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Business-Managed Democracy

“Business-managed democracies are those in which the political and cultural arrangements are managed in the interests of business”

Sharon Beder

Business-Managed Government

The World Bank and Chile

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When Allende’s socialist government was in power in Chile, President Nixon (pictured) President Nixonwanted to destabilize the country by putting pressure on its economy. The administration drew up a report on ‘options for the United States in the event Chile takes steps to nationalize or expropriate U.S. business interests in Chile’. According to notes by CIA director Richard Helms, Nixon wanted to ‘make the economy scream’. One of the ways used to do this was to cut off Chile’s access to loans. This came to be known as the ‘invisible blockade’. The American Executive Director of the Inter-American Development Bank (IDB) was told that he would not receive instructions from the US government on pending loans to Chile: ‘this will effectively bar approval of the loans’.

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In order to forestall future World Bank loans to Chile, the US Department of State, with the agreement of the US Executive Director of the IBRD – the division of the World Bank that would make the loans – drew up a series of questions ‘concerning areas where Chilean performance and policies may be most vulnerable with respect to future IBRD financing. Salvadore AllendeThe Executive Director will routinely and discreetly convey these questions to Bank staff members concerned so as to insure adequate attention to them… but without the hand of the U.S. Government showing in the process.’ So within a month of Allende’s election (see picture), the US administration was already manipulating Bank bureaucrats into making an economic case against World Bank loans to Chile.

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Just over a year later, after Chile nationalized the US copper companies and refused to compensate them because of the excess profits they had been taking, Nixon announced that the US would cut off all aid to Chile and ‘withhold its support from loans under consideration in multilateral development banks.’

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Chile received nearly $100 million in World Bank loans in the five years before Allende was elected. The Bank ceased loans to Chile during the Allende term of office, despite a number of applications for well-conceived projects and Chile’s loan repayments being up to date. Then when Pinochet ousted Allende, World Bank loans began to flow again with over $100 million in World Bank loans in the first two years and $680 million in US government loans. MDB loans to Chile fell off again when Carter was elected US president because of Pinochet’s poor human rights record, but they were reinstated by the Reagan administration. Five years after Reagan took office MDB and US loans reached $3 billion, including $430 million from the World Bank.

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