Lit Review: Business Conflict Model — Case Study: Chile, Copper, Pepsi, and Telecommunications
On December 2, 1823, President Monroe addressed the U.S. Congress and issued what became known as “the Monroe Doctrine,” in which he declared the neutrality of the United States in relation to European affairs insofar as they did not concern those of the Americas. Concerning European interventionism, Monroe said, the United States would not be indifferent and stated that the United States would “leave the parties [Latin American states] to themselves” (Message of President James Monroe). U.S. interests would not leave the Chileans to themselves, however. In 1879, Chilean business interests fought the War of the Pacific against Bolivia and Peru over the nitrate mines in the Atacama Desert. U.S. interests intervened shortly after to gain access to the nitrate reserves (Uribe, 1974/1975).
These interests were refused a foothold at the time, but the Chilean Civil War, fought between internationalist and nationalist interests, provided the United States with an opening (Uribe, 1974/1975). In 1891, shortly after the war ended, the U.S.S. Baltimore docked in Valparaíso, and several soldiers were assaulted outside of a bar, resulting in the Baltimore crisis. The United States used this crisis to assert its influence on Chile (Uribe, 1974/1975). Shortly thereafter, U.S. mining magnates, such as Meyer Guggenheim and the Braden Copper Company, entered the Chilean resource extraction sector with (Uribe, 1974/1975). The Anaconda Copper Mining Company joining later, while ITT consolidated management of Chilean telecommunications (Uribe, 1974/1975). By the end of the Second World War, U.S. firms had established themselves as the dominant foreign influence in Chile and controlled all critical aspects of the national economy, in particular copper, which was a symbol of the national treasure of the Chilean people, and telecommunications (Uribe, 1974/1975).
ITT had been formed in 1920 as a telecommunications firm focused on expanding access to new technologies around the world. The name, strikingly akin to AT&T, was deliberately chosen to cause confusion with the competing firm (Sampson, 1973). However, ITT was not focused on the U.S. market. Instead, it focused on international markets with the goal of building a system to rival that of AT&T (Sampson, 1973). As an internationalist firm, it ran into conflict with nationalist interests all over the world, and to best position itself to offer services, it resorted to corruption and compromise (Sampson, 1973). By 1925, AT&T and ITT created a secret pact to divide up the telecommunications world, with AT&T receiving unilateral control of the U.S. market and ITT the global market (Sampson, 1973). ITT’s foreign influence, measuring at around 20% of stockholdings, was referenced in Section 310 of the Federal Communications Act of 1934 when Congress forbade the holding of radio licenses to firms in which “more than one-fifth of the capital stock is owned of record or voted by aliens” (Sampson, 1973; Communications Act of 1934 § 310[a][4]).
ITT did not distinguish between types of governments and was operating closely with the Axis Powers at the start of the Second World War (Sampson, 1973). This did not hurt ITT’s standing, however, and it was able to recover its assets during the post-war period and even play governments, including that of the United States, against each other for its own interests, often without their knowledge (Sampson, 1973). In the 1960s, new management transformed ITT into a global conglomerate as it attempted to diversify the risks of nationalization to its global telecommunications; this shift positioned ITT to become the world’s tenth-largest firm by revenue by the 1970s (Sampson, 1973). This economic clout, which dwarfed many states in which ITT operated, was used to its own advantage, and its extensive internal communication network enabled it to have an intelligence reach that rivaled that of the CIA (Sampson, 1973).
In Chile, ITT controlled an estimated US$150 million interest in telecommunications and other businesses and employed more than 6,000 personnel (Uribe, 1974/1975). The internationalist government of President Jorge Alessandri had benefited ITT and other U.S. firms, such as Anaconda and Kennecott in the copper sector, as they were able to increase their market share at the expense of domestic industry. With Alessandri’s term in office ending, U.S. interests began to sense the tide of nationalization turning against them with the rise of Salvador Allende. In an attempt to mitigate this, President Kennedy initiated a campaign to pump US$2 billion into the Chilean economy and merge U.S. government and business interests to support the election of Eduardo Frei, who was viewed as more of an internationalist (Palast, 1998; Petras & Morley, 1975).
Direct election intervention by U.S. firms, including ITT, funneled US$20 million in private cash to the Frei campaign while the CIA and the State Department posted 100 “special personnel” in Chile to manage covert efforts to interfere in the election in favor of the pro-internationalist Frei (Sampson, 1973; Petras & Morley, 1975, p. 20). Direct aid to Chile grew from US$97.7 million in 1963 to US$260.4 million in 1964 — in time for the election — before decreasing back down to US$92.5 million in 1965 (Petras & Morley, 1975). Frei won the election, and the United States continued to funnel millions in aid to the country during his presidency, often in the form of loans and U.S.-led and managed development. By the 1970 election, Chile was indebted to the United States government, U.S. businesses, and U.S.-led international organizations to the tune of US$3.83 billion (Petras & Morley, 1975).
In 1965, shortly after the election of Frei, the Defense Department under President Johnson secretly implemented Project Camelot in Chile, which studied subversion in developing countries, without the knowledge of then-Ambassador Robert Dungan (Uribe, 1974/1975). The rollout was implemented quietly through universities, businesses, the Peace Corps, and other organizations (Uribe, 1974/1975). In 1967, a dissertation at the University of California, Los Angeles demonstrated the potential scope of the project in Chile. Civilians, retired generals, and active-duty officers were asked a series of questions gauging their sentiment about coup d’états, the likelihood of one occurring in Chile, their ideological allegiance, and whether or not they would support a military-led intervention (Uribe, 1974/1975). While it was unknown if the author was operating under Project Camelot, the timing and scope of the research offer a glimpse into the type of information that the Defense Department, in particular the Defense Intelligence Agency, was gathering on the Chilean people and government (Uribe, 1974/1975). Two years later, in 1969, the first coup d’état in Chile in decades occurred under the direction of General Roberto Viaux in Santiago (Uribe, 1974/1975).
The aim of the coup, which failed, was unknown, but the Nixon administration had advanced knowledge of it. Uribe noted that shortly before the incident, one of the most powerful businesspersons in Chile, Agustín Edwards, flew to Washington and spoke of a “they” who were ready to “make their move” and were not “waiting any longer” (1974/1975, p. 35). While in Washington, Edwards met with President Nixon and individuals at the Chilean embassy who would play key roles in the preparations for the 1973 coup d’état (Uribe, 1974/1975). Uribe noted that Edwards used his connections in the United States to move into a U.S. firm in the event the Chilean environment turned against his own business interests, and in 1970, after Allende won the presidential election, Edwards became a vice-president at PepsiCo (1974/1975). PepsiCo would go on to play a role in the 1973 coup as described by then-U.S. Ambassador Edward Korry in a 1998 interview; he stated that the U.S. plan was laid only after pleas for action by former chairman Donald Kendall to President Nixon, who had been PepsiCo’s former lawyer (Palast).
Early the next year, the same Chilean general was prepared to attempt a second coup to prevent Allende from winning the 1970 election (Uribe, 1974/1975). The Anderson Papers, which were leaked internal ITT memos, noted that General Viaux was operating under the guidance of the United States with ITT as the conduit (Uribe, 1974/1975). This was corroborated in Senate testimony several years later and in additional ITT memos. On July 16, 1970, the director of the CIA’s clandestine operations in the region met with ITT’s CEO in Washington to discuss options to oppose the election of Allende, which ITT deemed to be a likely reality (Uribe, 1974/1975). These options included incidents of economic and political sabotage designed to induce subversive acts and a civil war (Uribe, 1974/1975). Two months later in September, shortly after Allende’s victory on September 4, 1970, an internal ITT report deemed “some degree of bloodshed inevitable” with the Chilean military and national police force capable of managing the situation — forces noted by former Ambassador Korry to be “toy soldiers” (Uribe, 1974/1975, p. 41). The next month, an internal memo to the ITT vice-president stated that Washington had ordered General Viaux to stand down before the election due to the poor timing and to wait for a future date, at which point he would “receive material assistance and support from the U.S.” (Uribe, 1974/1975, p. 30).
The fears of ITT and the Nixon administration came true. Allende had won the 1970 election, and he sought to nationalize the telecommunications and resource extraction industries, which was within his right to do as the leader of Chile (Uribe, 1974/1975; Petras & Morley, 1975). Akin to the nationalization fears concerning Iranian oil, U.S. interests were concerned that Chilean nationalization would ripple to other Latin American countries, such as Peru, that were struggling to fight against U.S. internationalist interests (Petras & Morley, 1975). Meanwhile, the United States had experienced success in countering nationalist actions in 1964 in Brazil by backing the right-wing military coup d’état against the nationalist Goulart government, which secured U.S. business interests in the country (Petras & Morley, 1975).
The methods that the Nixon administration would use in 1973 against Allende bore a striking similarity to those used by the Johnson administration in 1964 and by the Eisenhower administration against Iran in 1953, including the direct coordination with the armed forces and the use of economic forces to “squeeze” the state and hasten internal turmoil to support the coup effort (Petras & Morley, 1975, p. 52). The key difference between the Brazilian and Chilean coups was the direct role that U.S. firms played, from pushing Nixon to act, like PepsiCo did, to directing much of the ground operations and strategy, as ITT did (Palast, 1998; Sampson, 1973; Uribe, 1974/1975; Petras & Morley, 1975).
The nationalization of the copper industry proved to be the most public of the rationales for U.S. intervention, since it was feared to cause ripples to similar sectors in Peru, where full nationalization had been able to be halted (Petras & Morley, 1975). The United States publicly stated that they expected full compensation for U.S. interests that were nationalized, and the Chilean government was happy to comply (Uribe, 1974/1975). The Chilean Supreme Court ensured that Anaconda and Kennecott received fair compensation in accordance with the new naturalization clause in the Chilean constitution, which was unanimously approved by the Chilean Congress in 1971 (Uribe, 1974/1975). This decision was accepted publicly by the U.S. firms, but the Nixon administration privately prepared to overthrow the Allende government in order to stop the nationalizations and ensure that U.S. interests were able to continue to operate as before (Uribe, 1974/1975; Petras & Morley, 1975). In the fall of 1971, while the nationalization of the telecommunications system was wrapping up, a letter from ITT’s vice-president to Nixon’s adviser for global economic affairs stated that, “everything should be done quietly but effectively to see that Allende does not get through the crucial next six months” (Uribe, 1974/1975, p. 116).
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Allende did, however, get through those six months, and the coup was planned for the fall of 1973. Leading up to that point, the United States used its financial institutions and its control of global institutions to squeeze the Chilean economy. The billions in debt owed from the Frei government was used to crush the Allende government in the hopes of causing social turmoil (Uribe, 1974/1975). U.S. allies joined the United States in imposing an embargo on Chilean copper, depriving the country of one the only key exports that provided the Allende government with hard currency (Petras & Morley, 1975). In the fall of 1972, a U.S.-directed insurrection was attempted. A nationwide truck strike attempted to cripple the economy and resulted in millions of dollars of lost productivity, while senators accused Allende of an “‘illegitimate exercise’ of power” (Uribe, 1974/1975, p. 119).
The effort failed, but the connections that had been made between the Chilean opposition and U.S. operatives continued into 1973. After Allende’s coalition increased its share of the Chilean Congress by 10% in the March 1973 election, the Nixon administration pushed forward for a final solution to the Allende issue (Uribe, 1974/1975). At the same time, the clandestine operations of ITT and the Nixon administration were exposed to the public. Jack Anderson released the first of the leaked ITT memos in early 1972, and further leaks forced the Senate Foreign Relations Subcommittee to investigate the allegations (New York Times, 1972a, New York Times, 1972b; Sampson, 1973). Commentators noted that the Nixon administration, who had cooperated with the Senate investigation, likely used the public hearings to demonstrate its ability to influence Chilean politics as one of its coercive efforts leading up to the 1973 coup (Uribe, 1974/1975).
Following the March 1973 elections, the Chilean opposition launched a propaganda campaign in April (Uribe, 1974/1975). The next month, in May 1973, acts of terror began in a systematic manner across the country that targeted the Chilean people as well as industry (Uribe, 1974/1975). Coinciding with the U.S.-led economic embargo, the terror attacks were designed to sow fear and discord, and the propaganda campaign helped in amplifying that mood (Uribe, 1974/1975). Members of Allende’s inner circle were assassinated, and the Chilean military used the growing violence to carry out subversive destruction of its own (Uribe, 1974/1975). These subversive activities were both violent, such as leftist executions, and psychologically traumatizing, such as the exposing of graves in Santiago’s Cementerio General, Chile’s de facto national cemetery (Uribe, 1974/1975).
Opposition forces planned to overthrow Allende on June 29, 1973, but aborted the operation (Uribe, 1974/1975). Instead, the opposition continued the subversive tactics throughout the spring and the summer. Strikes were launched, and leaders who sought to quell them were assassinated (Uribe, 1974/1975). The Chilean Senate crippled Allende’s foreign policy by refusing to approve ambassadors to the United States and other critical global capitals, including Moscow and Beijing, and in late August, the Chilean Congress denounced Allende as having used illegitimate power (Uribe, 1974/1975). On September 11, 1973, the opposition launched the final coup d’état, and instead of surrendering, Allende took his own life.
All these actions were financed by the United States, which had cultivated close relations with the Chilean armed forces and opposition (Uribe, 1974/1975; Petras & Morley, 1975). The Defense Department supported the training and development of the Chilean military, which afforded U.S. operatives access to key leaders who would go on to launch the coup (Uribe, 1974/1975; Petras & Morley, 1975). The CIA used millions of dollars to fund subversive activities, including the subsidization of key newspapers and political parties that played leading roles in the propaganda campaign and the political turmoil that gripped Allende’s government in 1973 (Petras & Morley, 1975).
The actions taken by the opposition bore a striking similarity to those that the United States was already known for, vis-à-vis Iran in 1953 and Brazil in 1964. Moreover, the options — with the notable exception of terrorist activities — discussed between ITT’s CEO and the CIA in 1970 were carried out by the United States government and firms (Uribe, 1974/1975; Petras & Morley, 1975). However, the CIA’s global covert operations have included terrorist actions, and its payroll included agents within Chile that could carry out these attacks (Uribe, 1974/1975; Petras & Morley, 1975). Furthermore, U.S. personnel stationed in the country were known to be specialists in subversive action (Uribe, 1974/1975), with one U.S. operative who was stationed in Valparaíso at the time of the coup stating shortly afterward, in November 1973, that “we came down to do a job and it’s done” (Petras & Morley, 1975, p. 131). By laying the economic and political landscape for opposition forces to act upon, the critical challenger to U.S. hegemony in the Americas had been removed. The U.S. firms that had pressed for action and had actively contributed to the economic and political landscape were free to continue as before with no nationalist opposition — at the expense of the thousands of Chileans who were executed or who were disappeared by the Pinochet regime and the tens of thousands more who were victimized.
References:
Communications Act of 1934, S. 3285, 73rd Cong. § 310 (1934).
Message of President James Monroe at the commencement of the first session of the 18th Congress (The Monroe Doctrine), 12/02/1823; Presidential Messages of the 18th Congress, ca. 12/02/1823-ca. 03/03/1825; Record Group 46; Records of the United States Senate, 1789–1990; National Archives.
Palast, G. (1998, November 8). A Marxist threat to cola sales? Pepsi demands a US coup. Goodbye Allende. Hello Pinochet. The Guardian. https://www.theguardian.com/business/1998/nov/08/observerbusiness.theobserver.
Petras, J., & Morley, M. (1975). The United States and Chile: Imperialism and the overthrow of the Allende government. Monthly Review Press.
Sampson, A. (1973). The sovereign state of ITT. Stein and Day.
Uribe, A. (1975). The black book of American intervention in Chile (J. Casart, Trans.). Beacon Press. (Original work published 1974).
