Word: pesos
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Next Reform. The Ibáñez reforms are not free from peril, though considerably less frightening than the destructive inflation cycle. The first effect of freeing the peso was to devalue it (from the official rate of 300 per dollar to a current 460). That puts heavy strain on the ceiling prices of imported goods, and the whole program is in deep trouble if price ceilings give way. Sure that they will, Labor Federation Leader Clotario Blest, blinking tired eyes in the sunny patio of Santiago's Central Jail, says: "The heart of the matter is that only...
...that they do not propose to liquidate inflation by squeezing the country's rotos (broken ones). They are confident that plenty of copper dollars, from new investment and current near-record prices (45? a lb.) plus a $75 million currency stabilization loan from the U.S., will bolster the peso. And to hold the price line against changeover shocks, the government gave temporary direct subsidies for vital imported goods, and raised living allowances under the social-security system for 3,000,000 rotos...
After a quarter-century of trying to set its foreign exchange rates by complex official decrees, Chile chucked the philosophy of government control over the value of the peso and went back to the supply-and-demand free rate...
Chile's experience with controls started out in 1931 as a Depression attempt to subsidize business by giving varying values to the peso (which had been traded freely at eight to the dollar). Depending on their utility, as evaluated by the bureaucracy, various imports got various rates; e.g., whisky was made proportionately more costly to import than milk. Export rates, too, were adjusted to let commodities-in theory at least-meet foreign competition; there was a "copper dollar," a "wine dollar," a "nitrate dollar" and a "sulphur dollar." Soon the government was in the satisfying business of creaming...
...from internal inflation, the scale of official rates dropped steadily to as low as 300; the limited free market that the law permitted hit a peak of more than 800 last August. U.S. Economic Consultants Klein & Saks, hired then by Chile to cure its economic fevers, made freeing the peso a high-priority recommendation...