Despite the best efforts of Chile's economic wizards, the nation's economy has gone into a tailspin.
Chile's specialists - the so-called ''Chicago boys'' - have experimented with the controversial free market economics of their mentor, University of Chicago economics professor Milton Friedman, for seven years.
But they have been unable to cope with record low copper prices and high international interest rates. These have combined to produce a serious depression with unemployment climbing and budget deficits soaring.
In trying to meet the increasingly bleak economic picture, Chile's military government devalued the peso 18 percent, a move it had rejected time and again. Devaluation was expected to aid immediately copper sales on the world market. These sales account for roughly 50 percent of Chile's exports. But businesses with debts in United States dollars are hard hit by devaluation and their financing costs have leaped.
There is also little assurance that unemployment will be cut as a result of devaluation, although the government says the reforms will get the economy back on track.
Moreover, inflation may again soar as merchants boost prices to compensate for devaluation. This may mean a return to the 30 percent inflation rates of the 1960s. After three years of single-digit inflation rates, the generals might try to jawbone prices down although the outcome would be questionable. Opposition to the economic system is growing.
Moreover, Raul Cardinal Silva Henriquez, Roman Catholic primate of Chile and one of the key opponents of Gen. Augusto Pinochet Ugarte's regime, says devaluation could be the undoing of the economic system.
The devaluation move was only part of the government's economic package. Eight state-owned companies in fields from steel to shipping will be sold to private investors in order to cut budget deficits. Foreigners are expected to get a crack at some of the shares.
Chile's central bank will also help shaky financial institutions cope with $2 billion in bad loans, allowing loan write-offs over 10 years, saving the firms from bankrupcty.