1939: Chile

The first anniversary of the election of the Popular Front Government of President Aguirre Cerda was celebrated on Oct. 25. On that occasion leaders of the Socialist, Communist and other Leftist Parties confirmed their support of the President. During the course of the year political opposition has not been lacking, however. A Conservative plot against the Government was uncovered in July, and arrests were made of many former police and army officers and civilians, who were disgruntled at the sweeping dismissal of officials at the outset of the new régime. On Aug. 25 the Government easily suppressed a military revolt in which General Carlos lbanez, former president and head of the reorganized Nacista Party, was implicated. A state of siege for a month was then decreed. Rightist strength in both houses of the Legislature, where the conservative parties have a majority, is a source of worry to the President and impedes the progress of the reform program of the Popular Front Government.

Emergency Caused by Earthquake.

On Jan. 24, a terrific earthquake demolished the city of Concepcion; Chillan, a city of 50,000; and 5 other cities and 5 towns. Devastating an estimated 40,000 sq. mi., it cost 30,000 lives and a property damage of $50,000,000. This earthquake created an emergency situation. Sharp disagreement developed between the opposing coalitions over the loan bill to raise 2,500,000,000 pesos, half again as large as the normal annual budget, for reconstruction and relief. The Rightists approved 1,000,000,000 for earthquake reconstruction but opposed the second part of the proposed measure calling for an appropriation to increase national production. The bill, authorizing the full amount and for both purposes, was passed in April, however. The Government was empowered to borrow from funds derived from profits on nitrate sales and copper exports, which are earmarked for service of the foreign debt. Foreign and internal loans were also authorized, a further point of disagreement between the Right and Left groups, the former being opposed to capital borrowings from the United States for the purposes of this bill. Two Government corporations were created to carry out the two general provisions of the bill. If the money should not be raised, in part at least, from foreign loans, very heavy taxes would be required constituting a drain on the nation's resources and on income largely in the hands of the wealthy class, which is opposed to the Popular Front. This would further cripple the Government's social program. In July, President Aguirre reported offers of capital from abroad, both for reconstruction and for intensification of production.

Economic Questions.

The reform program was outlined in the President's opening message to Congress on May 21. Chile is a country without a middle class. Extremes of wealth and poverty are great. Until last December the landowning aristocracy had been in control. The new Popular Front Government's primary concern, therefore, is with improving the status of the hitherto submerged working classes. To this end steps have been taken to lower living costs by fixing food prices, to cancel pawn pledges and return all pawned tools and machines, and to construct cheap workingmen's homes. Public education is to be brought within the reach of the poor by the abolition of enrollment fees and by the provision of clothing for destitute children, 41 per cent of whom are said to be inadequately clothed. Changes in the direction of reorganizing the educational system include the institution of a nation-wide program of free adult education, the elimination of religious influence in the schools, and curricular modifications reducing the emphasis on the professions and increasing instruction along industrial and commercial lines.

Plans for basic changes in the national economy include an attack on the semifeudal system of land tenure and measures towards greatly increased industrialization. Although no steps such as Mexico has taken towards land division have been adopted, decrees of the previous administration granting land concessions in the Territory of Magellanes, in southern Chile, have been annulled as socially unjustifiable. Moreover, the colonization of useful federal lands is contemplated, and plans for the expenditure of 80,000,000 pesos for that purpose were reported early in the year. The first Congress of Chilean Peasants, meeting in Santiago in May, announced plans for the placing with Government help of 40,000 families, organized in collective agricultural colonies. Such undertakings as these have had to yield place to earthquake reconstruction, however, although an immediate plan for the support of Chilean agriculture, calling for an expenditure of 89,000,000 pesos, was announced in September.

The inclusion in the reconstruction bill of authorization to pursue an intensified program of national production points to the second basic feature of the Popular Front policies, i.e., industrialization. The first step in this direction is hydroelectric development to supply cheap power to the nation's industries, and this is the major provision of the five-year plan announced in September by the State corporation to promote national economic development. By expanding the country's industries a great reduction in the volume of imports is hoped for. The movement towards economic self-sufficiency is intense, but whether Chile can industrialize successfully on a large scale depends in part on the elevation of the extremely low purchasing power of the masses. That no aggressive action towards North American or other foreign capital is intended has been stated and confirmed in a number of official pronouncements, although the announcement of the establishment of a Government monopoly on the sale and distribution of petroleum, which would force the Standard Oil Company of New Jersey and the Royal Dutch-Shell to liquidate properties valued at about $9,000,000 immediately, seemed like a contradiction of this policy. Chile under the Aguirre administration has not been without its labor difficulties. According to a Government report, up to Oct. 31 there have been 536 industrial conflicts affecting 118,427 workers, most of them concerned with wage demands. Settlement without strike was accomplished in 348 of them. Wage increases obtained have ranged from 5 to 80 per cent, and have totalled 91,140,000 pesos. The largest textile mill in the country, in November, announced its closing because of labor troubles.

Trade Treaties.

An intention to negotiate a reciprocal trade treaty with Chile was announced by United States Secretary Hull on Oct. 2. Hearings on the proposed agreement were completed Nov. 28. It is not generally believed that the breakdown in negotiations for the treaties with Argentina and Uruguay will affect the Chilean treaty. Violent protests to the proposed pact from United States western mining states, opposing any reduction in the 4-cent a pound excise tax on copper, were so effective that the United States Department of State announced on Dec. 21 that there would be no tariff concession on Chilean copper and copper products. This is the first time such an announcement has ever been made prior to the conclusion of a trade pact, and may be designed to avert some of the opposition to the renewal of the trade agreements program, which expires in June 1940 (see VENEZUELA). The great decline in Chilean-American trade was indicated by Secretary Hull when he pointed out that in 1919 the United States sold Chile products valued at $55,776,000 and purchased $102,025,000 worth from that country, whereas, in 1938, the export and import figures had dropped to $24,603,000 and $28,592,000 respectively.

Finance.

At the same time that the trade pact proposal was announced the Export-Import Bank completed arrangements for advancing $5,000,000 to Chile to facilitate commercial transactions and to develop production. The Finance Minister pointed out that the loan was needed only because of a shortage of foreign exchange, and that there was peso revenue sufficient to finance all plans for reconstruction and intensified production. He announced a balanced budget at the end of the fiscal year, without suspending foreign debt service or contracting new loans abroad. Budget estimates for the coming year are not much larger than those for the present year. The good condition of the national finances caused a favorable impression among the Rightist opposition groups as well as among the Popular Front elements. The allotment of over 100,000,000 pesos for new schools, waterworks and housing in the area devastated by the earthquake and other large sums invested in roads were indicated in the annual report of the Ministry of Hacienda.

As of June 1939, the holders of 55.2 per cent of the total amount outstanding of the Chilean external debt had assented to the Republic's debt plan of 1935, by which the Government may use 50 per cent of the funds set aside for the debt for repatriation through purchase in the open market. The Foreign Bondholders' Protective Council, in August, reported its criticism of this plan unchanged, although it no longer felt it must recommend against acceptance of the offer. Receipts for 1938, available for debt service, were reported on Dec. 30 as $14,135,573, compared with $6,106,751 in 1937. Of this figure $2,747,242 was derived from the Government's participation in the profits of the Nitrate and Iodine Sales Corporation. At the close of 1938 the total external debt was about $390,000,000, including about $43,000,000 of short-term loans. It is still regarded as burdensome in spite of considerable reduction through repatriation.

Politics.

The first definite step by the Government towards checking German Nazi activities in Chile was the closing of foreign educational establishments, aimed at the German schools in the southern provinces. The expulsion of all foreigners considered to be associating themselves with local politics led to deportation orders against both a German accused of trying to create race conflict by the distribution of over 100,000 anti-Jewish pamphlets and a Briton for the distribution of leaflets attacking Hitler and recommending a boycott of German commercial concerns. The reorganization of the indigenous Nacista Party as the Popular Socialist Vanguard was an attempt to establish it as free from association with Hitler and the Third Reich.