Appendix: Aid-Facts and Figures
Goodfellow, Bill
The following article is an abridged and updated version of "Chile's Chronic Economic Crisis, 1976 and Beyond," written by Bill Goodfellow for the September 1976 issue of International Policy...
...In 1973, U.S...
...In the World Bank, the U.S...
...thus it could be justified under the Harkin Amendment, and the United States voted for it...
...If the junta can locate the additional $68 million to complete the paper plant, the loan will be brought before the IDB's Board for a vote before the end of 1976...
...In 1975 the Ex-Im Bank loaned $21.15 million to Chile's state owned electric company, CHILECTRA, for an electric generating station and guaranteed the repayment of another $21.15 million that the Chilean electric company borrowed from private banks...
...Atkinson said, "In my opinion, no...
...3 The United States' ability to funnel aid to Chile through the IDB may be somewhat limited in the future, because the Harkin Amendment also applies to the bill which authorizes U.S...
...480 program, wheat is sold to the junta on credit...
...In an October telephone interview, Mr...
...exporters, their banks, and to foreign governments and private foreign companies to finance exports from the United States...
...In the IDB the U.S...
...8. Washington Star, ibid...
...According to the World Bank's in-house Monthly Operational Summary of August 11, 1976, two major loans totalling $50 million are now being processed for Chile for fiscal year 1977...
...When asked if the United States would be able to vote in favor of this loan, Mr...
...For an excellent discussion of what this means, see "Chile: the Status of Human Rights and its Relationship to U.S...
...The median income in Chile was $130 per month in December 1974...
...On June 4, 1976, the IMF announced that Chile would receive $90 million under the Fund's compensatory financing facility* "to compensate for a shortfall in export earnings experienced by Chile during calendar year 1975...
...Total Export-Import exposure in Chile (the amount of previous loans, financial guarantees and insurance still outstanding) is $358 million, of which $335 million is direct loans and financial guarantees and the remainder, $23 million, is insurance...
...In addition, we used Chile, Recent Economic Developments, International Monetary Fund, (Washington, D.C., May 21, 1976...
...IMF staff members anticipate at least a 200 percent inflation rate for 1976...
...On July 29, 1976, the IDB announced a S38 million loan to the junta from the Fund for Special Operations, to finance an irrigation and agricultural development project in the Digua and Maule Norte areas in central Chile...
...policymakers emphasized aid mechanisms which would provide Chile with "instant" money...
...According to AID, only two percent of the cost of the Chilean housing program requires the expenditure of foreign exchange...
...Since 1974, Chile's military junta has received more than $686 million in all forms of direct American assistance, including generous debt reschedulings (see Table IV-A).' In addition to the flow of resources from U.S...
...ECONOMIC ASSISTANCE: 96.3 80.3 26.3 8.6 9.0 10.1 252.3 273.3 129.3 63.5 AID 57.9 35.4 18.0 1.5 1.0 0.8 5.4 20.6 15.5 12.5 P.L...
...2. Proposed - see text...
...Under Title I of the P.L...
...In the 1974-75 period, Chile needed U.S...
...and Economic Memorandum on Chile, World Bank (Washington, D.C., December 1975...
...An examination of the nature and magnitude of the U.S...
...proposals which will be presented to Congress early next year...
...7 Arguing that the loan would help stabilize a repressive regime, the group urged McNamara to vote against the loan, but he said that the loan was a "drop in the bucket" of the $1.2 billion that Chile is receiving from other sources...
...The first payment on the Export-Import Bank's share of the loan doesn't fall due until May 10, 1984...
...How is this possible...
...In fiscal year 1974 (the Bank's fiscal year is July 1 to June 31) total Bank lending was $13.5 million...
...Ex-Im thus assumed the entire $42.3 million risk...
...share of the voting power for "ordinary capital" is 40.22 percent...
...It is a one-time adjustment...
...In calendar year 1974, the IDB's loans to Chile totalled S97.3 million, almost a 19-fold increase from the previous year's $5.2 million, and the largest amount of loans the IDB has ever made to Chile in any one year...
...government has funneled as much aid as possible to Chile, whatever Congress' intentions...
...banks to Chilean housing cooperatives...
...economic aid to Chile was a paltry $10 million, but by 1974 it reached $273 million...
...The junta was banking on an additional $100 million from another standby agreement with the IMF, but the Fund concluded during its March 1976 visit to Chile that the junta's efforts to curb inflation were inadequate...
...The U.S...
...Loans from the International Monetary Fund and debt rescheduling also provide immediate help...
...APPENDIX 1. The information for this section was gathered in interviews with officials in the U.S...
...In fiscal years 1975 and 1976 the IMF loaned the junta $231.8 million from its "oil facility" to compensate Chile for increases in the price of oil it must import to meet 70 percent of its needs...
...Economic Assistance Programs," Hearings Before the Subcommittee on International Organizations of the Com- mittee on International Relations, House of Representatives, April 29 and May 5, 1976 (GPO: 1976...
...He stated, "The loans have not been put in the deep-freeze...
...No Aid for '78...
...The $21 million loan will, according to the IDB, "provide the short and medium-term financing required to help stimulate recovery of Chile's manufacturing industry which is oriented toward the output, of such goods as foodstuffs, chemicals and fabricated metal products which possess high export potential...
...THE WORLD BANK During the three years the Allende government was in office, the World Bank made no new loans to Chile...
...The junta hopes to get more capital from private banks, which are less amenable to public criticism in the United States...
...However, the loan has been postponed at least until next year...
...Atkinson admitted that the United States would not be able to vote in favor of the ENAP loan, if and when it comes before the IDB's Executive Board for a vote...
...Since the coup, the IMF has come to the junta's aid with massive short-term balance-ofpayment support...
...3. Calendar year 4. A loan for $62 million will come up for a vote before the end of 1976...
...27 Housing Guarantees In fiscal year 1975 the U.S...
...Compiled by Bill Goodfellow.people in Chile, as required by the Harkin amendment.* "The greater part of the $55 million ($35 million) was to be used on cooperative housing in which a large number of families have already purchased land and have built the basic infrastructure with their savings...
...policy-makers moved relentlessly to fulfill that need...
...suppliers would be unwilling to extend long- or even medium-term credits without a guarantee of repayment from the U.S...
...Food for Peace loans, Housing Investment loans, Export-Import Bank loans, and Commodity Credit Corporation loans are usually disbursed within one year of the date the agreement is signed, and all these sources have been crucial in funneling quick support to the junta...
...In early 1974 the IMF agreed to a $95 million "standby agreement" that paved the way for another rescheduling of Chile's foreign debt in 1974 and in effect put the IMF's stamp of approval on the junta's economic policies...
...Attorneys Herbert Semmel and Leonard Meeker of the Center for Law and Social Policy, in testimony before the Fraser subcommittee of the House International Relations Committee on April 29, 1976, charged that the housing investment guarantee program would not benefit needy TABLE IV-A ECONOMIC ASSISTANCE TO CHILE (In Millions of Dollars) FY 1968 1969 1970 1971 1972 1973 1974 1975 1976 19771 TOTAL U.S...
...480 23.0 15.0 7.2 6.3 5.9 2.5 3.2 62.3 58.1 27.0 (Title I1) (7.2) (5.2) (7.2) (6.3) (5.9) (2.5) (3.2) (4.6) (9.0) (12.0) Other 2.0 1.2 1.1 0.8 0.5 0.5 1.3 0.6 - - Export-Import loans and guarantees 13.4 28.7 - - 1.6 3.1 0.3 54.8 30.7 24.0 Commodity Credit Corporation loans - - - 3.2 41.1 9.0 - - Housing Investment Guarantee - - - 30.0 25.0 Debt rescheduling (U.S...
...In the case of Chile, however, Ex-Im loans and financial guarantees are especially important since most private U.S...
...September 2, 1976...
...The report contains considerable data beyond that published here...
...The IDB loan would cover less than half of the $130 million total cost of the plant, so Chile must again find the balance of the capital from other sources...
...bilateral aid in the form of quickly-disbursing loans, and U.S...
...But even in these cases, a down payment of 10 percent was to be required...
...The countries they represent include almost every country in Western Europe - Britain, France, Germany, Belgium, Holland, Austria, Luxembourg, Cyprus, Denmark, Norway, Sweden, Finland, Iceland - plus Romania, Yugoslavia, and Israel and many nations of the Middle East...
...several European governments refused to renegotiate Chile's debt in 1975 and 1976, and some have cut off all aid programs for Chile...
...According to David Atkinson, a Senior Chile Analyst at IDB, "the issue is money...
...4 Thus, the IDB is supporting the junta's attempt to develop its export-oriented industries...
...The project cannot meet the "directly benefiting the neediest" criteria set down by the Harkin Amendment...
...480) loans, Chile would have to spend scarce foreign currency to buy wheat from commercial sources...
...The junta then sells the wheat to local merchants for pesos, which the junta is permitted to use for "self-help" development projects...
...World Bank president Robert McNamara was visited by eight critics the night before the loan passed, including among others: Representative Tom Harkin (D-lowa), Esteban Torres of the United Auto Workers, Tom Quigley of the U.S...
...in fiscal year 1975, $20 million...
...AID SINCE 1974 - THE MECHANISMS Food for Peace (PL 480) The junta has received important balance of payments support from Title I of the Food for Peace program, which in fiscal year 1975 provided 20 percent of Chile's total wheat consumption...
...It was the only loan in 1976 (of over 200) on which the board's vote was not unanimous...
...State and Treasury Departments as well as from interviews in the Interamerican Development Bank, the World Bank and the International Monetary Fund...
...The lowest 30 percent had incomes of less than $92 per month...
...The U.S...
...It forbids U.S...
...It will total about $62 million and will be used to finance a paper plant in Chile...
...Robert Driscoll, Chile Desk Officer at the State Department, confirmed the $37.5 million figure, but argued that the State Department was still adhering to the Congressional ceiling, because "we threw in the transitional quarter...
...The [Bank's] management wants to avoid the kind of controversy that accompanied the last loan to Chile...
...The first loan, for $20 million, will go to Chile's Central Bank for agricultural loans, long- and medium-term, to fruit and vineyard growers, livestock producers and to Chilean agroindustry...
...Including all sources, total U.S...
...This would range upward from the equivalent of $250, exceeding $500 in many cases...
...For more on the structure of the IMF, see Hector Melo and Israel Yost, "Funding the Empire, Part II, the Multinational Strategy," NACLA Newsletter, May-June 1970...
...however, I suspect they are being held up while the political waters are being tested...
...Agency for International Development started a large housing investment guarantee program in Chile under which the U.S...
...As described in the IDB's loan announcement, "The program . . will benefit low income farm families and cooperatives in the region...
...The sharp decline in real income of the poor in Chile, plus the large number of persons unemployed, makes it unlikely that those in greatest need will have the money to purchase the U.S.-supplied wheat...
...For more on the IMF and Chile, see Bill Goodfellow, "Chile's Economic Crisis, 1976 and Beyond," International Policy Report, September 1976...
...and relevant documents from the Agency for International Development...
...The Ex-Im Bank continues to give Chile the lowest of its credit ratings that still allows for some coverage...
...The remaining $5 million was to go to a cooperative bank for lending on lower-cost housing...
...28 MULTILATERAL AID The Inter-American Development Bank In dollar amounts, if not in terms of influence, loans from the IDB have been more important to the Chilean junta than have World Bank loans...
...Bankers' attitudes towards Chile will depend on the price of copper, and on their reading of current U.S.-Chile policy...
...The entire project will cost $330 million, of which the IDB would provide only 21 percent...
...26America, with 30 times Chile's population, received only $9 million in Title I assistance in fiscal year 1975...
...7. Mary McGrory, "Chilean Loan Questions," Washington Star, February 1976 (exact date unavailable), and Washington Post, February 12, 1976...
...government will be able to use the aid mechanisms described above to continue to funnel aid to Chile...
...funding for the IDB...
...It will be more difficult in 1977 than in previous years to provide Chile with quick sources of money from official bilateral aid programs, because of the $27.5 million ceiling placed on such programs by Congress...
...Reports of widespread malnutrition in Chile suggest that the program is not reaching the neediest...
...Meeker and Semmel...
...s In the final vote on the loan, nine of the Bank's 20 directors, representing 41 percent of the Bank's voting stock, either voted no or abstained on the loan...
...government guarantees loans made by private U.S...
...Bill Goodfellow .1 B B rr c 3130 International Monetary Fund The International Monetary Fund (IMF), unlike the World Bank and the Inter-American Development Bank, is not a development bank, but rather "a mechanism to assist member-countries with [temporary] foreign exchange difficulties," as it describes itself...
...In fiscal year 1975, however, $57.8 million in Title I loans were granted Chile, with a repayment term of 20 years...
...Catholic Conference, and Jack Conway of the American Federation of State, County and Municipal Employees...
...The $33 million loan - for rehabilitation of Chile's copper mining and processing facilities 6 - encountered considerable opposition and was widely criticized in the press in the United States and Europe...
...Without Food for Peace (P.L...
...The local merchants in turn sell the wheat on the commercial market...
...The legality of the State Department's sleight of hand is open to question, although the intent is obvious...
...It is difficult to know now whether the U.S...
...U.S...
...Pressure on other governments with representatives in the IDB will be necessary to stop such loans in the future...
...The IDB has scheduled a $70 million loan for Chile's National Petroleum Company (ENAP) for 1976...
...Aid figures tell with stark accuracy the story of U.S.-Chile policy since the coup of September 1973...
...5. Letter from Joseph V. Hinshaw, Associate Chief, Office of Information, IDB, to Rodney Larson, September 3, 1976...
...The loan would cover only part of the29 cost of a huge project for the liquification and export of natural gas...
...Director at the IDB recently voted against a $21 million loan to Chile for "an industrial credit program in the private sector...
...To limit the flow of capital to Chile, pressure on all fronts will be necessary: on the State Department, on Congress, and on the private banks and corporations...
...Thus, policy-makers needed to use "fast disbursing" loans, in order to fulfill the junta's needs...
...However, the program totalled only $4.6 million in fiscal year 1975 and $8 million in fiscal year 1976, which is hardly adequate to reach more than a limited number of those facing dietary deficiencies...
...He said one set of things privately to assuage his conscience while doing another set of things in an institutional role to carry out the logic of his career...
...share of the voting power is 22.66 percent...
...As explained above in Part II, the junta is in desperate need of dollars - to cover its balance of payments deficits, caused partly by the fall in copper prices and by the huge foreign debt payments...
...Because of the staff members' criticisms over the junta's inability to curb inflation, no standby agreement was reached.** * The IMF's compensatory facility, and its oil facility, are special facilities and do not require that the recipient country agree to the same economic policies which would be a precondition for a standby agreement...
...In this article, the specific aid mechanisms alluded to in previous articles are discussed in some detail...
...The second loan, for $30 million, will go to Chile's state-owned electric company, ENDESA, for the expansion of the electric transmission and distribution network in Chile, and for the installation of interim electric generating capacity "to bridge gaps in [the] delayed investment program...
...Conclusion In the future, the junta will need large doses of external capital in order to meet the obligations on its foreign debt and to import necessary items...
...while "development" loans from the Inter-American Development Bank (IDB) and the World Bank, though crucial in the long run, usually disburse over a period of four years, and consequently do not provide an immediate flow of foreign exchange...
...9-11...
...6. The loan will finance part of a $76.8 million modernization project for the copper industry, to be jointly funded by the Chilean government...
...and Canadian directors), they may, in the future, play an important role in IDB decisions...
...From interviews at and documents from the State Department, Treasury Department, World Bank and Interamerican Develop- ment Bank...
...In 1975 the IDB made four loans to Chile totalling $70.76 million...
...also has a small P.L...
...Chile's poorest people were not expected to participate because they couldn't afford to buy the houses to be constructed in this program," concluded the GAO...
...Though the new members of the IDB will share among them only two representatives on the Bank's board (there are seven Latin American directors, plus the U.S...
...bilateral aid program for FY 1978 (which would be presented to Congress sometime next spring...
...20002...
...5. Military assistance for Chile was banned in late 1974 by an amendment to the Foreign Assistance Act of 1975...
...During this same period only $4 million in housing investment guarantees were authorized for all the rest of Latin America...
...In an obvious attempt to undercut the inevitable controversy over future aid programs for Chile, the junta announced on October 21 that it did not want to be included in the U.S...
...aid program to Chile since 1974 reveals that U.S...
...Protests from labor groups and progressive members of the Chile solidarity movement have greatly limited aid to Chile from Europe...
...Another $15 million was to be given to the Chilean savings and loan system...
...loans and grants from the Agency for International Development (AID), as well as Title I Food for Peace Loans' (see part I, p. 8, for more on this recent development...
...assistance to the "government of any country which engages in a consistent pattern of gross violations of internationally recognized human rights," unless such assistance will directly "benefit the needy people in such country...
...The U.S...
...Because of this amendment, ,e U.S...
...James Rousch of AID said in an interview that the Chileans' "request" would presumably only affect aid granted under the Foreign Assistance Act - i.e...
...480 Title I assistance...
...According to the IDB's Office of Information, the German Executive Director, who represents Germany, Belgium, Denmark and the United Kingdom at the IDB, abstained on the vote on the $38 million loan.s These countries are new members of the IDB, and it is possible that they will, in the future, vote against new loans for Chile...
...Unlike the Title I program, the Title II aid does seem to reach many of the neediest people since it is given away, rather than sold...
...In 1975 $30 million in housing guarantees were authorized, and in 1976 another $25 million were authorized...
...The rest of Latin * The transitional quarter, from July 1, 1976, to September 30, 1976, allows the government to shift the beginning of the fiscal year from July 1, 1976, to October 1, 1976...
...programs and institutions, international financial institutions in which the United States plays the leading role have granted Chile $631 million since 1974...
...In an October interview, Hal Reynolds, the alternate U.S...
...The Harkin Amendment was introduced into aid legislation in 1975 by Representative Tom Harkin (D-lowa...
...General Accounting Office (GAO), in an April 29, 1976, report, supported the views of Messrs...
...Ex-Im officials admit privately that they are anxious about the Bank's large exposure in Chile...
...for military sales figures, see p. 7. Source: "Chile's Chronic Economic Crisis: 1976 and Beyond," International Policy Report, Center for International Policy, September, 1976...
...Since the coup, the Export-Import Bank's total of loans and financial guarantees to Chile is $79.1 million...
...4. IDB News Release...
...It was a disarming performance," related Richard Falk of Princeton, who was also among the loan's opponents, "rather like what he did on Vietnam...
...Nevertheless, the State Department plans a $36.5 million program in FY 1977 for Title I Food for Peace loans and Agency for International Development loans and grants, which come under the ceiling limitation...
...and in fiscal year 1976, $33 million...
...In spite of the "no" vote from the United States the loan got enough votes to pass...
...The following article is an abridged and updated version of "Chile's Chronic Economic Crisis, 1976 and Beyond," written by Bill Goodfellow for the September 1976 issue of International Policy Report, published by the Center for International Policy, 122 Maryland Ave., N.E., Washington, D.C...
...direct economic aid to Chile will total $63.5 million in FY 1977...
...government...
...480 Title II grant program in Chile which is administered by private voluntary organizations...
...The IDB's Board of Executive Directors is dominated by the United States to a much greater degree than is the World Bank's...
...The "request" would in no way affect other aid mechanisms such as the IDB and the World Bank...
...Each year since the military coup, however, the Bank has been cautiously increasing its lending...
...In the Fund for Special Operations, the IDB's soft-loan window, the United States has an effective veto, since any loan requires a two-thirds vote of the Executive Board...
...3. For more on the history and internal structure of the IDB, see Hector Melo and Israel Yost, "Funding the Empire: Part II, The Multinational Strategy," NACLA Newsletter, May-June 1970, pp...
...The remaining 98 percent of the foreign exchange thus can be utilized by the junta to alleviate its balance of payments deficit...
...During the three years of the Allende government, Chile received no P.L...
...2. NACLA telephone interview with James Rousch, AID, October 26, 1976...
...The Export-import Bank The United States Export-Import Bank extends loans and financial guarantees to U.S...
...Ex-Im Bank loans are usually made at near-commercial terms, carrying higher interest rates than loans from many other "aid" programs...
...Director on the Bank's Board, insisted that Chile meets the "basic tests of creditworthiness that the Bank requires before it can make a loan...
...share) - - - - 201.0 96.0 - - WORLD BANK: - 11.6 30.2 - - - 13.5 20.0 33.0 50.02 INTER-AMERICAN DEVELOPMENT BANK 3 : 16.5 31.9 45.6 12.0 2.1 5.2 97.3 70.8 54.0' - MILITARY ASSISTANCEs: 7.8 11.7 0.8 5.7 12.3 15.0 15.9 0.6 - - 1. The figures for 1977 are preliminary and are based on State Dept...
...The IDB has one more loan for Chile on its schedule this year...
...It seems likely that Chile will continue to receive loans from the IDB and from the IMF, but bilateral aid will become less significant...
Vol. 10 • December 1976 • No. 10
