29. Telegram 746 from Santiago, March 81
Priority. For Hamilton and Woodward. From Moscoso and Goodwin.
Following is text of agreement worked out with Chilean cabinet and which will be presented to Alessandri tonight.
1. The Government of the United States undertakes to extend to Chile loans up to $80 million for high priority economic and social development projects. The loans will be made available to Chile by the Agency for International Development (AID) and the Export-Import Bank. The loans will be available, subject to prior approval of each project in 1962 with no more than $40 million being made available before September 10.
2. The Government of Chile, for the achievement of its program of stabilization recognizes the need of reaching an agreement with the IMF which will permit it to draw at that time on standby credits from this Agency, simultaneously establishing the conditions under which other agencies or countries may be disposed to participate in the formation of the consortium destined to complete the financing of the external resources necessary for the public sector of the National Development Plan. The stabilization agreement will be concluded no later than September 10, 1962.
3. The Government of the United States also undertakes to participate in a consortium of international lending agencies [Facsimile Page 2] and national governments which is to be constituted for the purpose of making long-term loan commitments to help finance specific projects approved pursuant to Chile’s long-term development plan, after approval of such a plan by the nine-man panel of experts of the OAS which we understand will be finished by July 1962. For that purpose, the Government of the United States undertakes to make loan commitments of approximately [Typeset Page 69] $350 million to help finance the first five years of the public sector of Chile ten-year development plan subject to the following conditions:
That the loan commitments made by the United States Government for specific projects in the public sector in any year shall not exceed 50 percent of the sum of the loan commitments for projects in the public sector made in that year by all members of the consortium including the United States;
That the long-term loan commitments by the Government of the United States shall be contingent upon annual review by the panel of experts of the OAS for determination as to whether the Government of Chile is implementing its development plan satisfactorily and carrying forward with sufficient speed the necessary social and structural reforms. The Government of the United States will be relieved of its obligation to extend loans for specific development projects pursuant to this understanding whenever the Government of the United States determines, on the basis of this annual review, that the Government of Chile is not implementing its development plan, including its stabilization program, or is not carrying forward adequately its necessary social and structural reforms within the spirit and concept of the Alliance for Progress. The considerations which will be taken into account for this purpose by the Government of the United States will include the following:
[Facsimile Page 3]A. Whether the Government of Chile has enacted necessary tax reform legislation and has taken the necessary administrative measures to attain the level of tax revenues necessary for the financing by the Government of Chile of at least 80 percent of the total costs of the public sector development projects being implemented as estimated in Chile’s ten-year plan submitted to the panel of experts of the OAS, and to improve adequately the equity with which the tax burden is distributed among the different income groups of Chile.
(B) Whether the Government of Chile has enacted necessary agrarian reform legislation and has vigorously implemented that legislation. This would include the question, in particular, of whether a land tax has been enacted and has been so enforced as to encourage better land utilization and/or the voluntary sale of land by the owners of large tracts whenever they find that the possession of large holdings does not offer significant productive advantages.
4. It is understood that the loan commitments by the United States Government for future fiscal years are subject to Congressional appropriation of the funds required and Congressional approval of the necessary commitment authority.
- Text of agreement worked out with Chilean cabinet re U.S. loans to Chile. Confidential. 3 pp. Kennedy Library, National Security Files, Countries Series, Chile, January–June, 1962.↩