Abstract
In a broadcast to the nation on 30 December 1970, the President of the Republic of Chile, Dr. Salvador Allende, announced the decision to nationalize the Chilean banking system. This decision, an important aspect of the UP Government’s policy, in fact constituted one of the basic elements in the strategy of the left-wing Government, along with the nationalization of copper mining, the creation of an Area de Propiedad Social (APS) [Area of Social Property], the acceleration of agrarian reform and the nationalization of foreign trade.
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Notes
CORFO was established in 1940 to promote the country’s development. The broad scope and legal powers which its charter gave it allowed the UP Government to assign to it the task of purchasing companies in the private sector in order to incorporate them into the APS.
Concerned with coordinating and executing the Government’s housing plans, CORVI was authorized by law to receive the payments which were due from all those who subscribed to the plan for housing construction. Funds received by CORVI in this way were deposited in a special account in the State Bank.
See Ricardo Lagos, Industria en Chile. Antecedentes estructurales [Industry in Chile. Structural Antecedents] (Santiago de Chile, Instituto de Económica, Universidad de Chile, 1966).
The increase in the international copper price was interpreted as an appreciable increment of foreign exchange income and of the Central Bank’s international reserves.
Credits were obtainable on terms which fluctuated between six and twelve months renewability.
See the Statistical Appendix following Chapter 2, Tables XIV and XVI.
Quoted from a speech which President Allende made on 30 December 1970 to announce state control of the banking system. The figures correspond to regular statistics prepared by the SB.
These figures are from Eduardo Trabucco, Chile and the Principal Problems of Short Term Finance During the Period 1970/73 (Bonn, Friedrich Ebert Foundation, 1974).
It should be realized that this plan was part of a vast and complex conspiracy, designed to prevent President Allende from taking office, which has been fully corroborated and of which there is wide knowledge. See the report of the U.S. Senate Committee chaired by Senator Church, which is entitled Covert Action in Chile 1963–73. Staff Report of the Select Committee to Study Governmental Operations with Respect to Intelligence Activities (Washington D.C., United States Senate, The U.S. Government Printing Office, 1975).
The exchange rate in the (official) brokers’ market during this period was E °14 to the dollar, that is to say, the amount to be paid in cash was equivalent to $715.
This situation got worse on the European markets in 1973.
According to the regulations of the National Congress sufficient means existed for extending the discussion of a law for two or three months and, if necessary, for postponing a decision indefinitely.
It was created under Jorge Alessandri’s Government (1958–64), which was elected by Chile’s political and economic right.
One of the banks, the Edwards Bank, which was of long standing in Chile and was linked to one of the most important socioeconomic power groups, became involved in this type of illegal operation to the amount of nearly $8 million (approximately equivalent to the bank’s capital). This produced additional complications with a group of ten U.S. banks in New York which appeared to be involved in a loan used for the illegal transaction of funds.
The interest rate at that time was 24%, of which 20% was the basic rate, while 4% was an authorized extra charge. The Allende Government lowered this rate to a maximum of 18% and maintained this rate for the duration of 1971.
In the General Banking Code it was stated that banks providing credits could grant them to companies or individuals; however, each loan to an individual was limited to less than 5% of the bank’s capital.
This procedure was used in unexpropriated companies wnich ultimately were to oe brought under state control by a legal statute which, at that time, had not yet been defined.
E. Trabucco, Chile and the Principal Problems.…
Before 1971, sales through bills of exchange, through credit on current account, or through postdated cheques formed the majority of transactions.
In November 1970 the gross total of international reserves was $450 million, or the equivalent of four to five months imports at that time.
There were a few cases in which payment of debts was not suspended.
No fewer than sixty banking institutions, mainly based in New York, recorded forwarding credits to a variety of public and private Chilean companies.
This was the major union for bank employees and many of its leaders were militants in the parties that made up the UP, which explains their solid support for the Government’s bank reform policy.
This sectoral agreement, which applied only to banking, was part of a broader arrangement at a national level between the Allende Government and Central Unica de Trabajadores (CUT); [Trade Unions’ Confederation], that fixed the guidelines for workers’ participation.
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Inostroza, A. (1979). Nationalization of the Banking System in Chile. In: Sideri, S. (eds) Chile 1970–73: Economic Development and its International Setting. Institute of Social Studies, vol 4. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-8902-6_8
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DOI: https://doi.org/10.1007/978-94-011-8902-6_8
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