IV.   POLITICAL ENVIRONMENT


         Nature of Bilateral Relationship with the U.S.

     Since the return to democratic rule in 1990, U.S.-Chilean relations
have flourished.  The United States government has welcomed Chile's
successful effort to regain its place in the international arena after years
of political isolation, and views Chile's successful program of sustained
economic reform and its peaceful transition to democracy as models for
other countries.  The U.S. and Chile work closely together on many issues,
including support of democracy and human rights, and have growing
cooperation on security questions such as UN peacekeeping operations and
non-proliferation.


         Major Political Issues Affecting Business Climate

     Chilean politics is marked by broad consensus among the major
parties about the importance of a democratic political system and a free-
market economic system.  Key differences between the governing coalition
and the rightist opposition involve strategies for, and the role of
government in, addressing issues such as poverty eradication, health care,
infrastructure and education, as well as the degree to which the political
system should be reformed to eliminate power-sharing arrangements
created under the former military government which protect the interests
of the armed services and the political Right at the expense of those of the
elected majority.


         Brief Synopsis of the Political System

     President Eduardo Frei, a Christian Democrat and son of a former
president, won an overwhelming victory in December 1993 elections and
began his six-year term on March 11, 1994, when he succeeded Patricio
Aylwin (also a Christian Democrat).  An engineer by training, Frei was a
successful businessman before entering politics in the 1980's.  Many of his
closest advisors are U.S.-trained and share his commitment to Chile's
successful free market economic model.

     Frei heads Chile's powerful executive branch and his Center/Left
coalition has a majority of elected seats in both the lower and upper houses
of Congress (the Chamber of Deputies and the Senate).  Nonetheless, under
constitutional provisions promulgated during the period of military rule
(1973-1990), the balance of power in the upper house is held by the eight
living "institutional" senators appointed near the end of the Pinochet era.
Thus the government must negotiate with the conservative opposition to
pass any of its legislative program.

     For much of this century, Chilean politics have been marked by a
three-way division between the political right, center and left, with each
holding roughly one-third of the vote.  This division persists today with
the important modification that, since the transition to democracy, the
political Center and the democratic Left have been allied in a single
coalition.  As a result, Chilean politics today revolve around two large
political blocs:  the Center/Left governing coalition and the Rightist
opposition.  The former includes the centrist Christian Democratic and
Radical parties, and the moderate-leftist Party for Democracy and the
Socialist Party.  The latter includes the National Renewal Party, the
Independent Democratic Union, and the populist Center-Center Union.
Chile also has several small fringe-left parties which are not represented
in the Executive Branch or the Congress, but which have a few elected
representatives in local governments.


                             Election Schedule

June 1996      Municipal elections throughout Chile

Dec  1997      Congressional elections (all Deputies and half the elected
               Senators).  In addition, barring constitutional reform to
               eliminate appointed Senators, new "institutional" Senators
               will also be named

Dec  1999      Presidential elections

Mar  2000      Presidential inauguration

June 2000      Municipal elections

Dec  2001      Congressional elections (all Deputies and half the elected
               Senators)