. The president of Ralston Purina gratuitously added his opposition to the "basic approach suggested," although Foster understood the purpose of the committee to be not the coordination of economic warfare but stiffening the resolve of the U.S. government,⁵⁴ which was seen by committee members as far too conciliatory toward expropriating Latin American governments.⁵⁵ As for Kennecott, after attending two meetings of the committee, its representative Lyle Mercer concluded that "there was no particular value to us for continued participation."⁵⁶ The Bank of America representative likewise withdrew after the second meeting.⁵⁷

Abandoned by three of the seven original members of the committee, ITT persisted in lobbying the Nixon administration on its own. In late September 1971—now facing imminent expropriation—company representatives called upon Assistant Secretary Meyer and argued for an embargo of Chilean copper, combined with an immediate cut-off of all U.S. economic assistance. These proposals met with tepid response; Secretary Meyer reminded his visitors that, after all, a copper embargo would be tantamount to "an act of war."⁵⁸ A few days later Merriam submitted a detailed 18-point plan, which was designed to prevent Allende from getting through the allegedly "crucial" next six months, to Peter G. Peterson, Nixon's White House aide for international economic affairs. Among other things, the plan called for an embargo on all Chilean exports to the United States, not just copper, and delay or embargo of key U.S. exports to Chile, perhaps even extending to fuels desired for the Chilean armed forces. The plan also contained a covert political action component of grandiose proportions, including subversion of ("developing contacts with") the Chilean military, judiciary, and civil service, as well as coordinated diplomatic efforts with other foreign governments to isolate and pressure Allende.⁵⁹

Peterson later testified that he did not take the ITT program seriously, but more to the point, he added, "If one reads what actually came out of [the] policy work on January 19, 1972, there is certainly no relationship that I can see between the recommendations of ITT and the administration's decision."⁶⁰ The "policy work" to which he referred was an NSC study commissioned in June 1971, to examine the probable economic and foreign policy aspects of Chilean expropriations of American property. The "decision" refers to a Presidential policy directive which conditioned future economic benefits to

212 Modern Chile

Chile upon "reasonable steps to provide adequate compensation" for expropriated property. Indeed, the only area where the ITT memorandum and the Nixon directive clearly overlapped was in the matter of U.S. votes at the multilateral development banks. (See below).

On October 21, 1971, the major U.S. companies involved in Chile met with Secretary of State William Rogers, Jr. On that occasion ITT—once again in the lead—submitted to the Secretary its "White Paper on Chile," an abbreviated version of the 18-point economic warfare plan offered three weeks before to Peterson. The reaction at the meeting was mixed, both on the part of Rogers and the other company representatives present. The secretary emphasized the minimal leverage possessed by the United States over Chile, and his "only positive statements," the ITT minute noted, were a promise to speak out publicly against expropriations, and—if the appeals of the American copper companies were denied⁶¹—to invoke the Hickenlopper Amendment.⁶² (In fact, however, the latter was never invoked against Chile.) The ITT minute concluded that Secretary Rogers was "pretty much going along with the . . . soft-line, low profile policy for Latin America" of Assistant Secretary Meyer, obviously not much to the company's taste.⁶³

Having failed to organize a united front of American business concerns in Chile, and eliciting a minimal response from the Nixon administration, ITT turned from its plans for economic disruption to the serious pursuit of a negotiated settlement with the Chilean government. These talks had actually begun at the same time as the action just described, but apparently as a mere pro forma exercise while more adventurous strategies were explored. Having failed at the latter, the company was left with no choice but to behave responsibly and hope for the best.

## Nixon, the CIA, and the Schneider Debacle: Tracks I and II

The sudden approach of the CIA to ITT on September 29 was a partial result of two meetings of the 40 Committee on September 8 and 14, 1970, whose purpose was to plot a response to the fact of Allende's electoral victory. These deliberations led to a decision to unleash a program of covert political activity to deny Allende the presidency through constitutional means (that is, some variant of the "Alessandri gambit"). The day after the second of these two conclaves, however, President Nixon summoned CIA Director Helms to his office, and in the presence of Kissinger and Attorney General John Mitchell issued secret instructions to organize a military coup in Chile to forestall a Popular Unity government. So secret, indeed, were these orders that they were kept not only from the State Department and Ambassador Korry, but even from the 40 Committee itself. To preserve cover, Helms was ordered to use a private reporting channel that would extend directly from the

The United States and Chile, 1970-1973 213

CIA station chief in Santiago to Kissinger or his military deputy, Colonel Alexander Haig.⁶⁴ The Church committee subsequently labeled these two different approaches "Track I" and "Track II," respectively.⁶⁵

To implement Track I, on September 14 the 40 Committee authorized Ambassador Korry to enlist Frei's aid in rounding up congressional support for the "Alessandri gambit." To this end, a $250,000 contingency fund was set aside to bribe wavering Christian Democrats legislators.⁶⁶ When these efforts met with no success, an alternative version of the scenario was devised, calling for what would essentially be a "preventive" military coup. Under this plan—which Kissinger attributes to Korry and assumes was "cleared by associates" of the Chilean president—key ministers of the outgoing government would resign and induce their colleagues to follow suit. Frei would then have the option of replacing them with military officers. "In other words," Kissinger explains, "Frei was to be given the means to trigger a constitutional crisis—designed, as in every other scheme [within Track I], to lead to another election so that the country could choose between Frei and Allende, between democracy and potential dictatorship." Here, however, Washington encountered additional difficulties:

> There was doubt about Frei's willingness to do this [either]. The principal obstacle, however, was perceived to be the Commander-in-Chief of the Army, Generai [René] Schneider, who took the position that the politicians having put Chile into this mess, it behooved them to extricate her. Another stumbling block was reported to be the fear of the Chilean military that if they acted they would be treated like the Greek junta—that is to say, deprived of military aid by the United States and harassed by the left globally.⁶⁷

The 40 Committee then ordered Korry to meet with military leaders and assure them that they had nothing to fear from the United States on this score but that, conversely, inactivity would lead to what they most wished to avoid; and on September 29 pipeline shipments of military equipment were held up precisely to make this threat credible. At the same time, a propaganda campaign was mounted to convince Chileans, both civilian and military, of the economic ills that would befall the country in the event of a Marxist government. It was in this context, for example, that Ambassador Korry made his statement, much quoted subsequently, that in the event of an Allende accession the United States would not allow "a nut or a bolt" to reach Chile.⁶⁸

On October 3-4, the Christian Democratic party assembled to consider, among other things, the attitude to be taken in the coming congressional balloting. On that occasion Frei made no attempt to persuade his followers to prevent Allende from assuming office. At the same time, it was clear to Washington that the military required additional pressure, and Korry was instructed to apply it.

What in effect was happening, as Kissinger has observed, was that Track

214 Modern Chile

I and Track II were merging, though without the knowledge of some of the principal American and Chilean actors. Korry thought he was still working for a "constitutional" coup, although without Frei's cooperation, it is difficult to see how this scenario could be played out. Meanwhile, second-echelon elements of the same military who presumably would play a role in convoking new elections were being coaxed along a different path by the CIA. As the deadline date for the congressional runoff approached and the embassy's efforts proved increasingly fruitless, Nixon and Kissinger shifted emphasis— if not in intent, then by action and inaction—to an outright military coup.

The difficulties encountered along Track I paled into insignificance when compared with the obstacles faced by those who would implement Track II. Indeed, the latter could be mounted only over the loud and persistent objections of the intelligence community, who believe that conditions in Chile simply did not lend themselves to an adventure of this sort.⁶⁹ Nixon, whose respect for these people was not inordinately great in any case, waved their warnings aside. Thus, between September 15 and October 20, the CIA made twenty-one contacts with key military and police officers in Chile who were known to favor such action.⁷⁰

Recruiting "assets," particularly on such short notice, proved an extremely daunting task, for U.S. policy during the Frei years had systematically discouraged coup plotting among the military. And as a result that policy—in the words of one intelligence professional—the CIA had "deliberately distanced itself from those officers who were inclined to think in those terms."⁷¹ Eventually the CIA narrowed its search to two groups: one led by General Roberto Viaux, who had been forcibly retired after leading an unsuccessful military revolt in 1969, the other by General Camilo Valenzuela, commander of the Santiago military district. Both had qualities that recommended them to agency operatives. Viaux, whose adventure the year before was ostensibly a protest against the budgetary neglect of armed forces personnel, was a popular figure among career enlisted men and junior officers, and, since his retirement, a recognized figure in right-wing circles. As an active-duty officer in a key assignment, General Valenzuela was in contact with other senior military and naval figures and, what was more to the point, commander of the one garrison whose support was vital to success.⁷²

Here again the obstacle was thought to be General Schneider. Failing to obtain Schneider's reassignment, the coup plotters decided to kidnap him and put him on a plane to Argentina. The CIA eventually decided in favor of the Valenzuela group; Kissinger says that Viaux and his associates were so informed on October 17;⁷³ the Church committee agrees.⁷⁴ The Valenzuela group carried out two abortive attempts, one on October 19 and one on the following day. One last effort was to be made on October 22. At 2 a.m. on the morning of that day, the CIA distributed to Valenzuela's men three sub-

The United States and Chile, 1970-1973 215

machine guns, some ammunition, tear gas grenades, and masks, all of which had entered Chile through the U.S. diplomatic pouch. Before this effort could actually be consummated, however, the Viaux group moved on its own. General Schneider's car was pushed off the road while he was being driven to work; the commander himself was shot and critically wounded when he reached for his pistol. The plotters fled, and the commander-in-chief died three days later in a Santiago military hospital.⁷⁵

The Chilean military court that subsequently investigated the crime reported that General Schneider had been killed by handguns. These, in the findings of the Church committee, "were, in all probability, not those supplied by the CIA to the conspirators."⁷⁶ The committee also noted that an unloaded machine gun had been found at the site of the killing, but professed itself "unable to determine whether [it] was one of the three supplied by the CIA."⁷⁷

## *The U.S. Role, November 1969-November 1970*

If one assumes that the purpose of U.S. policy in Chile during the period under review was to prevent Allende's accession to power, one must confront the fact that virtually all American actions—whether by public or by private agencies—proved either irrelevant or counterproductive. The U.S. government's refusal to support a single candidate in the presidential campaign obviously inflicted no harm whatever on Allende's quest, and may even—if one accepts Kissinger's logic—have ensured his victory. Both the so-called spoiling campaign sponsored by the United States, and the more or less independent funding activities of U.S. corporations on behalf of Alessandri, seem to have had no decisive effect, at least in the direction desired.

In the period between election and inauguration, both ITT and the CIA, acting on instruction from President Nixon, explored various means of unleashing "economic chaos" in Chile, with a view either to convincing the Christian Democrats of the inadvisability of confirming Allende in the congressional balloting, or to persuading the Chilean military in effect to nullify the elections so as to restage them later as a two-way race. At the same time, $250,000 was set aside to win the concurrence of Christian Democrats utilities and senators, and military shipments to Chile were held up to convince the armed forces that failure to act in a way desired by the United States would have very serious consequences.

So much for U.S. intentions; the results were quite different. The CIA and ITT found it impossible to enlist other corporations and the banks in the plan to unleash "economic chaos." And although there was a high degree of economic uncertainty during the weeks between Allende's election and his inauguration, it arose out of preoccupations quite logical in their own terms,

216 Modern Chile

not as the result of an orchestrated campaign or concrete economic actions, which the Senate Subcommittee on Multinational Corporations was utterly unable to document. Even in the areas under its direct competence, the U.S. government betrayed a remarkable lack of bureaucratic coordination; even pipeline disbursements of nonmilitary aid to Chile continued unabated throughout this period.

Neither President Frei nor the Christian Democrats in Congress could be persuaded to play the role desired by Washington and the U.S. embassy in Santiago; consequently, the $250,000 that had been set aside was never actually spent.⁷⁸ The Chilean military could not be bribed negatively into sponsoring a coup, whether for new elections or some other purpose (Track I); when second-echelon figures in the armed forces were enlisted by the CIA to remove (not assassinate) General Schneider (Track II), a lack of control and discipline led to the precipitant events that climaxed in his death. The effect of the Schneider debacle was precisely the opposite of what was desired: it transformed the victim into a martyr of the "constitutionalist" traditions of the Chilean army; it encouraged other constitutionalist officers to support an orderly transfer of power to the new administration; and it discredited right-wing cabals both in the army and outside of it.⁷⁹ Two days after Schneider's death, the Congress met and with impressive dispatch confirmed Allende as the victor in the presidential contest.

ITT fared no better in its efforts. Shortly after Allende's inauguration, the company found itself subjected to the same treatment accorded to other large private economic concerns—the imposition of strict price controls combined with large mandated wage increases. In short order, the company began to experience serious cash flow problems.⁸⁰ Eventually the Chilean state took over the Chilean Telephone Company and offered to buy out ITT's local holdings for approximately $24 million. This was slightly more than one-eighth the company's own assessment of their book value, an appraisal that must have been closer to the truth, since it had been paying premiums to the Overseas Private Investment Corporation for properties worth over $108 million.⁸¹ For some months negotiations between the company and the Chilean government dragged on with no visible result; the publication of the ITT documents by columnist Jack Anderson in March 1972 afforded the Allende regime a pretext to break off the talks. It was said—then and subsequently—that ITT deserved no better because of the role it had played in attempting to thwart Chile's democratic and constitutional processes. This argument would possess undeniable weight were it not for the fact that, by its own admission, the Chilean government had moved against the company's holdings in ignorance of the role that ITT had played in 1970 and early 1971.⁸² Thus it cannot

217

be doubted that even if ITT's conduct in Chile had conformed to the highest canons of corporate responsibility, it would have suffered precisely the same punitive and confiscatory treatment—as in the event it received.

## U.S.—Chilean Economic Relations During the Allende Government

That Allende's accession to power was not regarded as welcome news by the United States requires no further documentation. There was, in the first place, a significant economic interest in Chile that was endangered by the new government. This included approximately half a billion dollars' worth of investment exposure, a large part of which was insured by the Overseas Private Investment Corporation—that is, ultimately, by the U.S. taxpayer.⁸³ At stake also were some crucial ideological and geopolitical issues—issues that, in the retrospective view of both former President Nixon and format Chilean Foreign Minister Clodomiro Almeyda, far overshadowed economic questions.⁸⁴

With Allende's election, a decade's worth of hopes, skills, and resources poured into Chile under the Alliance for Progress appeared for naught. A socialist state on the Latin American continental landmass posed the threat of a contagion that could not—as in Cuba—be easily confined within the boundaries of a single state. Chile might become a base for continental terrorist and extremist groups allied to the Soviet Union or Cuba. At a minimum, Allende's victory offered Castro a major opportunity to breach the wall of isolation that the United States and its allies had sought to erect around him.

In a global perspective, Allende's victory was also a serious set-back for the United States. As Ambassador Korry subsequently remarked, at the very time when President Nixon was about to launch new diplomatic initiatives in Moscow and Peking, "to act indifferent to the disappearing . . . of a unique democracy in what was viewed throughout the world as [our own] backyard, could have a significant effect on those who make policy in the Soviet Union and the People's Republic of China." Further, with impending elections in Italy and France, "popular front tactics [could alter] the whole fundamental structure of Western defense, Western ideals." In this, he affirmed, "the Chilean model could have a certain effect."⁸⁵

Whether such premonitions on the part of U.S. policymakers were fully justified is quite beside the point. These were the operative assumptions upon which the United States proceeded to deal with President Allende, notwithstanding some fulsome assurances by President Nixon that the United States was "prepared to have the kind of relationship with the [new] Chilean government that it is prepared to have with us."⁸⁶ Rather less clear, however, is

218 Modern Chile

the degree to which the United States was able to translate its concerns into an effective policy. Put simply, having established the fundamental hostility of the United States to the Allende experiment, we are still left to measure its effect.

### Economic Relations and the "Invisible Blockade"

The onset of serious economic difficulties after the regime's euphoric first year almost inevitably focused attention on relations with Chile's formerly preeminent partner in matters of trade, credit, and investment. The Popular Unity view of this matter was most definitively expressed by President Allende himself in a speech to the United Nations General Assembly on December 4, 1972. On that occasion he declared his country was the victim of "a new form of imperialism—more subtle, more artful, and for that reason all the more effective in impeding the exercise of our rights as a sovereign state." In this address Allende made particular reference to a "financial-economic blockade," "not an open aggression . . . but an attack at once oblique, subterranean, but no less lethal for Chile," whose purpose, he maintained, was "to isolate us internationally, strangle our economy, paralyze the sale of our principal export, copper. And to deprive us of access to sources of international financing."⁸⁷

Since the 1973 coup, the concept of an "invisible" or "informal blockade" has been raised to the level of an omnibus explanation for the regime's most critical economic disjunctions. The subsequent publication by the Church committee of CIA Director Helms's notes taken during his September 15, 1970, meeting with President Nixon and Kissinger seems to provide confirmation of Allende's charges from U. S. official sources, since on that occasion Helms quoted Nixon as having ordered the CIA "to make the [Chilean] economy scream."⁸⁸ A corroborative piece of evidence—also uncovered by the Church committee—was National Security Council Memorandum 93 of November 1970, which established U. S. policies toward the new government. In the economic field, that document called for "all new bilateral foreign assistance . . . to be stopped . . . . The U. S. would use its predominant position in international financial institutions to dry up the flow of new multilateral credit or other financial assistance. To the extent possible, financial assistance or guarantees to U. S. private investment in Chile would be ended, and U. S. businesses would be made aware of the government's concern and its restrictive policies."⁸⁹

Given the fact that U. S.-Chilean economic relations were dispersed along a rather broad front of activities, they must be explored layer by layer. Here we discuss the foreign debt, relations with the multilateral banks, relations with private banks, private suppliers of equipment and spare parts, and public

The United States and Chile, 1970-1973 219

(that is, government-to-government) aid programs. Finally, we review the credit available to Chile from alternative sources. Only then will it be possible to measure the proximate dimensions of the "invisible blockade."

*The foreign debt.* For some years before Allende's election, Chile had come to depend heavily on foreign borrowing to cover its trade and fiscal deficits. Such negative balances arose in part out of fluctuations in the world price of copper, whose volatile movements were capable of depriving the country almost overnight of resources needed to meet medium- and long-term commitments. Infusions of foreign capital—whether from governments, multilateral banks, or private foreign banks—eventually imposed an increasing burden of debt services, which as early as 1960 constituted 11 percent of the country's export earnings. Ten years later—that is, the year of Allende's election—that figure had ballooned to 37 percent.

Consequently, even before the advent of Popular Unity, international economists were beginning to worry about Chile; perhaps only the temporary boom in copper prices during the mid-1960s, producing the first trade surplus in many years, was capable of drowning out their warnings. Nonetheless, as one authoritative study recounts, "even in those prosperous days, [financial experts] were predicting that copper prices would soon fall and that Chile would need more than a billion dollars in new loans if the country was to continue to develop." In addition, it would require $600 million more for debt service. Because of the Vietnam War and the inflated price of copper, the exchange crisis predicted for the final years of Frei's administration was postponed for several years and in fact fell during the Allende period. It is worth noting, however, that even during the apparently halcyon Christian Democratic era, "Chile continued to experience a current account deficit during all but one of these years [1965-1970], and the country maintained its surplus only because foreign investment and external lending continued to be substantial."⁹⁰

Without doubt the willingness of foreign creditors to extend new lines to Chile during this period constituted a vote of confidence as much political as economic; this was particularly true of those in the United States. But that confidence rested not merely on evident ideological compatibility, but on a vigorous Chilean program of improved tax collections, the projected expansion of copper production, and respectful treatment of foreign investment and foreign obligations generally. Further, these creditors were operating on assumptions about future events in Chile quite different from those that subsequently occurred. The political difficulties that erased the profit balances of copper mining under Allende simply were not anticipated, and even the relatively conservative projections that forecast trouble for the late 1960s assumed a far lower bill for imports and foodstuffs than materialized under a socialist government.

220 Modern Chile

The long-avoided moment of truth came in November 1971, when President Allende announced a moratorium on foreign debt servicing and requested a general refinancing of Chile's international obligations. Between February and April 1972, Chilean delegates met for this purpose in Paris with representatives of the eleven nations holding shares in the country's public foreign debt.⁹¹ In spite of the fact that some $1.23 billion of the total principal of $1.86 billion was owed to the United States, the United States was unable to persuade other members of the "Paris club" to link refinancing to compensation of the expropriated copper companies.⁹² Instead, the Chileans obtained a quite favorable settlement, which allowed them to roll over for an eight-year period 70 percent of the debts that matured between November 1971 and December 1972. In addition, a two-year period of grace was extended to the remaining 30 percent, which would otherwise have fallen due immediately. Finally, the Paris club members agreed to consider Chile's request for a rescheduling of the country's 1973 debt service at the end of 1972; preliminary talks on this subject finally opened after several postponements in May 1973, and were still in progress at the time of the coup.

Within the general framework of the Paris club agreements it was left to Chile to work out bilaterally the exact sums and interest rates with each of the creditor nations. As a result, the Allende regime obtained even more extensive relief. For no final agreement on the debts owed to the United States was ever reached, and the Allende government never actually serviced the amount that otherwise would have been remitted to Chile's principal creditor. This in itself constituted a de facto relief on foreign debt servicing for 1972 alone of approximately $243 million.⁹³ Based on the then-current dimensions of Chilean exports (one billion dollars a year), the Paris club renegotiations—taken as a whole—increased the foreign exchange availability to the Allende government by approximately one third.

*The multilateral development banks.* Chile fared somewhat differently at the hands of the Inter-American Development Bank and the International Bank for Reconstruction and Development, more commonly known as the World Bank. Although both bodies had long supported Chilean efforts in economic and social development, during the Allende years there was a perceptible contraction in their financing role. Given the preponderant voice that the United States at least reputedly exercised in the deliberation of both bodies, many have concluded—along with President Allende—that political rather than strictly economic criteria determined the policies of both banks towards the Chilean government.

Sensitive to charges of this sort, both agencies have been at considerable pains to refute them. To this end, each issued a white paper documenting its dealings with the regime. The IDB brief advances the following points: (1) that two new "soft" loans were approved in early 1971 to expand the Catholic

221

University in Santiago and the Universidad Austral in Valdivia; (2) that slightly more than $70 million—loans approved during the Frei administration—was disbursed to Chile during the Allende period, making the Popular Unity government the recipient of the largest annual disbursements in the bank's history; (3) that the bank received three new project requests during the Allende period, which were at various stages of study, none reaching the vote stage by September, 1973; (4) that the bank rewrote an ordinary capital loan approved in 1969 at the Allende government's request in 1971 and by June 1973, had committed $13.1 million to this project—involving thirty-nine industrial ventures in which the Chilean State Development Corporation (CORFO) would own 49 percent of the stock—in addition to which it organized funding from nonbank sources bringing the figure to $54.2 million; and (5) that during these years the bank financed several million dollars' worth of capital imports to Chile from other member countries.⁹⁴ This still left, of course, no major new loans both approved and disbursed during the life of the Popular Unity government.

An independent study of Chile's relations with the multilateral development banks found the IDB guilty of a lack of consistency in lending policies, compared both with its past treatment of Chile and in its dealings with other Latin American nations during this period; but the critical focus of the study centered on the failure to approve new loans (and what it regarded as an unreasonable delay in processing new applications), rather than on a lack of disbursements. It also suggested that IDB officials discouraged Chilean representatives from tendering certain kinds of loan applications in 1972 and 1973 on the grounds that, given Chile's lack of creditworthiness, such requests would not be favorably considered by the bank's executive board. Thus the fact that—apart from the two small university loans—no new projects actually came before the board for a vote during the Allende period could not, in this reasoning, have been due merely to technical problems or to Chilean restraint.⁹⁵

What of the World Bank? Its own white paper recounted a close if increasingly troubled relationship with successive Chilean governments. On one hand, between 1948 and 1973 Chile received nearly $235 million worth of credit from this institution. On the other, in the half-decade before Allende's election, the bank began to worry about what it regarded as the country's gradually deteriorating creditworthiness, its general economic performance, and its relatively high rate of inflation. So much was this the case that, apart from a large burst in 1967, presumably related to the copper expansion program, Chile received relatively little assistance from the World Bank during the Christian Democratic period, particularly when compared with the IDB or, for that matter, the U.S. government and U.S. private lenders (see Table 7.1).

222 Modern Chile

TABLE 7.1
Loans Approved for Chile by Multilateral Banks, 1965-1973
(millions of dollars)

<table><thead><tr><th>Fiscal Year</th><th>World Bank</th><th>Inter-American Development Bank</th></tr></thead><tbody><tr><td>1965</td><td>4.4</td><td>4.9</td></tr><tr><td>1966</td><td>2.7</td><td>62.2</td></tr><tr><td>1967</td><td>60.0</td><td>31.0</td></tr><tr><td>1968</td><td>—</td><td>16.5</td></tr><tr><td>1969</td><td>11.6</td><td>31.9</td></tr><tr><td>1970</td><td>19.3</td><td>45.6</td></tr><tr><td>1971</td><td>—</td><td>12.0</td></tr><tr><td>1972</td><td>—</td><td>2.1</td></tr><tr><td>1973</td><td>—</td><td>5.2a</td></tr></tbody></table>

Source: Covert Action in Chile, p. 34.

Notes: Does not reflect actual disbursements. Dashes indicate no loans approved.

a = Loan approved after September 11, 1973.

Against this background it is not surprising that the bank should voice serious reservations about Allende's economic policies, particularly his artificial acceleration of demand, cavalier treatment of inherited reserves of foreign exchange, and neglect of productive investment. Quite early (February 1971) bank officials warned Chilean representatives that the quest for wholesale "structural and institutional changes" added an element of "uncertainty" to the short-term economic outlook, and reminded them that "the basic criteria of economic rationality and efficacy apply to socialist as well as capitalist-oriented economies."

During the first year of the Allende regime, the World Bank completed the preliminary studies for three new loans: one for electric power, one for livestock development, and one for fruit and vineyard processing. A conflict over electrical rates to be charged consumers quickly caused the first to be shelved; the second and third were at various stages of completion when it became clear that the country could no longer service its foreign debt according to schedule.

During 1972 relations between Chile and the bank deteriorated, as the latter repeated its call for "an investment program setting priorities for the next several years together with an analysis of the monetary, fiscal, and balance of payments implications" that would allow a fuller evaluation of the country's creditworthiness. For their part, Chilean delegates at various meetings accused the bank of serving "not all its members, but [acting] as the mouthpiece or tool of special private interests of one of its member countries." On January 1, 1973, Chile suspended all payments of interest and principal on its obligations to the bank.

During the first six months of 1973 there were repeated attempts by both Chile and the bank to resolve their differences. By mid-year the Chileans had

agreed to resume service on their debt to the bank, and to make good by
December 31 the payments that were in arrears. In exchange, the bank au-
thorized $5 million for feasibility studies that would justly future loans. At the
time of the coup, however, no action on these had been taken beyond the
preliminary paperwork.⁹⁶

Unquestionably Chile's decision not to compensate the American copper companies damaged its credit standing in the United States, but whether this decision dictated bank policy is far from established. As World Bank President Robert McNamara reminded Chilean representatives in October 1972, the bank had a history of lending to countries that opted to nationalize basic resources—and this over the objections of one or more great powers. The difficulties between the bank and Chile occurred about (but not quite) simultaneously with the country's suspension of service on its public debt. And that the Special Copper Tribunal refused to hear appeals by Anaconda and Kennecott at just about the time the bank was concluding (as the result of a special mission) that economic circumstances did not justify new lending to Chile does, however, provide some space for the dark inferences drawn by Popular Unity spokesmen at the time (and sympathetic commentators thereafter).⁹⁷

Although Chile thus received no new loans from the World Bank during
Allende's presidency, it fared only slightly better in the first two and final
three years of his moderate predecessor. This suggests a quite conservative
lending policy generally—one that, on other grounds, might be the proper
object of criticism. But with respect to the issue at hand, it strongly suggests—
as the independent study cited above concludes—that the bank was "rela-
tively consistent" in its treatment of Chile throughout both Christian Demo-
cratic and Popular Unity periods.⁹⁸

Some confusion has been introduced into this controversy by the Church
committee's publication of the contents of NSC Memorandum 93 and also by
President Nixon's admission that after Allende's election he had instructed
U.S. representatives at the multilateral banks to vote against Chilean loan
applications.⁹⁹ But the truth is that—apart from the two university loans
approved by the IDB in early 1971, no such petitions actually came before the
executive board of either during the Popular Unity years.¹⁰⁰ Was this the
result of U.S. efforts? At the IDB there was considerable delay in processing
new applications, and it is known that bank officials actively discouraged new
Chilean initiatives; when compared with its past role in Chile, and its con-
temporaneous treatment of other member states, this points strongly to U.S.
pressures within the organization. It is far more difficult to document such
patterns at the World Bank. Without discarding the possibility that the United
States *attempted* to influence the latter's dealings with Chile, however, it must
be noted that whatever political pressures may have been operative in the first
instance would inevitably have been overwhelmed in short order by economic

224 Modern Chile

criteria. That is, if one can look past the bank's historical lending policies up to the autumn of 1971, Paul Sigmund may be justified in remarking upon "a certain disingenuousness [on the part of the World Bank] in the constant reference to creditworthiness at a time when Chile was still paying her debts";¹⁰¹ for 1972 and 1973, however, Allende's own economic policies, undertaken independently and against the advice of World Bank technicians, were bringing about—ironically enough—precisely the situation that President Nixon would have willed if he could.

*Relations with private U.S. banks.* Private lending from the United States to Chile declined dramatically during the Popular Unity period. Cancellation of credit lines was gradual, however, and did not reach significant proportions until the fourth quarter of 1971—that is, after Allende’s suspension of service on the foreign public debt.¹⁰² The effect of this withdrawal of lending confidence was not negligible, since private U.S. banks had traditionally provided relatively low-cost money to finance imports and for rotating credits. There is no evidence of concerted activity, however, or even of financial “quarantine”; in mid-1973, for instance, the Bank of America was still involved in Chilean lending, both to local banks and to government corporations.¹⁰³

Alexis Guardia, who served as an important economic adviser to President Allende, has since claimed that American banks withdrew credit lines pending resolution of Chile's external debt refinancing by the Paris club; however, he complains, "once an agreement was made . . . the U.S. banks did not modify their policy."¹⁰⁴ Guardia passes right over the fact that although the United States initialled the Paris club agreements, those documents released Chile from its most pressing credit obligations, while establishing that it would have to reach an individual understanding with each member country. The United States was never able to conclude a refinancing agreement with the Allende government. Nor can the conduct of U.S. banks be divorced from general business and economic conditions in Chile, and the Popular Unity government's treatment of its own private banking sector.¹⁰⁵

*Equipment and Spare Parts.* At the time of Allende's election most of the equipment in use in the most critical sectors of the economy—copper, steel, electricity, petroleum, and transport—was of U.S. origin. By late 1972, according to data cited from Chilean sources by the Church committee, "almost one-third of the diesel trucks at the Chuquiquimata copper mine, 30 percent of the privately-owned city buses, 21 percent of all taxis, and 33 percent of the state-owned buses in Chile could not operate because of the lack of spare parts or tires."¹⁰⁶ What was the nature of these shortages, and to what could they be attributed?

Court attachments of the assets of CORFO and the Chilean State Copper Corporation (CODELCO) in New York State in early 1972 made some Chil-

ean acquisitions in the United States more difficult—more difficult, but not at all impossible. First, these attachments did not affect private Chilean entrepreneurs, whose problems arose out of either a shortage of credit or their own government's foreign exchange constraints. Second, no restrictions were placed on the acquisition of parts by third parties, whether Chilean private citizens, Mexicans, or even Soviet intermediaries. Third, had the Chileans chosen to do so, they could have established purchasing agencies in other states.¹⁰⁷ Fourth, according to the testimony of two former functionaries of the Allende government, it was possible to acquire many spare parts from European and Latin American subsidiaries of U.S. companies.¹⁰⁸

The problem of spare parts actually centered not on U.S. government restrictions, which did not exist, but on the availability of short-term credits. Indeed, in this connection it is not at all certain that the court attachments were really important, because by the time they were ordered in February and March 1972, the country's access to short-term financing had been seriously impaired by the moratorium on the foreign debt. Moreover, to the end of the Allende regime it was possible for Chilean government representatives to purchase critical spare parts for cash, and in fact Norman Gall reported in mid-1972 that such parts were acquired for the Chuquiquimata mine and flown directly to Chile. One of the managers he interviewed at that mine even remarked in passing that "the freezing of our New York bank accounts . . . does not seem now to prevent us from buying supplies in the United States."¹⁰⁹ Likewise, at the October 21, 1971 meeting of U.S. corporate representatives with Secretary Rogers, a spokesman for Ford Motor reported that his company had "been asked to continue to supply spare parts to Chile." It had "indicated that they will." he said, "with firm letters of credit on reputable banks." (This in spite of the fact that Ford's Chilean properties had just been expropriated and that the company had been forced to write off losses amounting to $16 million.)¹¹⁰

It is true that at the same meeting Secretary Rogers "raised the question of whether there should be an informal embargo on spare parts and materials being shipped to Chile." But according to the minutes, on this subject "the consensus of the group was quite mixed." Rogers urged the companies to hold periodic meetings with a view to "solidify[ing] a position."¹¹¹ No evidence has come to light suggesting that such an agreement was ever reached or implemented. Once again, by early 1972 Chile's credit standing imposed as serious a restraint on the acquisition of spare parts as any "informal embargo" might conceivably produce.¹¹²

*Public Aid Programs from the United States.* U.S. public aid to Chile—as expressed in loans and grants—fell dramatically during the Allende years, from an annual average (for fiscal years 1965-1970) of $119 million to slightly less than $7 million (1971-1973). To some degree the comparison is

226 Modern Chile

inevitably skewed by the fact that the Christian Democratic period was one in which Chile received unusually heavy assistance within the Alliance for Progress; further, the Nixon administration, whose views on aid to Latin America were (to say the very least) more astringent than its predecessors, began cutting back a full year before Allende's election. Thus the figure for total loans and grants authorized for FY 1970 (Table 7.2) is significantly lower than for previous years, though still, of course, higher than the amounts appropriated during each of the three Popular Unity years.¹¹³

As the table demonstrates, U.S. public assistance during the Allende period was dominated by loans and grants for military acquisitions, which reached a historic high.¹¹⁴ There was nothing particularly sinister about this development, however. Allende and his ministers, Ambassador Davis has recalled, "requested and approved all credits, sales, training, and other [military] cooperation between Chile and the United States." The ambassador adds that "the consistent thrust of President Allende's public and private posture was to support military cooperation and credit and to criticize us if we showed signs of cutting back." What is perhaps of equal or greater moment, U.S. arms sales to Chile during this period were overshadowed by purchases from the United Kingdom and other Western sources.¹¹⁵

Important as it was, military aid was not the only form of U.S. assistance that continued under Allende. "Old" loans continued to be disbursed, amounting—according to one U.S. Treasury estimate—to "perhaps $200 million" for 1971 and 1972.¹¹⁶ In addition, humanitarian aid—represented by the Peace Corps and the dispatch of surplus foods—was not withdrawn—it was shipment of the latter, including more than 10 million pounds of powdered milk in 1971, that "made it possible for President Allende to carry out his pledge to give a daily free pint of milk to every school child."¹¹⁷ As Table 7.2

TABLE 7.2
Foreign Aid to Chile from U.S. Government Sources, Fiscal Years 1967-1973
(millions of U.S. dollars)

<table><thead><tr><th></th><th>1967</th><th>1968</th><th>1969</th><th>1970</th><th>1971</th><th>1972</th><th>1973</th></tr></thead><tbody><tr><td>AID<sup>a</sup></td><td>15.5</td><td>57.9</td><td>35.4</td><td>18.0</td><td>1.5</td><td>1.0</td><td>0.8</td></tr><tr><td>Food for Peace</td><td>7.9</td><td>23.0</td><td>15.0</td><td>7.2</td><td>6.3</td><td>5.9</td><td>2.5</td></tr><tr><td>Export-Import Bank</td><td>234.6</td><td>14.2</td><td>28.7</td><td>3.3</td><td>0</td><td>1.6</td><td>3.1</td></tr><tr><td>Total U.S. economic assistance</td><td>258.0</td><td>95.1</td><td>79.1</td><td>28.5</td><td>7.8</td><td>8.5</td><td>6.4</td></tr><tr><td>Military aid</td><td>4.1</td><td>7.8</td><td>11.8</td><td>0.8</td><td>5.7</td><td>12.3</td><td>15.0</td></tr><tr><td>Total military and economic aid</td><td>262.1</td><td>102.9</td><td>90.9</td><td>29.3</td><td>13.5</td><td>20.8</td><td>21.4</td></tr></tbody></table>

Source: *Covert Action in Chile*, p. 34.

Note: Corrections in addition made by author. <sup>a</sup> = Agency for International Development.

indicated, in spite of President Nixon's decision to end all bilateral assistance not already committed at the time of Allende's election, new appropriations—however token in proportion—were nonetheless authorized during every year of the Popular Unity government.

The episode that placed U.S. assistance policies in the most unfavorable light concerned a Chilean attempt to borrow $21 million from the U.S. Export-Import Bank for the purchase of three Boeing passenger jets for the national airline (LAN). In August 1971—that is, one month after the expropriation of the copper mines but before a decision had been announced on compensation to American firms—officials of the bank suddenly announced that they were postponing a decision on financing. The political motivations of this step seemed all the more transparent since it came some months *before* Chile declared a moratorium on foreign obligations. It seems probable that this move was taken at the behest of Treasury Secretary John Connally as part of a new hard-line policy toward expropriating third world countries in general and Latin America in particular.¹¹⁸ From the U.S point of view, however, the decision proved curiously self-defeating. The Chileans were not dissuaded thereby from deducting "excess profits" from the amounts due the American copper companies, and the Allende government—spurred by Washington—simply turned to negotiating with the Soviets for the purchase of Ilyushins.¹¹⁹

*Alternative sources of aid.* The withdrawal of lending confidence in Chile by the U.S. government, the multilateral banks, and private U.S. banks was—from a purely quantitative point of view—more than amply replaced by credits from alternative sources. The precise amounts have escaped documentation, but in a very general way it is known that in the period 1970-1973 Chile's medium- and long-term debt increased by 16.7 percent, while its short-term obligations grew nearly six-fold.¹²⁰ For 1972 alone, estimates of new credit lines range from $600 million¹²¹ to $950 million.¹²²

The universe of Chile's new creditors embraced a remarkable range of political systems and ideologies. With Argentina, for example, a neighbor with whom relations had rarely been cordial and which at the time was ruled by a right-wing military junta, there was a significant growth not only in trade (largely foodstuffs) but in short-term credits, which, according to former foreign minister Almeyda, were critical in helping Chile to overcome balance-of-payments difficulties.¹²³ A somewhat similar relationship evolved with Brazil, whose military rulers were, if anything, even cooler to the Allende experiment;¹²⁴ for 1972 Brazil allocated $32 million to Chile, and the following year the Argentines authorized lines amounting to $100 million.¹²⁵

With Western Europe economic relations were characterized—again, in the judgement of Almeyda—by "a friendly, cooperative, and favorable attitude";¹²⁶ if another Popular Unity functionary is to be believed, by 1972 Western

228 Modern Chile

European banks began to assume the role formerly played by their counterpart in the United States. By mid-1973, in his reckoning, "Chile had rebuilt and diversified its system of external finance." And, he adds, by June of that year the country had obtained from these sources short-term credits amounting to $547 million.¹²⁷ To which should be added the fact that Chile was able to draw from the International Monetary Fund for the period November 1970 to September 1973 an amount slightly greater than $100 million.¹²⁸

Chile's economic relations with the socialist countries during the Allende period are still shrouded in controversy. According to the same Popular Unity source cited above, however, they were characterized by long-term grants of credit for the purchase of machinery and industrial plants, which reached $471 million by the end of 1972 (excluding grants from the Chinese). "In general," this commentator holds, "the monetary conditions attached to these credits were better than those of non-Socialist markets, at least as far as interest rates were concerned, for [these] varied between two and five percent, while no interest was charged for the Chinese grants, for which the first payment varied between 0 and 15 percent.¹²⁹ This seems a very generous interpretation of Soviet (and Chinese) accounting methods, but if it is true, in this particular area the refusal of U.S. credit sources to underwrite the Popular Unity experiment was for Allende an asset rather than a liability.

These figures are deprived of much of their grandeur in one, crucial qualitative dimension: for the most part Chile's new financial partners were unwilling to extend hard-currency loans. That is, most of the credits from sources both East and West were tied to specific projects or acquisitions; very little of them constituted "straight out balance of payments assistance—literally fully disposal convertible foreign exchange." Even the largest hard-currency credit from the Eastern bloc, a $50 million loan from the Soviet Union authorized in late 1971, may have been something other than what it appeared, at least in the opinion of some U.S. Treasury officials, who regarded it as largely "project oriented and therefore susceptible to delays in disbursements."¹³⁰ "The overall picture," one sympathetic observer concludes, "is therefore that [Popular Unity] successfully obtained aid and credit to replace that withdrawn from the United States. The bulk of this credit," he adds, "was, however, short-term, involving harsher financial terms than in the past."¹³¹

*The "invisible blockade": Toward an evaluation.* The most obvious conclusion to all the material presented above is that there was no "financial-economic blockade" of Chile, invisible or otherwise. In sheer financial flows, the country continued to receive credit assistance from the widest variety of sources, and in virtually unprecedented amounts. In fact, as Ambassador Davis has pointed out, on August 30, 1973, a few days before his fall, Allende had almost twice as much short-term credit available as he had upon

assuming office three years before.¹³² The refusal of the World Bank and the Inter-American Development Bank to countenance new loans (whether due to economic or to political motives, or a combination thereof) did not interrupt disbursements, which for the IDB reached record proportions. Even private U.S. banks and U.S. government agencies continued to transfer resources to Chile, though in greatly reduced amounts. At no time was an embargo on spare parts or equipment imposed upon Chile by the U.S. government, or, evidently, the supplying companies themselves.

Even the legal judgments sought by Kennecott against copper shipments had only a tangential effect; at least, this is what a senior CODELCO official of the period tells us. After 1971, he writes, "the market for Chilean copper did not change in any substantial way." Although some supply routes had to be changed to circumvent orders of attachment in specific countries, "the fact is that Kennecott was unable to block the sale of El Teniente copper in Europe."¹³³

To say that there was no blockade does not mean that Chile under Allende did not experience problems in its economic relations with the United States. Quite obviously, the inability to reach a settlement on the portion of the public foreign debt owed to the United States and probably also on the compensation due the copper companies had repercussions throughout the banking community and among U.S. creditors actual and potential. Above all, the reduction of short-term lines of credit immediately convertible into any currency introduced an "element of rigidity" into Chile's foreign trade transactions.¹³⁴

That the U.S. government sought to use debt renegotiations to extract from Chile what it did not wish to grant—an end to deducting "excess profits" from the sums owed to Anaconda and Kennecott—does not mean, however, that in the absence of such demands its creditworthiness would have been instantly restored. "Refusal to grant aid to a nationalizing government is, after all, a perfectly rational decision," two British friends of Popular Unity have tartly observed, "since there is reasonable doubt whether the loans will be repaid."¹³⁵

In examining the sorts of credits Chile was able to obtain during the Allende years, two aspects command attention. First, they constitute attempts by newcomers to take advantage of the U.S.-Chilean impasse, whether for economic or for political reasons, often at Chile's expense.¹³⁶ Second, the terms offered were generally so much less favorable than in the past that one cannot but think that the judgement of U.S. private bankers about actual Chilean creditworthiness was not far off the mark.

Finally, no evaluation of Chile's financial problems in this period can omit mention of the *advantages* that accrued to Chile by its failure to service its debts to the United States. This constituted de facto relief of $243 million for 1972 alone, which more than offset the loss of commercial credits from the

230 Modern Chile

United States,¹³⁷ although it could not fully cover the enormous balance-of-payments deficit. The dimensions of that deficit were indeed impressive, but due entirely to elements beyond Washington's control: a drop in world copper prices; the increasing cost of foodstuffs; a decline in Chilean industrial productivity (particularly copper); and above all, Popular Unity's own policies, which contemplated a painless transition to socialism—a transition in which the loyalty of some Chileans would be held in the one case, and the reluctance of others overcome in the other by an unremitting wave of consumption.¹³⁸

## Assistance to the Opposition, 1970–1973: The Dimensions of the Covert Effort

In its investigation, the Church committee found that between 1971 and 1973 the CIA was authorized to spend $7 million “in covert support to opposition groups in Chile.” Of this amount, $6 million was actually spent during the Allende presidency, and some $84,000 thereafter for commitments made before the coup. If money spent during 1970 (that is, during the presidential campaign and before Allende’s inauguration) is added, the figure rises to approximately $7 million, including project funds not requiring 40 Committee approval.¹³⁹ Obviously, it is these funds that lie at the heart of Representative Harrington’s charge that the United States “destabilized” the Allende regime; therefore, the purposes to which they were put must be examined in careful detail.

*Assistance to the Opposition Media.* Ample evidence—both documentary and circumstantial—exists that significant portions of CIA money were passed to proprietors of opposition media during the Allende period. A Christian Democratic newspaper founded shortly after Allende’s presidency, for example, closed for economic reasons within weeks after the coup. The television channel of the Catholic University and about two-thirds of the radio stations in Santiago were in the hands of opposition forces.¹⁴⁰ It is known for certain that *El Mercurio*, dean of Chilean dailies and the most sophisticated of conservative organs, received a covert subsidy from the United States of $1.5 million.¹⁴¹

The somber tones in which the Church committee presented these figures are considerably lightened, however, when placed in context. During the Allende period the media were subject to recurring waves of economic and political pressure. The Chilean government itself and state-owned industries together constituted the largest source of advertising in the daily press; the redirection of this business to exclusively progovernment papers, combined with the generally perilous state of private industry during this period, deprived the independent press of any visible means of support.¹⁴² More to the

The United States and Chile, 1970-1973 231

point, efforts of the Allende government to bankrupt the only privately owned source of newsprint, the Compañía General de Papel y Cartones (the so-called "Papelera"), failed only because of National Freedom Fund assistance, and the intervention of Allende's service chiefs. As one of the conditions for entering his cabinet in late 1972, the generals insisted that the president observe the spirit as well as the letter of the Statute of Democratic Guarantees, and allow the company to raise its prices.¹⁴³

Newspapers and radio stations, along with other elements of the private sector, sustained losses produced by government-declared wage increases and price freezes. Bills for back taxes were presented under new interpretations of the law. Fire codes and other municipal violations were invoked against opposition newspapers and radio stations. When students of the University of Chile voted to change the orientation of their institution's television station, Popular Unity militants organized a takeover of the studios by the local union. Import licenses and foreign exchange permits to acquire radio and television equipment and printing supplies were denied to unfriendly outlets.¹⁴⁴ In spite of all this it is true, as the Church committee somewhat artfully concluded, that "freedom of the press continued in Chile until the military coup of 1973";¹⁴⁵ this, however, was thanks not to Allende but to the CIA.¹⁴⁶

*Assistance to Opposition Political Parties and Movements.* The greater portion of CIA money—approximately $4 million—went to the support of opposition political parties. This was used to underwrite the costs of their media, posters, campaign expenses, and salaries. The largest recipient was the Christian Democratic party, and smaller amounts were disbursed to the National party and various splinter groups. An effort was also made to split elements off from the Allende coalition, which may have played a role in the departure of the Radicals in late 1971. CIA funds subsidized the opposition in three by-elections in 1971, and in the congressional elections of 1973. "The CIA gave support in 1970 to one [unidentified] group whose tactics became violent over time," the Church committee's report somewhat tortuously reasons. "Through 1971 [Patria y Libertad] received small sums of American money through third parties for specific purposes," which activities it defines as demonstrations or propaganda activities, rather than violence. "Such disbursements—some $7,000 in total—ended," the committee concludes, "in 1971." Nonetheless, it adds, "It is possible that money was passed to [Patria y Libertad and other] groups on the extreme right from CIA-supported opposition political parties."¹⁴⁷ For his part, Ambassador Davis, who assumed his post in the final weeks of 1971, has simply stated that "to my knowledge, no monies or support of any kind were passed to Patria y Libertad during my incumbency."¹⁴⁸

The support of non-Communist political forces in Chile was nothing new for the CIA; what were different were the circumstances. The Christian Dem-

232 Modern Chile

ocratic party, as Ambassador Korry later recounted, ended the 1970 presidential campaign owing "large amounts of money to banks the Allende government would quickly nationalize; we reckoned that [the latter] would exploit nationalization to blackmail, to coerce, and to starve financially ... numerous and influential members of the party." This premonition, he adds, was amply fulfilled "starting quickly in 1971." The vulnerability of the Christian Democrats was apparent in that their party "owned no national newspaper, had no TV outlet, and influenced few of Santiago's many radio stations at the time of the election"—a truly astonishing situation given the fact that it was the largest party in the country and had been in government for six years.¹⁴⁹ In the context of an ever-widening public sector under the control of Popular Unity, the prospects for the financial survival of the Christian Democrats, the Radicals, and other forces of the center were extremely problematic—or rather, would have been without external subventions.

Moreover, the Popular Unity government was far from helpless in the fact of this challenge. "Most domestic and foreign newsmen in Chile were aware," Ambassador Davis writes, "that government parties skimmed a percentage off foreign trade operations." Further, "government transport, communications equipment, supplies of paper and printing facilities were made available to the [Allende] forces on a large scale. Subventions came from abroad. I believe most foreign correspondents in Chile could confirm that [government] parties and candidates went into the elections of 1972-73 well supplied and supported."¹⁵⁰

In addition to funding political parties, the CIA provided financial assistance to a wide range of private sector groups, including trade organizations and labor unions. It is here that the greatest controversy has arisen over the agency's role in Chile, since these groups were responsible for organizing the two great national strikes (October 1972 and July-September 1973) that shook the regime, required military participation in government, and arguably set the stage for the coup. The Church committee has extensively documented the degree to which the CIA make "a careful distinction between supporting the opposition parties and funding private sector groups trying to bring about a military coup." It confessed itself unsure, however, "given the turbulent conditions in Chile" and the close relationship between various sectors of the opposition, whether such a difference was operationally meaningful.¹⁵¹ It goes on to say that

with regard to the trucker's strike [July-September, 1973] two facts are indisputed. First, the 40 Committee did not approve any funds to be given to the strikers. Second, all observers agree that the two lengthy strikes ... could not have been maintained on the basis of union funds.

It remains unclear to what extent CIA funds passed to opposition parties may have been siphoned off to support strikes. It is clear that anti-government

The United States and Chile, 1970-1973 233

strikers were actively supported by several of the private sector groups which received CIA funds. There were extensive links between these private sector organizations and the groups which coordinated and implemented the strikes. In November, 1972, the CIA learned that one private sector group had passed $2,800, directly to the strikers contrary to the Agency's grounded rules. CIA rebuked the group but nonetheless passed it additional money the next month.¹⁵²

The funds made available to these private sector groups were intended for relay to opposition political parties—in other words, to be tendered to such forces from the sources which, under normal circumstances, they could expect to receive financial assistance. What was the "seepage factor" for non-electoral purposes? Ambassador Davis has addressed himself to this question very fully:

> Obviously, if one gives a political party money to meet its needs, somebody or some group which otherwise might have contributed to those needs could not contribute to the truckers. But that is not the same thing as the party acting as a conduit. And it is not so difficult to tell if money given to a political party for electoral purposes or advertisements, for example, is being used for that purpose.

To which he adds, with a droll touch: "The CIA has been paying monies in foreign countries ever since the Agency was formed, and has developed techniques of some effectiveness for determining whether its monies are being used for the purposes authorized and intended."¹⁵³

This is not merely a matter of one man's opinion. Such information as has come to light on actual disbursements repeatedly points to a careful rein on such matters. In September 1972, for example, the 40 Committee authorized $24,000 in emergency support for one opposition group, but deliberately withheld it from others for "fear that these organizations might be involved in anti-government strikes." The following month, the committee allocated some $100,000 to private sector groups, which the CIA subsequently reported was spent exclusively on "election activity, such as voter-registration drives, and get-out-the-vote drives" in connection with the congressional elections of March 1973.¹⁵⁴ That this authorization took place in October 1972—a month characterized by widespread strikes against the Allende government— is far less suggestive than might appear at first glance, for such allocations required an additional six to eight weeks for disbursement. By that time, of course, the crisis in Chile had been temporarily resolved.

The most thorough account of CIA deliberations on this subject and perhaps, given the chronology, the most important, concerns August 1973. During that month the CIA station in Santiago recommended that an additional $1 million be granted to opposition parties and private sector groups. While the 40 Committee was considering the proposal, the station forwarded an addi-

234 Modern Chile

tional plan to pass $25,000 to the striking truckers. The first proposal won approval, conditional, however, on the assent of the ambassador and the State Department. It remains unclear whether the second ever actually came before the 40 Committee. It is a matter of record that the initial proposal never received the necessary concurrence of the ambassador or the State Department, and therefore was not implemented; the second, strenuously opposed by the U.S. mission, was never approved. *None of these funds ever changed hands.*¹⁵⁵ Meanwhile, events in Chile raced ahead of the deliberations in Washington, and the Allende government fell.

All of this still does not exclude the possibility that small amounts of CIA money found their way to the strikers. But official U.S. policy on the matter is unmistakable; and, assuming that the Agency was faithfully pursuing the instructions it received (which the Church committee does not dispute), any major misallocation of funds by recipients would have been both obvious to it and the pretext for a policy review. Because the CIA believed that its money was being properly used,¹⁵⁶ no such occasion arose.

*The United States and the Military Coup of September, 1973.* "Was the United States directly involved, covertly, in the 1973 coup in Chile?" To this rhetorical question, the Church committee report responds that its investigation "found no evidence that it was." It goes on immediately to qualify these findings, however, by observing that "the United States sought in 1970 to foment a military coup in Chile; after 1970, it adopted a policy, both overt and covert, of opposition to Allende; and it remained in intelligence contact with the Chilean military, including officers who were participating in coup plotting."¹⁵⁷ By this it is not clear precisely what the committee means us to understand. Either it wishes to convey the notion that, in spite of being unable to find any evidence, it refuses to abandon the presumption of guilt; or possibly it believes that between opposing Allende and fomenting a military coup there can be no meaningful distinction. Let us examine the evidential premises upon which the committee based these statements.

That the United States favored a coup in Chile during October-November 1970 is beyond discussion; it is likewise reasonable to assume that the desires of the Nixon administration became a matter of common knowledge among the Chilean high command as a result of probes made in connection with the Schneider affair.¹⁵⁸ But once these efforts ended in disaster, how relevant were they to the subsequent U.S. role? On this the committee received two completely different views. One was the testimony of Thomas Karamassines, former CIA deputy director for plans and principal agency contact throughout Track II. In the excerpt published in the committee report, the following dialogue appeared:

235

MR. KARAMASSINES. I am sure that the seeds that were laid in that effort in 1970 had their impact in 1973. I do not have any question about that in my mind either. . . .

Q. Was Track II ever formally ended? Was there a specific order ending it?

MR. KARAMASSINES. As far as I was concerned, Track II never really ended. What we were told to do in effect was, well, Allende is now President, so Track II, which sought to prevent him from becoming President, was technically out and done. But what we were told to do was to continue our efforts. Stay alert, and to do what we could to contribute to the eventual achievement of the objectives and purposes of Track II. That being the case, I don't think it is proper to say that Track II was ended.

When summoned before the committee, Kissinger took issue:

THE CHAIRMAN. Would you take issue with that, with the [Karamassines] testimony?

SECRETARY KISSINGER. Totally. * * * It is clear that * * * after October 15 there was no separate channel by the CIA to the White House and that all actions with respect to Chile were taken within the 40 Committee framework. There was no 40 Committee that authorized an approach to or contact with military people, no plots which I am familiar with, and all covert operations in Chile after Allende's election by the Congress were directed towards maintaining the democratic opposition for the 1976 election. And that was the exclusive thrust, and if there was any further contact with military plotting, it was totally unauthorized, and this is the first time I have heard of it.¹⁵⁹

Ambassador Davis some years later offered his own assessment:

> Unfriendly sentiment in the White House toward Salvador Allende no doubt continued [after 1970]. Elsewhere in Washington, however, enthusiasm for covert action ebbed, and Washington policymakers focused increasingly on the importance of avoiding compromising acts. There was, also, progressively less Chilean institutional viability to 'destabilize'."¹⁶⁰

The subsequent investigation of the committee, far from resolving this controversy, only added to it by gathering evidence for yet another version. This falls into three distinct chronological periods. Before October 1970 the CIA's contacts with the Chilean military were limited to two "assets," neither of whom—when President Nixon ordered implementation of Track II—was prepared to spark a coup. Under heavy pressure from the White House, the station rushed ahead to establish new contacts. After General Schneider's murder and the collapse of this initiative, the station was left "with only its initial assets in the military." It took the CIA another ten months to rebuild a network of agents "among the cautious Chilean military."

236 Modern Chile

The second period began in the fall of 1971 and ran through the early months of 1972. By this time the Santiago station and CIA headquarters were discussing how to use the network of assets. The Church committee report continues:

> In November 1971 the Station suggested that the ultimate objective of the military penetration program was a military coup. Headquarters responded by rejecting that formulation of the objective, cautioning that the CIA did not have 40 Committee approval to become involved in a coup. However, headquarters acknowledged the difficulty of drawing a fine line between monitoring coup plotting and becoming involved in it. It also realized that the U.S. government's desire to be in clandestine contact with military plotters, for whatever purpose, might well imply to them U.S. support for their future plans.¹⁶¹

In spite of these inferences, the report concludes that it was this period—some nine to twelve months before the Allende regime confronted its first serious crisis—in which the CIA was “most active” within the Chilean military. In this context, it refers to a “short-lived” effort to subsidize a small anti-government news pamphlet aimed at the armed forces, the compilation of arrest lists and other operational data, and what it referred to as a “deception operation.” The latter began as a plan to pass to senior Chilean officers counterfeit materials attempting to “prove” that Cuban secret police and the Investigations unit of the National Police (carabineros) were gathering intelligence prejudicial to the army high command. “It was hoped,” the report explains, “that the effort would arouse the military against Allende’s involvement with the Cubans, including the armed forces, to press the government to alter its orientation and to move against it if necessary.” This proposal, it continues, was rejected by CIA headquarters, however, in favor of passing “‘verifiable’ [true?] information to the leader of the coup group [sic] which headquarters and the station perceived as having the highest probability of success.”¹⁶²

The third and final period embraced the second half of 1972 and all of 1973 up to the coup in September. Here the report concedes that CIA operations during these months were confined to intelligence gathering, but once again manages to convey at the same time the unmistakable impression that such activities were virtually inseparable from coup plotting. It reports, for example, that during this period the Santiago station collected operational intelligence necessary in case of a coup, such as

> arrest lists, key civilian installations and personnel that needed protection, key government installations which needed to be taken over, and government contingency plans which would be used in case of a military uprising. According to the CIA, the data was collected only against the contingency of future headquarters requests and was never passed to the Chilean military.¹⁶³

Then it reports that CIA "penetration" of various military groups known to be coup-prone

was to walk a tightrope. The distinction between collecting information and exercising influence was inherently hard to maintain. Since the Chilean military perceived its actions to be contingent to some degree on the attitude of the United States government, these possibilities for exercising influence scarcely would have to be consciously manipulated.¹⁶⁴

As the careful reader will perceive, the second sentence in the paragraph above begins by presenting as a statement of fact what is nothing more than an opinion, and concludes by declaring the United States guilty for purely contextual reasons. What is more important, the first sentence suggests an insensitivity on the part of the CIA to the possible consequences of intelligence gathering far greater than was, in fact, the case. During the secret testimony of David Atlee Phillips, former chief of the agency's Western Hemisphere Division, the elaborate precautions taken by CIA headquarters to avoid involvement in a coup in Chile were outlined in considerable detail. In its report, however, the Church committee, for reasons of its own, chose not to take official cognisance of this evidence. It has only come to light in Phillips' subsequently published memoirs. There he explains that in May 1973 two cables were sent to the Santiago station.

In a rather abrupt departure from CIA custom, these instructions pointed out the probability of an opposition move against Allende and the inevitability that CIA would be blamed as the instigator of any coup.

The Station response to the first message reminded headquarters that CIA continued to have the responsibility of predicting a coup—ringing the gong—and that the Station could hardly be expected to do that unless its agents penetrated all conspiracies.

The second headquarters cable countered this valid argument saying that, this time, keeping CIA's record clean was more important than predicting a coup. In short, the CIA Station Chief was ordered to do the best he could on forecasting a coup from the margin of plotting and to avoid contacts of actions which might be construed as supporting or encouraging those who planned to overthrow Allende.¹⁶⁵

*The United States and the Chilean Opposition: What Does the Evidence Support?* The one incontrovertible fact concerning the period after Allende's inauguration that the Church committee uncovered in its investigation was that the CIA had played a crucial role in sustaining the opposition in Chile. But beyond this it offered no standard by which to measure the precise U.S. role in the larger context of developments. To weigh the importance of covert involvement properly, one would have to balance that single fact against several others. For one thing, control of the government armed Popular Unity

238 Modern Chile

with significant economic (and therefore political) resources of its own. For another, Allende unquestionably received subsidies of an unknown magnitude from Eastern bloc and Cuban sources. For yet another, there is no inevitable and direct relationship between heavy financial support and political success—as the Watergate affair and the subsequent presidential campaign of John Connally in the United States both illustrate. In Chile it is very possible, as Henry Landsberger has suggested, that foreign influence on one side "simply cancelled out" efforts on the other, "leaving factors internal to Chile as the more basic explanation of what occurred."¹⁶⁶

Certainly one cannot automatically elide support for the opposition into support for a military coup—as the Church committee comes perilously close to doing any number of times—and then from there jump directly to the event itself. Quite apart from the fact that both the opposition and the armed forces shifted their stance toward the regime over time, CIA practice consistently differentiated between the purposes of the United States and the evolving goals of Chilean actors. Thus the agency withheld money from potential strikers, was repeatedly reminded by headquarters that support for a coup was not authorized, and—in the final, critical weeks of the regime—directly dis-tanced itself from officers known to favor a coup and to be actively discussing that option. Finally there is no inconsistency whatever between a U.S. policy aimed at "maintaining the democratic opposition for the 1976 election" (Kissinger) and covertly subsidizing hard-pressed political parties, newspa-pers, and radio stations. Indeed, one can hardly imagine what *other* course of action—given that objective—the U.S. government could have been expected to take. Conversely, if a military coup (as opposed to contingency planning and intelligence gathering) was what Washington wished, why did the 40 Committee so persistently withhold what it could so easily have given: the necessary authorization?

## The U.S. Role in Chile: Some Concluding Observations

What is truly remarkable about the investigation of the Church committee concerning U.S. involvement in Chile is how little its actual findings have altered the perceptions originally created by Representative Harrington's letter and Seymour Hersh's articles in the *New York Times*. For although the United States looked with extreme disfavor on the advent of a socialist government in Chile, it was unable to prevent Allende's election of confirmation by Congress. Nor was it able to facilitate a coup, of either the military or "constitutionalist" variety. Plans to "unleash economic chaos" (ITT) or "make the economy scream" (Nixon)—both conceived during the period between Allende's election and inauguration—remained on the drawing board because of the unwillingness of the banks and major multinationals (with the

sole exception of ITT) to endanger their holdings, the possibilities of com-
pensation, or their future relations with the new government.

Now, eventually the economy did "scream," but not as a result of U.S.
government measures. There was no "invisible blockade," either of credit or
spare parts; there was a drastic reduction (but never a total cutoff) of U.S.
public aid to Chile, intensifying a trend already at work during the final year
of the Frei regime. There was also a credit squeeze that eventually assumed
proportions, largely as a consequence of the Allende government's own pol-
icies, which forced it to declare a moratorium on its foreign debt in November
1971. Although failure to reach an agreement with Washington within the
context of the Paris club agreements grievously damaged Popular Unity's
credit standing in the United States, it nonetheless afforded it very consider-
able short-term relief.

The U.S. government in all probability did lobby at the Inter-American Development Bank and may also have made attempts at the World Bank to shut off the flow of loans to Chile. But after 1971 such efforts—given the country's general economic perspective—would have been wholly gratuitous. In any event, the attitude of the multilateral banks was of less than crucial significance; Chile was able to turn elsewhere for credit, which it obtained in unprecedented amounts. The new terms were considerably less favorable than those traditionally obtained from U.S. sources, but so, indeed, were Chile's prospects for repayment.

Throughout the Popular Unity period the United States expended nearly $6
million to keep opposition political parties and forces alive. The subvention
was most evident in the media, interest groups, and the electoral process. The
CIA did not, however, generally fund groups committed to the violent over-
throw of the regime, such as Patria y Libertad, and although its relations with
the Chilean military after the Schneider debacle apparently experienced sev-
eral shifts, by mid-1972 they were confined to contingency planning and
intelligence gathering (monitoring coup plotting). The authorization to go
beyond this was pointedly refused several times, and in the final six months
of the regime, the Santiago station was specifically enjoined to distance itself
from coup-prone elements in the armed forces, lest U.S. policy be misun-
derstood.

The CIA was not involved in promoting or sustaining the strike of October
1972, and although support for that of July-September 1973 was discussed in
Washington, no decision was ever reached. The CIA did not, contrary to
Seymour Hersh's report, "provide strike benefits for anti-Allende strikers and
other workers in 1972 and 1973."¹⁶⁷

Without question, these activities did have an impact in Chile, though not
precisely in the fashion often suggested by critics. Subventions to elements of
the opposition created difficulties for the regime, inasmuch as it found itself

240 Modern Chile

unable effectively to bankrupt or expropriate their sources of financial sup-
port. Allende was therefore forced to implement his policies—policies for
which there was never a majority—within the context of a continuing plural-
istic political system. That is not, however, the same thing as "destabilizing"
a regime. As a matter of fact, there never was a decision to "destabilize"
Chile. As William Colby later explained in a letter to the *New York Times* on
September 18, 1974, the word was Harrington's in his characterization of the
CIA chief's secret testimony.¹⁶⁸

One might argue—as Harrington later did—that given the role the United
States had played in Chile, withdrawal of support for any regime was bound
to have far-reaching (and negative) consequences. But this amounts to nothing
more than declaring the obvious: that the United States could have made life
much easier for Allende by rushing forward with credits, grants, and other
forms of material assistance. It had done this for Frei, in a vain attempt to
provide an attractive alternative to Castroism in Latin America. But this
perspective does not explain why the United States, having failed to avert the
triumph of Marxism in Chile (at the cost of $2 billion in aid and millions more
in Overseas Private Investment Corporation insurance premiums), should
have ratified its error by throwing good money after bad. This point of view
could only make sense if one believed (as Harrington surely does not) that the
advancement of Marxism in Latin America and throughout the Third World
should be an element of U.S. foreign policy.

Finally, whatever its intentions, the United States was utterly unable to conjure up the fundamental weaknesses of the Allende regime. These were a failure to obtain a decisive mandate at the ballot box, a governing coalition internally inconsistent and frequently at war with its constituent elements, an economic policy bound to polarize both its supporters and its enemies, and ultimately the need to recur to the military for the stability that only a genuine consensus could provide. It was here—not in the machinations of the CIA, real or (more often) imagined—that the seeds of disaster were planted. It is to these elements—not to external forces—that anyone wishing to understand the fall of Allende must inevitably recur.

Notes

1. Jack Anderson, *Washington Post*, March 22, 1972.

2. The investigation and the documents were subsequently published as U.S. Congress, Senate, Committee on Foreign Relations, Subcommittee on Multinational Corporations, *The International Telephone and Telegraph Company and Chile, 1970-71*, 93rd Congress, 1st session, 1973; a separate report of findings appeared under the same source and title as a committee print on June 21, 1973. Hereafter the hearings and documents are cited as *ITT, 1970-71*, the committee print is cited as *ITT-CP*.

3. Seymour Hersh, *New York Times*, September 20, 1974.

The United States and Chile, 1970-1973 241

4. Seymour Hersh, *New York Times*, September 24, 1974. These and other charges are fleshed out with a wealth of baroque detail in Hersh's subsequent book, *The Price of Power: Henry Kissinger in the White House* (New York, 1983), pp. 258-296. It is not possible to examine them here; an exhaustive critique, which among other things sheds considerable light on Hersh's reportorial methods, is found in Nathaniel Davis, *The Last Two Years of Salvador Allende* (Ithaca, N.Y., 1985), pp. 316-347 and *passim*.

5. The precise designation of the documents is as follows: U.S. Congress, Senate, Select Committee to Study Governmental Operations with Respect to Intelligence Activities, *Covert Action* (Hearings), 94th Congress, 1st session, 1975 (hereafter *Covert Action*); idem, *Alleged Assassination Plots Involving Foreign Leaders*, 94th Congress, 1st session, 1975 (hereafter *Alleged Assassination Plots*); and idem, *Supplementary Detailed Staff Reports on Foreign and Military Intelligence*, 94th Congress, 2d session, 1976 (hereafter *Supplementary Reports*). The second document deals with alleged assassination plots in many countries; obviously, I shall only be concerned with its findings as they apply to Chile.

6. U.S. Congress, House of Representatives, Committee on Foreign Affairs, *The United States and Chile during the Allende Years*, 94th Congress, 1st session, 1975 (hereafter *The United States and Chile*).

7. President Carter at his press conference the next day characterized the Church committee as not having found "any evidence that the U.S. was involved in the overthrow of the Allende government in Chile." The United States had apparently given financial aid to "political elements that may have contributed to the change of government" in Chile, the president admitted, but he said that there had not been "any proof of illegalities here," which was surely beside the point. Ironically, President Carter's statement on that occasion was considerably at variance with his version of Chilean events as he expounded them in his 1976 debate with President Ford. At that time he accused the Republican administration of having "overthrown an elected government and helped to establish a dictatorship" in Chile. All quotations are from *Facts on File, 1977* (New York, 1978), p. 219.

8. *New York Times*, June 3, 4, 1980.

9. "Kissinger: Self-Portrait," in *Practicing History* (New York, 1981), p. 219.

10. *Covert Action*, p. 45.

11. "U.S. Policies in Chile under the Allende Government" (interview with William F. Buckley, Jr., on September 29, 1974), in F. Orrego Vicuña, ed., *Chile: The Balanced View* (Santiago, 1974), p. 292.

12. One of the problems with the Church committee report *Covert Action in Chile, 1963-73* (Washington, 1975) (hereafter *Covert Action in Chile*) is that it combines indiscriminately CIA activities of the 1960s with those of the Allende period, even though they unfolded under very different conditions. As will be shown further on, it is far easier to defend the necessity of covert action during the Allende period than in the years preceding it.

13. William E. Colby and Peter Forbath, *Honorable Men: My Life in the CIA* (New York, 1978), p. 191. For a fascinating personal account of how one agency official operated in Chile during the early 1950s, see David Atlee Phillips, *The Night Watch: Twenty-Five Years of Peculiar Service* (New York, 1977), pp. 14-28.

14. *Alleged Assassination Plots*, p. 229n; *Covert Action in Chile*, p. 9.

15. *Honorable Men*, p. 302.

242 Modern Chile

16. *Covert Action*, p. 6.

17. *Covert Action in Chile*, p. 16.

18. Ibid., pp. 16-17.

19. Ibid., p. 9.

20. Korry, "U.S. Policies in Chile," pp. 289-90.

21. U.S. Congress, Senate, Committee on Foreign Relations, *Nomination of Hon. Cyrus R. Vance to be Secretary of State* (Hearings), 95th Congress, 1st session, 1977 (hereafter *Vance Nomination*), p. 51; *ITT, 1970-71*, vol. 1, pp. 281, 311. In the latter hearings Ambassador Korry remarked that representatives of all three candidates in the 1970 elections approached representatives of major U.S. financial interests in Chile as well.

22. Ambassador Korry estimates $425,000 (*Vance Nomination*, p. 52); *Alleged Assassination Plots*, pp. 20-21, 229, refers to $390,000 with an additional contingency fund of $500,000 set aside to influence the vote of Congress if Allende received a plurality; and *Covert Action in Chile*, p. 20, gives the high figure of "between $800,000 and $1,000,000."

23. *Covert Action* (testimony of Inderfurth), p. 13.

24. *Vance Nomination*, p. 52; *Covert Action in Chile*, pp. 12-13.

25. *Covert Action in Chile*, pp. 12-13; see also *The United States and Chile* (testimony of Sigmund), p. 245.

26. Henry Kissinger, *White House Years* (Boston, 1979), p. 659.

27. *Covert Action in Chile*, p. 20.

28. Colby and Forbath, *Honorable Men*, pp. 302-303.

29. *Covert Action in Chile*, pp. 17, 19-20.

30. Cord Meyer, *Facing Reality* (New York, 1980), p. 182.

31. Kissinger, *White House Years*, p. 663.

32. Ibid., p. 665.

33. Ibid., p. 667.

34. Ibid., p. 669.

35. Ibid., pp. 670-671.

36. *ITT, 1970-71*, vol. 1 (testimony of Broe), pp. 244-246.

37. *Covert Action in Chile*, pp. 12-13.

38. *ITT, 1970-71*, vol., pp. 608-615. The Chilean Constitution did not allow successive presidencies, but this technically would be circumvented by a twenty-four hour Alessandri administration.

39. Ibid., vol. 1 (testimony of McCone), pp. 102-103.

40. Ibid. (testimony of Neal), pp. 59-87; (testimony of Meyer), pp. 398-410; and vol. 2. pp. 599-600.

41. Ibid., pp. 622-623.

42. Ibid., vol. 1 (testimony of Broe), pp. 250-253.

43. *ITT-CP*, p. 11.

44. *ITT, 1970-71*, vol. 2, p. 627 (emphasis added).

45. Ibid., pp. 644-645.

46. *ITT-CP*, p. 11. See also the testimony of various bank executives in *ITT, 1970-71*, vol. 1 (Clark, Lillicotch, Greene, and Odgen), pp. 342-373; (Bolin, Raddatz), pp. 383-398.

47. As William H. Bolin, senior vice-president of the Bank of America, explained to the Church committee, any policy to undermine the Chilean economy "would have been directly contrary to our own interests at that point in time, because we

The United States and Chile, 1970-1973 243

had every reason to expect that we would be approached by the Chilean Gov-
ernment with a proposal to sell out our branches and that we would be able to
negotiate this satisfactorily if the environment of our negotiations were right, and
that, in fact, did occur.'' *ITT, 1970-71*, vol. 1, p. 388.

48. Ibid. (testimony of Greene), p. 359.

49. Ibid. (testimony of Clark), p. 344.

50. To be sure, there were signs of massive bank withdrawals during the period after the September 4 election, but these were due to legitimate fears that Allende would rigorously fulfill his campaign promise to lower interest rates drastically. Broe emphasized in his testimony that this was a preexisting reality upon which the CIA had hoped to build the larger plan he presented to Gerrity. Ibid., pp. 250-251.

51. Ibid., vol. 2, p. 528.

52. Ibid., vol. 1 (testimony of Merriam), pp. 45-47.

53. Ibid. (testimony of Mecham), pp. 265-276.

54. Ibid. (testimony of Foster), pp. 373-377.

55. For example, Anaconda Vice-President Ralph Mecham stated in his testimony that he found it incomprehensible that the Nixon administration persisted at this time in continuing pipeline aid to Chile. Ibid., p. 267.

56. Ibid., p. 320.

57. Ibid. (testimony of Raddatz), p. 393.

58. *ITT, 1970-71*, vol. 2, pp. 943-953 and 964-965.

59. Ibid., pp. 951-953.

60. Ibid., vol. 1, p. 431.

61. At the time Allende's "excess profits" finding was pending before the Special Copper Tribunal.

62. This directed the president to suspend all foreign aid to a country that had expropriated U.S. property without compensation or had not taken steps within six months to move toward arbitration or other means of discharging its obligations under international law.

63. *ITT, 1970-71*, vol. 2, pp. 1091-1092.

64. *Covert Action in Chile*, p. 23; *Alleged Assassination Plots*, p. 225.

65. Kissinger himself describes the September 15 meeting at the White House in somewhat different terms. In his recollection, Nixon "told Helms that he wanted a major effort to see what could be done to prevent Allende's accession to power . . . Helms should bypass Korry and report directly to the White House, which would make the final decisions. The operational object at the time was still the 'Rube Goldberg' scheme [that is, the Alessandri gambit]. Nixon did not in fact put forward a concrete scheme, only a passionate desire, unfocused and born of frustration, to do 'something.'" In Kissinger's view either Track I or Track II would have involved military participation of some sort; therefore, the Church committee labels are not very meaningful (Kissinger, *White House Years*, p. 673). But at best this would not deny the coup-oriented objective of Track II, merely extend it to Track I, which is, by the way, also at times the position of the Church committee. It found, for example, that "the essential difference between Tracks I and II . . . was not that Track II was coup-oriented and Track I was not. Both had this objective in mind. The difference between the two tracks was, simply, that the CIA's direct contacts with the Chilean military and its active promotion and support of a coup *without* President Frei's involvement were to be known only to a small group of individuals in the White House and

244 Modern Chile

the CIA." *Alleged Assassination Plots*, p. 232. Ambassador Korry disagrees.
"Track I," he told the Church committee, "followed Mr. Frei, then the President of Chile and its constitutional leader. It adopted certain minimal and cosmetic suggestions put forward by one purportedly in President Frei's confidence. Track II, on the other hand, did not seek his concurrence, did not follow his lead, *did not pretend to be within any constitutional framework of Chile*." *Covert Action*, pp. 30-31 (emphasis added). Of course, Korry only learned of the existence of Track II some years later.

66. *Alleged Assassination Plots*, p. 230.

67. Kissinger, *White House Years*, pp. 674-675.

68. The full statement, originally passed to Frei through his defense minister, read, "Frei should know that not a nut or bolt will be allowed to reach Chile under Allende, Once Allende comes to power we shall do all within our power to condemn Chile and Chileans to utmost deprivation and poverty, a policy designed for a long time to come to accelerate the hard features of a Communist society in Chile. Hence, for Frei to believe that there will be much of an alternative to utter misery, such as seeing Chile through, would be strictly illusory." Quoted in *Alleged Assassination Plots*, p. 231n. Korry later explained to the Church committee that the statement was a "deliberate overstatement" to goad Frei into activity along Track I (the "Alessandri gambit") and relieve Korry of pressure emanating from Washington "to go to the military" (the "constitutional" coup). *Supplementary Reports*, pp. 127-128.

69. *Alleged Assassination Plots*, pp. 232-233.

70. Covert Action in Chile, pp. 23-24.

71. Meyer, *Facing Reality*, pp. 185-186; see also *Covert Action in Chile*, pp. 33-37.

72. In its report, the Church committee went to considerable lengths to establish that these two groups were not totally discrete entities. (See especially *Alleged Assassination Plots*, p. 239, n. 2); nonetheless, they were treated as such by the CIA, and, as will be shown, operated as if they were.)

73. Kissinger, *White House Years*, p. 676.

74. *Alleged Assassination Plots*, p. 243.

75. Ibid., pp. 243-245.

76. Ibid., p. 226.

77. Ibid., p. 226n.

78. *Covert Action in Chile*, p. 24.

79. *Alleged Assassination Plots*, p. 246. The murder of Schneider also led to the promotion into his position—by order of strict seniority—of General Carlos Prats González, who, it anything, was even more inflexibly "constitutionalist," and, as time would show, not at all unsympathetic to Allende. (See Chapter Eight.).

80. *ITT, 1970-71*, vol. 1 (testimony of Guilfoyle), p. 208.

81. *ITT-CP*, pp. 13-16; U.S. Congress, Committee on Foreign Affairs, Subcommittee on Inter-American Affairs, *Recent Developments in Chile*, 92d Congress, 1st session, 1971 (hereafter referred to as *Recent Developments*) (testimony of Mays), p. 6.

82. Embassy of Chile (Washington), press release, text in *ITT, 1970-71*, vol. 1, pp. 228-229.

83. Korry, "U.S. Policies in Chile," p. 292. Whether the U.S. taxpayer should in effect have borne the burden of such risks is a debatable matter, although at the

The United States and Chile, 1970-1973 245

time such insurance was introduced it was believed that it would defuse poten-
tially explosive investment disputes. Instead of isolating the sources of conflict,
however, OPIC insurance in effect spread them into the political community—
that is, made private disputes with foreign governments a matter of public
interest. This curious bifurcation of intentions and results is fully explored in
Paul Sigmund, *Multinationals in Latin America* (Madison, Wisconsin, 1980),
especially pp. 302-337.

84. See excerpted texts, "The Nixon-Frost Interview," *Historic Documents of 1977* (Washington, 1978), pp. 351-352, and Clodomiro Almeyda, "The Foreign Policy of the Popular Unity Government," in Federico Gil et. al., *Chile at the Turning Point: Lessons of the Socialist Years, 1970-73* (Philadelphia, 1979), p. 101.

85. Korry, "U.S. Policies in Chile," pp. 294-295.

86. Richard Nixon, "Third Annual Report to the Congress of the United States on Foreign Policy, February 9, 1972," in *Public Papers of the Presidents of the United States, Richard Nixon, 1972* (Washington, 1974), pp. 263-264. This was, of course, a grossly hypocritical statement; nonetheless, President Allende, too, made florid statements affirming his desire for cordial relations with the United States, but, when offered the opportunity to reach an accommodation in early 1971—in the concrete matter of compensation for U.S. mining properties—found himself unable to proceed. This was due to pressures from within the left wing of his own coalition, which, as Almeyda had since complained, was quick to see an "unjustifiable surrender in every negotiation and compromise." ("Foreign Policy of the Popular Unity Government," p. 85.) Doubtless Allende was sincere in his desire to minimize conflict with the United States, as long as it cost him nothing. "I don't know of a single instance," Ambassador Korry remarked to a U.S. congressional committee in mid-1971, "where the President of Chile has assured me or where his ambassador assured the Department [of State] of something that was going to happen that has happened yet, not a single instance where it involves our interests . . . It just hasn't worked out ever that their assurances have been fulfilled . . . I think when the President of Chile gives me these assurances, he is being sincere about them, but because of these internal contradictions within his own government . . . he can't carry them out." (The United States and Chile, p. 16.) For its part, the Nixon White House proceeded on the basis of a worst-case scenario, but it was constantly fighting against backsliders in the State Department and the embassy in Santiago, as Ambassador Nathaniel Davis-Korry's successor—makes abundantly clear in his own memoirs. Had the Allende government seriously addressed legitimate concerns, such as compensation for expropriated properties, events might have acquired a momentum of their own, and the two governments come to an understanding in spite of themselves. Ambassador Korry is preparing a memoir on this subject; pending its publication, readers are referred to his remarks in "U.S. Policies in Chile," pp. 291-294; *Covert Action*, pp. 32-33; and "Ambassador Korry on a 1971 Proposal to Allende," *Washington Post*, September 29, 1974.

87. "Sobre la independencia politica y económica de los pueblos," official text released by the Chilean mission to the United Nations, mimeographed.

88. *Alleged Assassination Plots*, p. 227.

89. *Covert Action in Chile*, p. 33.

246 Modern Chile

90. Jonathan E. Sanford, "The Multilateral Development Banks and the Suspension of Lending to Allende's Chile," in *Orrego Vicuña, Chile: The Balanced View*, pp. 127-130. Although this is an official Chilean government publication, Sanford's work is merely reprinted. It was originally commissioned by the Congressional Research Service, Library of Congress.

91. Belgium, Canada, France, Great Britain, Italy, Japan, the Netherlands, Spain, Switzerland, West Germany, and the United States.

92. Eventually, in fact, the United States—or more precisely, the Nixon administration—eventually desisted from this position for reasons of its own. For the details, see Davis, *The Last Two Years of Salvador Allende*, pp. 72-77 and Henry Kissinger, *Years of Upheaval* (Boston, 1982), pp. 385-388.

93. Virginia M. Hagen, "United States Relations with Chile under the Government of Salvador Allende: Background and Current Developments," in *The United States and Chile*, p. 401; Nathaniel Davis, "U.S. Covert Actions in Chile, 1971-1973," *Foreign Service Journal* (November, 1978), p. 38; $243 million is the figure estimated by the International Monetary Fund.

94. Background paper: Chile and the Inter-American Development Bank During the Administration of President Salvador Allende," in *The United States and Chile*, pp. 440-441.

95. Sanford, "Multilateral Development Banks," pp. 137-140.

96. International Bank for Reconstruction and Development (IBRD), "Chile and the World Bank," in *The United States and Chile*, pp. 441-448. According to Ambassador Davis, by mid-1973 pressures were mounting for the Inter-American Development Bank "to approve something for Chile," largely because Santiago was scheduled to host the annual meeting of the board in 1974. Davis, *The Last Two Years of Salvador Allende*, p. 128.

97. Sanford, "Multilateral Development Banks," pp. 137-140.

98. IRBD, "Chile and the World Bank," p. 447. The annual average under Frei was $15.6 million, under Allende $15.4 million.

99. "The Nixon-Frost Interviews," p. 351.

100. It is not clear that it would have made much difference if they had. At the confidential meeting with representatives of major American investors in Chile on October 21, 1971, cited above (p. 22), Secretary Rogers turned aside pressures "to curtail IADB [IDB] loans" with the remark that the United States "does not have veto power over loans." *ITT, 1970-71*, vol. 2. p. 975.

101. Sigmund, *The Overthrow of Allende and the Politics of Chile, 1964-1976* (Pittsburgh, 1977), p. 338.

102. See, for example, the figures offered by William S. Ogden, executive vice-president of Chase Manhattan, in *ITT, 1970-71*, vol. 1, pp. 366-367.

103. Ibid., vol. 1 (testimony of Bolin), pp. 386-392.

104. "Structural Transformation in Chile's Economy and Its System of External Economic Relations," in S. Sideri, ed., *Chile, 1970-73: Economic Development and Its International Setting* (The Hague, 1979), p. 76.

105. *ITT, 1970-71*, vol. 1 (testimony of Greene), p. 360; (testimony of Ogden), p. 366-373; (testimony of Bolin), pp. 386-387; and vol. 2, p. 536.

106. *Covert Action in Chile*, pp. 32-33.

107. This would have run the eventual risk of renewed legal action by the copper companies, and would also have necessitated relocating specialized personnel already settled in New York. But since it was never tried, we cannot know to what degree these obstacles would have been negotiated successfully.

247

108. Carlos Fortin, "Nationalization of Copper in Chile and Its International Repercussions," in Sideri, *Chile, 1970-73*, pp. 207-208; and Fernando Fajnzylber, "The External Sector and the Policies of the Unidad Popular Government," in ibid., pp. 144-145.

109. Gall, "Copper Is the Wage of Chile," *American Universities Field Staff Reports* (West Coast South America Series), vol.19, no. 3 (1972), p. 10.

110. *ITT, 1970-71*, vol. 2, p. 1074.

111. Ibid., p. 1075.

112. For a persuasive but fundamentally misleading account of this issue from a pro-Allende point of view, see Edward Boorstein, *Allende's Chile* (New York, 1977), pp. 89-107. It is worth noting that the issue of spare parts was not seen as a particularly conflictive element in U.S.-Chilean relations at the time; instead, many Chilean officials effusively welcomed the opportunity to diversify their country's foreign sources of supply. It was only after the fall of the regime that this issue surfaced as an element in the debate, suggesting its polimical rather than concrete value.

113. Figures from Kenneth Ruddle and Kathleen Barrows, eds., *Statistical Abstract of Latin America, 1972* (Los Angeles, 1974), table 276; and James Wilkie and Paul Turovsky, eds., *Statistical Abstract of Latin America, 1976* (Los Angeles, 1976), table 3000.

114. U. S. Arms Control and Disarmanent Agency, *World Military Expenditures and Arms Transfers, 1966-75* (Washington, 1976), table II.

115. Davis, "U.S. Covert Actions in Chile," p. 39. See also Davis, *The Last Two Years of Salvador Allende*, p. 99.

116. *ITT, 1970-71*, vol. 1 (testimony of Hennessy), p. 340.

117. Paul Sigmund, "The 'Invisible Blockade' and the Overthrow of Allende," *Foreign Affairs*, vol. 52, no. 2 (1974), p. 334.

118. Sigmund, *The Overthrow of Allende*, p. 153. Kissinger offers some piquant collateral evidence in *Years of Upheaval*, pp. 385-388. For alternative explanations of the transaction offered by Export-Import Bank Officials, see *Recent Developments* (testimony of Sauer), pp. 5-6; and U.S. Congress, *House of Representatives*, *Committee on Foreign Affairs*, *Subcommittee on International Affairs*, *New Directions for the 1970s: Part 2, Development Assistance Options in Latin America*, 92d Congress, 1st session. 1971 (testimony of Corette), p. 225.

119. After discussions with the Soviets, the Chileans returned to Boeing in early 1972 and purchased the three planes with funds that "according to speculation," could have come out of a $50 million credit from Moscow. Hagen, "United States Relations with Chile," p. 400.

120. Philip O'Brien, "Was the United States Responsible for the Chileans Coup?," in O'Brien, ed., *Allende's Chile*, p. 233.

121. *Covert Action in Chile*, p. 32.

122. *The United States and Chile* (testimony of Crimmins), p. 69.

123. Almeyda, "Foreign Policy of the Popular Unity Government," p. 87.

124. Ibid., pp. 89-90.

125. O'Brien, "Was the U.S. Responsible . . .," pp. 233-234.

126. Ibid., p. 93.

127. Guardia, "Structural Transformations in Chile's Economy," pp. 85-86.

128. International Monetary Fund, *International Financial Statistics, 1973 Supplement* (Washington, n.d.), p. 71.

248 Modern Chile

129. Guardia, "Structural Transformations in Chile's Economy," pp. 82-83. For a U.S. estimate of bloc and Chinese assistance, which runs considerably higher, see Davis, *The Last Two Years of Salvador Allende*, pp. 130-133.

130. *The United States and Chile* (testimony of Crimmins), p. 69. For a similar observation with regard to Western Europe, see Guardia, "Structural Transformations in Chile's Economy," p. 86.

131. O'Brien, "Was the United States Responsible . . .," p. 233. An explanation of the more advantageous role formerly played by American banks is presented in *ITT, 1970-71*, vol. 1 (testimony of Greene), p. 363.

132. Davis, *The Last Two Years of Salvador Allende*, p. 129.

133. There was, he adds, a slight decline in sales to Western Europe and the United States, but this was compensated for by increased shipments to Japan, Latin America, and the socialist countries, particularly China, Fortín, "Nationalization of Copper in Chile," pp. 205, 206-207.

134. Guardia, "Structural Transformations in Chile's Economy," p. 86.

135. Clive Bell and David Lehmann, "The International Context of *La Via Chilena*," in J. Ann Zammit, ed., *The Chilean Road to Socialism* (Brighton, Sussex, 1973), p. 359n.

136. Markos J. Mamalakis, *The Growth and Structures of the Chilean Economy* (New Haven, 1976), pp. 260-261.

137. These fell from $219 million in August, 1970 to $32 million in August, 1972.

138. *The United States and Chile* (testimony of Crimmins), p. 69; (testimony of Lansberger), pp. 227-228; Henry A. Lansberger, "An Introduction to the Complexities of Assessing the U.S. Credit Squeeze," in *The United States and Chile*, pp. 527-528 and Guardia, "Structural Transformations in Chile's Economy," pp. 83, 86.

139. *Covert Action in Chile*, p. 27.

140. *The United States and Chile* (testimony of Sigmund), p. 247.

141. *Covert Action* (testimony of Treverton), p. 16. Some additional funds were spent for propaganda activities of a more general sort. According to the Church committee, the CIA also (1) subsidized several magazines of national circulation, and a large number of books and special studies: (2) developed material for placement in opposition press and electronic media; and (3) funded an opposition researched organization that channeled a steady flow of economic and technical material to opposition parties and private sector groups. Many bills introduced by opposition parliamentarians were drafted by this organization. *Covert Action in Chile*, p. 30.

142. By the end of the regime *El Mercurio*, normally comparable in size to the *Washington Post*, was reduced to an edition of six or eight pages, virtually devoid of advertising.

143. Davis, *The Last Two Years of Salvador Allende*, p. 117. Contrary to widespread presumption, apparently the CIA did not play a role in saving the Papalera. Ambassador Davis says that he flatly refused to support "a covert bailout of the Papalera— . . . I still shudder to think of how much money could have been absorbed by that operation." Ibid., p. 327.

144. Davis, "U.S. Covert Actions," p. 11; Everett G. Martin, "Did the Chilean Press Need CIA Help?", *Wall Street Journal*, September 18, 1974.

145. *Covert Action* (testimony of Treverton), p. 17.

The United States and Chile, 1970-1973 249

146. Ibid. (testimony of Korry), p. 4. See also Ambassador Korry's letter to Senator Church dated October 23, 1975, reprinted in Ibid., p. 117; and his remarks to William Buckley, Jr., in Korry, "U.S. Policies in Chile," pp. 296-297.

147. *Covert Action in Chile*, pp. 31, 49.

148. Davis, "U.S. Covert Actions," p. 14.

149. Korry, letter to Senator Church.

150. Davis, "U.S. Covert Actions, Part II," p. 11 See also *The Last Two Years of Salvador Allende*, pp. 340-341. Osvaldo Puccio reveals that in the 1960s he and other members of the Socialist party set up the Sociedad Comercial Arauco, for the express purpose of raising money through trade operations with the governments of Poland, East Germany, Cuba and "other socialist countries." In 1970, he writes, Allende's entire presidential campaign was funded in this way. *Un cuarto de siglo con Allende* (Santiago, 1985), pp. 163-164, 166, 168, 205. It surpasses belief that once in government the Socialist party did not continue to use this method to raise campaign funds.

151. *Covert Action in Chile*, pp. 16, 22, 30-31.

152. Ibid., p. 31.

153. Davis, "U.S. Covert Actions, Part II," p. 14. In his book he adds, "As for the private-sector groups which received CIA money, they were given relatively small sums, and their own needs were pressing." *The Last Two Years of Salvador Allende*, p. 325.

154. *Covert Action in Chile*, p. 10.

155. Ibid., pp. 30-31; see also Davis, *The Last Two Years of Salvador Allende*, pp. 324-328.

156. Phillips, *The Night Watch*, p. 237.

157. *Covert Action in Chile*, p. 2.

158. Oddly enough, however, this is scarcely mentioned in the posthumous memoirs of General Carlos Prats, Schneider's successor. See *Memorias: testimonio de un soldado* (Santiago, 1985).

159. *Alleged Assassination Plots*, p. 254. Asterisks indicate material excised from the record for security reasons.

160. Davis, *The Last Two Years of Salvador Allende*, p. 328.

161. *Covert Action in Chile*, p. 37 (emphasis added).

162. Ibid., pp. 38-39.

163. Ibid. (emphasis added).

164. Ibid., p. 135. Ambassador Davis takes strong issues with this, arguing that that by mid-1973 "the gap between the desires of the Chilean opposition and the inclinations of our embassy widened. As [the year] progressed, anti-UP forces were coming to favor a coup . . . . The U.S. government could have done little to prevent or slow this trend, and seeing this, we tried to avoid bankrolling the plotters and to keep away from the plotting. As pro-coup sentiment spread, the effort became more and more difficult, but it was honestly sustained . . . it was becoming clear [by then] to responsible U.S. officials in Washington as well as in Santiago that the U.S. record of abstention from coup plotting was going to be more important than any resort to increasingly superfluous covert intervention." Davis, *The Last Two Years of Salvador Allende*, pp. 328-329.

165. Philips, *The Night Watch*, p. 238.

166. *The United States and Chile* (testimony of Landsberger), p. 226.

167. Hersh's other sensational allegation—that Ambassador Davis at some point was instructed "to aid the opposition by any means possible" and "to get a little

250 Modern Chile

rougher''—was flatly denied by Davis at the time his articles were published, and, as the ambassador later had the satisfaction of observing, found no substantiation in the Senate investigation. ''U.S. Covert Actions in Chile,'' p. 38.

168. "To insure that no mere difference in semantics is involved," Colby added, "this term especially is not a fair description of our national policy [in Chile] from 1971 on of encouraging the continued existence of democratic forces looking to future elections." Newsman Daniel Schorr, who was later also permitted to read top secret materials on covert CIA operations in Chile, has corroborated Colby's statement. Daniel Schorr, *Clearing the Air* (Nashville, Tenn., 1977), pp. 130-133.