NAFTA-Bound Chile Tries to Subdue Army - Carefully

RENEWED friction between Chile's civilian leaders and former military rulers is a fresh reminder that Latin America's much-vaunted democratization is still in the building stages.

One of two Army officers convicted of planning a famous 1976 murder in Washington is still not in prison, pushing Chile's leaders to bring the military under democratic rule. This "civilian-military conflict" has lingered since Chile returned in 1989 to a democratic regime - although former dictator and current army commander, Gen. Augusto Pinochet Ugarte, still plays a large role in government.

The friction has placed a different focus on a country more accustomed to international praise for its impressive economic performance. Even as it negotiates to enter NAFTA, Chile finds itself caught in a spotlight on Latin America's bumpy political transition.

Chile was sent into jitters when the two officers did not go to prison after the Supreme Court upheld their conviction on May 30. President Eduardo Frei Ruiz-Tagle canceled an important trip to Brazil this month. And key members of the US Congress, who are probing Chile's bid to join NAFTA, questioned their Chilean counterparts about the troubles when they visited Washington last week.

But Chile proclaimed that the democratic rule of law was in operation after Brig. Gen. Pedro Espinoza a week ago began serving a six-year sentence for his role in a 1976 car bombing in Washington that killed Orlando Letelier, a former Chilean foreign minister, and his American assistant.

General Espinoza's imprisonment was important for Chilean democracy, since it demonstrated the military's submission to a civilian court. But most political leaders and observers say real progress depends on whether retired Gen. Manuel Contreras - called by some here the "big fish" of the two convicted officers - will submit to the Supreme Court ruling and serve his seven-year term.

The former director of the dictatorship's much-feared and now-dissolved DINA secret police, General Contreras said shortly after the court ruling he would "never" spend one day in prison. He then withdrew to his ranch in southern Chile.

With tensions rising, the Army briefly fooled the public by sending a man disguised as Contreras from the airport near the general's home to Santiago under heavy guard. Only then did the real general leave his home for a Naval hospital, where he has been under medical care since June 13.

With daily news reports and speculation on when Contreras will be found fit to begin serving his term, leaders disturbed by the drama's effect on the country are seeking ways to make sure such tensions don't flare again.

Alejandro Foxley, president of the Christian Democratic Party - the party of President Frei and part of Chile's ruling coalition - called last week for the military and civilian leaders to set an agenda to settle the conflict, and to "allow us to go forward with a shared vision of the future - but only after Contreras begins serving his term."

Other coalition leaders rejected that idea, however, saying a civilian government has no political arrangements to discuss with a subordinate military.

Jorge Schaulsohn, member of Congress and president of the small coalition party Party for Democracy, says this is not a time for proposals and speculation "but to be firm and single-minded: Everybody has to abide by the law, and Contreras has to go to jail."

The "great risk" for Chile, he adds, is that the situation drag on "with everyone proclaiming the rule of law has been respected when that is not the case. That would corrode the fundamentals of our democracy right as we thought we were doing so well."

Chile's human rights violations, left over from its era of military rule, will be difficult to resolve. On Friday, Contreras and another brigadier general were handed long prison sentences in Italy for a 1975 attack in Rome against Chile's former Vice President Bernardo Leighton and his wife. Other continuing cases involve the killing of a Spanish United Nations official and a Chilean general in Argentina.

GENERAL Pinochet, who will hold his powerful position until 1997, said at the height of tensions that he suspects some political forces really want a trial of his 17-year military regime. He caused an uproar when he called the Contreras-Espinoza trial "unjust" and compared it to "Nuremberg," the trial of Nazi leaders for war crimes after World War II.

Yet many military leaders also appear to realize that the cases suggest the Army is chafing at its role in a democracy, hurting the country's image of political stability.

"The armed forces are obedient and subordinate in our system," says retired Gen. Jorge Ballerino. "There may have been some problems, but the justice system functioned." The Contreras vow never to submit to the court ruling was a "personal utterance," he says, that was given too much weight by Chile's press.

What Chile also learned from the political tensions is the effect they have on the country's international image and thus on the perception of it as a sound investment partner. Chile's stock market dipped last week for what some analysts called the "Contreras effect."

A blip in the market can hardly be compared to Mexico's financial collapse, which observers link in part to political instability. But for Chile, recent events offered evidence that the stability of democratic institutions is a primary, not a secondary, factor in economic progress.