CHILE: The Toughest War

Chile, the doughty little country that never lost a shooting war, is fighting a desperate battle against the hemisphere's deadliest case of inflation. Until the beginning of this year, victory was in the air; President Carlos Ibanez, advised by U.S. Economic Consultants Klein & Saks, had effectively reversed 40 years of accelerating inflation. But last week the battle was again going against the inflation-fighters.

The immediate, causes of the setback were three sharp economic blows. First, the worst drought in 87 years parched the fertile south, forcing Chile to spend hard cash for foreign wheat. Then unseasonal rains flooded the...

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