Transwiki:History of Chile

The territory of Chile has been populated since at least 12,000 BCE. In the 16th century the Spanish conquistadors began to subdue and colonize the region of present-day Chile, and the territory became a colony from 1540 to 1818, when it gained independence from Spain. Chile's economic development was successively marked by the export of first agricultural produce, then saltpeter and later copper until the 1980s. The wealth of raw materials led to an economic upturn, but also led to dependency, and even wars with neighboring states. The country was governed during most of its first 150 years of independent life by different forms of restricted democracy, where the electorate was carefully vetted and controlled by an elite. Failure to address the economic and social disparities and increasing political awareness of the less-affluent population, as well as indirect intervention and economic funding to the main political groups by both the KGB and the CIA, as part of the Cold War, led to a political polarization under socialist President Salvador Allende which in turn resulted in the Chilean coup of 1973 and the government of General Augusto Pinochet. The 17-year military-led government was marked by severe human-rights violations and deep market-oriented economic reforms. In 1988, Chile made a peaceful transition to democracy.

Early history
About 12,000 years ago, migrating Native Americans settled in the fertile valleys and coastal areas of what is present day Chile. Pre-Hispanic Chile was home to over a dozen different Amerindian societies. The current prevalent theories are that the initial arrival of humans to the continent took place either along the Pacific coast southwards in a rather rapid expansion long preceding the Clovis culture, or even trans-Pacific migration. These theories are backed by findings in the Monte Verde archaeological site, which predates the Clovis site by thousands of years. Specific early human settlement sites from the very early human habitation in Chile include the Cueva del Milodon and the Pali Aike Crater's lava tube.

Despite such diversity, it is possible to classify the indigenous people into three major cultural groups: the northern people, who developed rich handicrafts and were influenced by pre-Incan cultures; the Araucanian culture, who inhabited the area between the river Choapa and the island of Chiloé, and lived primarily off agriculture; and the Patagonian culture, composed of various nomadic tribes, who supported themselves through fishing and hunting (and who in Pacific/Pacific Coast immigration scenario would be descended partly from the most ancient settlers).

No elaborate, centralized, sedentary civilization reigned supreme.

The Araucanians, a fragmented society of hunters, gatherers, and farmers, constituted the largest native American group in Chile. A mobile people who engaged in trade and warfare with other indigenous groups, they lived in scattered family clusters and small villages. Although the Araucanians had no written language, they did use a common tongue. Those in what became central Chile were more settled and more likely to use irrigation. Those in the south combined slash-and-burn agriculture with hunting. Of the three Araucanian groups, the one that mounted the fiercest resistance to the attempts at seizure of their territory were the Mapuche, meaning "people of the land."

The Inca Empire briefly extended their empire into what is now northern Chile, where they collected tribute from small groups of fishermen and oasis farmers but were not able to establish a strong cultural presence in the area. As the Spaniards would after them, the Incas encountered fierce resistance and so were unable to exert control in the south. During their attempts at conquest in 1460 and again in 1491, the Incas established forts in the Central Valley of Chile, but they could not colonize the region. The Mapuche fought against the Sapa Tupac Inca Yupanqui (AD 1471-93) and his army. The result of the bloody three-day confrontation known as the Battle of the Maule was that the Inca conquest of the territories of Chile ended at the Maule river, which subsequently became the boundary between the Incan empire and the Mapuche lands until the arrival of the Spaniards.

Scholars speculate that the total Araucanian population may have numbered 1 million at most when the Spaniards arrived in the 1530s; a century of European conquest and disease reduced that number by at least half. During the conquest, the Araucanians quickly added horses and European weaponry to their arsenal of clubs and bows and arrows. They became adept at raiding Spanish settlements and, albeit in declining numbers, managed to hold off the Spaniards and their descendants until the late nineteenth century. The Araucanians' valor inspired the Chileans to mythologize them as the nation's first national heroes, a status that did nothing, however, to elevate the wretched living standard of their descendants.

Spanish conquest and colony
The first European to sight Chilean territory was Ferdinand Magellan, who crossed the Strait of Magellan on November 1, 1520. However, the title of discoverer of Chile is usually assigned to Diego de Almagro. Almagro was Francisco Pizarro's partner, and he received the Southern area.(Nueva Toledo). He organized an expedition that brought him to central Chile in 1537, but he found little of value to compare with the gold and silver of the Incas in Peru. Left with the impression that the inhabitants of the area were poor, he returned to Peru, later to die in a Civil War.

After this initial excursion there was little interest from colonial authorities in further exploring modern-day Chile. However, Pedro de Valdivia, captain of the army, realizing the potential for expanding the Spanish empire southward, asked Pizarro's permission to invade and conquer the southern lands. With a couple of hundred men, he subdued the local inhabitants and founded the city of Santiago de Nueva Extremadura, now Santiago de Chile, on February 12, 1541.

Although Valdivia found little gold in Chile he could see the agricultural richness of the land. He continued his explorations of the region west of the Andes and founded over a dozen towns and established the first encomiendas. The greatest resistance to Spanish rule came from the Mapuche culture, who opposed European conquest and colonization until the 1880s; this resistance is known as the Arauco War. Valdivia died at the Battle of Tucapel, defeated by Lautaro, a young Mapuche toqui (war chief), but the European conquest was well underway. The Spaniards never subjugated the Mapuche territories; various attempts at conquest, both by military and peaceful means, failed. The Great Uprising of 1598 swept all Spanish presence south of the Bío-Bío River except Chiloé (and Valdivia which was decades later reestablished as a fort), and the great river became the frontier line between Mapuche lands and the Spanish realm. North of that line cities grew up slowly, and Chilean lands eventually became an important source of food for the Viceroyalty of Peru.

Valdivia became the first governor of the Captaincy General of Chile. In that post, he obeyed the viceroy of Peru and, through him, the King of Spain and his bureaucracy. Responsible to the governor, town councils known as Cabildo administered local municipalities, the most important of which was Santiago, which was the seat of a Royal Appeals Court from 1609 until the end of colonial rule.

Chile was the least wealthy realm of the Spanish Crown for most of its colonial history. Only in the 18th century did a steady economic and demographic growth begin, an effect of the reforms by Spain's Bourbon dynasty and a more stable situation along the frontier.

Independence (1810-1826)
The drive for independence from Spain was precipitated by usurpation of the Spanish throne by Napoleon's brother Joseph Bonaparte. The Chilean War of Independence was part of the larger Spanish American independence movement, and it was far from having unanimous support among Chileans, who became divided between independentists and royalists. What started as an elitist political movement against their colonial master, finally ended as a full-fledged civil war between pro-Independence Criollos who sought political and economic independence from Spain and royalist Criollos, who supported the continued allegiance to and permanence within the Spanish Empire of the Kingdom of Chile. The struggle for independence was a war within the upper class, although the majority of troops on both sides consisted of conscripted mestizos and native Americans.

The beginning of the Independence movement is traditionally dated as September 18, 1810 when a national junta was established to govern Chile in the name of the deposed king Ferdinand VII. Depending on what terms one uses to define the end, the movement extended until 1821 (when the Spanish were expelled from mainland Chile) or 1826 (when the last Spanish troops surrendered and Chiloé was incorporated to the Chilean republic). The independence process is normally divided into three stages: Patria Vieja, Reconquista, and Patria Nueva.

Chile's first experiment with self-government, the "Patria Vieja" (old republic, 1810–14), was led by José Miguel Carrera, an aristocrat then in his mid-twenties. The military-educated Carrera was a heavy-handed ruler who aroused widespread opposition. Another of the earliest advocates of full independence, Bernardo O'Higgins, captained a rival faction that plunged the Criollos into civil war. For him and for certain other members of the Chilean elite, the initiative for temporary self-rule quickly escalated into a campaign for permanent independence, although other Criollos remained loyal to Spain. Among those favoring independence, conservatives fought with liberals over the degree to which French revolutionary ideas would be incorporated into the movement. After several efforts, Spanish troops from Peru took advantage of the internecine strife to reconquer Chile in 1814, when they reasserted control by winning the Battle of Rancagua on October 12. O'Higgins, Carrera and many of the Chilean rebels escaped to Argentina.

The second period was characterized by the Spanish attempts to reimpose arbitrary rule during the period known as the Reconquista of 1814-17 ("Reconquest": the term echoes the Reconquista in which the Christian kingdoms retook Iberia from the Muslims). During this period, the harsh rule of the Spanish loyalists, who punished suspected rebels, drove more and more Chileans into the insurrectionary camp. More members of the Chilean elite were becoming convinced of the necessity of full independence, regardless of who sat on the throne of Spain. As the leader of guerrilla raids against the Spaniards, Manuel Rodríguez became a national symbol of resistance.

In exile in Argentina, O'Higgins joined forces with José de San Martín. Their combined army freed Chile with a daring assault over the Andes in 1817, defeating the Spaniards at the Battle of Chacabuco on February 12 and marking the beginning of the Patria Nueva. San Martín considered the liberation of Chile a strategic stepping-stone to the emancipation of Peru, which he saw as the key to hemispheric victory over the Spanish. Chile won its formal independence when San Martín defeated the last large Spanish force on Chilean soil at the Battle of Maipú on April 5, 1818. San Martín then led his Argentine and Chilean followers north to liberate Peru; and fighting continued in Chile's southern provinces, the bastion of the royalists, until 1826.

A declaration of independence was officially issued by Chile on February 12, 1818 and formally recognized by Spain in 1840, when full diplomatic relations were established.

Constitutional organization (1818-1833)
From 1817 to 1823, Bernardo O'Higgins ruled Chile as supreme director. He won plaudits for defeating royalists and founding schools, but civil strife continued. O'Higgins alienated liberals and provincials with his authoritarianism, conservatives and the church with his anticlericalism, and landowners with his proposed reforms of the land tenure system. His attempt to devise a constitution in 1818 that would legitimize his government failed, as did his effort to generate stable funding for the new administration. O'Higgins's dictatorial behavior aroused resistance in the provinces. This growing discontent was reflected in the continuing opposition of partisans of Carrera, who was executed by the Argentine regime in Mendoza in 1821, like his two brothers were three years earlier.

Although opposed by many liberals, O'Higgins angered the Roman Catholic Church with his liberal beliefs. He maintained Catholicism's status as the official state religion but tried to curb the church's political powers and to encourage religious tolerance as a means of attracting Protestant immigrants and traders. Like the church, the landed aristocracy felt threatened by O'Higgins, resenting his attempts to eliminate noble titles and, more important, to eliminate entailed estates.

O'Higgins's opponents also disapproved of his diversion of Chilean resources to aid San Martín's liberation of Peru. O'Higgins insisted on supporting that campaign because he realized that Chilean independence would not be secure until the Spaniards were routed from the Andean core of the empire. However, amid mounting discontent, troops from the northern and southern provinces forced O'Higgins to resign. Embittered, O'Higgins departed for Peru, where he died in 1842.

After O'Higgins went into exile in 1823, civil conflict continued, focusing mainly on the issues of anticlericalism and regionalism. Presidents and constitutions rose and fell quickly in the 1820s. The civil struggle's harmful effects on the economy, and particularly on exports, prompted conservatives to seize national control in 1830.

In the minds of most members of the Chilean elite, the bloodshed and chaos of the late 1820s were attributable to the shortcomings of liberalism and federalism, which had been dominant over conservatism for most of the period. The abolition of slavery in 1823—long before most other countries in the Americas—was considered one of the liberals' few lasting achievements. One liberal leader from the south, Ramón Freire, rode in and out of the presidency several times (1823–27, 1828, 1829, 1830) but could not sustain his authority. From May 1827 to September 1831, with the exception of brief interventions by Freire, the presidency was occupied by Francisco Antonio Pinto, Freire's former vice president. In August 1828, Pinto's first year in office, Chile abandoned its short-lived federalist system for a unitary form of government, with separate legislative, executive, and judicial branches. By adopting a moderately liberal constitution in 1828, Pinto alienated both the federalists and the liberal factions. He also angered the old aristocracy by abolishing estates inherited by primogeniture (mayorazgo) and caused a public uproar with his anticlericalism. After the defeat of his liberal army at the Battle of Lircay on April 17, 1830, Freire, like O'Higgins, went into exile in Peru.

Conservative Era (1830-1861)
Although never president, Diego Portales dominated Chilean politics from the cabinet and behind the scenes from 1830 to 1837. He installed the "autocratic republic", which centralized authority in the national government. His political program enjoyed support from merchants, large landowners, foreign capitalists, the church, and the military. Political and economic stability reinforced each other, as Portales encouraged economic growth through free trade and put government finances in order.

Portales was an agnostic who said that he believed in the clergy but not in God. He realized the importance of the Roman Catholic Church as a bastion of loyalty, legitimacy, social control, and stability, as had been the case in the colonial period. He repealed Liberal reforms that had threatened church privileges and properties.

Portales brought the military under civilian control by rewarding loyal generals, cashiering troublemakers, and promoting a victorious war against the Peru-Bolivia Confederation (1836–39). After defeating Peru and Bolivia, Chile dominated the Pacific Coast of South America. The victory over its neighbors gave Chile and its new political system a psychological boost. Chileans experienced a surge of national enthusiasm and cohesion behind a regime accepted as legitimate and efficacious.

Portales also achieved his objectives by wielding dictatorial powers, censoring the press, and manipulating elections. For the next forty years, Chile's armed forces would be distracted from meddling in politics by skirmishes and defensive operations on the southern frontier, although some units got embroiled in domestic conflicts in 1851 and 1859.

The "Portalian State" was institutionalized by the Chilean Constitution of 1833. One of the most durable charters ever devised in Latin America, the Portalian constitution lasted until 1925. The constitution concentrated authority in the national government, more precisely, in the hands of the president, who was elected by a tiny minority. The chief executive could serve two consecutive five-year terms and then pick a successor. Although the Congress had significant budgetary powers, it was overshadowed by the president, who appointed provincial officials. The constitution also created an independent judiciary, guaranteed inheritance of estates by primogeniture, and installed Catholicism as the state religion. In short, it established an autocratic system under a republican veneer.

The first Portalian president was General Joaquín Prieto, who served two terms (1831–36, 1836–41). President Prieto had four main accomplishments: implementation of the 1833 constitution, stabilization of government finances, defeat of provincial challenges to central authority, and victory over the Peru-Bolivia Confederation. During the presidencies of Prieto and his two successors, Chile modernized through the construction of ports, railroads, and telegraph lines, some built by United States entrepreneur William Wheelwright. These innovations facilitated the export-import trade as well as domestic commerce.

Prieto and his adviser, Portales, feared the efforts of Bolivian general Andrés de Santa Cruz to unite with Peru against Chile. These qualms exacerbated animosities toward Peru dating from the colonial period, now intensified by disputes over customs duties and loans. Chile also wanted to become the dominant South American military and commercial power along the Pacific. Portales got Congress to declare war on Peru in 1836.

Liberal era (1861-1891)
The political revolt brought little social change, however, and 19th century Chilean society preserved the essence of the stratified colonial social structure, which was greatly influenced by family politics and the Roman Catholic Church. A strong presidency eventually emerged, but wealthy landowners remained powerful.

Toward the end of the nineteenth century, the government in Santiago consolidated its position in the south by persistently suppressing the Mapuche during the Occupation of the Araucanía. In 1881, it signed a treaty with Argentina confirming Chilean sovereignty over the Strait of Magellan, but conceding all of oriental Patagonia, and a considerable fraction of the territory it had during colonial times. As a result of the War of the Pacific with Peru and Bolivia (1879–1883), Chile expanded its territory northward by almost one-third and acquired valuable nitrate deposits, the exploitation of which led to an era of national affluence.

In the 1870s, the church influence started to diminish slightly with the passing of several laws that took some old roles of the church into the State's hands such as the registry of births and marriages.

In 1886, José Manuel Balmaceda was elected president. His economic policies visibly changed the existing liberal policies. He began to violate the constitution and slowly began to establish a dictatorship. Congress decided to depose Balmaceda, who refused to step down. Jorge Montt, among others, directed an armed conflict against Balmaceda, which soon extended into the Chilean Civil War of 1891. Defeated, Balmaceda fled to Argentina's embassy, where he committed suicide. Jorge Montt became the new president.

Parliamentary republic (1891-1925)
The so-called Parliamentary Republic was not a true parliamentary system, in which the chief executive is elected by the legislature. It was, however, an unusual regime in presidentialist Latin America, for Congress really did overshadow the rather ceremonial office of the president and exerted authority over the chief executive's cabinet appointees. In turn, Congress was dominated by the landed elites. This was the heyday of classic political and economic liberalism.

For many decades thereafter, historians derided the Parliamentary Republic as a quarrel-prone system that merely distributed spoils and clung to its laissez-faire policy while national problems mounted. The characterization is epitomized by an observation made by President Ramón Barros Luco (1910–15), reputedly made in reference to labor unrest: "There are only two kinds of problems: those that solve themselves and those that can't be solved." At the mercy of Congress, cabinets came and went frequently, although there was more stability and continuity in public administration than some historians have suggested. Chile also temporary resolved its border disputes with Argentina with the Puna de Atacama Lawsuit of 1899, the Boundary treaty of 1881 between Chile and Argentina and the 1902 General Treaty of Arbitration.

Political authority ran from local electoral bosses in the provinces through the congressional and executive branches, which reciprocated with payoffs from taxes on nitrate sales. Congressmen often won election by bribing voters in this clientelistic and corrupt system. Many politicians relied on intimidated or loyal peasant voters in the countryside, even though the population was becoming increasingly urban. The lackluster presidents and ineffectual administrations of the period did little to respond to the country's dependence on volatile nitrate exports, spiraling inflation, and massive urbanization.

In recent years, however, particularly when the authoritarian regime of Augusto Pinochet is taken into consideration, some scholars have reevaluated the Parliamentary Republic of 1891-1925. Without denying its shortcomings, they have lauded its democratic stability. They have also hailed its control of the armed forces, it respect for civil liberties, its expansion of suffrage and participation, and its gradual admission of new contenders, especially reformers, to the political arena. In particular, two young parties grew in importance - the Democrat Party, with roots among artisans and urban workers, and the Radical Party, representing urban middle sectors and provincial elites. By the early twentieth century, both parties were winning increasing numbers of seats in Congress. The more leftist members of the Democrat Party became involved in the leadership of labor unions and broke off to launch the Socialist Workers' Party in 1912. The founder of the POS and its best-known leader, Luis Emilio Recabarren, also founded the Communist Party of Chile in 1922.

Presidential republic (1925-1973)
By the 1920s, the emerging middle and working classes were powerful enough to elect a reformist president, Arturo Alessandri Palma. Alessandri appealed to those who believed the social question should be addressed, to those worried by the decline in nitrate exports during World War I, and to those weary of presidents dominated by Congress. Promising "evolution to avoid revolution", he pioneered a new campaign style of appealing directly to the masses with florid oratory and charisma. After winning a seat in the Senate representing the mining north in 1915, he earned the sobriquet "Lion of Tarapacá." As a dissident Liberal running for the presidency, Alessandri attracted support from the more reformist Radicals and Democrats and formed the so-called Liberal Alliance. He received strong backing from the middle and working classes as well as from the provincial elites. Students and intellectuals also rallied to his banner. At the same time, he reassured the landowners that social reforms would be limited to the cities.

Alessandri soon discovered that his efforts to lead would be blocked by the conservative Congress. Like Balmaceda, he infuriated the legislators by going over their heads to appeal to the voters in the congressional elections of 1924. His reform legislation was finally rammed through Congress under pressure from younger military officers, who were sick of the neglect of the armed forces, political infighting, social unrest, and galloping inflation. whose program was frustrated by a conservative congress.

A double military coup set off a period of great political instability that lasted until 1932. First military right-wingers opposing Alessandri seized power in September 1924, and then reformers in favor of the ousted president took charge in January 1925. The Saber noise (ruido de sables) incident of September 1924, provoked by discontent of young officers, mostly lieutenants from middle and working classes, lead to the establishment of the September Junta led by General Luis Altamirano and the exile of Alessandri. However, fears of a conservative restoration in progressive sectors of the army led to another coup in January, which ended with the establishment of the January Junta as interim government while waiting for Alessandri's return. The latter group was led by two colonels, Carlos Ibáñez del Campo and Marmaduke Grove. They returned Alessandri to the presidency that March and enacted his promised reforms by decree. The latter re-assumed power in March, and a new Constitution encapsulating his proposed reforms was ratified in a plebiscite in September 1925. The new constitution gave increased powers to the presidency. Alessandri broke with the classical liberalism's policies of laissez-faire by creating a Central Bank and imposing a revenue tax. However, social discontents were also crushed, leading to the Marusia massacre in March 1925 followed by the La Coruña massacre.

The longest lasting of the ten governments between 1924 and 1932 was that of General Carlos Ibáñez, who briefly held power in 1925 and then again between 1927 and 1931 in what was a de facto dictatorship. When constitutional rule was restored in 1932, a strong middle-class party, the Radicals, emerged. It became the key force in coalition governments for the next 20 years.

The Seguro Obrero Massacre took place on September 5, 1938, in the midst of a heated three-way election campaign between the ultraconservative Gustavo Ross Santa María, the radical Popular Front's Pedro Aguirre Cerda, and the newly-formed Popular Alliance candidate, Carlos Ibáñez del Campo. The National Socialist Movement of Chile supported Ibáñez's candidacy, which had been announced on September 4. In order to preempt Ross's victory, the National Socialists mounted a coup d'état that was intended to take down the rightwing government of Arturo Alessandri Palma and place Ibáñez in power.

During the period of Radical Party dominance (1932–52), the state increased its role in the economy. In 1952, voters returned Ibáñez to office for another 6 years. Jorge Alessandri succeeded Ibáñez in 1958.

The 1964 presidential election of Christian Democrat Eduardo Frei Montalva by an absolute majority initiated a period of major reform. Under the slogan "Revolution in Liberty", the Frei administration embarked on far-reaching social and economic programs, particularly in education, housing, and agrarian reform, including rural unionization of agricultural workers. By 1967, however, Frei encountered increasing opposition from leftists, who charged that his reforms were inadequate, and from conservatives, who found them excessive. At the end of his term, Frei had accomplished many noteworthy objectives, but he had not fully achieved his party's ambitious goals.

Collapse of democracy
In the 1970 presidential election, Senator Salvador Allende Gossens won a plurality of votes in a three-way contest. He was a Marxist physician and member of Chile's Socialist Party, who headed the "Popular Unity" (UP or "Unidad Popular") coalition of the Socialist, Communist, Radical, and Social-Democratic Parties, along with dissident Christian Democrats, the Popular Unitary Action Movement (MAPU), and the Independent Popular Action. Allende had two main competitors in the election — Radomiro Tomic, representing the incumbent Christian Democratic party, who ran a left-wing campaign with much the same theme as Allende's, and the right-wing former president Jorge Alessandri. In the end, Allende received a plurality of the votes cast, getting 36% of the vote against Alessandri's 34% and Tomic's 27%.

Despite pressure from the government of the United States, the Chilean Congress, keeping with tradition, conducted a runoff vote between the leading candidates, Allende and former president Jorge Alessandri. This procedure had previously been a near-formality, yet became quite fraught in 1970. After assurances of legality on Allende's part, the murder of the Army Commander-in-Chief, General René Schneider and Frei's refusal to form an alliance with Alessandri to oppose Allende - on the grounds that the Christian Democrats were a workers' party and could not make common cause with the oligarchs - Allende was chosen by a vote of 153 to 35.

The Popular Unity platform included the nationalization of U.S. interests in Chile's major copper mines, the advancement of workers' rights, implementation of land reform, reorganization of the national economy into socialized, mixed, and private sectors, a foreign policy of "international solidarity" and national independence and a new institutional order (the "people's state" or "poder popular"), including the institution of a unicameral congress. Immediately after the election, the United States expressed its disapproval and raised a number of economic sanctions against Chile. In addition, the CIA's website reports that the agency aided three different Chilean opposition groups during that time period and "sought to instigate a coup to prevent Allende from taking office". The action plans to prevent Allende from coming to power were known as Track I and Track II. At the same time, indigenous and peasant forces across the country violently started to take control of agricultural lands, forcibly fulfilling Allende's land redistribution promises.

In the first year of Allende's term, the short-term economic results of Economics Minister Pedro Vuskovic's expansive monetary policy were unambiguously favorable: 12% industrial growth and an 8.6% increase in GDP, accompanied by major declines in inflation (down from 34.9% to 22.1%) and unemployment (down to 3.8%). Allende adopted measures including price freezes, wage increases, and tax reforms, which had the effect of increasing consumer spending and redistributing income downward. Joint public-private public works projects helped reduce unemployment. Much of the banking sector was nationalized. Many enterprises within the copper, coal, iron, nitrate, and steel industries were expropriated, nationalized, or subjected to state intervention. Industrial output increased sharply and unemployment fell during the administration's first year. However, these results were not sustainable and in 1972 the Chilean escudo had runaway inflation of 140%. An economic depression that had begun in 1967 peaked in 1972, exacerbated by capital flight, plummeting private investment, and withdrawal of bank deposits in response to Allende's socialist program. Production fell and unemployment rose. The combination of inflation and government-mandated price-fixing led to the rise of black markets in rice, beans, sugar, and flour, and a "disappearance" of such basic commodities from supermarket shelves.

The Cuban packages scandal revealed arms smuggling from the Communist Cuba to Chile; Allende - surrounded by KGB advisors - had turned Chile into a center for Soviet operations in Latin America. Salvador Allende now had a personal KGB adviser. According to Allende's KGB file, Allende "was made to understand the necessity of reorganising Chile's army and intelligence services, and of setting up a relationship between Chile's and the USSR's intelligence services". The nationalization of U.S. and other foreign-owned companies led to increased tensions with the United States. As a result, the Richard Nixon administration organized and inserted secret operatives in Chile, in order to quickly destabilize Allende's government. In addition, Nixon gave instructions to make the Chilean economy scream, and international financial pressure restricted economic credit to Chile. Simultaneously, the CIA funded opposition media, politicians, and organizations, helping to accelerate a campaign of domestic destabilization. By 1972, the economic progress of Allende's first year had been reversed, and the economy was in crisis. Political polarization increased, and large mobilizations of both pro- and anti-government groups became frequent, often leading to clashes.

By 1973, Chilean society had grown highly polarized, between strong opponents and equally strong supporters of Salvador Allende and his government. Military actions and movements, separate from the civilian authority, began to manifest in the countryside. A failed military coup was attempted against Allende in June 1973.

In its "Agreement", on August 22, 1973, the Chamber of Deputies of Chile asserted that Chilean democracy had broken down and called for "redirecting government activity", to restore constitutional rule. Less than a month later, on September 11, 1973, the Chilean military deposed Allende, who apparently shot himself in the head to avoid capture as the Presidential Palace was surrounded and bombed. Subsequently, rather than restore governmental authority to the civilian legislature, Augusto Pinochet exploited his role as Commander of the Army to seize total power and to establish himself at the head of a junta.

Controversy surrounds alleged CIA involvement in the coup. As early as the Church Committee Report (1975), publicly available documents have indicated that the CIA attempted to prevent Allende from taking office after he was elected in 1970; the CIA itself released documents in 2000 acknowledging this and that Pinochet was one of their favored alternatives to take power.

According to the Vasili Mitrokhin and Christopher Andrew, the KGB and the Cuban Intelligence Directorate launched a campaign known as Operation TOUCAN. For instance, in 1976, the New York Times published 66 articles on alleged human rights abuses in Chile and only 4 on Cambodia, where the communist Khmer Rouge killed some 1.5 million people of 7.5 million people in the country. .

Military government (1973-1989)
By early 1973, inflation had risen 800% under Allende's presidency.  The crippled economy was further battered by prolonged and sometimes simultaneous strikes by physicians, teachers, students, truck owners, copper workers, and the small business class. A military coup overthrew Allende on September 11, 1973. As the armed forces bombarded the presidential palace (Palacio de La Moneda), Allende committed suicide. A military government, led by General Augusto Pinochet Ugarte, took over control of the country. The first years of the regime were marked by human rights violations. On October 1973, at least 72 people were murdered by the Caravan of Death. At least a thousand people were executed during the first six months of Pinochet in office, and at least two thousand more were killed during the next sixteen years, as reported by the Rettig Report. About 30,000 left the country, and tens of thousands of people were detained and tortured, as investigated by the 2004 Valech Commission. A new Constitution was approved by plebiscite characterized by the absence of registration lists, on September 11, 1980, and General Pinochet became president of the republic for an 8-year term. In the late 1980s, the government gradually permitted greater freedom of assembly, speech, and association, to include trade union and political activity. The government launched market-oriented reforms, which have continued ever since. Chile moved toward a free market economy that saw an increase in domestic and foreign private investment, although the copper industry and other important mineral resources were not opened for competition. In a plebiscite on October 5, 1988, General Pinochet was denied a second 8-year term as president (56% against 44%).

After the coup, Chileans witnessed a large-scale repression, which started as soon as October 1973, with at least 70 persons murdered by the Caravan of Death. The four-man junta headed by General Augusto Pinochet abolished civil liberties, dissolved the national congress, banned union activities, prohibited strikes and collective bargaining, and erased the Allende administration's agrarian and economic reforms. The junta jailed, tortured, and executed thousands of Chileans. According to the Rettig commission and the Valech Report, close to 3,200 were executed or "disappeared", and at least 29,000 imprisoned and tortured. According to the Latin American Institute on Mental Health and Human Rights (ILAS), "situations of extreme trauma" affected about 200,000 persons. ; this figure includes individuals killed, tortured or exiled, and their immediate families.



The junta embarked on a radical program of liberalization and privatization, slashing tariffs as well as government welfare programs and deficits. In 1973, Chile was in shambles - inflation was hundreds of percents, the country had no foreign reserves, and GDP was falling. In order to halt the ongoing economic collapse, economic reforms were drafted by a group of technocrats known as the Chicago Boys because many of them had been trained or influenced by University of Chicago professors. The first reforms were implemented in three rounds - 1974-1983, 1985, and 1990.

After the economic crisis of 1982, Hernan Buchi became Minister of Finance from 1985 to 1989. He allowed the peso to float and reinstated restrictions on the movement of capital in and out of the country. He introduced banking legislation, simplified and reduced the corporate tax. Chile pressed ahead with privatizations, including public utilities plus the re-privatization of companies that had returned to the government during the 1982–1983 crisis. Under these new policies, the rate of inflation dropped from about 1,000% per year to about 10% per year. While this was still a high rate of inflation, it allowed the economy to start recovering. From 1984 to 1990, Chile's gross domestic product grew by an annual average of 5.9%, the fastest on the continent. Chile developed a good export economy, including the export of fruits and vegetables to the northern hemisphere when they were out of season, and commanded high prices.

An important initiative begun in 1981 and carried on until today, aimed at modernizing the use of Information and Communication technology, greatly contributed to disentangle the traditional bureaucratic and cumbersome clerical procedures in all dealings with branches of the government, from civil registry to import/export documentation, thereby fostering a more agile economy and a more efficient public administration.

The military junta began to change during the late 1970s. Due to problems with Pinochet, Leigh was expelled from the junta in 1978 and replaced by General Fernando Matthei. Due to the Caso Degollados ("slit throats case"), in which three Communist party members were assassinated, César Mendoza, member of the junta since 1973 and representants of the carabineros, resigned in 1985 and was replaced by Rodolfo Stange. The next year, Carmen Gloria Quintana was burnt alive in what became known as the Caso Quemado ("Burnt Alive case").

Problems with Argentina coming from the 19th century reached a high in 1978, with disagreements over the Beagle Canal. The two countries agreed to papal mediation over the canal. Chilean-Argentine relations remained bad, however, and Chile helped Britain during the Falklands War.

Chile's constitution was approved in a national plebiscite held in September 1980. It came into force in March 1981. It established that in 1988 there would be another plebiscite in which the voters would accept or reject a single candidate proposed by the Military Junta. Pinochet was, as expected, the candidate proposed, and he was denied a second 8 year term by 54.5% of the vote.

Return to democracy
Chileans elected a new president and the majority of members of a two-chamber congress on December 14, 1989. Christian Democrat Patricio Aylwin, the candidate of a coalition of 17 political parties called the Concertación, received an absolute majority of votes (55%). President Aylwin served from 1990 to 1994, in what was considered a transition period. In February 1991 Aylwin created the National Commission for Truth and Reconciliation, which released in February 1991 the Rettig Report on human rights violations committed during the military rule. This report counted 2,279 cases of "disappearances" which could be proved and registered. Of course, the very nature of "disappearances" made such investigations very difficult. The same problem arose, several years later, with the Valech Report, released in 2004 and which counted almost 30,000 victims of torture, among testimonies from 35,000 persons.

In December 1993, Christian Democrat Eduardo Frei Ruiz-Tagle, the son of previous president Eduardo Frei Montalva, led the Concertación coalition to victory with an absolute majority of votes (58%). Frei Ruiz-Tagle was succeeded in 2000 by Socialist Ricardo Lagos, who won the presidency in an unprecedented runoff election against Joaquín Lavín of the rightist Alliance for Chile, by a very tight score of less than 200,000 votes (51,32%).

In 1998, Augusto Pinochet traveled to London for back surgery. But under orders of Spanish judge Baltasar Garzón, he was arrested there, attracting worldwide attention, not only because of the past history of Chile and South America, but also because this was one of the first arrest of a former president based on the universal jurisdiction principle. Pinochet tried to defend himself by referring to the State Immunity Act of 1978, an argument rejected by the British justice. However, UK Home Secretary Jack Straw took the responsibility to release him on medical grounds, and refused to extradite him to Spain. Thereafter, Pinochet returned to Chile in March 2000. Upon descending the plane on his wheelchair, he stood up and saluted the cheering crowd of supporters, including an army band playing his favorite military march tunes, which was awaiting him at the airport in Santiago. President Ricardo Lagos later commented that the retired general's televised arrival had damaged the image of Chile, while thousands demonstrated against him.

The Concertación coalition has continued to dominate Chilean politics for last two decades. In January 2006 Chileans elected their first woman president, Michelle Bachelet, of the Socialist Party. She was sworn in on March 11, 2006, extending the Concertación coalition governance for another four years.

In 2002 Chile signed an association agreement with the European Union (comprising FTA, political and cultural agreements), in 2003, an extensive free trade agreement with the United States, and in 2004 with South Korea, expecting a boom in import and export of local produce and becoming a regional trade-hub. Continuing the coalition's free-trade strategy, in August 2006 President Bachelet promulgated a free trade agreement with the People's Republic of China (signed under the previous administration of Ricardo Lagos), the first Chinese free-trade agreement with a Latin American nation; similar deals with Japan and India were promulgated in August 2007. In October 2006, Bachelet promulgated a multilateral trade deal with New Zealand, Singapore and Brunei, the Trans-Pacific Strategic Economic Partnership (P4), also signed under Lagos' presidency. Regionally, she has signed bilateral free-trade agreements with Panama, Peru and Colombia.

After 52 years, Chile is now heading in a new direction. Over half of the registered voting population of Chile has opted for a change away from center-left politics by electing a right-wing candidate, Sebastián Piñera, during the Chilean presidential election, 2009–2010; although Pinochet was considered right-wing and was affirmed in the 1980 election. Piñera is also Chile's first billionaire to be elected.  The new president has voiced a desire for a government of national unity, and promises to move his coalition to the center, away from the political polarization that has plagued Chilean politics and society since the coup d'état of 1973. Piñera will also inheret a $16 billions USD surplus attained by Chile while copper prices were high.