1938: Chile

Presidential Elections.

The Chilean presidential election of Oct. 25 had unusual significance among Latin-American shifts in power, as the forces pitted against each other represented real differences in basic social philosophy. The principal candidates were Gustavo Ross. Minister of Finance, representing the Rightists, and Pedro Aguirre Cerda, a prominent Radical and leader of the Popular Front, a coalition of left-wing groups. Other Leftist groups, together with the Nazi party, backed General Carlos lbáñez, a former president, whose administration was popularly associated with an elaborate public works program to which the world depression had called a halt. Sr. Aguirre Cerda won the election and was formally inaugurated as president on Dec. 24. A charge from the Rightists that the violent attitude of Aguirre's supporters had hampered free voting led to an investigation of the returns by an examination committee, whose report was to be issued Nov. 24. A reappraisal of the election returns reduced President-elect Aguirre's majority from 7,000 to 4,000, and later to 800 in a total vote of nearly 500,000. Twelve days before the court decision on the election was to have been announced the defeated candidate, Gustavo Ross, called for an end of the recount and left the country. General Ibáñez was arrested after the Nazi revolt in September, which put an end to his candidacy, although he was later exonerated. One group which supported the General until his arrest, the Popular Liberating Alliance, then switched to the Popular Front, and is now disgruntled because its shift of allegiance has not been rewarded by representation in the first Aguirre Cabinet. This is the first time in the history of the American republics that a Popular Front has taken part in a national election. The mainstay of the Chilean Popular Front is the Radical party, a moderate political group, but it includes as well Socialists, Communists and Nazis.

The short-lived but sanguinary revolt of Sept. 5 was a symptom of the tension caused by the bitter presidential campaign. It was led by the Nacistas, an indigenous Nazi group which claims a membership of over 30,000 armed men. Its leader is Deputy Jorge Gonzalez von Marée, who was sentenced to twenty years imprisonment for his complicity in the revolt. Other leaders received sentences of from ten to twenty years imprisonment or deportation for from five to twelve years. Martial law for four months was decreed following the suppression of the uprising. The Nacistas are strongly nationalistic and favor a totalitarian form of government for Chile, but they are not anti-racial and probably have very little, if any, support from Europe. Special Nazi organizations control the German element of the population, which is fairly large, especially in south Chile. At the last municipal elections the Nacistas polled 13,000 votes, an all-time high for this political group, and they have been able to elect two deputies to the National Chamber of Deputies. Sr. Gonzalez von Marée had created a political disturbance in May, at the opening of the Congress, and was in prison, serving a sentence of one and a half years, at the time of the election. Further disorder was feared in December on the arrival of the Spanish Loyalist leader, Sr. Indalecio Prieto, for the inauguration, since his visit had the outspoken disapproval of the Rightists. In view of the bitterly contested election, conservative reaction seemed inevitable, if not imminent. Whether it will be precipitated, as in Spain, by internal dissension among the Leftists — Prieto, since his arrival, has warned of this — or by dissatisfaction with the policies of the Aguirre government, remains to be seen. Although the Nazis are represented in the Popular Front, it is unquestionably dominated by its Leftist contingents. It has been outspoken in its condemnation of Germany's anti-Jewish activities and, through local committees, has called on all democratic forces in Chile to support it in order to avoid the spread of Fascist tendencies. In general, its victory promises to strengthen Left-wing forces and to weaken totalitarianism in Chile.

Economic Situation.

Some doubt is felt as to the course the new government will follow in its economic policies, especially with respect to foreign capital. The day after his election President Aguirre announced a policy of 'ample protection' to foreign investment. On the other hand, in a statement published in Mercurio, Santiago's leading newspaper, shortly before the election; he said:

'Times have been changing, and there is need of carefully revising the privileges obtained by foreign capital in other days. . . . If it threatens to leave the country, let it! — and the sooner the better! but I do not think that foreign capital invested in concerns extracting products from our soil, especially North American capital, will prove to be stupid and fail to appreciate the times in which we live.

'If it wishes to continue doing business, it must yield wherever yielding is just. No more privileges! — or, if there are to be any, they must be for Chileans. Foreigners engaged in the above-mentioned lines must understand clearly that it is no longer sufficient that they should pay us salaries and a certain degree of tribute.

'No! We wish to share the wealth which, up to now, they have taken away. Moreover, did not President Roosevelt say a very short time ago that North American capital did not behave well in these countries of ours, and that the time had passed forever when, behind each dollar, well or badly acquired, there were warships and cannon?'

Even granting that this might be merely campaign talk, it is the expression of an anti-imperialist attitude which, following the expropriation policies of Mexico, makes foreign capital very uneasy. In Chile, North American investors have a stake of about $750,000,000, second in size only, in Latin America, to the investment of United States citizens in Cuba. This sum is principally invested in copper and nitrates. The anxiety of these interests was intensified by Chile's proposal at the Lima Conference (see PERU) for the adoption of a principle of no special recourse for foreign investors in cases of expropriation or confiscation. Yet President Aguirte has declared his government opposed to nationalization or socialization of the country's great industries, although it would like to encourage the development of medium-sized industries by Chilean capital so far as possible. It has also announced that if encouragement to the small farmer, through government credit agencies, calls for the division of large but economically inefficient properties, this will be done, with compensation. The education of the masses is an important objective of the new president, who was at one time Minister of Education.

Foreign Trade.

On Jan. 6 a provisional trade pact with the United States was concluded, and in May negotiations were renewed for a new commercial treaty with Great Britain, of the most-favored-nation type, to replace the modus vivendi which expired June 30. But here, as elsewhere in Latin America, Germany has found a profitable area of trade expansion through its system of payment in compensated marks. In November it was announced that the commercial agreement with the Reich would be prolonged for another six months, in spite of the opposition of the Popular Front, which has complained of the large purchases from the totalitarian countries. The high foreign trade figures for 1937, when exports rose 68 per cent in value as compared with 1936, tended to level off in the opening months of this year. In 1937 the United States led in both the import and export trade, displacing Germany as principal supplier of imports. Great Britain ranked second as customer for Chile's exports, and Germany third. This increase in foreign trade reflected a period of great economic activity during 1937, but a general price decline towards its end, affecting chiefly the copper industry, made the outlook for 1938 not so favorable. Copper production in 1937 was the highest ever registered in Chile. (See also WORLD ECONOMICS.)

Finance.

The budget for 1938 provided expenditures totaling 1,620,900,000 pesos, receipts to the amount of 1,622,000,000 pesos. The budgetary surplus carried over from 1936 to 1937 of about 86,000,000 pesos was reduced almost one-half, so that, as of Dec. 31, 1937, there was a carry-over of about 44,000,000 pesos. By decree of May 17, 1938 an official interpretation was rendered of the law of January 1935, setting forth the plan for partial resumption of service on the external debt, which, up to this time, the Foreign Bondholders' Protective Council had been unwilling to accept. The external dollar debt outstanding on Dec. 31, 1937 amounted to $216,070,000. After the 1938 retirements it will be about $182,000,000. Since the 1935 plan was put into effect the dollar debt has been reduced by about 30 per cent. Receipts in 1938 available for debt service amounted to $14.135,573,50 per cent to go for interest payments, the balance for retirement. These were derived principally from taxes on the profits of copper enterprises and from the Government's participation in the profits of the Chilean Nitrate and Iodine Sales Corporation.