Reaching a Dangerous Point

By Kenneth W. Banta

As Pinochet fumbles, a faltering economy provokes violence

It was a daring show of defiance, but as 600 workers and students paraded through downtown Santiago in an illegal protest last week, the 200 uniformed policemen lounging on the sidelines made no move to stop them. Suddenly, from within the crowd of protesters, agitators lashed out, clubbing and punching the marchers. Angry demonstrators retaliated, hurling rocks at the police. Within an hour, the rioting spread throughout the center of the city. It took two hours for the police, equipped with tear gas and truncheons, to regain control. The toll: 72 injured and 76 arrested.

Until recently such an open challenge to the stern regime of General Augusto Pinochet Ugarte would have been unthinkable. A notoriously repressive dictator, Pinochet has regularly silenced his opposition with torture, killings and exile. In the 9 1/2 years since he took power in the bloody coup that overthrew Marxist President Salvador Allende Gossens, Pinochet has also maintained control by bringing remarkable prosperity to the Andean nation. But Chile's economic miracle may have run its course. After a booming 7.3% average yearly expansion of the economy from 1977 to 1981, Chile suffered a catastrophic 13% negative growth rate in 1982. As a result, Pinochet's regime is threatened by unrest over unemployment and an inflation rate exceeding 30%.

This week Chile's largest union, the 27,000-member National Conference of Copper Workers, will mark its discontent with an illegal 24-hour national strike. With unprecedented boldness, the union denounced the government's "weapons of fear and repression." Said President Rodolfo Seguel: "We are heading toward a dangerous point where the Chilean worker will not see any worse alternative to his present situation." Even the general's supporters fear that he has no answer. Says a former minister: "The country is in greater danger than when the Marxists were in power."

The current troubles represent a severe setback for Pinochet's attempt to make his country a laboratory for the monetarist economic theories espoused by University of Chicago Nobel Laureate Milton Friedman. Guided by advisers known as the "Chicago boys," Pinochet revamped economic policy, which under Allende had led to 600% inflation and riots over food shortages. He sold 400 ailing state-owned companies, ended price controls and most state subsidies, and encouraged foreign trade by slashing import tariffs from almost 100% to an average of 10%. The resulting economic boom encouraged most Chileans to overlook Pinochet's repressive campaigns against leftists, in which as many as 10,000 were killed and up to 150,000 were jailed. In 1980 Chilean voters approved by 67% a new constitution that allowed Pinochet to stay in power until 1989, and quite possibly longer.

But Chile's economic planners began to make costly mistakes. In 1979, in an attempt to curb inflation, they pegged the peso at an artificially high rate against the dollar. That caused interest rates and imports to rise, while exports fell. Meanwhile, as recession took hold worldwide, the price of copper fell from a peak February 1980 price of $1.33 per Ib. to 71-c- last year. Chile compounded its economic difficulties by borrowing heavily abroad at high interest rates. On a per capita basis, its current foreign debt of $18 billion is now greater than that of Mexico.

The effects have struck with bewildering speed. In the past year, the country's banks have become virtually insolvent. Official unemployment figures have doubled to 21%. In Santiago, until recently an orderly and well-heeled city, evidence of poverty abounds. Police with dogs conduct periodic sweeps to scatter women hawking everything from garden tools to kitchen soap on downtown sidewalks. In urban slums, groups of unemployed have banded together to run their own comedores, or communal soup kitchens.

Chileans, who have learned in the past decade to keep their views to themselves, are becoming increasingly willing to vent their resentment. In March, five opposition parties, which are technically outlawed and have long remained silent, issued a collective declaration demanding "total democracy" through free elections.

Yet Pinochet seems unable to resolve the crisis. He has changed finance ministers four times in the past year and has reversed his economic policy by restoring extensive government control over the economy. Under the current Finance Minister, Carlos Caceres, the government has pledged to refinance 30% of the debt of Chilean firms while doubling duties on imports.

Pinochet has responded to the criticism of his policies by cracking down on dissent. The independent Chilean Human Rights Commission documents 1,789 political arrests last year, nearly triple the figure for 1981, while reports of torture have almost doubled. The regime has alienated the Catholic Church hierarchy by expelling three foreign priests for operating a "politically oriented" soup kitchen. Last week Pinochet warned strikers that they "will have to accept the consequences of such acts."

Dismayed by Pinochet's erratic policies and fearful that his continued rule will spark a wave of violence, many businessmen, who until now have been among the general's staunchest allies, privately hope for his departure. Says a prominent lawyer: "No transition to democracy is possible with Pinochet. Prolonging the present regime is radicalizing the society." Yet as long as Pinochet's strength rests with the unswervingly loyal military, most of whose leaders he appointed, the chances for an orderly return to democracy are slim. --By Kenneth W. Banta. Reported by Gavin Scott/Santiago

With reporting by Gavin Scott/Santiago This file is automatically generated by a robot program, so viewer discretion is required.