Chile creditworthiness

 No. E 116 CONFIDENTIAL 67025 This report is restricted to those members of the staff to whose work it directly relates. r ',:,- L , ..'" '-,~, ~--=",.,-. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CHILE CREDITWORTHINESS November 13, 1950 Economic Department Prepared by: Harold Larsen  CON TEN T S Page I. General Conclusions • • • • .• • • • • • • • • • • • • 1 II. Present Position. ..... . . , . ...• • • 2 A. External • • • • . ,. . . • • • • • • • • 2 B. Internal ... • • ·.• • • • • .. C. ExisEng External Debt ..• • • • . . . . .. 7 III. Future Prospects • • • • • • • • • • • • • • • • 10 A. Stabilization and Prodlwtion Increase •• • • 10 B. New Lending • . .. . .. . . . • • • .. . 13 (a) General Assumptions • l' • • . . .. .. 13 (b) Conclusions upon M:agni tude of Hevl' Lending • • • * • .. • • • • • • 14 1. Lending of US") 50 l;iiillion i~eVI over Five Years , • . 0 ' • • Ih 2. New Lending of US~p 100 l"iillion over Five Years • • • • • • • 15 I~ote upon exchange rates The 60 rate (1.67 US cents per peso) is probably the most appropri2J.te for purposes of gener?,l statistica.l conversion. Exchange Darity for the Chilean peso is 31 pesos to the US dollar ( 3.225 cents per PE)so). As at October 30, 1950, there were 6 official buyir.g rates (the highest be~tng 60, ar:mlied to some minor exports) and;; official selling rates ( tM highest being 60.10, the general import rate). The legal, fluctuating, free market rate wa.s 88 on October 20, and the current fluctuat- ing gold market rate (applying ne"wly mined gold to luxury imports) was 140.  CHI L E GREDITVWRTHINF13S T. General Conclusions 1. Chile IS present foreign inde')tedness is now near the limit of credi t1;Yorthiness, but a sound and well adjus ted development pro,:,;ram could raise this limit consider!3bly. The uncertainty of fl,lture -earnings from copper and nitrate makes it inadvisa1)le to count on the natnral growth of these items alone to support 'a mnch larger service burden. The present balance of payments position could be eased by output growth both in other exports and in import savinG industries .. 2. Borrowings at the rate of :WIO milli on a ye ar would keep lXl th total indebtedness and debt service about level and could not therefore of itself involve for Chile the threat of greater strains than those 'fi th which she is at present confronted. 3. Even for this relatively low rate of borrowing Chile should be seriously encouraged to curb inflation, thereby reducing stimulus to import and uneconomic investment, and to direct investment so that maxt- mum increase in production derives therefrom. 4. Wi th coherent investment and deiTelonment programmi.ng, it ",:ould be possible to make further loans, predicated upon the success of the adopted "program. II  -2- 5. The level of lending would depend to an jmportant extent upon the actual pro::;ram adoptGd; any excess over tTS$ 10 million annua1J.y for five years would depend wholly upon the expected.'effects of ti-le "program!! on pro- duction anG the balance of payments. 6. Further lending tnerefol'e involves the risk that proCr['m ment may fail of expectation, an outco;:,e depending as much 11Pon the actions of the Chilean people and Government themselves as on v!Orld mar!<:et trends for copper and nitrates. 7. If, however, satisfactory agreement can be reachAd upon a good development program, new lending to the limit of US~? 100 million over five years appears to be possible. II. Present Position Chile is at~present at or near the margin of creditworthiness, if as- sessed upon the assumption that present external and internal trends persist. A. External The balance of payments posi ti on remains tight, with little pros- pect of long-run impf'ovement other than that offered by import replacement. Despi te recent conper price gains, the ,,'[arId conper position remai.l1s vul- nerable in the long run, and present Chtlean import reauLrements are rela- tively rigid, offering little scope for compression unless replaced by domestic production. The 1949 position was maintaIned partly by increased investalent by the mining cO[:lpanies and partly by a special balance of pay;nents loan from ExL11bank, the justification for which vras based upon dir:linished receipts from copper exports.  -.3- 194c3 1949 --------------------.------------ ..------------~----~-------- Average New York copper price (cents/lb) ~ • • . • 22.20 19.37 Chilean copper production (000 short tons). .. .. • " 468 ~ U.S. imports of Chilean copper (000 short tons) .. • • .321 ~ (Millions of l.i .S. Dollars) Current and Capital Account HO"ement into Chile Disbursements in Chile of mining companies -- net exports . • • • • " • . 167.4 117.1 -- capital movements • . • " . - 6 .. 6 2h.8 Eximbank and IBRD disbursements . . • * t . 17.2 40.9 -- service • " . • . . , " • ...11.6 -10.7 166 .. 4 172.2 Other exports, f .a.b. • .. • • • , .. t . • . • 68.4 68.3 Uther current account receipts • • • " . • 0.3 21.2 2.3~.1 2'b1":7 - Current Out-Payment from Chile Imports (non-mine) c.i.f. • . . .. . 235 .. 2 256.3 Central Bank: changes in gold and exchange reserVe - 2.7 -10.2 Chilean (peso) wholesale prices of import goods ..... • • 100 115 Copper prospects, which in early 1950 were not regarded as good ("Chile's CreditvlOrthiness,'t No. E 79, February 8, 1950) have improved since the Korean crisis, and are likely to remain favorable so long as the defense program maintains high levels of United States durable goods output. If a decline occurs, '-lowever, it may now be severe, since oresent prices may stimulate expansion of copner out-:ut facilities elser,rhere, particularly in African countries such as l-Torthern Rhodesia and the Bel- gian Congo. ];/ Other exports show no immediate promise, Very recently nitrates 17The present copper position is more extensively discussed in an Economic Department paper "Prospects for Chilean Copper Exports" dated November 1), 1950.  -4- were shifted to an export rate of 50 pesos per dollar upon condition that the comnanies undertook cost-reducinG investment to facilitate competi- tion with synthetic nitrates. Other exports, mainly agric111tllJ:'21, ShQVIl no present growth tendency. A reflection of balance of payments difficulties is the complexity of present Chile"lD multiple rate nractices, increasi.ngly center- around a rate (50 pesos to US;,.,l) which the LF regards as inappro- priate, recommending 60. The intr2,ctsbili ty of present tr1port pres::mres is indica ted by frequent exchange lJudget revisions. B. Internal Domestic inflation ho.s been sizeable, although [aoney supply in- crease has recently slackened. 1948 1949 1950 Dec. June Dec" June --- Money Supply (billion pesos). • • 15.3 15.9 16.0 %increase (six- monthly) • • 15.7 4.0 1.0 Index • .. .. . 100 116 120 121 Prices Tiholesale . .. 100 113 120 12911 Cost of living • 100 119 127 1.34 hanufactl'ring I'iages . 100 116 131 1423/ Productio~ (volume) lianufacturing . • • 100 98 109 107 ]/ ]/ Hay. ~I April~ The cav.ses of Chilean inflation were recently exhaustively studied  -5- by an TIP Mission, which reported: It to look behind the increase in tl-Je rncney supnly to the "underlying" causes of the tnfJ.atton. One of tJ8Se i.s pro- bably an exces volu:ne of investment, al thou:sh the evidence on this point is not conclusive. (The UN Hission believes that the present vohl.1ne of investnent could be maintained at sta.ble prices.) A considerat:Lon of the economic waste involved in capital formation through inflation, of alternative means of securing savings, and of the experience of other countries indicates that the Chilean economy could enjoy a healthy growth with prices. Another cause of inflation has been the government!s budget. Dur- ing the':rar years, an export surplus also contributed to Chileen in- flationary pressures, but this influence has been reversed in post- 17ar years. most important cause of inflation in recent , in the opinion both the Fund 1\1ission and t'1e UB Nisslon, has been a wage-price spiral. The Chilean inflati.on and the Chilean payments problerns are re- ciprocally related as causes and effects. The inflation by dOJl1estic costs and prices makes it more difficult to export and stimulates exces imports. The shortage of foretgn exchange, on the other hand, restricts imports a.nd so stimula.tes inflation. The attempt to reconcile t~es8 difftculties through a system of rates and quantitative restrictions prevents the most effecttve nse of real resources and :tnfl4tes 1mporters' profits at the expense of prices paid by consumers.l:l Both the new on and a stmultaneous \TN ]\,[is810n made recom- mendations designed to achieve stabiliz8ti.on. In both cases the recom- mende:, tions fall into two categories, short-term and long-term. Both Missions emphasize the importance of production, and both recomInend development programming. The UN Report suggests administra- tive reforms and improvement of economic information to "facilitate the formulation of consistent unified economic policy." It is in their short-term recommendations th[,~t the lZeports dif- fer. Both are concerned ,vi th inflationary oredi t increase; the 1MF would prevent this by setting a ceiling upon total outstandtng credit .----------~--~-----------------~--------------- }/ "Report of the Ei55ion to Chile," IlilF, August 25, 1950, pp. i-ii.  -6- until a non-inflatton.:::>ry environment is established, whEreas the llN ex- perts would offset new credit by cOl'lpulsor-j" savings over the next t"ro years. Both agree upon the importance of breaking public expectation of continued rising prices, but the Fund would rely upon the credit ceiling for this result vvhereas the UN recommends a general price freeze. Both require a substantial budgetary surplus (the UN by 1953, whHe the niP recow~endation has no explicit timing). Of these two short-term stabilization programs, the Dill' is pro- bably more realistic in the Chilean environment. l~ei tl-Jer, hm'J"evor, claims that their respective short-term programs are adequate by then- selves permanently to C 1 jro Chile'1n inflation; both envisage effecti.ve steps to secure prod;lction incre2.se. It may be noted that the tm experts made no suggestions reb.ttng exchange rates and pract'.ces to their proposals for domest-ic stabilisa- tion; on this topic the ·~Fund 's reco]11..lnend~tion reads - flas the d.omesttc inflation is checked, steps should be taken to consolidate the present exchange system into a unitary system wi th a neliT parity and to relax import restrictions.n Of special interest to the Bank is ttD .concern shovm in these Reports, and indeed in previous Bank reports (for eXaIl1ple, flChile IS Cre- ditworthiness," No. E 79 of F'ebrv.ary 8, 19$0), WH!1 the possibiUty that over-investment may be contributin;;:; to instability in Chile. On this point the IFF found the evidence inconclusive. Over-investment 1.s not, how·ever, an absolute, but a relation hetV'!een investment nrojects and investment resources, If over-investl7lent exists, it can be met either by reduction or by change of projects or ~y imryrovement of' resources.  -7- In the Chilean case, however, t~1ere are warni 11,:'; :tndic: tions tl,at im~)rovement of investment resources viculd not necessarily permit expansion of ne'iv investment projocts by the sarne amount. C. Existin i;";xternal Debt - "" o Present CClilean external debt is estimated as foll01!"8 /ii:r - - _ . ,IcfiULms of U.S. Dollars) ,_._------------------ U,S. Dollar: Bonds 11 . • • 116.5 Eximbank r;3RD • · • • ..• • • • . • 11 96.5 16.0 229 0 0 Sterlin~ Bonds • • • • . 62.8 Swiss Franc Bonds • 11 • • 11 22.8 Total Government Debt 11 • • • • o· 31b6 -- Corporate Debt (Fitrate Comranies: not guaranteed) U.S, Dollar Bonds • • 11 • 26.7 Sterling Bonds " .. 23.0 • • • • • 54.7 The strikin;; feature of forecast serv:Lce upon present Governm.cnt debt is its un,ifornly hiGh Idvels; until J970 tile only significant dimi- nution occurs in 1958-1960. From 1951 to 1958, total service averages US:) 18.3 million annually (US:p 12~1 million in U.S.dollars); from 1960 to 1970 total service falls only from 12.3 million annually to 'uS~ 10,8 million, averaging US:' 11.9 million. From 1971 to 1974, presently forecast service is steady at us·~) 7.3 million t Within these totals, amortizati.on is sizeAb1e. From 1951 to 1955 amortization avera~es liS? 1 0 ' ) n annually, and dllrin~ the snbsequent five years US~~ 8,8 million. In the ten years 1951 to 1960, Chile is ex- pected to make amortization payments totalEng US. 94 million,  -8- U.S. Dollars Total Amortization Total Amortization Total (r,i[i1lions of U.S .Dollars) (five-year periods) 1951.. 1955 • • .46.01 78.78 50.43 93.87 1956-1960 38.78 63.98 43.73 79.49 1961....1965 • • 27.47 45.64 34.09 61.15 1966-1970 • 30.68 41.86 39.54 57.36 (ten-year periods) 1951-1960 84.85 142.76 9~.16 173.36 1961-1970 • 58.15 81.50 73.63 118.51 Total, 1951-1970 • • 143.00 230.26 167.79 291.87 Balance of payments receipts for 1949 fall short of those of the , two previous years, 2nd three-year balance of payments averages have therefore been used as a basis in computing the relative level debt service. On this basis, forecast debt service is high for Latin America, averaging over the next five years more than 9% of exports. 'Not until 1961-1965 does service fall even fractionally below 6~~ on this basis. The next table is based upon balance of payments figures for which a breakdown by currency areas is not available, 'AI though trade statistics indicate that for Chile, as for most Latin ft~erican countries, 1/ dollar service relatively more burdensome than total service,- the position in terms of Chile's actual foreign exchange recei_pts is more favorable. Only a part of the proceeds of the exports of large mining 1:/ On average 1947-1949 the United States t(y,k 48% of Chile's exports, whereas service in dollars over 1951~1955 averages 83% of total ser- vice.  -9- companies return to Chile (60% in 1949). On this net or actual receipts basis, export earnings from trade with the United States is a higher pro- portion of total exchange earnings than suggested by (gross) trade sta- tistics. At present the distribution of service between dollar and non- dollar debt roughly mat.ches the distribution of net exchange earnings .. All Currency U.S. Areas Only O:illion U.S .Dollars ) Three-Year Averages (1947-1949) Net exports . . . • 205.8 Net exports plus other ct'rrent (account balance .. • • .. . • 205.2 Direct Investment (non-mine) . . Inflovf Income remitted •• ., ..• . . •• • • 7.. 5 6.1 Debt Service 1951 .. • • • .. .. .. 18,,6 15.6 1951-1955 Average • 1956 • • .. .. .. • . . . .. .. .. .. .. 18.8 17,4 15 .. 8 14.3 1956-1960 Av~rage .. . .. .. • 15.9 12.8 1961-1965 Average • 12.2 9.. 2 Percentages 1951-1955 Service on 1947-1949.exports .. 9.13 8.5 1956-1960 Service on 1947-1949 exports .. 7.73 6.9 1961-1965 Service on 1947-19L~9 exports .. 5.93 5.0 -------------- ----------------------~------~----------~------.------- ];/ Estimated.  CHILE: ESTIMATED DEBT SERVICE AS OF OCTOBER 1950 (MILLIONS OF DOLLARS) 25 r .... 1 ,~_n~_~_ ,- I T -,-----,-----" 2 5 20 20 TOTAL SERVICE 151 § ,.,...,. ,.,.. 15 DOLLAR SERVICE I 0 I' -~ ...- - - - -... , ----- ', 1 " TOTAL AMORTIZATION/\\ , - -------....;;""" I , -.". I 10 5 1 - - - - - - - - \\ ---------- "- ...----- 15 0 1 10 1950 1955 1960 1965 1970 1974 SOURCE: Central Statistics Section, I.RR.O. I.B.R.O. - Economic Dept. No. 500  -10- III. Futu.re Prospects A. Stabilization and Production Increase It is believed that the Chilean Government could modify present trends in the Chilean economy, throu,:;h short-term policies of stabiliza- tion merging into longer-term policies for production increase. The i:11Jnediate inflationary problem has been examined and recon- mendations made by two international missions. It nov; remains for the Chilean Government to take effective steps, whose success '!Jill depend more upon the acceptance of anti-inflationary policies as a national ob- jective than upon details of financial manipulation. Stabilization would improve creditworthiness in two ways, directly and indirectly. Directly and in the short run it would ease existing im- port pressures through cessC'tion of financial inflation.. Consumer money incomes would no longer continuously outstrip the availability of goods. The effect would ease nresent balance of payr.1ents pressures, re-intro- ducing some margin for manoeuvre, even if small, at the existing level of exch"nge receipts and real income. Since actual deflation is not envisaged, short-term stabilization may also involve adjustment of exchange rates. Indirectly 'nd in the longer run, lStabilization would improve the prospects for production increase throu:~h creatiniS an economic environ- ment 'llhere both public and private production plans can rely upon expecta- tions based upon consideration of real resources, the efficiencJ of pro- ductive techniques, and real consumer demand rather than upon general  -11- price increase expectations. As one a.spect of this, st13bili2'8.tion ",ould V8.ry the rell':'tive ettrflctiveness of oi'mership and management of vE'rious cetegories of resources, reducing those presently valued mainly as inflationary hedges. Thus better incentive would emerge for enterprising use of resources in ~ctUE'l production. Long-run maintenance of a non-inflationery environment "nIl require conscious <md consistent policy just as does immedia.te stabilization. Stabili- 7ation thus merGes into investment and development progrl'lInming. It is believed that I'Jt 1:fOrst such programming could mf'intpin the existing rate of proc.uction increl"se ~!1i thout undue inflation. There are, however, prospects of increasing production gro':rth through programming, rgain and addl tionally improving credi t- i·rorthiness. ·:U mpy even be said thst programming mi,~~ht in the long run nrove more important th1'ln stabilization as a factor of credit1!lorthiness. In other Hords, if a mild degree of inflation could not be eradicRted a "lise use of eve,ilable resources for 1)roduc ti ve purposes co,uld \·'ell imnrove Chile I slone run balence of peyments nrospects. The generel Gontent and structure of 1)rogremming is discussed in s6nerete Economic Denertment pepers. Certain chFlrecteristics, hov'ever. of e possible program in Chile designed, inter alia. to improve present credit"lorthiness, plready seem apparent. The pro(;rpm must pvoid investment levels thet outrun BvpilEtble resources, thet is, over-investment, ,-rhose present existence is suspected. This means thflt if the Bank ,,'ere to support some projects, it may find it necesspry to require postponement of others \"hich 1,rould heve been undertaken wi th or \"i thout foreign loans. It should not be flssumed that output is increesed only by investment. or by expensive investment. There is almost certainly greet room for improvement  -12- in the org~mi 7i'.'l.tion of production, both iI'i thin the en terTirise (mpnagerip1 technit.i.ues. etc.) fl.nd outside it (better commercial informf'tion, reduction of unnecessary controls. improvement of commotii ty merkets. etc.) Further, the generel economic policies of Government in the fisc~l end financial field pffect production. \/i thin Eo development program, the nroduction Droblem should not be regp.rded solely as an investment problem, othen!ise investment f<'ile of its full potential. 'Ihe investment and develonment progrems should take into account the neeessi ty of improving Chilean credi tworthiness. i!1hey should therefore not only seek maintenence of finf'lncial stability but plso should neglect no onportuni ty of economic increase of exnorts or reduction of im:;:>orts. Imnort replacement should not, ho,,,rever, become an objec tive in itself. ltd thout any regard to domestic costs in relation to landed import Tlrices. If loans be made in support of a development program, it is obviously lmportpnt that the Chile8n Government does not subsequently undertpke invest~ ment not included in the agreed program. however fine.nced, ltd thout Ba.nk agree- ment to the program modification. :S. Neil T Lending (s) General ASSQmntions 1. I t is believed that, on the bc>sis of present trends. Chile cennot s~fely f)dd to her existing burden of debt service 'aefore 19:59-1960. Underlying this is the belief that no perm~nent improvement in the vcolues of treditional eXports (couper end nitretes) can be eXpected. Possible present geins from copper sre thus regerded 8S more or less short-term 1:rindfFllls. 2. A bflSic t)remise is that a successful stebili?ation policy is nossible in Chile. This depends more unon the attitude of the Chilspn neople pnd Government tm·'s.rds their o,,'n economic nroblems th~n unon detriled  -lJ- interpret~tion of ,·,h1't those problems ~md their technical remeclies are. J. It is assumed as a minimum that there ,dll be a Chilean in- vestr.lent progrem the.t maintains investment around its present levels 1.·.1. th- out marked domestic inflation, end [>s l' m~x:im\'lIn th~t there )';'lay oe 8 develo1)- ment ~lrof,;ram echieving en increased ra te of produc tion gro\·rth. 4. It is assllmed that there pre in f~ct opportunities for incr-erse of Chilean production in directions ':Thich '·!ould replace some present imports ~t economic prices, ,·!ithout undue }Jrotection. 5. It is assumed thet foreign direct (non-mining) investment in Chile ,;Jill no t diminish from its present level punroxime tely coverin,~ direc t investment (non-mining) income. 6. It is assumed that non-dollar sources of required Chilean im- ports remain or become available, so that general Cl1ilean import ~'l1d pPy- mente problems over the next hTenty to hrenty-fi ve yeers c-re not pt;f,reveted by doller shortpgo as contrested ',ri th exchange shortege. ~f this psstl..rnption is rejected, the limit for doller loans may be lover in each Cese than the totels sug;o;ested in the next section. (b) Conclusions u-non Magni tude of He", l,.ending Any ne11l' lending in Chile involves consider8ble risk. This risk includes but does not center upon world prospects for major ex~orts: the main risk element resides in the '!Jil;Lingness end pbili ty of Chile to modify existing trends in her o,m economy. Several levels of ri sk can perhans be distinguished. 1. liew Li~nding gf US ~50 MilJion over Five Years .--This 1rTould equal emorti7ation upon existing debt in the roriod 1951-1955. This does not re- present pny ne1rT net cc'-:pital inf1o\·! into Chile, but is n'ther f' methoG. of enabling Chile to use thpt amount of her O'l'Tn spvings (othenrise transferred)  -14- over th~t period, post:r.>oning the tr1'1nsfer of seving to the future at the cost of loan interest. If, as seems a. reasonable presumntion, full service upon the ,,"hole ?mount did not start until 1959, end "'i th minimum ElSsumptioi1 (3) f'bove, th8t rou.:;h1y syeaking nresent investment levels are maintained witho;.l.t inflation, risk for lending pt this level may be accepteble. Risk '\Iiould be diminished by eny economic eX"r)ort exoansion or import rei)la.cement that cpn be f'chieved ',"i thin the investment level. vii th equal service :nayments upon loe.ns repeYE'ble over t"renty yerra pt 4-1/2,b. 19.59 debt service ",culd then be only slightly less thpn the nrssent 1952 end 19.54 levels. There "muld, ho"rever, be some reduction of 'Y)rcsent f'ver::ge debt burden; the ne," 19.56-1960 rverp.ge totPl service "JOuld be US .:pI? .4· million. and in 1961-196.5, us ';16.1 million, com'lered '\ll1i th present C'verFge service of US $18.8 million in 1951-1955. On the whole, i f a series of lo~ms at the rpte of US .:plO n::illion p yeer \-rere mpde by us or by others, this ""ould not theoreticelly impose unon Chile I s belpnce of y8yments e [Teeter strein thelU it beers pt nresent. It mEiY '·rell be, ho,·rever, that misdirection of investment and misjuoPc:ed economic 'Dolicies will ceuse en effective deter;i.orl"tion in the future internr>tionl"l bl'!lence of the country, An extensive discussion of Chileen investment end economic nolicies WOQld, therefore, be required in any cese. ~ut such discussion could be much more fruitful if it succeeded in inducing the Chileans to set ~0 a positive development program designed to improve the economic nasition of the country end not merely to prevent e deterioration. This more positive possibility is the one envisaged in the follov.dng section,  -15- 2. lie,,! Lendin~ of US :.il100 Nil lion Over fiye Years .--Lending et this level raises service through 1970 ~bove averege 1951-1956 level on existing 11 debt. The risk ",QuId be acceptable only if programs end nolides 'Nere ado1)ted by Chile "rhich held reel T)romise of increaSing outnut. and neglected no onnortu- ni ty of export gro',th and economical import replacement .. 1/ The follo'lring table summarizes the service lmplications of these three lending levels, assuming equel service peJrments upon lopns repe~TPble over t"lenty yee,rs at 4-1/2io ,·ri th full amortization stElrting 1959. To tal Service 1tr.i. th Add! tional Service on :Borro1:nng of Present 50 100 Debt (rvlillions of U.S. Dollars) Annual Service 1952 19.3 Average 1951-1955 18.8 II 1956-1960 15.9 17.4 19.0 II 1961-1965 12.2 16.1. 19.9 II 1966-1970 11.5 15.3 19 .. 2 The foregoing assumes loe.ns reppypble over hlenty years. ilepayt'lent over lesser periods 1Irould reduce loan prinCipal for given service, and longer amortization increase it. Chile appears to be a epse ",here externe,l amorti- 7~tion should not be linked to the liqu1detion period of f? loen financed nroject.  -16- It 'Irould be en inconsistent policy to I"dvocate. as 'He do, the I"doption of 8 development program and yet to fix 8 limi t of credi hrorthiness based on the assumption that there will be no development plan. \'Ie do believe thl't there is H good opportunity find economic adventrc:e i::1 sound devel0:9ment program- ming in Chile. On thl't assumption, the present upper limit on ne N ored.i t ... "rorthiness is US $100 million over the next five yeprs. \~'hether this limi t ce-n be rel".ched denends on t~'TO fa.ctors: (8) the nature of the development program itself, on which it is not yet possible to pronounce, pnd (b) the degree of frith the B~nk entertains that pny program adopted ~dll be effectively eyecu- ted • .'