The Mad Method

When shrewd, peppery President Gabriel Gonzalez Videla made up his mind last month that Chile must devalue the peso, he knew he would have to blitz his country into going along with him. He promptly set out on a fire-eating tour of the country, in which he made faces at all his political enemies--and scarcely mentioned the peso.

He dedicated buildings, inaugurated cattle shows, addressed miners' rallies. Wherever he went he told his audiences that the atmosphere in Santiago was enough to choke him, that he had fled to the provinces to collect support against the vile politicos plotting his overthrow. Flying to Copiapo to visit a copper smelter, he said: "I must be a gypsy traveling from town to town! They are plotting against me." At a banquet of Talca farmers he cried: "I haven't come in a peaceful mood but in one of war. I will kill or be killed!"

Turning on the Motors. After a month of such stumping, Gonzalez' coalition of Radicals, Liberals and Conservatives was properly aroused and ready to slap down the plotters whoever they might be. Leaders of the three parties answered his call for a conference. Affable and confident, his dignity regained, Gonzalez now talked not of plots but of the peso. He wanted everybody's help, he explained, on a plan to save Chile's world markets by revaluing the peso and at the same time keep living costs down by clapping on new taxes and controls.

Leaving the politicians to work out details with his ministers of finance and economy, the president flew to Vina del Mar for a weekend of swimming, tennis, and Brahms recordings at the summer palace. Then, starting the engines of his cinnamon-colored DC-3 himself, he flew back to Santiago.

"Well, gentlemen, have you reached an agreement?" he asked as he walked into the palace conference room. When, the answer was not definite enough, the President himself went to work. Next day the plan was ready, and party chiefs signed the paper.

Riding Out the Rise. At week's end Gonzalez made devaluation law by decree. Instead of the eight old dollar-peso exchange rates, Chile got just one, pegged, after talks with the International Monetary Fund, at about 65 to the dollar. At the same time, food and drug products and bus fares got state subsidies, while income taxes were hiked and new taxes levied on horse-race betting, cigarettes, soft drinks and automobiles. And for the first time, tax-dodgers were made liable to imprisonment.

No one knew better than Gonzalez how painful economic reforms could be. Four months ago students, protesting over an increase in bus fares, set off a bloody riot in Santiago. But his whirlwind stump tour had won Gonzalez enough political support to put over the plan. Now his problem would be to hold down prices firmly enough for the plan to work.

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