Washington softens position on key World Bank loan to Chile. US fears blocking loan would hinder democratic transition

The United States, with its stance on a key World Bank loan to Chile, seems to be trying to send a mainly symbolic message of opposition to the authoritarian rule of Gen. Augusto Pinochet Ugarte. The Reagan administration decided not to try to block the $250 million loan, saying such action would be counterproductive to encouraging a democratic transition in the country.

Instead, the US is lobbying other nations to join in abstaining on the loan approval on Nov. 25, officials at the Departments of State and Treasury say. Abstention is considered a form of opposition but it would not prevent passage of the loan.

Elliott Abrams, assistant secretary of state for inter-American affairs, told a House Banking subcommittee in July that, based on the human rights situation in Chile at the time, he would recommend that the US vote against multilateral bank loans for the country.

Officials say the pattern of ``gross human rights violation'' has not changed in Chile but concern for the effects of a vote against the loan has brought about the change of policy.

The $250 million structural adjustment loan is tied to other commercial bank loans, and denial of the loan could send the Chilean economy into a tailspin, the officials say. Also, the international financial community considers the management of the Chilean economy to be a model among Latin American debtor nations. Blockage of the loan, the officials say, might cause an anti-US backlash that could galvanize support for Pinochet.

Further, they say, a majority of Chileans want the loans - including Juan Francisco Cardinal Fresno, who sponsored the National Accord for a democratic transition agreed to by diverse opposition groups.

Economic sanctions are the latest means the US is considering to pressure Pinochet, whose repressive tactics, US analysts say, are fueling leftist revolutionary activity. Already in 1986, the administration has sent two envoys to Chile to encourage Pinochet to move to a democratic government. In March, it sponsored a UN resolution condemning Chile's human rights violations. This summer, it stepped up public criticism of the Pinochet regime after a US resident was allegedly burned to death by Chilean soldiers.

As for the abstention, ``we want to make some kind of statement. But we have to take into account the politics of the situation,'' says a high-level State Department official. ``The worst possible signal to send Pinochet is if we vote no, and the loans pass, and we look impotent.''

``They're trying to send a message and it's [the abstention] irrelevant, because it's a message through the wrong channel,'' says Miguel Schweitzer, a former Pinochet official and government loyalist. ``There are other channels to use like the UN and the State Department, but not mixing politics'' with finance.

World Bank members are reluctant to politicize the institution's loan process. US queries to other bank member nations last summer brought ``cable after cable'' showing there was little support - except in the five-nation Nordic bloc - for a ``no'' vote, the State Department source admits.

``If we were to abstain now, where would that lead next?'' says an official of one member nation. ``What about the African country with an equally bad human rights record? It's a real dilemma, because we've seen other international organizations become fragile and lose credibility because they became politicized.''

The US, however, is required by law to oppose loans to countries ``that engage in gross violations of internationally recognized human rights.'' Abstention qualifies as opposition under the law, explains a House Banking Committee official.

But ``abstention is sort of the minimum the US could do. The US isn't being clear and consistent in its policy,'' says Peter Hakim, director of the Inter-American Dialogue. He testified before the House Banking Committee in favor of a proposed blanket, one-year opposition to any multilateral bank loans to Chile.

A Treasury official says the planned November abstention is not ``loan specific.'' Abstention is the current policy on Chilean loans and is expected to be exercised on Inter-American Development Bank loans before the end of the year.

Though considerable political attention is being paid to the loan votes, World Bank officials stress that the US as a 20 percent shareholder could not block a loan on its own. Further, they say, loan decisions are adopted by consensus among the 22-member board. A formal vote is rarely taken; each nation merely records its position on a given loan. Not one loan presented to the board has been rejected in the bank's 40-year history.