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A Marxist threat to cola sales? Pepsi demands a US coup. Goodbye Allende. Hello Pinochet

By Gregory Palast for The Observer UK
‘It is the firm and continuing policy that Allende be overthrown by a coup… Please review all your present and possibly new activities to include propaganda, black operations, surfacing of intelligence or disinformation, personal contacts, or anything else your imagination can conjure…’
‘Eyes only, restricted handling, secret’ message. To US station chief, Santiago. From CIA headquarters. 16 October 1970.
You would be wrong to assume this plan for mayhem was another manifestation of the Cold War between the ‘free world’ and communism. Much more was at stake: Pepsi-Cola’s market share and other matters closer to the heart of corporate America.
In exclusive interviews with The Observer last week, the former US Ambassador to Chile, Edward Korry, told the story in – and behind – these and other top secret CIA, State Department and White House cables recently released by the National Security Archives. Korry filled in gaps in the story by describing cables still classified, and disclosing information censored in papers now available under the US Freedom of Information Act.
Korry, who served Presidents Kennedy, Johnson and Nixon, told how US companies, from cola to copper, using the CIA as an international debt collection agency and investment security force.
Indeed, the October 1970 plot against Chile’s President-elect Salvador Allende, using CIA ‘sub-machine guns and ammo’, was the direct result of a plea for action a month earlier by Donald Kendall, chairman of PepsiCo, in two telephone calls to the company’s former lawyer, President Richard Nixon.
Kendall arranged for the owner of the company’s Chilean bottling operation to meet National Security Adviser Henry Kissinger on September 15. Hours later, Nixon called in his CIA chief, Richard Helms, and, according to Helms’s handwritten notes, ordered the CIA to prevent Allende’s inauguration.
But this is only half the story, according to Korry. He claims the US conspiracy against Allende’s election did not begin with Nixon, but originated – and read no further if you cherish the myth of Camelot – with John Kennedy.
In 1963, Allende was heading towards victory in Chile’s presidential election. Kennedy decided his political creation, Eduardo Frei, the late father of Chile’s current President, Eduardo Frei Ruiz-Tagle, could win the election by buying it. Kennedy left it to his brother, Bobby, the Attorney-General, to put the plan into action.
The Kennedys cajoled US multinationals into pouring $2 billion into Chile, a nation of only 8 million people. This was not benign investment, but what Korry calls ‘a mutually corrupting’ web of business deals, many questionable, for which the US government would arrange guarantees and insurance.
In return, the American-based firms kicked back millions of dollars to pay for well over half of Frei’s successful election campaign. By the end of this process, Americans had gobbled up more than 85 per cent of Chile’s hard-currency earning industries.
The US government, the guarantor of these investments, committed extraordinary monetary, intelligence and political resources to protect them. Several business-friendly US government front organisations and operatives were sent into Chile -including the American Institute for Free Labor Development, infamous for sabotaging militant trade unions.
Then, in 1970, US investments, both financial and political, faced unexpected jeopardy. A split between Chile’s centre and right-wing parties permitted an alliance of communists, socialists and radicals – uniting behind the socialist Allende – to finish the presidential election 1 per cent ahead of his nearest rival.
That October, Korry, a hardened anti-communist, hatched an off-the-wall scheme to block Allende’s inauguration and return Frei to power. To promote his own bloodless intrigues, the ambassador claims he ‘back-channeled’ a message to Washington warning against military actions that might lead to ‘another Bay of Pigs’ fiasco. (Korry retains a copy of this still-classified cable.)
But Korry’s prescient message only angered Kissinger, who had already authorised the Pepsi-instigated coup, scheduled for the following week. Kissinger ordered Korry to fly in secret to Washington that weekend for a dressing-down. Still not knowing about the CIA plan, Korry told Kissinger in a White House corridor that ‘only a madman’ would plot with Chile’s ultra-right generals.
As if on cue, Kissinger opened the door to the Oval Office to introduce Nixon. Nixon – who described his ambassador as ‘soft in the head’ – did agree that, tactically, a coup could not yet succeed. A last-minute cable to the CIA to delay action was too late: the conspirators kidnapped and killed Chile’s pro- democracy Armed Forces Chief, Rene Schneider. Public revulsion at this crime assured Allende’s confirmation by Chile’s Congress.
Even if the US president’s sense of realpolitik may have disposed him to a modus vivendi with Allende – Korry’s alternative if his Frei gambit failed – Nixon faced intense pressure from his political donors in business who were panicked by Allende’s plans to nationalise their operations.
In particular, the president was aware that the owner of Chile’s phone company, ITT Corporation, was illegally channelling funds into Republican Party coffers. Nixon could not ignore ITT – and ITT wanted blood. An ITT board member, ex-CIA director John McCone, pledged Kissinger $1 million in support of CIA action to prevent Allende from taking office.
Separately, Anaconda Copper and other multinationals, under the aegis of David Rockefeller’s Business Group for Latin America, offered $500,000 to buy influence with Chilean congressmen to reject confirmation of Allende’s victory. But Korry wouldn’t play. While he knew nothing of the ITT demands on the CIA, he got wind of, and vetoed, the cash for payoffs from Anaconda and the other firms.
Korry, speaking last week from his home in Charlotte, North Carolina, disclosed that he even turned in to the Chilean authorities an army major who planned to assassinate Allende – unaware the officer was linked to the CIA plotters.
Once Allende took office, Korry sought accommodation with the new government, conceding that expropriations of the telephone and copper concessions (actually begun under Frei) were necessary to disentangle Chile from seven decades of ‘incestuous and corrupting’ dependency.
US corporations didn’t see it that way. While pretending to bargain in good faith, they pushed the White House to impose a clandestine embargo on Chile’s economy. But in case all schemes failed, ITT, claims Korry, paid $500,000 to someone referred to in their intercepted cables as ‘The Fat Man’. Korry identified him as Jacobo Schaulsohn, Allende’s ally on a committee set up to compensate firms whose property had been expropriated.
It was not money well spent. In 1971, when Allende learned of the corporate machinations against his government, he refused the compensation. It was this – the Chilean leader’s failure to pay, not his perceived allegiance to the hammer and sickle – that sealed his fate.
The State Department pulled Korry out of Santiago in October 1971. On his return to the US, he advised the government’s Overseas Private Investment Corporation to deny Anaconda Copper and ITT compensation for their seized property. Korry argued that, like someone who burns down their own home, ITT could not claim against insurance for an expropriation the company had itself provoked by violating Chilean law.
Confidentially, he recommended criminal charges against ITT’s top brass, including, implicitly, chief executive Harold Geneen, for falsifying the insurance claims and lying to Congress.
Given powerful evidence against the companies, OPIC at first refused them compensation, and the Justice Department indicted two mid-level ITT operatives for perjury. But ultimately, the companies received their money and the executives went free on the grounds that they were working with the full co-operation of the CIA – and higher.
In September 1970 in a secret cable to the US Secretary of State, ambassador Korry quotes Jean Genet: ‘Even if my hands were full of truths, I wouldn’t open it for others.’ Why open his hand now? At 77, one supposes there is a desire to correct history. He says only that it is important to take out of the shadows what he calls – optimistically – the last case of US ‘dollar diplomacy’.
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Gregory Palast’s other investigative reports can be found at where you can also subscribe to Palast’s column.
Gregory Palast’s column “Inside Corporate America” appears fortnightly in the
Observer’s Business section. Nominated Business Writer of the Year (UK Press
Association – 2000), Investigative Story of the Year (Industrial. Society – 1999), Financial Times David Thomas Prize (1998).

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