Chile Starts Chasing the Capitalists

NOT long ago, pessimists were warning that if Salvador Allende Gossens became President of Chile, there would be civil war. Three months after the surgeon-turned-Socialist was elected, a civil war of sorts is being waged in Chile--but it is among Allende's own advisers. North American businessmen, who have invested as much as $1 billion in Chile, have dubbed the conflict a war between the Machiavellians and the Gradualists. The Machiavellians want a blitzkrieg nationalization of foreign economic interests; the Gradualists also want nationalization, but only a step at a time.

Last week, in a victory for the Machiavellians, Allende submitted to Congress a constitutional amendment that would nationalize the country's mining industry. The prime targets of the amendment, which is almost certain to be adopted in the next three or four months, are the three American firms that control copper mining. Anaconda, Kennecott and Cerro together have investments of $617 million tied up in Chilean copper. Allende's move was the latest in a recent series of major expropriation steps in Latin America. In September, Argentina nationalized its telephone and telegraph industry. In October, Bolivia announced that it plans to seize all foreign holdings.

Though the Machiavellians won the latest battle in Chile, there was some comfort for the Gradualists. Banks and insurance companies, which Allende earlier had promised would be nationalized right along with the mines, were given a reprieve until a government commission can come up with a takeover plan.

"Temporary" Takeovers. Last week's developments marked an ominous change of tone in Chile. During Allende's first several weeks in office, the Gradualists seemed to be on top. Teams of Allende officials circulated through the business community, spreading reassurances that no precipitous moves were planned. In November, however, Allende announced the "temporary" takeover of a hardware manufacturer that is partly owned by Northern Indiana Brass, as well as a feed company that is a subsidiary of Ralston Purina. The seizures were accomplished under a 1945 labor law that allows government intervention to prevent a plant from closing. The hardware company had shut its doors when credit tightened and home construction slowed after Allende's election. The feed company had laid off ten workers at its broiler farm after disease twice decimated the chickens. Allende used a similar 1953 law to expropriate the country's largest textile factory, charging that it suffered from bad management. Foreign investors were worried that the musty laws would become standard vehicles for quick takeovers, bypassing compensation requirements.

In the case of mining, Allende felt that he needed a constitutional amendment. The "Chileanization" laws that were pushed through by his predecessor, Eduardo Frei, gave the government a 51% share in the copper mines, with options to buy the remaining 49%. There were two stipulations: in some cases the options had to be paid for in cash, not long-term government bonds, and could not be exercised if the mineowners objected. The amendment sweeps away such obstacles. Under it, the government could act unilaterally, and compensation would be whatever

Allende chose. Payment would probably be spread out over 30 years in annual installments.

Strikes and Students. Foreign businessmen concede that Allende is moving faster toward Socialism than they had first feared. Allende, on the other hand, may worry that he is not moving fast enough. Aroused by his hellfire-and-brimstone campaign promises to take away Chile's wealth from monopoly capitalists and give it back to the people, the people are growing restive. Wildcat strikes have erupted all over the country, and squatters have seized 4,250 new apartments in Santiago alone. Street fighting between leftists and extreme leftists has broken out in several cities. Throughout the country, bands of radical students and workers have been marching through the streets to demand faster government action against foreign interests.

New investment from abroad has dried up, but some companies are going ahead with ambitious capital projects. Dow Chemical is building a $25 million plastics plant and Bethlehem Steel is completing a $25 million expansion of its iron-mining operation. So far, none of the more than 150 U.S. firms in Chile have given up and left. Though expropriation of most, if not all of them, seems only a matter of time, none are willing to antagonize Allende unnecessarily before knowing just when or where he will strike next. As long as there are Gradualists in his inner policy circles, there could be some more years of profits left for foreign investors in Chile.

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