Allende’s Chile and the Inter-American Cold War (33 page)

In August 1972 Allende had asked Letelier to draw up recommendations about how to deal with the United States and how to resolve the government’s financial problems. The analysis of Chile’s international position that Letelier drew up was far more pessimistic than anything he had submitted before. As the ambassador saw it, if the UP could not avoid a confrontation with the United States, it would simply not survive. The UP’s political future, he insisted, depended on resolving Chile’s financial difficulties by seeking international assistance. Specifically, he calculated that Chile needed an immediate injection of approximately $300 million and would have to try and scrape the amount together from a variety of sources simultaneously (capitalist, socialist, European, Japanese, South and North American) to get it. Without a doubt, the key to success was unfortunately
the United Sates. As Letelier stressed, 25 percent of Chile’s overall supplies, 50 percent of its industrial supplies, and most of its military supplies came from the United States. He also highlighted the socialist countries’ reticence about undermining détente to help Chile and suggested that instead of using the United States as a scapegoat, Allende’s only hope was to enter into serious bilateral negotiations with it.
¹¹⁵
As he put it on 6 September in a personal letter to Foreign Minister Almeyda, he did not foresee how Chile could “confront … serious financial problems with any success and simultaneously face an economic and financial confrontation with the United States.” At a moment when things were becoming far tougher “on all sides” for the Chileans, he urged the UP to consider more tactical efforts at compromise to postpone an overt U.S.-Chilean conflict.
¹¹⁶

Despite its sense of urgency, Letelier’s advice, which was laid out in full in two lengthy memorandums he sent back home in August and September 1972, was not all that dissimilar to his earlier recommendations.
¹¹⁷
But it did seem to underscore an increasingly obvious failure: Chile now appeared to be
more
dependent on the United States than it had been before Allende’s election. Because of this, the far Left within the UP was especially angered by what Letelier was proposing, namely that the Chileans put all their energies into negotiating a way out of its difficulties by making a deal with Washington and therefore tying their future to the United States.

A few months earlier, Allende had tried to improve the UP’s economic strategies by dismissing his controversial minister of the economy and appointing the more pragmatic Communist, Orlando Millas.
¹¹⁸
In part, the move had been an effort to placate the Soviets, to show the socialist bloc countries that Chile now had a grasp of the economy, and to persuade them to offer Chile more assistance. By August, however, Allende was warning supporters about the inadequacies of Soviet bloc aid to meet Chile’s economic needs. As he had lamented, socialist credits for industrial investment and future economic development would take “two or three years” to be effective.
¹¹⁹
Indeed, Moscow’s relationship with Santiago was evolving too slowly when it came to the rapidly changing situation within Chile.

Unbeknownst to the Chileans, the Soviet leadership was also increasingly disdainful of the UP’s performance. A report written by the Latin American Institute at Moscow’s Academy of Sciences in mid-1972 had described the Chilean situation as “uncertain and unstable” and had predicted the months ahead would be “agitated and tense.” The UP had only partial political power, its authors argued, and Chilean parties had no fixed
ideas or immediate means or potentials for launching Chile on a road to socialism.
¹²⁰
In fact, in the context of disturbances between left-wing supporters in Concepción back in May, the Soviet Union’s ambassador in Santiago had called all Soviet bloc ambassadors in the capital together to discuss the “deep crisis” developing within the UP. A month later, the East German ambassador had reported back to Berlin that left-wing Chilean unity remained a problem and was likely to remain one for the foreseeable future. To be sure, he noted that the UP’s composition had changed and that the PCCh was making concerted efforts to curb “adventurism.” But, overall, he lamented the growing divergence between the Communist and Socialist parties, caused by the “outright lack of maturity” and discipline within the PS itself.
¹²¹
Then, in October 1972, the Soviets downgraded their definition of Chile from a country “building socialism” to a Third World nation seeking “free and independent development on the path of democracy and progress.”
¹²²

For their part, however, Allende’s inner circle tended to concentrate on global developments rather than internal developments when explaining the Soviets’ lack of interest in offering more meaningful assistance. As Letelier pointed out, Chile’s timing in seeking more assistance from the East was bad. One only had to recognize that for “tactical and strategic reasons on both sides,” the world was “living through a moment of convergence and understanding between the United States and socialist countries,” which meant that Chile could not expect to receive the same type and amount of financial help from the Soviet bloc that it might otherwise have.
¹²³
Allende’s curious decision to send the anti-Soviet Socialist, Carlos Altamirano, to the USSR just one month after Nixon’s summit with Brezhnev must also not have helped win over the Soviet leadership, suspicious as it was of far Left “extremists” hijacking the Chilean revolutionary process.
¹²⁴

Even so, as the Soviets dragged their feet, Chile was in ever greater need of hard-currency loans to cover its balance-of-payments deficit. In conversation with a U.S. Embassy official, a Chilean lawyer with contacts in the UP government described Orlando Millas as an “astute and able man” who recognized the USSR would not necessarily be as forthcoming as hoped: “[Millas] realizes that Chile’s economic problems are grave and that a solution will require credit from abroad. The extent to which this help will be provided by the Soviet Union is limited … the only alternative, therefore, is for Chile to restore its financial relations with the West, particularly the U.S. Millas, who like most Chilean Communists is above all a pragmatist,
will have no ideological difficulty in moving in this direction … [and] realizes that the kind of financial relations he desires will not be possible unless there is progress in solving outstanding bilateral economic problems between Chile and the U.S.”
¹²⁵
Although himself a Socialist, Letelier offered a similar assessment, reasoning that given the state of world politics, socialist countries would be more likely to increase their assistance to the UP if Chile first repaired relations with developed countries in the West. As he saw things in August and September 1972, hopes of seeking benefits from contradictions between capitalist countries were futile because of the growing interdependency between them. He thus urged the Chileans to transcend the deadlock in U.S.-Chilean relations by pushing for a meaningful compromise.
¹²⁶

The three obvious questions Letelier’s proposals raised were, first, whether the Nixon administration would be at all receptive to the idea of meaningful bilateral negotiations; second, what exactly the Chileans could ask for in return for certain compromises; and, finally, whether he could persuade the whole of the fractious UP coalition—and particularly the Socialist Party—that this was the best course forward. By late 1972, it seemed clear to Chilean diplomats that the United States was “playing dirty.” Chilean properties in the United States had been ransacked, and its diplomats were so worried about being under surveillance that they were using voice distorters during telephone conversations or conducting conversations outdoors.
¹²⁷
The Chilean Embassy in Washington had also been burgled in May, and although intruders had ignored valuables, they had stolen a list of subscriptions to embassy publications and four radios that staff had been using to muffle sensitive conversations. Indeed, the Chileans suspected the U.S. government and/or multinationals were behind the robbery, especially when a similar burglary took place at the Watergate complex a month later.
¹²⁸

Even so, Letelier was now insisting that the UP still had a slight window of opportunity before things got even worse. To some extent, his appreciation of the severe deterioration of Chile’s position was conditioned by his exaggerated faith in Kissinger’s reassurances the previous year. Yet, it was also clear that Allende was running out of options when it came to avoiding confrontation with the United States over compensation claims. Looking ahead to what they expected would be the Chilean Special Copper Tribunal’s rejection of Anaconda’s appeal on the “excess profits” ruling, Chilean diplomats had been trying to keep Chile’s international options open by rescheduling debt repayments with other Paris Club creditors as
quickly as possible (and not always as satisfactorily as more time might have allowed).
¹²⁹
As Letelier forewarned, the tribunal’s pronouncement was likely to undercut the Chileans’ chances of receiving credits from international organizations, U.S. government organizations, and private banks. He also observed that those in Washington who were happy to wait until Chile’s economic problems overtook the UP—those who, in Letelier’s words, appeared happy to wait until “fruit ripened and fell from the tree”—were also a growing minority in Washington. And because Letelier predicted that Nixon’s widely expected reelection would allow him to pursue a harder line toward Chile, the ambassador called on his government to seize the moment before U.S. presidential elections on 7 November to improve relations with the United States. The Nixon administration would not want to appear to be intervening in Chile before this date, and he also had indications from Washington officials that the United States wanted to sit down and talk.
¹³⁰

So what did Letelier propose that the Chileans should talk
about
? What is particularly interesting—and surprising—about the proposals that he sent to Almeyda is the sheer scope of issues that he suggested his government could negotiate. Not only did he propose asking for understanding, but he now also suggested Santiago might request
assistance
from the United States to help Chile’s ailing economy and, by implication, La Vía Chilena. In concrete terms, this involved ensuring that Washington cooperated in debt negotiations and modified existing U.S. policy (e.g., by securing agreement from the administration that it would not apply sanctions as stipulated by the González Amendment and that it would normalize trade as well as AID and Eximbank credits). It also involved requesting a $50 million credit to help Chile’s balance-of-payments problem and a further $50 million for foodstuffs under the United States’ PL-480 credits. Moreover, Letelier indicated that the Chileans could not hope to receive this assistance for nothing. Instead, he proposed that the Chilean government should consider international arbitration to resolve the gridlock with private copper companies, that it should be prepared to pay off the Cerro copper corporation and examine a way of paying Anaconda, that it could offer a moratorium on nationalizing further U.S. investments in Chile, that it could review ITT’s case, and that it would commit itself to not accentuating ideological differences with the United States by ensuring that the media under its control did not harden its anti-American posture.
¹³¹
These were hardly small concessions. In no uncertain terms, Letelier was proposing taking considerable steps backward when it came to asserting
Chile’s independence vis-à-vis the United States as a means of helping the UP survive.

Unsurprisingly, Letelier’s proposals caused immense controversy even when presented to the government in a watered-down and most basic form by Foreign Minister Almeyda. After three long and arduous meetings in September 1972 between the UP’s Economic Committee of Ministers and the UP’s party leaders, Almeyda wrote to Letelier that the matter was a difficult one and that its “result would at worst end up making conflict [with the United States] even more difficult to resolve.” Both the ambassador and Almeyda had always recognized that the task of persuading certain members of the government coalition would be difficult. Furthermore, the PS’s leader, Carlos Altamirano, had already voiced opposition to a similar suggestion only months before Letelier formally re-proposed negotiating with the United States in September 1972.
¹³²
Now, even though Almeyda had refrained from suggesting that the UP be prepared to compromise on ITT and despite promising that the issue of compensation would be nonnegotiable, Altamirano expressed palpable contempt for negotiations. He vehemently criticized what he called the UP’s “bland” policy toward the United States, its failure to denounce Washington, and its lack of preparation when it came to mobilizing Chile’s population to face a confrontation with the United States.

Indeed, when it came to Chile’s relations with the United States, the government was clearly severed in two. On one side the Communist Party; the Radical Party; Chile’s newest economics minister, Carlos Matus; and Gonzalo Martner were among those who agreed that Chile should negotiate meaningfully in good faith even though they were rather pessimistic about what could be achieved. On the other side, ex–economics minister Pedro Vuskovic, MAPU, and Altamirano were unsympathetic and opposed to negotiations, fearing that they would force Chile to relinquish its stance on compensation. Allende had to break the deadlock, which he did when he voted to approve negotiations.
¹³³

In October 1972 the UP approached talks with the United States through gritted teeth. Need rather than desire pushed it toward such an approach. And rather than Santiago setting the agenda for bilateral discussions as Letelier had hoped, troublesome intragovernmental divisions were holding the Chileans back and attaching heavy weights to the process. As UP officials deliberated, they stalled, and as they did, U.S.-Chilean relations deteriorated even further.
¹³⁴
As predicted, a major reason for this was the Special Copper Tribunal’s final decision to uphold Allende’s “excess
profits” ruling. With it, the atmosphere of crisis in Chile got worse, and Allende’s negotiating position weakened as Kennecott halted copper shipments to Europe.