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INFORMATION TO USERS This manuscript has been reproduced from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are reproduced by sectioning the original, beginning at the upper left-hand corner and continuing from left to right in equal sections with small overlaps. Each original is also photographed in one exposure and is included in reduced form at the back of the book. Photographs included in the original manuscript have been reproduced xerographically in this copy. Higher quality 6" x 9" black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. University Microfilms International A Bell & Howell Information Company 300 North Zeeb Road, Ann Arbor, Ml 48106-1346 USA 313/761-4700 800/521-0600 Order Number 1349386 The politics of decentralization in Chile: Allende and Pinochet Villar, Daniel, M.A. The American University, 1992 Copyright ©1991 by Villar, Daniel. All rights reserved. UMI 300 N. ZeebRd. Ann Arbor, MI 48106 THE POLITICS OF DECENTRALIZATION IN CHILE: ALLENDE AND PINOCHET by Daniel Villar submitted to the Faculty of the School of International Service in Partial Fulfillment of the Requirements for the Degree of Master of Arts in International Development Signature of Committee: Chair: Dean of SIS, Dr. Louis Goodman ^ Iff! Date 1991 The American University Washington, D.C. 20016 73)4 CH3 AMERICAN UNIVERSITY LIBRUY © COPYRIGHT by DANIEL VILLAR 1991 ALL RIGHTS RESERVED THE POLITICS OF DECENTRALIZATION IN CHILE: ALLENDE AND PINOCHET BY DANIEL VILLAR ABSTRACT Decentralization, in practice, is never a value free process. National leaders try to target the process so as to empower political groups sympathetic to them. But since decentralization involves shifts in the power structure of society, the outcomes of the process may not be those desired by the leaders who set the process in motion. Salvador Allende attempted a decentralization process aimed at empowering grass roots organizations traditionally supportive of the Chilean Left. With time, local organizations became increasingly autonomous from, and critical of, the Allende government. Under Augusto Pinochet, privatization was used as much for economic as for political reasons. It was a means of returning to the upper class some of the power it had lost. It enabled the Pinochet regime to maintain that support of the upper class. The flaw of this decentralization process was that in its attempt to empower a minority of the Chilean population it alienated the majority. In the only free elections held under Pinochet he was defeated. To Nancy, my mother, and Maria Helena, my wife. TABLE OF CONTENTS Abstract ii Introduction 1 The Concept of Decentralization 2 Definition and 2 Types of Decentralization 5 The Issue of Power 7 The Process of Decentralization 12 Historical Overview 17 Independence and the Emergence of Portales 20 Balmaceda and the Political Crisis 26 New Political Actors and Alessandri 29 The Rise and Fall of the Radical Republic 34 Eduardo Frei’s Administration 41 Decentralization under Salvador Allende Gossens 53 Overview 53 The Successes of the First Year and Inaction on Decentralization 59 Truckers’ Strike and De Facto Decentralization 69 The Fall of the Allende Government 81 Decentralization under Augusto Pinochet Ugarte 89 September 11, 1973, and its Aftermath 89 Chile’e Economic Setting in the Early 1970s and Decentralization 93 Privatization in Chile 98 The 1981-1984 Political Crisis 104 Conclusion 117 Bibliography 123 INTRODUCTION The purpose of this thesis is to examine an aspect of decentralization that has not been dealt with in great detail in the literature. This issue refers to the political consequences of the shifts in political power structures that inevitably come about with a decentralization process. This thesis is limited to Chile’s experience in the seventies and eighties. In this period, Chile has been governed by two drastically different administrations: Salvador Allende’s Marxist experiment (1970-1973) and Augusto Pinochet’s right-wing dictatorship (1973-1989). This thesis will attempt to draw general conclusions of the vastly different decentralization processes of these two governments. Both Allende and Pinochet undertook a decentralization process with the purpose of empowering a particular group of Chilean society (the poor majority in Allende’s case and the upper and middle classes in Pinochet’s case). The hope was that this process would bolster the leader’s power, and that of his supporters, even further. But as groups were empowered the ability of the leadership to manipulate them was substantially weakened. This process led, ultimately, to the demise of the governments. Under Allende it was the perceived "chaos," caused in part by the decentralization process, that precipitated the military coup; under Pinochet, decentralization and shifting of political forces were targeted on a minority of Chileans, which led to his defeat in the only free elections that took place during his regime. But before beginning a discussion on decentralization in Chile, it is important to define the key concept of decentralization. This will be done in the next section. After this, the specific case of Chile, in reference to decentralization, will be discussed. THE CONCEPT OF DECENTRALIZATION I. DEFINITION OF DECENTRALIZATION "Decentralization is a process whereby centralized governing institutions transfer authority, responsibility, or functions to, or share such attributes with, sub-national units of government."1 Decentralization not only means transferring "authority, responsibility, or functions" sub-nationalto units o f government', it also means transferring these roles toprivate individuals or to institutions. An example of decentralization involving private individuals is the privatization of state-owned assets. Over the past three years, twenty five governments in diverse areas of the world have sold state-owned enterprises, totalling $90 billion,2 Decentralization focuses on a central government’s distribution of power. Theoretically, as the central State cedes some of its activities to local organizations, its power diminishes because its ability to disburse resources is weakened. An exception to this is deconcentration, a form of decentralization which intensifies the reach of the State over the country. Whereas decentralization stipulates the State’s relinquishing of authority, the processper se does not indicate to whom these powers must be assigned. These 1 Morgan, Mara. "A Conceptual Overview of Decentralization." (Draft Report). (Washington, D.C.: The World Bank, 1991), 2. 2 Auerbach, Stuart. "Around the Globe, the Sale of a Century." The Washington Post. November 17, 1991. HI, H9. 3 "recipient organizations" range from local agents of the central ministries, to grass roots groups (e.g. a neighborhood association or a labor union chapter), to private individuals. The motivations that compel national leaders to initiate such a process are as diverse as the agents they empower. Traditionally, it has been believed that the reason leaders initiate decentralization is to make the State more responsive to the needs of the population, to enhance democracy or to intensify the legitimacy of the state.3 These beliefs, while often valid, assume a benevolent and efficient State. But the way a State functions is a direct consequence of the way it is made to function by its leadership. And once power is attained, there must be a powerful incentive to relinquish it. A politician, by definition, seeks power. Political leaders must feel that they will gain something by diffusing the power of the State, over which they have significant influence. There is much to gain: personal wealth, national prestige and universal admiration. The premise of this thesis is that leaders of a central government perceive decentralization as desirable, if they also perceive that process as a means to increase 3 For example see World Bank reports such as Campbell, Tim et. al. "Decentralization in the LAC Region: National Strategies and Efficiency of Local Government Spending." (Washington, D.C.: World Bank, 1991), Campbell, Tim et. al. "Decentralization in Chile." (Washington, D.C.: World Bank, 1991) and Morgan, Mara. "Conceptual Overview of Decentralization (Draft)." (Washington, D.C.: World Bank, 1991). These reports, especially the first two, look at decentralization as a tool the central government has to increase the effectiveness of budget allocation and financial management. The report on Chile deals almost exclusively at improving local government financial rationality, this being, for the authors, one of the strongest attributes of decentralization, at least in the Chilean context. their personal power. A Statedistributing power is not paradoxical to an

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