Chapter 2

2.5 THE HARD-LINERS

However, the Academy of War and SIM "eggheads" who became the
"intellectual leaders" of the armed forces' conduct during the
Allende administration did not comprise the majority of senior
officers. Their power rested less in their numbers than in
their close contact with the Pentagon and their access to
information being prepared under the aegis of the American University
in Washington, which had various contacts with the Pentagon. Since
late 1970 this contact had permitted the composition of a kind of
aide-memoire with respect to the main lines of the Unidad Popular
government's program, which served to draw the different political
views of the senior officers together around a "line of conduct",
the nature of which had been sketched on the previous pages. The main
points of the aide-memoire were:

1. The armed forces consider it "correct" that the basic wealth of
the country should be in the hands of the Chilean state, because that
strengthens the national economy and thereby the capability of the
armed forces to equip themselves properly.

(This philosophy reached its apex in July 1972, when General Carlos
Prats was charged by his corps of generals to tell Allende that "the
administration of the nationalized copper companies ought to be
mainly in the hands of military technicians, since it is a strategic
industry," and that "a study ought to be made leading to autonomous
financing of the armed forces out of profits from copper sales,"
which, in fact, meant that the Chilean military would become an entity
on the fringes of Parliament for its own financing, a power within
another power. Allende, at that time, found "the idea reasonable",
but apparently did not have time to return to the topic before his
overthrow.)

2. The Armed Forces support the nationalization of the copper mines,
but at the same time they believe that "the North American companies
who are exploiting them should be paid reasonable indemnities."

(Salvador Allende, on November 4, 1971, emphasized this in his first
anniversary speech. The mines had been nationalized in July of that
year, and "military pressure" for "compensation to Anaconda and
Kennecott" was very strong. Allende said: "Here are four numbers the
people should remember. These companies invested the sum of $30
million. In fifty years, they have taken out $4.5 billion. If the
Special Court does not decide against it, two companies will be
compensated, and if the Special Court does not decide otherwise, we
will not compensate Anaconda, or Kennecott, or El Salvador, but the
debts of those companies are $736 million and it is logically
foreseeable that we will have to assume those debts. Thus, WE WILL BE
PAYING AN INDIRECT INDEMNITY of $736 million to the copper companies
who over a period of fifty years took out $4.5 billion." This argument
served to lower military pressure on the subject. It had, in any case,
forced Chile's foreign debt upward, in one stroke, from over $3
billion to over $4 billion, and made the Chilean economy even more
dependent on North American, and even European, foreign aid.)

3. The armed forces believe in the need for an agrarian reform to
permit the capitalist development of rural areas and liquidate part
of the LATIFUNDISTAS' power over Chilean society. This reform will
serve to support the industrialization of the country, as a new
market and as a producer of industrial raw material.

(This thesis, cribbed from the Alliance for Progress created by the
assassinated John F. Kennedy, had already provoked the ire of the
LATIFUNDISTAS against Eduardo Frei's agricultural policy and was
producing an angry new campaign by their organizations against the
Chilean generals, whom they called "chickens" for allowing Allende
to run the country.)

4. The armed forces believe it to be "just" that the credit
institutions (banks) should be controlled by or be in the hands of
the Chilean state, to better "regulate" the "democratic national
growth" of the country, which historically had been obstructed by the
personal interests of some powerful groups in the private oligopolies.
The latter's "recalcitrant" attitude is a threat to "the stability of
the entire economic and social structure" of Chilean society.

5. The armed forces believe that the U.S. banking, industrial, and
commercial cartels("the most advanced and efficient in the world")
SHOULD PARTICIPATE, under a "clear and exact regulation that protects
our national sovereignty," in the industrial development of Chile,
because "without the capital and technology of the United States, WE
WILL NOT BE ABLE TO BECOME A DEVELOPED COUNTRY."

(In May 1971, at the Lima meeting of the board of governors of the
Interamerican Development Bank, the Chilean Treasury Minister, Americo
Zorrilla, a member of the Political Commission of the Chilean 
Communist party, stated the same thesis: "In the picture of the
Chilean revolutionary process, external financing as well as
investment of foreign capital plays a role...oriented toward the
priorities indicated by the necessities of our economy...")

The Chilean military thesis as well as the then Treasury Minister's
had a kinship with Nelson Rockefeller's 1969 Latin-American report:
"The time has arrived for the United States to move consciously from
a paternalistic role to one of partnership" with the Latin Americans,
in which "foreign private investment can provide essential technical
knowledge and capital." 24

6. The armed forces believe that all change must take place within
"our institutional system, in consideration of the democratic way of
government and in solidarity with the Western bloc of nations."

From these points put forth by the "eggheads" (whom we shall
henceforth refer to as the "reformist generals," to distinguish them
from other groups of generals whom we will define shortly), the
senior officers derived a consistent criterion to deal with the Unidad
Popular phenomenon. On these same points, President Allende and part
of the Unidad Popular leadership made a kind of entente cordial with
the armed forces, and the latter in turn influenced the Christian
Democratic and National parties' leadership. Even the private
oligopolistic associations such as the Society for Industrial
Development (SOFOFA -Sociedad de Fomento Fabril) and the National
Agriculture Society (Sociedad Nacional de Agricultura) accepted the
criterion of "wait and see" proposed by the "reformist" generals and
the Pentagon, under the general slogan "Allende can help us put out
the fire."

An incident in August 1971 shows how the Unidad Popular government,
its program reduced to what the military and the U.S. Pentagon wanted,
had the conditional support even of its political enemies. Eximbank,
a U.S. government agency, bowing to pressure from Anaconda and
Kennecott, refused a credit of $21 million to Chile for the purchase
of Boeing passenger planes for the National Airline (LAN -Linea Aerea
Nacional), in order to "pressure for indemnification for the copper
industry."

The reactionary EL MERCURIO commented on August 17: "This North
American political manoeuvre endangers inter-American relations and
constitute a repetition of old, historical errors."

The National party, which promoted the interests of the agricultural,
industrial, and commercial oligopolies of Chile, had released a
declaration of irate protest the day before: "Attitudes and statements
such as the ones we refer to serve only to obstruct international
relations and to impede the solution of our problems... They show
a lamentable lack of judgement and an ignorance of the Chilean
reality."

But it was LA PRENSA, the daily newspaper of the Christian Democrats,
directed by Eduardo Frei's group, which most clearly defined the
problem, in an editorial on August 16, 1971:

"The apparently responsible decision of Eximbank's president has all
the crudeness of a provocation... The American government appears
once again, and prematurely, to have identified with private
interests, forgetting a superior political interest... In our
country's government, for the moment at least, two tendencies coexist.
One sector wishes to conduct the Chilean revolution inside the
boundaries of the Constitution, without violence on the internal
plane and without creating and international crisis. Another sector
wishes to provoke a violent rupture which, necessarily, will project
itself onto the international plane. It is these people who demand
or announce unilaterally that the expropriated industries should
not be indemnified... Eximbank has begun to play up to this viewpoint,
which wants nothing more than to provoke just such reactions... On few
occasions, if any, HAS A NATIONALIZATION IN LATIN AMERICA OPERATED
WITH MORE LEGALITY -and even constitutionally- OR WITH MORE GUARANTEES
FOR THE NORTH AMERICAN ENTERPRISES AFFECTED".
The political representatives of Chile's agricultural oligopoly
(already decaying after Frei instituted agrarian reform in 1967) and
the commercial, financial, and industrial oligopolies knew whereof
they spoke when they reproached the Nixon administration in August
1971 for having let itself be influenced by Anaconda and Kennecott
lobbying. Even the industrial oligopoly's association, the Society 
for Industrial Development, on the same day, August 16, addressed
an irate letter to the president of Eximbank in which they explained
that "Chile is living through a process of profound economic and
social transformation that is radically affecting our economic
structure and, as a consequence, the situation of our industrialists.
Therefore, our institution of trade guilds -the oldest in the
Americas- finds itself pledged to MINIMIZING THE ECONOMIC COST OF
THE TRANSFORMATIONS WE ARE EXPERIENCING and to fully guaranteeing
that the economy develop within a framework of freedom and democracy
and with full respect for the fundamental guarantees...." For this
reason, in the face of Eximbank's refusal of credit, "as private
industrialists and above all out of respect for our noble democratic
tradition, we cannot accept their subjection to resolutions of this
nature, conditioning them to decisions which our government might
adopt in the lawful regime which has democratically been installed
in our country." The Society for Industrial Development went on to
urge Eximbank to reverse the deferral of the loan to LAN-Chile.
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[24] THE ROCKEFELLER REPORT ON THE AMERICAS, New York Times Edition,
Quadrangle Books, 1969, pp. 66, 70.
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